Sunday, Dec 16, 2007
Oh my God! It is a bubble!
Guardian: Home truths: tales from housing's front line
Karen Ward, chief UK economist at HSBC, says that homeowners in the UK have been living in a bubble which is about to burst. 'I didn't find a genuine balance between supply and demand in the property market [no immigrants and divorcees? how about students?]. A lot of demand has been speculative -- people expecting big capital gains on their properties. As people realise rapid gains they were expecting aren't going to materialise [uhuuuuhhhhuuu!] a lot of that demand will drop off.' There is evidence that the buy-to let market in particular is being driven by people buying for the potential profit on their property rather than from the rent they think they can get [no kidding!!]
Posted by confused76 @ 01:11 AM (1112 views) Add Comment
12 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. George Sore Ass said...
I read Karen Ward's report the other day and she pointed out something that I've believed for a long time, using the same evidence. There is no UK shortage of property and there never was. The evidence is clear if you look at rents. If there was a shortage of property due to more single people, immigrants, etc. then you would expect to see rents rise rapidly too, as house prices have done.
But they have not. I looked up a one-bed flat in SW London and saw that the current rent in a block where I used to live (several flats available) is 750 GBP. The price in 2001 when i moved in? 750 GBP. If you look across the country, you'll find a similar story. Rents have hardly risen in the last 6-7 years.
So there is no shortage of property. Only a shortage of property available *to buy*. The reason is obvious - low interest rates shifted the cost of buying downwards around 2001 but not renting. People could borrow more so prices rose, and this sucked in more investors. All these new investors priced out many first time buyers, but increased the stock of rental property available, subduing rent increases. Smart people realised this and rented instead of buying.
With the bubble now popped, I would expect things to revert back so that eventually rent and buying will be balanced again. This will mean large house price falls, but probably some rent increases too as the pool of rental property shrinks with BTLs selling up. Those who've enjoyed cheap rents for the last 6 or 7 years will be well placed to pick over the carnage that was BTL and get a nice place for a reasonable price in the next 2-3 years.
TIMBER!
2. hpwatcher said...
This makes a lot of sense to me. I feel that the effects of immigration has been hugely overstated, as most simply aren't able to earn the money to either buy or rent. It's all the activity of 'amateur' speculators.
But the question is how much longer before we see the effect of a real correction? So far all we have seen are fairly neglegible reductions.
3. confused76 said...
Housing in numbers
£220,111 Current average cost of a home in the UK
9 Number of times house prices are above average annual earnings
£2,200 Average drop in price on a £100,000 property in the past three months
40 Percentage that UK homes are overpriced
85 Percentage of towns unaffordable for first-time buyers in 2005
UAAHHHH HAHAHHAH HAHHA HHH 40% IT S CRASH
The BTLetter
'Despite having a 94 per cent occupancy rate, I am now veering away from the residential sector." UHHHHUUHHHH
The Agent
'We sold a house on the Balham-Battersea border for £620,000, but the valuer came in with a valuation of £550,000. We argued with him and he raised the valuation by £40,000, but the buyer had completely lost confidence and pulled out [i.e.buyers trust surveyors]. The house is now under offer again at the same price" COME AGAIN!!! THEN WHAT DID YOU "SELL"??? STILL ON THE MARKET
It's definitely a buyer's market: buyers at the moment will get a bit of a bargain. It's only going to take one little niggle with a property and the buyer will go elsewhere. AHH HAHAHH HAHAHHAH
'I'm feeling quietly confident about next year. People will still get married, have children, get divorced, so there will still be house sales.
YEAH YEAH YEAHHHHHHHH the immigrants the students the small island
4. paul said...
This is a very recurring theme I find among homeowners:
"So even if people have the money, they are holding on. In the end it just becomes a self-fulfilling prophecy elsewhere, but not here."
"... but not here".
In other words "I think I've been smart enough to choose a location so good that it will be immune to property downturns".
Forget what you think, love. Let's see what the market thinks of Burnham on Sea ... computer says "no"?
5. Orwell said...
The average salary in many windows of agencies in Bristol is about £14,000 per annum. Notwithstanding that this will mean all professional services will suffer from the slowdown in time, Burnham on Sea is 30 miles or so commuting from Bristol and there are not many jobs down that way paying near £14000.
So if the purchasers of a £170,000 house want to commute and can afford it with all the stealth taxes and the like, fine. I think that they will NOT sell a house at that value. I predict it will fall to about £120,000 if the sellers are lucky...
6. happyrenterz said...
Why do we report the average home price and average income in the UK? The super-rich with their super-expensive homes completely skew this statistic. The median, or middle value, is far more representative of the "average person". This is what I see being used in the US a lot and it is better.
7. doomwatch said...
I live near "nappy valey" and I have been laughing at the empty EA offices while walking along Northcote Road on a Sat morning. They
have been dead since September, when according to "experts" like Fpill Spencer, this is when the market picks up. The Dougal and Garden agent
is talking out of his arsh.
8. financial planner said...
'You always expect it to quieten down in the weeks before Christmas, but this year it's particularly quiet. People have given up the ghost earlier than normal. They're waiting till the new year."
Ah yes, the spring bounce. Yep, that'll be sure to arrive! Not!
9. techieman said...
happyrenterz yes i made this poiunt a while back. The median price is the key - i think someone else highlighted that in the states the price of the median house nationwide has fallen for the first time since the depression. This aint restricted to florida and california!
10. it_is_going_with_a_bang said...
'I don't think that this is going to lead to a recession,'
Oh Please.
The one thing that has been keeping the ecomony going for 10 years is house price inflation and there won't be a recession when it falls apart....
Wishful thinking !
11. sold out said...
Doomwatch,
Yes thats exactly what i have been doing in Chelmsford,walking past all the EA offices and laughing at them sitting there pretending to be busy.its a joy to see.
12. Urine Trouble said...
Old Joke Time, What does an estate agent do in the afternoon? Stare out of the window just like they do in the morning!