Friday, Mar 09, 2007
Homeowners personal inflation is twice renters
Evening Standard: Homeowners 'on the rack' due to record mortgages
"The CCCS also found that a typical homeowner who contacts the charity has unsecured debts of £36,192, which is about £14,200 higher than a non-homeowner.
Unsecured debt includes borrowings on credit cards, personal loans and other overdrafts. It excludes their mortgage debt which is 'secured' on their home.
Malcolm Hurlston, the CCCS chairman, said: "Homeowners are being stretched. They are on the rack."
Posted by kagiso @ 12:39 AM (170 views) Add Comment
4 Comments
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1. japanese uncle said...
Majority of those who overstretched themselves to 'step onto the property ladder' during the past three years here, are presumed to be the British counterparts of the American 'sub-prime' borrowers. They were able to buy because of the market failure in which exorbitantly easy credit allowed them to buy something unaffordable from the beginning. They are destined to find themselves unable to cope after the initial 'fixed' or interests only repayment periods expire, triggerring the HPC . The last remnant of the excessive liquidity originating in Japan seems now still hanging around this market, having escaped the US that is already on its way to hell. The idea of what the effect of the full-scale property meltdown should be, is simply too horrendous to entertain, looking back over the past decade of excess and prodigality, painting each and every town on this isle redder than blood, making the livers of Britons swollen as same as their debt. Five years ago the invisible chain around its neck was already long and heavy enough, but now the number of links it has forged ever since is beyond our wildest guess. Visits of the Thee Sirits is now the only chance for it to rid itself of the curse, albeit a rather rude awakening. May the long-awaited HPC serve the purpose in somewhat constructive manner. After all our dear old ES was successfully reborn.
2. Dugmug said...
There’s a heck of a lot of talk about this “more demand than supply” in the housing market in the UK, with many commentators claiming this is the key reason why house prices “definitely won’t fall”. I have a problem with it every time I see it quoted and it’s mentioned in this article too, so here’s my tuppence worth…
…I don’t disagree that there’s more demand being caused by things like an aging population, a high divorce rate meaning more single-person households and more in-migrants than out-migrants. I also don’t disagree that house building in this country hasn’t historically kept up with these pressures for many years. And of course, conventional wisdom is that when there’s more demand for something than supply of it, prices go up! BUT…
…The fact is we definitely had a house price crash in the early 1990’s – this is a matter of record that I don’t think anyone disputes (surely?). Looking at the figures, the number of divorces in 1991 was 179 thousand but in 2005 it was only 152 thousand (and the “divorce rate” has also dropped accordingly). Average life expectancy has increased by three years for men and two years for women, between the early 1990’s and now, but it was still pretty high in 1991 and had been increasing for many years even back then. Net migration has changed markedly, as it was negative in 1991 and is now very much positive – but despite us all living longer, the rate of “natural” increase in population (births against deaths) has been falling, which has helped reduce the effects of in-migration; the population of England has “only” risen by 2.5 million between 1991 and 2005. Set this population increase against the fact that there has been an increase of 2.1 million dwellings in England between 1991 and 2005 and it doesn’t look as bad for the housing market. The building rate has been increasing too - in 1990/91, 160 thousand new houses were completed, then it all went down for a while, but then it has been rising again with 163 thousand new dwellings finished in 2005/06.
So my point is, OK, now we’ve had 16 more years of high divorce rates, and 16 more years of increasing numbers of old people living on their own in 4 bedroom houses, and 16 more years of the population expanding, and 16 more years of house-building often not keeping up with these pressures, but the fact is all these things were true in 1991; we were divorcing like crazy, getting older and had been for years, having more kids than people were dieing, and the number of new dwellings in the country hadn’t been keeping pace for decades, and yet WE STILL HAD A CRASH. This tells me that pure demand and supply rules don’t tell the whole story when it comes to the housing market; there must be other things also going on – something enabled a crash in the 1990’s even though there was more demand than supply back then too, so you can’t blithely rule it out now.
The current market is a bubble – it’s been extra-exaggerated by the worsening pressures caused by the factors I’ve mentioned, but it’s still a bubble, and so chances are it will burst. The important thing with bubbles is not supply and demand in the end, it’s how much people are willing and able to pay for something – eventually people can’t or won’t pay any more, and when everyone involved realises this point has been reached, it all tumbles down as the speculators desperately pull out (whether our housing market has quite got there yet is obviously open to speculation). It’s the human factor that makes bubbles happen, not economics; as long as human beings are motivated by greed, bubbles will continue to form and then burst as they have for centuries.
3. Dugmug said...
Missed a bit...I should have said, "as the speculators desperately pull out AND all those who really couldn't afford it in the first place are forced to sell."
4. Justsold said...
Dugmug......
Right on.
This is exactly how I see it.
I'm doing my bit to try to hasten the fall by sharing the thought with many people I meet.
My experience is that the average home owner simply can't see it happening, they find it totally incredible.
In my opinion, more fool them.