Sunday, Jul 02, 2017

40% of a lot is a lot of money


1. sosoon said...

This reminds me of situation 10 years ago before the props were installed.

Sunday, July 2, 2017 10:13AM Report Comment

2. jack c said...

Fire Sale anyone ?

"Industry data shows around 10,000 borrowers a year between now and 2020 will come to the end of interest-only loans, with either a projected shortfall from their repayment strategy or no strategy at all"

Sunday, July 2, 2017 11:41AM Report Comment

3. icarus said...

This is he Fail's Bad Cop act. Next week the Good Cop will tell us how house prices have SOARED and how much wealthier we all are as a result.

Sunday, July 2, 2017 02:24PM Report Comment

4. reticent said...


But does cashing in private pensions count as a repayment strategy? I thought we decided that the pension reforms were partly aimed at defusing the interest -only timebomb. But then I remember there being many more than 10k/year expected from 2015 before that happened, so it probably does. You can expect then many more to downsize as many will not want to live off the state pension in a home they had to cash in their pension to afford.

I imagine most of the 10k are people too young to cash in their pension or simply don't have one. I know pension pots tend to be less than £50k but HPs in 1992 weren't much more than that.

10k itself isn't a very significant figure. And these people will still need homes. Downsizers don't start chains, they just extend them.

Of course, if house prices start to fall, the fact that there are 10k forced sellers out there will ensure there is still some liquidity in the market.

Monday, July 3, 2017 08:32AM Report Comment

5. doomwatch said...

I suspect this will be in the hinterlands of London e.g. Barking etc.

Monday, July 3, 2017 01:57PM Report Comment

6. libertas said...

This article, where to start.

You have to question the initial premise, that this looks like 1988. At that time, unlike now, house prices were above their long term trend. Right now they are below trend (look at the inflation adjusted chart).

In 1988, there was no free movement of Europeans. London's population was continuing its collapse from its 8m in 1939 to 6.5m 1996. London's population is now heading towards 9m.

In 1988, inflation was out of control and interest rates were heading towards 17%. Interest rates are at zero now and inflation is there a little, but not much.

House building has collapsed since the 1970s and 80s.

London had just one skyscraper in the early 1990's, you can barely see Tower 42 now.

Very few parallels. Reality is, this cycle will be different. With poor housebuilding levels and huge immigration, the major trend is increased crowding levels. This means that affordability can fast deteriorate, as families that once graced 3 bed houses are now crammed into 2 bed flats, but they spend a similar proportion if not more of their wage on mortgages.

It will take the next government years to get immigration under control after leaving the EU and affordability and prices can soar from here. They have to go above the trend-line at least. I am still targeting somewhere between 2024 and 2026 for the next 2008. Recent market weakness is delaying the next peak.

Monday, July 3, 2017 08:56PM Report Comment

7. techieman said...

They "have to" ? I have heard this Matra so many times .. the latest was with a friend of mine who said cable HAD to go below 1.20 . To which I said it would likely first react to 1.30.

The truth is markets don't HAVE to do anything.

The chart you quote could easily be read that there was a top in real prices then a fall below the trend line and a retrace back toward it.

The chart isn't gospel at any rate as we all know it's limitations. I'd like to see the median price charted. I'd like to see it charted on both nominal and semi-log scale.

Humans have a funny way of discounting fundementals before they occur... maybe you're right and it is different this time. Maybe your 18 year cycle will repeat ... but have to ?

I wouldn't bet the house on it.

Tuesday, July 4, 2017 07:28AM Report Comment

8. icarus said...

libertas - why mention the long-term trend line when you point to so many changes that make it almost irrelevant? (Also, note that the pre-2008 bubble is pulling the trend-line upwards.)

Tuesday, July 4, 2017 10:04AM Report Comment

9. hpwatcher said...

Hmmm I'd love to buy a nice place in London; perhaps this is what I have been waiting for. not holding my breath tho'.

UK government literally cannot allow a HPC, it would likely kill *them*, the banks and the whole economy....that's the trouble with tying EVERYTHING to house prices...and that's where we are.

Tuesday, July 4, 2017 02:12PM Report Comment

10. hpwatcher said...

TBH the graph in the article is pretty meaningless. It's such a tiny slice of time, volume is the key thing to be watching.

Tuesday, July 4, 2017 02:14PM Report Comment

11. reticent said...

@10 Whenever I hear commentators refer to 9% yoy growth as a fact of life I wonder which of the events underlying the 1952-present dataset they think will reoccur first :

Married women entering the workforce?
Booming post-war wage growth?
Financial innovation vastly widening mortgage access?
Runaway inflation followed by continually declining interest rates?

Obviously there were negative shocks over this time too and there are other positive one-off shocks to come but the scale of these and their impact upon the trend line tells me 9% average over the next 65 years is fantasy-land.

That and the fact that it would bring average house prices to £54m by 2082.

Tuesday, July 4, 2017 02:33PM Report Comment

12. hpwatcher said...

That and the fact that it would bring average house prices to £54m by 2082.

Who knows? Perhaps a loaf of bread will be £10,000 by then....

Tuesday, July 4, 2017 03:25PM Report Comment

13. libertas said...

The graph goes right back to the 1800's.

Our house sold for about £500 in 1932. It then sold in the 1960's for about £5,000. We bought it for about £325k in 2014 and they are moving towards £500k. By 2050, no doubt, it will be £5m.

We are beginning to hear rumblings of wage increases and inflation. This is when house prices really take off, lifting gracefully above the trend-line whilst interest rates rise in tandem up until a crescendo when they collapse again as they always do.

If you are only interested in bear news and not trying to project the timing of the next crash, there is little point being here because you will simply be the broken clock that is correct once a decade. News-flash, house prices peak when interest rates are high, because peak interest rates co-incide with peak economic strength. As with 2008, interest rates collapse as house prices collapse and business confidence falls, yet the media will tell you that rising rates are the death of a housing market. Yes, there are winners and losers, but we are discussing the general market not overly leveraged idiots competing for a Darwin award.

Tuesday, July 4, 2017 10:15PM Report Comment

14. britishblue said...

There is a political angle that is largely ignored.800,000 new young people are able to vote every year. These young people are starting to group together and see Corbyn as moderate, many would go far left of him. On the other side of the coin 800,000 elderly people die each year. These are predominantly Conservative and want to restrict new house building, believe greenbelt is sacred and tend to believe that if young people worked anywhere as hard as them they would have the same prosperity and property. Over 4 years this represents a swing of around 3.2 million voters from right to left, with a good percentage hard left. So that long awaited perfect storm could be on the horizon. In the next few years the government have to solve the housing crisis and embark on a massive house building spree otherwise they are going to be hounded out of office. If an increase in housing stock and easing of planning restrictions coincides with a house price crash, you will also see a crash in the rented market. Whether we still have base rates bumping along the bottom is another story. Plenty of black swans out there. But none of us can predict the future and when one will land.

Wednesday, July 5, 2017 10:24AM Report Comment

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