Tuesday, Mar 27, 2007
Will supply and demand dynamic turn on buy-to-letters?
MoneyWeek: Could the UK property market could the way of the US?
There’s safety in numbers, so the saying goes. Maybe that’s why UK house builders are clamouring to hook up with each other like there’s no tomorrow. George Wimpey and Taylor Woodrow are headed for a £5.4bn merger - though many believe that FTSE 100 house builder Persimmon may gatecrash the party. Things aren't getting any better in the US property market and, back in the UK, the demand dynamic propping up the market isn't as strong as people think.
Posted by mary @ 10:49 AM (214 views) Add Comment
17 Comments
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1. Scott said...
Houses are just like any other stock. If everyone decides to sell, prices will drop sharply, and then this site could be called housepricegrowth.co.uk publishing wishful articles on prices increases. Unfortunately, the exact opposite has been true for some time.
Like I have said before, unless drastic action is taken, such as 8-10% interest rates, this house price crash will be the biggest disaster that never happened since the millenium bug.
2. sold 2 rent 1 said...
Scott,
I disagree.
The credit cycle is turning. Inflation is rising.
With HPI at over 10% I think 6-6.5% IR will be enough for a recession and HPC.
The "Lombard Street Research" quarterly report on housing affordability will be out 5-6 days.
It will show conditions worsening and well into the danger zone.
With another IR rise almost guranteed in April/May and HPI showing no signs of slowing, the affordability index will move rapidly lower for the rest of this year.
For those who haven't seen it. This is the graph last October
http://www.telegraph.co.uk/money/graphics/2006/10/02/cnhouse02big.gif
3. cyril said...
Housing is a risky investment, not because the price is particularly volatile, but because people borrow the money to invest at very high gearing so a small drop in price = financial disaster. And you can't just cash in a house at a moment's notice, so you might get lumbered.
If I had a BTL I think I'd sell it quick. Don't forget to pay your capital gains tax though!
4. inbreda said...
The housebuilders merging could be doing so to cover up bad news. Muddy the accounts to paper over the cracks.
5. doomwatch said...
Does anybody want to buy a house ?!
6. Confused76 said...
Scott,
When stocks trade at P/E ratios above 30, on average, you too would start considering a bit of overpricing (summer 2000).
Please check this affordability report from 2004 predicting a market slowdown (which in reality did happen, but was reverted by the BoE decision to cut the base rate in 2004/5)
http://www.cheltglos.co.uk/pdfs/affordIndex230904.pdf
To bring the affordability index from 2004 to 2007 1Q, please multiply by 1.6 and divide by 1.1... the result for the South East is frightening, we have the same affordability today than in 1991.
Good luck with the "millennium bug"... but I think you meant the "dot.com bubble"
7. tyrellcorporation said...
Inbreda, I think you're spot on there!
8. David20040_0 said...
As I keep saying the USA can build itself out of the problem.
9. mrmickey said...
I can understand investing in a business that is growing and producing more profit, but i've never really understood why residential property is supposed to be such a good investment, property doesn't do anything it's really like investing in gold but not as good because gold doesn't get woodworm or rising damp.
10. The Capitalist said...
Our legal department ( I work for a firm of property managers) is flat out with remortgaging applicants on BTL (my firm is a freeholder on lots of sites).
"The market can turn downward longer that you can remain solvent".
11. Caesium said...
No HPC
12. This comment has been removed as it was found to be in breach of our Blog Policies.
13. uncle tom said...
At this point it is hard to say whether the collapse of the subprime lenders in the US will snowball into a major international crisis - or quietly fizzle out with the finance houses licking their wounds..
But you can be pretty certain that right now there is an intensive round of urgent meetings going on to re-assess and re-price the risk element of non-standard mortgage lending, and to cover their backs, erring on the side of caution is likely to be the order of the day.
So even if the BOE do nothing, a great many people, mostly those who are already overstretched, and probably including the BTL brigade - will soon find themselves paying significantly more for their loans...
14. Scott said...
I think the south is stupidly overpriced. I have lived, worked, played in many areas of the UK. The north, midlands and the south have their golden areas and their slums. The difference is that you can move out of a southern slum and then live in a nice place in the north or in the midlands. Slough for example is an industrial wasteland but I would have to sell my dad's house, car and kidneys to get a studio there. What is the point? Perhaps this is why 1 in 10 brits live abroad.
15. Davros said...
What's David going on about exactly?
16. geed said...
Keep posting David, we all need alternative views but I think you've been smoking something this time.
"As I keep saying the USA can build itself out of the problem."
READ 546,000 homes unsold, why the h3ll would you build more, think before you type.
"Here in the UK, according to S&P, about 58% of mortgages sold last year were ‘specialist’ loans". Seems we decide to call the Subprime market the "specialist "market here in the UK. I guess we shoudnt estimate what is going on behind the closed doors of our financial institutions...but i fear their toilet paper bill has risen way above the CPI.
17. Don'tknow said...
here in Oxford 'one' has the opportunity to buy ---in the right area of course--a two bedroomed terrace house (the type you would normally associate with a row of red brick miners houses -with toilets outside etc)--narrow streets ..on streeet limited residents parking...
..for .....wait for it ....'offers over 4,00,000 (FOUR!) ...............
i have to add that bthe toilets for most of these types are noe inside ..maybe downstairs beside the kitchen ...which is nice....or upstairs...taking away the 3 rd bedroom.....
....something has got to give...