Saturday, Dec 30, 2006
The Telegraph joins in, is this the start of the "bad HPI" media coverage
Telegraph: Homes cost six times wages
The true size of the housing market boom was demonstrated yesterday by figures that showed people are borrowing an average of almost 6.5 times their salary to buy a home.
We already know this, but do the general public know ?
Posted by bryan @ 10:32 AM (38 views) Add Comment
13 Comments
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1. Bobsta said...
If only everyone read the Telegraph!!
If this message would only spread across to The Mail and The Sun, we might see some sense of reality begin to kick in.
2. sold 2 rent 1 said...
6.5 is the predicted peak ratio by Fred Harrison in his Boom Bust book
Previous peak ratios were
1973/4 --- 4.7
1988/9 --- 5.0
Fred has a new book
Ricardo's Law: House Prices and the Great Tax Clawback Scam
It looks like he changed the title between November and December 2006
http://www.politicos.co.uk/books/131117.htm?ginPtrCode=10410&identifier=
http://www.allbookstores.com/book/0856832413/Fred_Harrison/Ricardo's_Law.html
3. Surfgatinho said...
"The Telegraph joins in"
The Telegraph has been pretty bearish for a while now.
4. sirgoogle said...
My guess is that the die-hards will still buy at 8x salary and not worry.
We are not nearly in-debted enough as a society for a crash yet ;-)
We must be forced to our knees in debt with tears of repentance for our profligate ways before any sense kicks in. Perhaps the foreign investors will be the ones to help by putting their foot on our neck and point a pistol to each of our heads shouting "pay-up".
Prediction - Somehow Crash Gordan will enourage us in 2007 to borrow more to keep the economy going.
I think we are still some way off from a HPC - as the IRs need to hit 6-8% before they really bite - or we get a good bout of inflation or unemployment or there is a sudden run on the pound (up or down).
5. Rimmer said...
I think this article is about time but wrong, i can see a 25% reduction occuring easily as a correction and possible much more, IR i will stay around 5-6% and then gradually climb towards 8% long term ( they wont be going back low for many years ! ), dont forget the ecomomy is one big cash cow, trillions have been lent and the people who did that want it back with the best possible returns ( you know who they are ).
HPC predictions of 30% reductions came out in 2005 and we are 25% higher since then, i see an economic trigger upsetting Gordons land of milk and honey and bringing a degree of reality to life.
I know lots of people who say if a HPC happens i will step in and make a killing, dont be so sure! ------- if utility bills are 50% higher in 5 years than now ( with food costs etc going with them ), IRs 8%, unemployment double or triple what it is today, Chinese and far east imports more expensive and council taxes 1% PA of values taken in 2007 you go ahead and buy the biggest house you can find - bet you think twice, when all is said and done a home is something you need not an assett to trade.
6. Enuii said...
I don't know where sirgoogle lives but in my neck of the woods (its grim up north don't you know) a lot of the low wage FTBs are loosing their jobs by 1) outsourcing of call centre jobs 2) most warehousing and building jobs being taken by eastern europeans especially poles (crewe population 48000 has 3000 poles who have pushed out local workers) and 3) a general tightening on recruitment by local firms.
The unemployment figures are also widely known to be fiddled as is the real rate of inflation, just wait till your council tax bill drops on the door mat in February for next year.
Interest rates are irrelevant when your wages are not keeping in pace with inflation and your tax bill (direct and indirect) is rocketting.
Reality starts on the 2nd of January 2007.
7. Nohpc said...
Well IRs won't hit 6-8 percent that's for sure. Well maybe they will but not in the next few years anyway. I think the BoE will feel very nervous about raising rates at all now. Even though their goal is to target inflation there is so much more to lose by raising rates. It does not matter what it costs to buy a house only what the repayments are and what you can afford so first time buyers will not benefit from a falling market and increased rates as they still will not be able to afford it and current home owners will also be stretched. For example if rates were at 0.5 percent I could afford a 1 million pound home but if they were at 20% I would struggle to afford a 100000 pound home. Prices are irrelevant rates are the only thing that matter now.
I think there is a strong possiblity of a house price crash now after weighing up both sides. I am lucky because it will not affect me as I will not have to sell and I can afford it. However, I think the folk on this site will not feel the benefit of a houseprice crash. Many of you will lose your jobs in the climate it will take to create it. You say you need a home. True but you do not need to buy a home. As long as you have any roof over your head you are okay but how are you going to manage this with zero income. All computer analysists, business types, and anyone in public sector beware what you wish for.
I am in Auckland till October 2007 and if things go pear shaped I will continue to rent out my flat and will not come back till things pick up.
8. talking rot said...
Yawn.
Next year, we'll still be here, and still be sad, because a House Price Crash still won't have happened. It is destined for 2020 and be a drop of 20%, so houses will no longer be totally, hugely, incredibly unaffordable; they will only be totally unaffordably.
2008 looks like being an interesting year.
9. bidin'matime said...
Trolling rot - Yawn indeed!
10. Rimmer said...
NoHPC
While i 100% agree with what your saying regarding those who think they are going to " Cash In " from a HPC need serious help, the conditions that will cause it effects us all ( and certainly me with a family ) - that said we have been on borrowed time ( literally ) for a while now.
What i dont agree with you on is IRs, the B of E has a duty to protect the economy of the UK and that takes international factors in consideration, its only in the last 10 years the B of E had had to consider house prices as a consumer item, historically uk IRs have been around 8 - 9% for more than 50% of the last century, perception for you and i puts low IRs at 2%, 20 years ago low IRs would have been 6 - 7%...........................depends how you look at it.
Regardless of it all >>>>>>>>>>>>>> Not the time to buy a house in my book ( borrow money to buy a house that is ) too many -ve factors !!
11. talking rot said...
Sorry bidin'
I'm no troll - merely some one who has read this Blog long enough to see never ending patterns of dire predictions which never come to fruitition. Personally I'd love a HPC but I just don't see it this year (2007) but perhaps next.
But bidin', PLEASE tell me what a crash is. Because if prices drop 20%, I still won't be able to afford them. A crash from totally, hugely, incredibly unaffordable to merely totally unaffordably won't help me and millions of others.
Looking at a house in North Yorkshire: bought in 2000 for 87,500. Sold in 2005 for 245,000. Average wage of area 22,850. So prices will have to drop by 40% to 45% to be meaningful. This isn't going to happen. At best, we're looking at 20% - which is as much use as an ash-tray on a motor-cycle.
Yawning
Best wishes to you all. I'm off to bed and am now looking at buying a Dutch barge as it will allow me to escape Council Tax.
12. Rimmer said...
Talking rot
sorry you may be disappointed, prices may well fall 50% or more in yorkshire but the conditions to allow that will mean you might not be will or able to go for a morgage.
30 years ago i had friends contracting in Germany as it was the only way the bank manager would give them a mortgage ( ie with a 20% deposit ).
House prices may well fall but the cost of living in one wont.
13. Nohpc said...
Rimmer,
I agree that the BoE's job is to protect the economy but the best way to do this is not always with high rates but also with low rates. High rates in Britain (ie 6-9%) would completely crush the economy and cause a recession which is worse than inflation.