Wednesday, Jul 25, 2007
Short, sharp and to the point... Sir Landlord, post this on your site!!
BusinessDay: A housing perspective
Quote a couple of uncontentious figures, connect two dots... the London housing market can only go in one direction: DOWN
Posted by confused76 @ 12:32 AM (163 views) Add Comment
4 Comments
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1. Orwell said...
There is no link - has it been turned off? I wonder why?
2. confused76 said...
it works from the usual article link
however this is the link again
http://www.businessday.co.za/articles/markets.aspx?ID=BD4A522770
3. denzil said...
It's an interesting article and painfully correct. I'm no bull but if you factor in the interest rates during the two periods mentioned then even though income to price ratios are 3 and over 10 then because of the low interest rates the repayments from the period of 3 * salary and 10 * salary are significantly less extreme. However, in my very humble opinion allowing house prices to run amok because of a period of low interest rates is utter madness and will create a disaster if rates rise significantly again.
I do still struggle to see where the crash will come from as at this point in time I don't see interest rates tipping 7% causing forced sales. I still see a period of froth being blown from house prices of up to 10% and then either tiny rises or falls which will look and smell like stagnation.
I would like to be wrong and see a really big slap in the face to financial services sector and money markets who appear to have taken leave of their senses over the last 5-10 years.
4. dohousescrashinthewoods said...
Denzil, I believe the case for a crash at less than 7% is on the basis of leverage.
To oversimplify, if it took 7% to crash a 3x leverage, 6x leverage would only require 3.5%
Clearly it's not that simple, but the point is that masses more debt creates a lower IR pain threshold/tipping point. I wouldn't be surprised to find out next spring that a crash kicked off in earnest this autumn.