Thursday, Nov 29, 2007
Don't panic! Don't panic!
The Times: Gloom not doom. Correction not crash.
Are we talking down the housing market?
In a word, yes. The shrill headlines are far more alarming than the actual prospects for house prices.
Interest rates now look certain to fall, easing mortgage costs. A repeat of the negative equity blight is unlikely.
Posted by little professor @ 10:08 PM (614 views) Add Comment
10 Comments
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1. Trader said...
The housing market is not being talked down at all. I have been examining the property market in glasgow for the last 6 months and it has most definatley taken a huge hit. It seems that the interest rates look set to fall but with inflation rate rising at an uncontrollable speed the bank will have to actually increase interest rates! This is obviously the horrible situation the bank is in- whether to let the lives of britons go down the pan with rising inflation added to by lowering interest rates or to let the property market drop 20%+ by raising interest rates to stop inflation!??
2. daft boy said...
For most people, though, a house is not a short-term investment. They may as well sit out the crash – at home or in de nile.
3. drewster said...
In the past year the headlines have gone from:
+20%: Prices keep rocketing up! Buy buy buy!
+10%: Prices increase a bit more slowly, but still definitely upwards forever
+2%: Cooling off, expect a flat period for a little bit then back to the hyperinflation
0%: Prices to remain steady in a "soft landing", but definitely won't fall
-1%: Due for a minor correction, still a soft landing, definitely won't crash
I wonder what comes next....?
-5%: Prices regain sanity, now it's back to business as normal and the market will recover before Christmas
-10%: Vendors return to realistic valuations, great opportunity for bargain-hunters
-20%: Buy-to-lose investors relieve stress through bankrupcy and prepare to plunge back into the market
-30%: Government claims to have solved immigration problems as millions of Poles return home because UK economy is screwed
and so on, make up your own headlines!
4. Stevie Dee said...
If this website has not been taken over by the Government, it soon will be.
5. Quiet Guy said...
There is something odd going on here. I expected a very long, slow, gradual turn in sentiment as the bubble fizzled out. I was thinkig in terms of at least two years before these sort of stories became mainstream followed by a decade of decline. Instead, in the last few weeks, the bears seem to be coming out of the woods and mauling us fast and hard. I think there might be dead cat bounce - soon.
6. Urine Trouble said...
I am with drewster on this one, prices must come down and if they do it better be worthwhile. In my 30's living with parents, don't want to rent.
7. inbreda said...
"Interest rates now look certain to fall"
wHY?
8. Davros said...
A 31% year on year drop in mortgage approvals isn't a slowdown, a correction or soft landing.
This might not have been reflected in prices yet, but it's a matter of time.
9. dohousescrashinthewoods said...
Base rates will fall, mortgage rates will rise
10. Aaron_m said...
Base rates may or may not fall (probably will), mortgage rates will definitely rise. House prices will definitely plummet. Rents will also fall significantly. The latter two won't really be affected in any real sense by the central bankers (in my humble opinion).
A question for you all: If we take for granted that politicians don't care about the economy as a whole but simply want to help, or be seen to help, the vested interests (including idiot voters who bought hovels for insane prices) then what will their next move be? Secondly, will their actions actually help those idiot voters? Cutting central banks interest rates might seem like a good idea (to make the debt seem smaller), but it might just push up the mortgage rates (due to the expectations of rampant inflation).
I think the only bit of this I'm unsure of is the affect of massive inflation. Part of me thinks it might suit those in negative equity who think it'll help to artificially decrease the size of their debt (i.e. make their house seem worth more as prices move up with inflation). On the other hand, banks will be increasing their rates to take account of the inflation.
Therefore, I suspect that no amount of cackhanded intervention by the central bankers can ease the blow. If you owe a bank 10 times your salary for a hovel (and some tat 'funded' via equity release), you're still going to spend 10 years of your life paying it off and have nothing to show for it other than a hovel and a hangover and a Playstation.