What's all this talk of a bubble?
Well for starters is not just 'all talk', its a fact. The housing boom is a bubble. It's a common economic concept which seems to becoming ever more apparent in all aspects of modern day living. Someone spots a good thing and everyone jumps on the bandwagon with the fear that they'll get left behind. Just because it's the housing market doesn't make it any different from any other bubble. Who can forget the dot.com bubble, and how many of us got our fingers burnt with that one?
Maybe it's a credit to our society that we have so many entrepreneurs out there that are able to react quickly enough to spot a good thing when they see it or maybe we're all becoming far too greedy, grabbing and materialistic. Speculative buying is what causes a bubble which goes hand in hand with blowing hot air into the bubble and talking the market up.
So, who's blowing hot air into this bubble? Estate agents, buy to let landlords, banks, building societies, most people who have seen the value of their property increase and so on and so on. The list is endless and extends into just about every section of society. So, who's not blowing hot air into the bubble? First time buyers, level headed economists and those that have seen this all before during the last property boom of the eighties and have just recovered from the effects of negative equity. So when you look at the two sides there are far more puffers that pin prickers!
Which brings us on nicely to 'herd mentality'. Basically sheep. We've all seen how they run around in a field not really knowing where they are going with no-one really taking the lead. It's natural. I know we're not sheep but we're all part of mother nature and we have certain similarities in our social patterns. But sheep don't just run one way, they might start heading for the far left of the field at a rate of knots but then for no apparent reason they'll suddenly about turn and go the other way. This will happen with housing market. People get too caught up in the micro economics of the issue. If everyone took a step back and looked at it from a macro viewpoint then I think we might start asking a few questions....... is this 2 bedroom terrace property in a bad neighbourhood really worth £200,000 and should I really be stretching myself to 10 times my salary?