Saturday, May 12, 2007
House price tanker heading for storm but taking some time to turn
Firstrung: House prices up 0.7% as HIPs could be housing's equivalent to the millennium bug
The national index has risen by 0.7% in April and by 8.4% in the year. The annual rate of growth at a regional level, averaged over the last three months, is shown in the chart below. The averaged annual growth in London (13.3%) still far exceeds other regions as the chart shows. In rank order, the southern regions - South West (8.6%), East Anglia (8.3%) and South East (8.3%) - show the greatest increases outside of London and are over 1% higher than the remaining regions.
Posted by converted lurker @ 09:26 AM (343 views) Add Comment
5 Comments
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1. royston said...
The thing that is sustaining this market, that drives it on in spite of negative media and interest rate increases, is the firm belief that property prices will go up over the long run. "So what if there is a correction and prices come down" says the property bulls "Look 5 to 10 years ahead and prices will be a lot higher than they are now". This will only be true if we get a big dose of inflation. The housing market is now so far ahead of itself, that I now believe a 20 to 30 year property slump is not out of the question. Markets run on expectations. Expectations are built from recent experience. If we get a couple of years or house price falls, the attitude towards house buying and house owning will change radically. Happy renters will come to snigger at their unfortunate contemporaries who hold falling assets, in contrast to now, where even the renters on this site are looking for buying opportunities. Then the demographic issue, a large number of BTLers are going to try drawing our their pension from this falling market over the next few decades. It sure is going to be interesting!
2. converted lurker said...
I'm with you on the potential 20-30 yr slump, with reference to a 'housing market' I reckon you're bang on there too, fundamentals are now irrelevant to a market that acts as an emerging stock market in a developing country, it's no more than a punt ATM IMHO.
3. manjit1966 said...
Royston,
I am with you on this one.
In simple terms house prices are in unsustainable territory when the average house price to average wage ration is 7.2 and the long term UK average is about 4.2 ish.
I was there at the last slump in 1989-1994 and have negative equity. This crazy situation cannot be sustained otherwise Labour will get a drubbing from the younger disinchanted voters of which there will be many. If Gordan had any sense he would actually engineer a slow down and gradual pull back of house prices to give him a greater chance of getting voted in at the next General Election or perhaps we should let him make a complete mess of it as he has done since his contradictory speech in 1997 , What utter deceit !!
4. Scott said...
When house prices crash and bring down people's only security in life and jobs become affected too, who will these millions of people blame? Will there be violent clashes with minority groups followed by an extremist new government, a much more powerful police force and a mass exodus? Alternatively, will it be like Russia whereby several bankers were murdered out of revenge/justice and state assets were stripped? These are not wild speculations of a demented drunk, these are things that have happened very recently in history. You cannot have a house price crash in isolation, ithere will be wider consequences!
5. Idproperties said...
Property in London are in demand due to external Overseas buyers.
The rest of the UK may see a considerabe slowdown due to higher interest rates.
As for HIPS, its difficult to judge what kind of an impact this will have on Property.