Thursday, May 21, 2009
RICS chief economist bleats the same old message.
The Gaurdian: House prices 'close to stabilising'
Simon Rubinsohn says house prices will soon stabilise, but lending will continue to elude first-time buyers and that contrary to expectation when the credit crunch began, the London property market had been the most, not the least, buoyant in England and Wales.
** article a joke., but the comments are better.
Posted by 51ck-6-51x @ 01:11 PM (1895 views) Add Comment
20 Comments
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1. 51ck-6-51x said...
It does seem that London has fared relatively well, especially central London, which leads me to believe that there is a lot further to go. Anyone have any thoughts on London's markets?
2. house said...
@1
The operative word is soon. I can only assume soon to be in about 3 years time and then stay there for the next 6 or 7 years. Did he not hear of S & P (expected) downgrading the UK Triple A credit rating from stable to negative. Many are living in Cukoo Land.
As said before many people are in denial. Time will tell.
What do you think?
3. icarus said...
"lenders coming out with interesting packages". Hmm, "interesting" in the same way that CDOs were "interesting", or in the way that Lloyd's 'get your parents to ante up your deposit' scheme is "interesting". It simply means the banks need anything other than straightforward deals to keep themselves afloat.
4. techieman said...
666 - i like this one:
"The current recovery in the housing market is effected by several unusual factors .
1) - Pent up demand
2) - Record low interest rates
3) - Low return on Cash
4) - Falling stock markets
Also the London market is boosted by the recent low value of Sterling.
Prices will never return to the late 90's level of affordability with the increasing number of households and dreadfull planning restrictions in the UK .
However , increasing taxation and the return of normal interest rates in the near future will prevent a return to increasing prices .
Imho"
which then gets a right hook from
"GrownUpTalkin - This is just 'property investment talk'
1- There are over 1 million empty properties in the UK, and more will become empty as unemployed people from abroad move back home or elsewhere.
There are also properties frozen in the construction pipeline to be finished.
2,3,4- Investing in property can't be compared to banks not offering good interest rates on no notice savings accounts or accounts where you invest in a bond for a few years.
UK interest rates will have to start to go up within the next 12-18 months because of the inflationary effects of prining tens of billions of pounds.
Also as forward currency pegs begin to expire for importers and they have to hedge in new contracts because the £ has fallen against major currencies around the world this also means all our imports and services priced in other currencies will rise further causing inflation to rise meaning interest rates will have to rise.
The housing market can't be compared to the stock market either.
House prices can't just keep on rising like a stock market does as the housing market doesn't produce anything of value to the economy, a home is just a home, not an investment plan.
And as interest rates rise affordability in the market will be dented more in the near future.
Like Sybil 13 mentions banks provided people with mortgages using 'borrowed money' from other international sources.
This source of funding is over.
With banks being able to lend less and people being able to borrow less as a result the housing market will continue to correct itself.
Seeing as the culture of banks borrowing money to lend to mortgage borrowers started at the start of the decade it would seem house prices will have to fall to prices seen in the late 90's."
Knockout! BTW is that "our" sybil?
5. mark wadsworth said...
I can't bear to read the article but the comments are indeed priceless.
6. uncle tom said...
Are house prices close to stabilising?
In my opinion, absolutely not. But that's only my opinion.
Now, who has the better track record for predicting the housing market -
The chief economist at RICS..
..or me?
7. techieman said...
i like the chief economist at RICS and i like uncle Tom, but who to believe ? theres only one way to find out.....
8. crunchy said...
Chief economist attacked by a bear, answers to the name of Tom.
9. icarus said...
techie - re the first four points you list @4, I'm assuming that somebody's arguing that low return on cash and on stocks leads to investment in alternative assets e.g. property, so I'm not sure why you're saying that you can't compare the housing and the stock markets. Surely you can from this angle. They're also both subject to bubbles (defined as unjustifiably high price/yield ratio) caused by easy credit and spec behaviour, so both can lead to boom/bust economics.
Maybe your housing - stockmarket distinction stems from the classical distinction between earned income (capital, enterprise, labour, wages, profits) and unearned income (land rent, monopoly rent, interest, monopoly privileges including money management and banking)? This distinction I can see. The predominance of unearned income means a 'financialised' economy, with high, debt-leveraged house prices and a personal and corporate debt overhead, where debts accrue interest faster than the economy's ability to pay it, where productive investment takes a back seat and where local and other tax authorities cannot hold down land prices, which are capitalised and paid out as interest to the banks, so the authorities are forced to tax the productive sectors - wageearners, businesses, consumers - more heavily than they otherwise would.
10. 51ck-6-51x said...
house - I personally think we will have some more falls as more BTL empires wind down and more unfortunate souls loose their jobs and must either sell up or get an extended financing deal (possible because banks don't want fire sale and see an eventual recovery, so why not accrue some outstanding in certain cases?). It may not be until late summer though due to mortgage approval timing.
By the way an S&P rating outlook is not some expected action, but rather an assessment of potential change (subtly different) an outlook is not necessary for a change in rating either (would be more shock factor if a downgrade happened without the outlook).
11. techieman said...
Icarus - they were two comments at the bottom of the article. I was going to say i didnt agree with all the points made by the "non VI" - but ive been a bit busy.
So none of the points were mine.... but i generally quite liked 'em. I might come back re your points later.. sorry.
12. Majic said...
Remember that S&P were giving triple A ratings to ALL the big banks, immediately prior to their collapses. So what do they know?
13. symo said...
All recovereh is dependent on the UK banks and governement being able to raise credit. They can't unless they sack some Heads of Diversity on 100k a year.
14. pelethar said...
I think there's a Richard Littlejohn fan in the room......
15. growler said...
on a lighter note...
The RICS are even more amusing than the BofE gives them credit for
16. Stu531 said...
What's disappointing here is that, if FTB cannot get mortgages, but that BTL can (because they have a bigger deposit than FTB), we've still got the problem of no new homeowners - the whole invest-rather-than-live thing.
The government should be enabling house prices falls, whilst making BTL difficult (though the recent news on making it more difficult for bad Landlords should help).
Of course, given the number of houses that MPs have these days, it's not likely to be in their interest to engineer this...
17. Mohc said...
Prices are topping out at the top of this bull trap, not bottoming out as some naive commentators are reporting.
18. mdmick said...
I wish I'd said the following: As unemployment goes up, how can house price mortgage lending improve?
It's very sage. So now can not be the time to get excited about house prices rising!
Also, if you do go from a good salary then to job seeker's allowance, IMO, you will generally find that they contest your right to the measly money they are meant to give you. You will generally find that actually mortgage repayments can not be met. This is the breaking point area, as far as I am concerned: through no wrongdoing, you find yourself with no back up plan and you get repossessed. My feeling is that it is about to go exponential.
19. japanese uncle said...
An uplift skillfully engineered/staged/coordinated by those who wish to further exploit more venturesome (less thoughtful) investors in a suckers' rally both in stock market and property market. Those risk their fortune in this phase will be sorry for such move for the rest of their lives.
20. symo said...
@Techieman,
How can there be pent up demand when rents are falling across London.