Wednesday, Jun 30, 2010
Tick Tock...
Independent: How long can the housing market avoid a crash?
A potentially lethal combination of stagnant living standards and declining mortgage approvals is threatening to send the housing market into a precipitous slump.
In separate warnings yesterday, it emerged that British consumers face a four-year wait for an improvement in their living standards, while a "double dip" recession in the housing market is now "more likely than not", according to City economists.
Bank of England data released yesterday suggests that the revival in property sales seen during the second half of last year has gone firmly into reverse, with every indication that prices will fall by next year, as lending remains so sluggish.
Posted by little professor @ 01:05 AM (1692 views) Add Comment
19 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. hpwatcher said...
Watching BBC Financial news this morning, an expert was asked about the independent article. He stated that he didn't think there was going to be a housing crash, due to the amount of foreign money that is finding it's way into UK property, which will keep prices up.
So the question is, has UK property now become an investment opportunity or safe haven for the rest of the world?
2. peter said...
If property prices actually DO show some signs of falling, Merv will have to get his printng presses running again.
How about just handing out wads of £50 notes to house buyers this time around?
There seems to be nothing that UK politicians won't do to keep that bubble going...including ruining the rest of the economy.
3. hpwatcher said...
If property prices actually DO show some signs of falling, Merv will have to get his printng presses running again.
There does seem to be a stealth policy within BOE and UK government to maintain high property prices - at all costs. The only thing that could prevent this, is if their hands are tied by inflation - which is likely.
4. tyrellcorporation said...
Kathleen Sadler, 84. Mrs Sadler, and her husband David, 75, have been trying to sell their home for three years.
"We never imagined that it would take so long to sell it," she said. "It is a beautiful cottage with four double bedrooms and a great garden, and it is in a beautiful area with brilliant schools. But not a single person made us an offer.
"We have been forced to bring down our price. Originally, we were trying to sell for £700,000 but have revised that down to £630,000. We also had windows refitted and the property re-wired. You would think such a great house would have sold by now but it hasn't. It is stressful, particularly at our age."
£630,000 is still Monopoly money for a vast majority of the population and yet these people seem to think it's a 'normal' amount to spend on a house. The double irony is that they probably bought it for £35k back in the 70's on about 3x income. Shame on all those hapless young families who aren't lining up to buy this bargain!
5. Ian said...
I suspect that Merv the Nerd will try to prop the market up further by printing more money but the financial markets are getting wise to this and they will hopefully make this difficult to achieve. You cannot buck the market.
I have heard the red herring about foreign money pouring into the UK. I agree that foreigners may but exclusive homes in Chelsea and Mayfair and country estates but they do not buy shoddily built, cramped little houses and flats that lie empty in many parts of the UK.
Merv and the BOE may try to prop up the market buthey are spitting against the wind and they will only defer the evil day and make the eventual correction all the more painful.
6. simon68 said...
To: hpwatcher
Those BBC experts who said foreign money is finding its way to UK property are just buxxshit!
Do you know international hot money is flooding the banking and property markets in Asia?
For instance, if a family of 4 members with monthly earnings of $50,000 (approx. £4,310) apply for a mortgage loan with any one of high street banks in Hong Kong, they need to pay only wholesale bank interest (HIBOR) which is 0.33% plus spread of 0.5% per annum. They can buy a 4 room apartment with $6,042,534 (approx. £520,908) and repayable in 15 years. After 15 years the house is belonged to the family since all monthly payment will be used to repay the principal loan with peanut sum of mortgage interest.
The monthly mortgage repayment is $25,000 (approx. £2,155) where £2,025 is being used to repay principal loan and £130 towards mortgage interest. The monthly mortgage repayment is really cheaper than monthly rent; so it’s better to buy than rent.
Throughout this 15 years lifetime of mortgage, total interest payment is just $270,269 (approx. £23,299) versus loan amount of $6,042,534 (approx. £520,908).
7. simon68 said...
BOE holds down base interest rate doesn’t mean mortgage loan sharks will charge you un-precedent low interest on property mortgage. Unless you have the savings enough to provide 35% deposit on mortgage loan, otherwise you need to pay 3.5% to 4.8% interest on your property mortgage.
8. it_is_going_with_a_bang said...
What !? House prices actually go down? Surely not.
"But not a single person made us an offer" - In 3 years. that only says one thing about the price they are asking for their property.
They were asking £700k at the very top the boom and now they ( slowly come down to ) want to sell with 10% off that figure.
That is equivalent to having to pay over £1 million over 25 years - at today's modest rates e.g 4.2% - and somehow people still believe this country is not over priced. That's for a cottage with 4 bedrooms and a nice garden. Monopoly money indeed - although I may need a few sets.
9. uncle tom said...
One interesting stat in this piece:
"Some 85 per cent of first-time buyers rely on parental help"
So, what percentage of young people have parents who are able to help?
I've done a little bit of number crunching, and concluded that the age of the parents counts for a great deal, and that there's a tipping point..
..parents born before 1958 are mostly loaded with home equity, have often paid off their mortgage, are likely to have savings, and are more likely to have a well funded pension. They are therefore in a reasonably strong position when it comes to helping their offspring financially.
..those born after 1958 are mostly heavily mortgaged still, have little in the way of savings, and are much more likely to have an inadequate pension provision, leaving them reliant on their home equity for retirement.
Thus older parents are generally well placed to act as a BOMAD, while those a little younger need to hold on to what money they have..
So while many of the early baby boomers can play the BOMAD card (but nothing like 85% of them) the younger ones have far less scope for giving assistance.
So while older FTB's have some scope for begging from their parents, few of the upcoming generation have that option.
10. str 2007 said...
Simon68
Your numbers don't add up.
£520k Capital + £23k interest = £543k / 15 years / 12 months = £3022 per month.
Also if loans like that are being offered then there is trouble just down the road.
I think your market is in a serious bubble.
Also, how does a bank lend that much money over 15 years for just £23k and make any money. Answer it doesn't, in fact it would loose substantially when inflation is factored in.
I'm not sure any of us considered Asian sub prime but if Simons numbers are correct then it's coming.
11. Simon68 said...
To: str 2007
The mortgage calculation isn't straight line.
12. simon68 said...
To: str 2007
The mortgage interest calculation isn't straight line method.
13. simon68 said...
Thanks for the PIIGS and UK public debts crisis and US debts mountain.
Hot money is just finding a refuge in Asia.
If you really think UK can pay down its national debt to 3% of GDP and austerity plan in PIIGS work then interest rate in Asia would definitely come down. But I don't think so.
14. simon68 said...
Sorry, amend error.
If you really think UK can pay down its national debt to 3% of GDP and austerity plan in PIIGS work then interest rate in Asia would definitely come UP. But I don't think so.
15. simon68 said...
To: str 2007
Whether it is a bubble or not depends on economic growth.
If UK having 6 consecutive quarters GDP contraction could still sustain 2007 highest level house price, I don’t think 8.5% GDP growth in China/Hong Kong cannot sustain a house price increase of 5% per year.
16. str 2007 said...
Simon
Never mind straight line interest rates, you couldn't repay the capital alone unless you were repaying £2889 per month.
I think you said the other day that house prices were up 30% in the first 1/4 or since January this year.
Maybe I've got my wires crossed, but somethings not adding up.
Don't forget interest rates were dropped from 5% to 0.5%, that's what's maintained prices so far. It doesn't sound like dropping interest rates to make mortgages more affordable is an option for where you're talking about.
And a take home pay of £4000k + to achieve a 4 room aparment (even if you meant 4 bedrooms) sounds very expensive to me. But I realise people are smaller out there and put up with more.
17. simon68 said...
I forgot to mention this is a 70% mortgage which requires 30% deposit, however you can apply for 90% mortgage with Hong Kong Mortgage Corp via purchase of an insurance policy and pay premium in addition to annual mortgage interest.
http://img268.imageshack.us/img268/484/mortgageloan.gif
18. simon68 said...
“Don't forget interest rates were dropped from 5% to 0.5%, that's what's maintained prices so far. It doesn't sound like dropping interest rates to make mortgages more affordable is an option for where you're talking about.”
It is not just interest dropped to maintain house price.
There isn’t wage growth in UK and if you lose your job you are doomed. But the economy in Asia is quite strong and upward mobility in job market is high. Even if you don’t change job, you will have 5% to 15% annual pay-raise. That alone will drag down the percentage of loan repayment to household earnings.
19. 51ck-6-51x said...
Whilst the home-ownerist votes are still out there, we are at the beginning of the electoral calendar while blame may be laid at the feet of the opposition, at the same time the pressure of failing banks has weakened so there is less incentive to stem house price falls. Crashes will, of course, attract mitigation controls of one sort or another - but I think that the decline is more politically acceptable.
Recaptcha = on hamon (...ham on ...hang on ...and on ...and Ariston!)