Thursday, Mar 22, 2007
House prices unstoppable say experts
About Property: House prices unstoppable say experts
House prices look set to continue to rise at an unstoppable rate for the foreseeable future, experts have said.
Focusing on income multiples alone is not helpful – they must be considered instead in the context of affordability," said Michael Coogan, director general of the Council of Mortgage Lenders.
He added income multiples of six or seven could be a possibility in future.
Posted by daniel @ 02:13 AM (173 views) Add Comment
6 Comments
- If you do not have an admin password leave the password field blank.
- If you would like to request a password allowing you to add comments and blog news articles without needing each one approved manually, send an e-mail to the webmaster.
- Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
- Please note that any viewpoints published here as comments are user's views and not the views of HousePriceCrash.co.uk.
- Please adhere to the Guidelines
1. Thomas said...
This isn't really surprising is it.
2. Davros said...
It's impossible for prices to rise faster than incomes indefinitely, that's fact.
You can talk the market up all you like, but at the end of the day there's only a finite supply of money.
3. Dugmug said...
I don't believe that even these so called experts really believe what they're saying, but I've been looking at the maths:
Use the example of a repayment mortgage, borrowed over 35 years, and on the basis interest rates don't go above 5.5% for the period of the loan (and would any sensible person bet their life on that?). On this basis the most you can borrow is 10 times your salary before the monthly mortgage repayments, and unavoidable bills like Council Tax, actually exceed your net income! 100% default rate anyone? You might say that 10 times sounds a lot, and that you can play with interest-only mortgages or even longer repayment terms, but it would just be toying around the edges - the fact is there is actaully a limit to just how much higher than wages house prices can go - it cannot go on the same way forever despite what these "experts" say.
If you factor in higher interest rates (likely) and reduced repayments terms (you'd normally have to be under 30 to get a 35 year mortgage after all, and the average FTB is already older than that) and maximum income multiples come down still further. Then factor in the fact that most people also need to buy food and clothing and and pay for themselves to and from work everyday (not even including any "luxuries" like having a mobile phone or being able to watch TV) and you realise that the repayments become unaffordable long before they exceed your net pay. Even using my example above, basic housing costs exceed two-thirds (67%) of net monthly income if only six and a half times income is borrowed. You simply can't just keep lending people more and more money forever as there are mathematical limits to what people have the ability to pay back, so whilst I can't 100% gaurantee that prices will crash (although I believe it 99.9% likely), I can gaurantee that prices can't continue to increase so much faster than wages forever and ever amen. (even the mortgage companies know this, that's why so few are even offering 5 or 6 times multiples, despite their greed).
4. Ash said...
That article has a post date/time of: Wednesday, 21 Mar 2007 08:49. Write that down. The market has peaked.
5. Davros said...
Dugmug is right.
I've done the maths myself. I'd be screwed at 5 x my salary, due to train tickets and nursery fees.
6. uncle chris said...
Don't forget student loans .... there's a good chance that any young ftb'ers getting a decent enough salary to purchase even a tiny box these days will be encumbered with one of these. There is another £150 per month you need to factor in, given the average student debt these days. I've done a few sums from time to time and Davros's 5 x salary limit does seem the absolute limit to keeping afloat and having any sort of life to talk of.