14-16 Year Cycle charts:


source



.

We have therefore developed a new affordability index, that we have
called the Total Mortgage Payment Affordability Index, which takes
into account all mortgage payments and changes to income over the
life of the mortgage (see box on page 5 for a detailed explanation)
rather than just the first year of the mortgage. In our opinion it is a
better measure of affordability than our original index as it captures
the prospect of rising interest rates to their trend level as well as the
prospect of rising incomes at today’s index levels. This composite
index is now very close to its all time high of the late 1980s and is
much higher than its peak in the late 1970s. Clearly, the Total
Mortgage Payment Affordability Index suggests that affordability in
the UK has now reached its long term peak and this is a likely
explanation of the fall in the proportion of new mortgages accounted
for by first time buyers.

MORE: Reliance on BTL

More buy-to-let investors
Whilst first time buyers are accounting for a decreasing share of
mortgages, the proportion accounted for by buy-to-let investors has
increased in recent years. Buy-to-let investors accounted for 7% of
all new mortgages in the UK in 2003 compared to less than 3% in
1999.

This increase has occurred in spite of recent interest rate rises and
a relatively muted private rental market, particularly at the prime end
of the market. This is because the buy-to-let investment market has
been boosted by a number of factors: Investors, including “nonprofessional�
landlords (i.e. individuals with one or more properties
with limited management skills), have been attracted to the UK
market where prices have continued to rise significantly in recent
years compared to the recent slump in equity markets. The 1988
UK Housing Act, which included the assured shorthold tenancy, also
allowed rents to be adjusted to market levels within a year of letting.
Improved access to the buy-to-let market was facilitated by
increased competition from buy-to-let mortgage providers.
Buy-to-let investors, like first time buyers, are vulnerable to further
interest rate rises and falls in house prices. There is little data
available on the buy-to-let market and its investors and little
information on whether investors have a short or long-term horizon
with funds to see them through market voids and rising mortgage
payments and on whether they are looking for income or capital
appreciation. It is therefore difficult to assess the risks faced by the
buy-to-let section of the market.

Short- and medium term outlook
Our Total Mortgage Payment Affordability Index is currently close to
its historic peak suggesting that further rises in interest rates are
likely to put more downward pressure on affordability.
As the Total Mortgage Payment Affordability Index captures all likely
mortgage rate developments, it is not reasonable to use it for
scenario analysis of different interest rate paths. By construction, a
short term rise in interest rates (assuming constant house prices
going forward) does not affect our new affordability index. This is
because our index relies on mortgage rates in 25 years, which are
assumed constant in the long term, whilst all our short term
scenarios assume that mortgage rates go back to trend levels by
2008 at the latest.6 We therefore come back to the First Mortgage
Payment Index to illustrate the impact of different future interest rate
adjustment paths on affordability. We have therefore carried out
analysis using the First Mortgage Payment Affordability Index based
on three mortgage rate forecast scenarios

PRICES FALL: Fifth Month in a row

Estate agents across the country were also reporting that only houses with a reasonable asking price are selling.

The average discount from asking price remains relatively high level at about 5%.

There was a slight increase in the number of first time buyers than in the previous two months, but it was still historically a low proportion of 11.43%.

More: article

MARKET AFTER THE PEAK : The Pattern
(what Estate Agents know, wont tell you):

I've been working as a trader/investor for years, and have seen
loads of market peaks. Normally in a post peak market, the first sign
of a turn is that transactions dry up. Buyers freeze, realising a
change may be about to happen. (Is this is where we are now?)

After that, the market falls slowly. A few buyers around who remember
the euphoria, and think the pause is temporary will buy. They may base
their buying hopes on ideas like: "the market always picks up in the Fall,
after a summer pause. It may soar again if rates come down." A few
transactions get done, and there are maybe some grounds for hope. But
then the market starts slipping as sellers begin to worry. The only way
to get a sale (after the buy-the-pause buyers are finished) is to create
an illusion of value, by making the price cheaper than at the peak.
The estate agents will say: "It's a bargain, the seller decided he wanted
to sell, so he cut his asking price by 5% (or 10%, or whatever) to sell."

As the price cuts become more widespread, then the press will catch on
that the market is falling. And those who wanted to sell at the top, and
realised they have missed it, will try to sell quietly while talking the
market up. "I think I'll hold this property until the fall, when the
market will come back." or: "If the market starts to slide, they will
cut rates and that will bring the buyers back." This is called the
denial phase. It will last for months, as prices fall quietly.

At some point, maybe 20%, 25%, or even 30% or more off the top. There
will be a panic. There will be forced sales. And bank foreclosures
will be competing with the other sellers. People will wonder what happened
to the positives they were depending upon during the denial phase. This
is when the genuine bargains will be had. When the main sellers are banks,
who want to get out, and arent thinking about the price, just getting cash
quickly

The bottom (and perhaps only a temporary one) could come in Late 2005/
or even 2006. After that? Maybe a "tradable bounce of 1-3 years", and
then I suppose a grinding decline lasting a few more years.

...until then: BTL Property = (Toast)
Why? Poor cash-on-cash returns (negative, if unrented), Falling capital values.
Plus maintenance and marketing headaches for the landlord.

DrBubb, this is a great thread. It should be moved to the main forum.

I too have followed the "lifetime affordability" charts. There has been some excellent forcasting on TMF's board by ex-poster TrojanTrader, which actually shows that the lifetime affordability is MUCH more expensive than at the 1989 peak simply because of the combination of current low initial affordability which is just off the 1989 peak, combined with drastically lower debt erosion.

Conclusion: buying a house now will seriously damage your health/wealth.

maybe...
but it would get lost quickly there

- - -
LISTEN TO THE SPIN coming out of Estate Agents:

Headline:
“Buyers are returning�, say estate agents
12th Nov 2004: article

Actual News:
The average UK house value fell 1.6% over the last month, recording its fifth consecutive monthly fall, according to figures from the National Association of Estate Agents.

Spin-laded sentences:
"All indicators show that there were slightly more buyers than last month, but still a lower number than in the summer months or earlier in the year.

The number of transactions remained low, demonstrating that although buyers are starting to enter the market again as prices fall, many are unwilling to commit in anticipation of further price falls."

The reality:
THERE IS LITTLE INTEREST, and Buyers are only responding to bargains.
Prices that looked "realistic", are too high to attract Buyers now.
The Sellers will have to get more aggressive

Ratio of UK house prices to average earnings over time.

...Chart: Thomson Datastream

"Buy-to-let investors would be wise to consider selling. Unless house prices can continue to rise at least in line with incomes, 3-4% a year, holding on for rental income alone does not make sense for most properties.

Gross rental yields are 6% on average across the country, but only around 4% in London and many other popular investment spots. Yet, with typical costs averaging 3-4% annually, including agents and managements fees, repairs and depreciation, and an allowance for voids, net yields are down to 2-3% pa at best, not enough to make it worthwhile without a strong prospect of a capital gain"

so says: John Calverley, Chief Economist & Strategist at American Express Bank
@: http://personalfinance.iii.co.uk/articles/...at_id=Mortgages

More important charts.
Prices have followed loan activity in the past (with a lag) and they are bound to do so again this time



All loans, also showed a dramatic drop

another chart - same message

Falling trend

WHERE we are now...

Back to where we were just prior the Previous Crash



Looks like 5 more years to the Low

(thnx to the other thread for posting the chart- which I have marked up)

QUARTERLY Prices, Greater London from Halifax:

.Qtr. AveProp Index %Q/Q %12m PrCycle %12m CBets H/CB
83.03 £ 38,523 96.7
83.06 £ 39,319 98.7 +2.1%
83.09 £ 40,530 101.8 +3.1%
83.12 £ 41,168 103.4 +1.6%
84.03 £ 42,622 107.0 +3.5% 10.6%
84.06 £ 43,690 109.7 +2.5% 11.1%
84.09 £ 45,047 113.1 +3.1% 11.1%
84.12 £ 46,986 118.0 +4.3% 14.1%
85.03 £ 48,854 122.7 +4.0% 14.6%
85.06 £ 50,792 127.6 +4.0% 16.3%
85.09 £ 52,396 131.6 +3.2% 16.3%
85.12 £ 55,568 139.5 +6.1% 18.3%
86.03 £ 58,404 146.7 +5.1% 19.5%
86.06 £ 61,913 155.5 +6.0% 21.9%
86.09 £ 65,801 165.2 +6.3% 25.6%
86.12 £ 69,438 174.4 +5.5% 25.0%
87.03 £ 73,661 185.0 +6.1% 26.1%
87.06 £ 77,565 194.8 +5.3% 25.3%
87.09 £ 81,024 203.5 +4.5% 23.1%
87.12 £ 85,356 214.4 +5.3% 22.9%
88.03 £ 90,374 227.0 +5.9% 22.7%
88.06 £ 96,334 241.9 +6.6% 24.2%
88.09 £102,422 257.2 +6.3% 26.4%
88.12 £105,234 264.3 +2.7% 23.3%
89.03 £104,963 263.6 -0.3% 16.1%
89.06 £102,476 257.3 -2.4% +6.4%
89.09 £ 99,133 249.0 -3.3% -3.2%
89.12 £ 96,193 241.6 -3.0% -8.6%
90.03 £ 96,474 242.3 +0.3% -8.1%
90.06 £ 94,125 236.4 -2.4% -8.1%
90.09 £ 91,857 230.7 -2.4% -7.3%
90.12 £ 93,540 234.9 +1.8% -2.8%
91.03 £ 91,091 228.8 -2.6% -5.6%
91.06 £ 90,188 226.5 -1.0% -4.2%
91.09 £ 88,085 221.2 -2.3% -4.1%
91.12 £ 86,672 217.7 -1.6% -7.3%
92.03 £ 83,349 209.3 -3.8% -8.5%
92.06 £ 80,497 202.2 -3.4% -10.7%
92.09 £ 79,224 199.0 -1.6% -10.1%
92.12 £ 76,605 192.4 -3.3% -11.6%
93.03 £ 75,832 190.4 -1.0% -9.0%
93.06 £ 76,480 192.1 +0.9% -5.0%
93.09 £ 76,677 192.6 +0.3% -3.2%
93.12 £ 76,439 192.0 -0.3% -0.2%
94.03 £ 77,851 195.5 +1.8% +2.7%
94.06 £ 77,703 195.1 -0.2% +1.6%
94.09 £ 78,015 195.9 +0.4% +1.7%
94.12 £ 78,018 195.9 +0.0% +2.1%
95.03 £ 78,194 196.4 +0.2% +0.4% £ xx,xxx xx.x% 117.5 1.67
95.06 £ 77,742 195.2 -0.6% +0.1% £ xx,xxx xx.x% 120.8 1.62
95.09 £ 76,946 193.2 -1.0% -1.4% £ xx,xxx xx.x% 124.2 1.56
95.12 £ 77,203 193.9 +0.3% -1.0% £ xx,xxx xx.x% 120.2 1.61
96.03 £ 79,191 198.9 +2.6% +1.3% £ xx,xxx xx.x% 119.2 1.67
96.06 £ 83,601 209.9 +5.6% +7.5% £ xx,xxx xx.x% 123.0 1.71
96.09 £ 84,779 212.9 +1.4% 10.2% £ xx,xxx xx.x% 127.8 1.67
96.12 £ 88,865 223.2 +4.8% 15.1% £ xx,xxx xx.x% 126.2 1.77
97.03 £ 92,971 233.5 +4.6% 17.4% £ xx,xxx xx.x% 128.5 1.82
97.06 £ 96,684 242.8 +4.0% 15.6% £ 80,715 xx.x% 134.6 1.80
97.09 £ 99,372 249.6 +2.8% 17.2% £ 82,383 xx.x% 143.0 1.75
97.12 £102,514 257.4 +3.2% 15.4% £ 84,920 xx.x% 143.4 1.80
98.03 £104,668 262.9 +2.1% 12.6% £ 86,257 xx.x% 143.9 1.83
98.06 £107,454 269.8 +2.7% 11.1% £ 89,303 10.6% 151.5 1.78
98.09 £108,955 273.6 +1.4% +9.6% £ 91,541 11.1% 160.2 1.71
98.12 £110,747 278.1 +1.6% +8.0% £ 94,384 11.1% 156.0 1.78
99.03 £114,802 288.3 +3.7% +9.7% £ 98,447 14.1% 154.3 1.87
99.06 £121,398 304.9 +5.7% 13.0% £102,361 14.6% 164.9 1.85
99.09 £131,799 331.0 +8.6% 21.0% £106,421 16.3% 178.4 1.86
99.12 £142,233 357.2 +7.9% 28.4% £109,782 16.3% 181.5 1.97
00.03 £148,242 372.3 +4.2% 29.1% £116,428 18.3% 183.3 2.03
00.06 £144,852 363.8 -2.3% 19.3% £122,370 19.5% 193.0 1.88
00.09 £149,242 374.8 +3.0% 13.2% £129,722 21.9% 193.9 1.93
00.12 £153,454 385.4 +2.8% +7.9% £137,869 25.6% 195.9 1.97
01.03 £157,773 396.2 +2.8% +6.4% £145,489 25.0% 196.4 2.02
01.06 £168,712 423.7 +6.9% 16.5% £154,337 26.1% 205.8 2.06
01.09 £175,137 439.8 +3.8% 17.4% £162,517 25.3% 216.2 2.03
01.12 £179,546 450.9 +2.5% 17.0% £169,765 23.1% 203.5 2.22
02.03 £185,512 465.9 +3.3% 17.6% £178,841 22.9% 214.3 2.17
02.06 £196,380 493.2 +5.9% 16.4% £189,355 22.7% 232.8 2.12
02.09 £206,584 518.8 +5.2% 18.0% £201,843 24.2% ??
02.12 £214,743 539.3 +3.9% 19.6% £214,598 26.4% ??
03.03 £220,525 553.8 +2.7% 18.9% £220,490 23.3% ??
.Now. .Current. ----- ----- ----- Prior: Q4.1988 Peak

- - -

Month . NWide-UK Halif-UK LandReg. Gr.Lond. LDckHSC Ratio Dchg
Dec.98. £ 66,372 £ 73,286 £....... £110,787 £150.0K 1.354
Dec.99. £ 75,219 £ 81,595 £....... £142,233 £189.0K 1.329 +26%
Jun.00. £ 81,452 £ 84,293 £....... £144,852 £210.0K 1.450 +11%
Dec.00. £ 82,188 £ 86,085 £....... £153,454 £210.0K 1.369 + 0%
Jun.01. £ 89,068 £ 90,590 £....... £168,712 £241.5K 1.431 +15%
Dec.01. £ 93,544 £ 96,337 £....... £179,546 £230.0K 1.281 - 5%
Jun.02. £106,693 £106,195 £....... £196,052 £248.5K 1.268 + 8%
Dec.02. £117,206 £121,137 £....... £213,957 £260.0K 1.215 + 5%
q1Mar03 ........ £124,753 £....... £219,501 .
Jun.03. £127,214 £129,696 £....... £212,824 £234.0K 1.100 -10%
Dec.03. £135,444 £140,643 £....... £232,679 £245.0K 1.053 + 5%
- Jan04 £134,806 £145,610
- Feb04 £138,730 £148,089
q1Mar04 £142,584 £147,785 £262,685 £239,439 .
- Apr04 £145,918 £154,304
- May04 £149,020 £157,326 £262,685
q2Jun04 ........ £159,685 £....... £244,411 £265.0K 1.084 + 8%
. Jul04 ........ £161,466
. Aug04 ........ £160,584
q3Sep04 ........ £162,669 £....... £242,797 .
. Oct04 ........ £160,639
. Nov04 ........ £160,259
q4Dec04 ........ £162,493 £....... £241,778 £246.0K 1.017 - 7%
. Jan04 ........ £163,682
. Feb04 ........ £162,824
q1Mar04 ........ £163,714 £....... £241,918 .
. Apr04 ........ £163,458
. May04 ........ £162,411
q2Jun04
- - -
Sources:
C&D:Hurford Salvi Carr, Halifax, Nationwide, LandRegistry

.... Residential Property, Greater London
Year Yr Qtr4. %Rise . 5yrRise
1969 69 6,195
1970 70 6,882 11.09%
1971 71 7,932 15.26%
1972 72 11113 40.10%
1973 73 14447 30.00% ------- : High1
1974 74 14857 +2.84% 139.82% :
1975 75 14918 +0.41% 116.77%
1976 76 15566 +4.34% 96.24%
1977 77 16745 +7.57% 50.68%
1978 78 19160 14.42% 32.62% : Low.1
1979 79 25793 34.62% 73.61%
1980 80 30968 20.06% 107.59% : High2
1981 81 30757 -0.68% 97.59%
1982 82 30716 -0.13% 83.43%
1983 83 34640 12.78% 80.79%
1984 84 39346 13.59% 52.55%
1985 85 44301 12.59% 43.05% : Low2
1986 86 54863 23.84% 78.38%
1987 87 66024 20.34% 114.95%
1988 88 77697 17.68% 124.30% : High3
1989 89 82383 +6.03% 109.38%
1990 90 83821 +1.75% 89.21%
1991 91 85742 +2.29% 56.28%
1992 92 78049 -8.97% 18.21%
1993 93 81332 +4.21% 4.68% : Low.3
1994 94 87631 +7.74% 6.37%
1995 95 89528 +2.16% 6.81%
1996 96 94065 +5.07% 9.71%
1997 97 105819 12.50% 35.58%
1998 98 114783 +8.47% 41.13%
1999 99 142321 23.99% 62.41%
2000 00 163577 14.94% 82.71%
2001 01 182325 11.46% 93.83%
2002 02 207246 13.67% 95.85% : High4??
2003 03 241864 16.70%
2004 04 272886 12.83%

Source: Office of the Deputy Prime Minister, as reported in
Property Investments for Pensions Plc Prospectus
from Teather & Greenwood Ltd., page 13
- - -
Update
http://www.odpm.gov.uk/stellent/groups/odp...ouse_604088.xls

Thnx to PAL on S-Pig:
http://www.singingpig.co.uk/discussion/for...=41&m=62419&p=1

Using data shown in this thread,
I was able to produce this chart, which shows a clear comparison of cycles



And I have started a thread called, "The Power of Cycles":