Monday, Mar 30, 2009
Some good charts showing prices have to fall because of loan to incomes
Lovemoney: Why prices have further to fall
A good article confirming that loan to income ratios is what has brought property prices in real terms down 50% already. At peak according to HBOS/ Halifax loan to income ratios were just below 6x , the Council of Mortgage lenders have confirmed the average now is 3x's, prices are going to have to fall 50% because lending is not going to go back up as this article confirms. Property prices are not going to go back up to 2007 levels for two decades and then only in line with wages.
Posted by sybil13 @ 03:43 PM (880 views) Add Comment
8 Comments
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1. bidin'matime said...
Yep.
2. Eiji said...
Agreed. Current prices are ludicrous.
BTW, why don't any of my comments ever show up in the comments section?
3. amjidk said...
i agree totally and would add that they will probably overshoot on the downside, my strategy of waiting for another 12-18 months would be spot on if it weren't for the government putting a spanner in the works with QE etc..
4. quiet guy said...
@amjidk
If you are concerned about QE (I am as well), you'd be better off worrying about preserving you savings rather than worrying abouy house prices. I expect that the real inflation rate is going to be significantly more than the official CPI/RPI rates which will make houses look a bit better value than is realistic which complicates things for people like you and me.
5. quiet guy said...
@Eiji
If you want to see your posts to the HPC blog published quickly, you simply must have an 'admin' password (used with key symbol after the 'Username' field. Sometimes the posts are coming in so fast that not having an admin password makes it virtually impossible to get a discourse going because everybody has moved on by the time your comment has been approved. As long as your posts and comments are reasonable (check the blog guidelines), the site moderators seem to be quite willing to grant an 'admin' password.
6. stillthinking said...
Good article with reminder of the sums involved. A rather epochal additional point though is that wages are going to fall in the UK which wasn't a trend in previous crashes.
The UK owes money externally which we have to work off. Imagine you borrowed money from a farmer, and you have no other choice but to work that debt off. You can offer your labour to that farmer in the form of books, films (wrong language), dairy products (already has them), public sector services (not applicable), financial products (flat refusal) etc but the farmer has the whip hand because the farmer -chooses- the labour he wants, not the labour you want to give.
The only way the UK can rid itself of our huge government and also privately held debt is to provide work which is acceptable and wanted by our creditors. We DO NOT choose. We could have the largest most vibrant economy in the universe but unless we make something our creditors want then our debts won't go down.
A fair proportion of our creditors consider twenty dollars a day good income. For them to use our debt to purchase from us, our production is going to have to be pretty cheap. Otherwise our indebtedness will simply grow worse by itself.
There is a gross arrogance in the UK that we simply offer up existing production at existing prices. Paying back is unfortunately going to be on a like for like basis. We bought £20 video players, and now we are going to have to make them, or something else at a similar affordable (to our creditors) price, which means wages will collapse. And so will house prices. Worse than this fellow suggests. All of which is incredibly deflationary leading on to the old forgotten aspect of the crisis, which is that their is only the choice of default through a) actual default or b) inflation default.
7. Puppee said...
good article we have known this for a while but it is never mentioned in the mainstream press or news so the sheeple get to hear about as the sooner this happens the better it will be for the general economy so how do we get the word out to the mainstream media
8. bidin'matime said...
Still Thinking - nicely put.