the don

lets look at mortgage multiples for man wiith non working wife and 2 kids assume he earns £40000p.a-above average salary tax and ni amount to nearly £9000, leaving him with £31,000p.a or £2600 per month take home if he borrows 3.5 x salary - £135000. at 7% repayment mortgage he will pay £1000 per month in mortage. add council tax gas, electric imnnsurance etc together -say £300/ month. he is left with £1300 to cover food transport clothing etc. if interst rates go to 8. 5% his repayment mortgage is £1130 per month and he has £1170 left for everrything else. if he borrows 5X salary-£200,000. at 7% repayment mortgage he pays£1430/ month leaving him with £870 for food etc at 8.5% repayemnt he pays £1630/ month leaving £670 to feed an clothe family. if mortage interet rates hit 8. 5% there is a good chance that he will at some point be unemployed. he may need to take a pay cut to say £35000 to get a job. result: he will barely be able to feed his family. if property prices drop he will get the double whammy. the lender however, will not lose. what is teh chance of mortgage interest rates hitting 8.5% ? pretty high with UK and US borrowing out of control.

TB is not ahamed to lie. he lied about WMD and the 45 minute warning and sent our troops into combat knowing some would die. if he was a man ( like thatcher) he would have sent the lads in on whatever was his real reason he can hide behind th eweasle words, b ecause as a traione dlawyer he is skilled at using words to deceive.

i like the bit where he says that the EAS are obliged to get the best price for the vendor. the reality is with many EAS being wholly or partially dependent on commisison for their income, total turnover is more important than actual prices. 1.5% of nothing is nothing!! i believe the factors that will bring reality back will be: panic by BTLS unaffordability of FTBS Starvation of EAS Less risky lending by Banks he seems to be knowledgable about the flat earth soiciety. presumably membership is compulsory for EAS.

ok lets look at it from the developers perspective in the last housing slump- late 80's early 90's -the developers worked on a premise of pile em high, sell em cheap. they were busy fools. since then they have wised up. part of the HPI was caused by developers restricting supply and foicing up prices. they would only build what they sold and held their prices. hard to prove , but it loked like a cartel with all the majors doing the same thing. they learnt from the politicians and spun the line that the shortage of supply was all down to beastly planners. obviously some truth, but by no means the whole story. in recent years the davelopers have been consolidating so that there are a limited number of huge developers,( wimpey, barratt, persimmon, redrow ) who control the spec housing market. the scarcity of land for self build has driven people to buy very expensive boxes if they want new build. so what will the reaction be to a downturn? slow down the rate of build, hold on to the land bank and try and hold prices up. sub contractors, suppliers will feel th pinch but the developers will not sacrifice margin. they will rpobaly shed some head office staff but by nad large they run with relatvely low central overheads to blow their game the govt and planners need to free up land for small developers& self builders who would build more imaginative quyality homes at good costs

The BTL phenomenon has underpined the housing bubble. It is generally recognised that there is currently a dearth of FTB's . This will make the completion of chains more difficult. When the BTL brigade start dumping their properties, they will in general go to FTB s. This will further remove sources of people at the bottom of chains as the BTL sellers will not be trading up. this should accelerate the correction just as the reverse accelerated the price bubble. wait for it !!

i dont own my house at the moment. i sold in 2002 when i had to relocate from s east to north west. i chose not to buy as i have set up a new manufacturing business and did not want the pressure of mortgage when my personal cash flow was low-at times it was nil. i have always viewed my house as my home. i have concluded that property overall moves in line with the growth in the economy- c 2.5 % p.a. people who ride the peaks and troughs are more speculators than home owners. i consider that some of my equity released has been used as true business investment. if the business goes tits up then it will prove to have been a poor investment. i will buy again when my income stream is stable- but not at todays ludicrous prices

A few comments on this thread: firstly, in a " free" market economy there will always be a churn with factories opening and closing. the fit survive and the less fit are at risk. it also depends upon the extent to which the industry is under competitive threat from overseas. the french do support there industrial base including using hidden ilegal support. we have a government that chooses to suport the unproductive public sector intsead. as a nation we voted for labour twice so we have got what we voted for. i persoanlly disagree with support for specific companies as this can cover up under performance. better in my view to set the right framework for businesses to start/ grow. the enterprise instinct of the brits and many immigrants will over time produce successful organisations. the right framework in my view is very low taxes-personal and corporate. slim down the bureaucrats who have to justify themselves by wasting the time of people who do real jobs in private enterprise , commerce and the frontline public services. decent education and training is a pre-requisite and i would prefer to see university education reduced in quantity but free for those who do it. whilst it is easy to be negative about some failures manifested in plant closures, we should recognise that the financial services in the UK is still a world beater as well as some sectors of industry. ther are some things that new labour has not manged to strangle ( yet)

i am involved in supplying roof tiles to the new build and re-roofing sectors our product is niche but i am in touch with the volume new build market the market was good up to Christmas, but activity has slowed since the turn of the year. admittedly there was a late burst of winter snow in march, but i heard the other day of major rooofing contractors layong off 18 roofers in midlands through lack of work. too early to say if this is a blip, or the start of a major general contraction

Duke of Hazzard No problems with being pedantic. This was meant as a light hearted comment as a counterpoise to some of the clever economic stuff from Dr. Bubb et al. I was in a good mood having seen the Taffs pull off the Grand Slam. Do you think I might have fooled Phil Spencer and Kirstie Allsopp?

one of the things i was taught early in my management training was the rc factor-the resistance to change factor the basic premise is that people try and maintain the status quo as long as possible as change is uncomfortable. as humans we can accept "good news" in the form of apparently rising prices easier than bad news with prices falling thats why people try and sell at ludicrous prices when the market has started to face the reality of a normal market eventually reality will kick in withh low inflation the high debts that some people have taken on in mortgage etcetera will begin to bite and thats when prices will drop -like a stone

we neeed to nderstand that the HPC was accurately predicted by Britains greatest Physicist and Mathematician in th 18th Century(i think!) Newton's 3rd Law of motion: To every action there is an equal and opposite reaction.............. or what goes up must come down!!

Paulw One of the reasons we are in this ludicrous housing bubble is because too many people see houses as cash generating investments, rather than being places wherer people live. It is thus not unreasonable for you to place a priority on buying a place that you like against sitting it out for what seems likle an eternity waiting for the full correction to unwind. It may take years and life is too short for all of us. Having said that my personal view is that the speed of the correction will be meteoric, with the major correction being over by the middle of 2006. EA's must be getting close to starvation now, especially those who are purely paid on Commisison. They will drive prices down to get activity levels back up.

brown bear there were 2 recessions under the last tory govt, but we need to recognise the root causes recession1 was effecetively Thatcher having to deal with the bankrupt philosophy of the preceding Callaghan govt which handed power over to the Union barons. the whole country knew that some stiff medicine would be needed and Maggie was not afraid to dish it out. the price was tough for many people but Thatcher got the message home that the world does not owe us Brits a living. If you doubt that travel in Africa and see what our fellow human beings have as a birthright. Abject poverty for many. the 2nd recession was a combination of allowing too much liquidity into the money supply to re-expand the public services and a Chancellor who had his own agenda. Any simalarities to todays situation?

my heart says vote conservative but my brain hopes new/old labour should get in and have a go at managing the ship that will sink under all the bullsh*t and jobs for the boyos that have been created for tonys cronies. dont think tories have enough talent yet, but hopefully they will get some good new uns after the next poll. they will need them .

excellent reminder FM the most worrying statement people can make is" it's different this time" what is different? people, are very slow to change over time, economic trends up and down are very slow to take root . i am a non believer in new paradigms. i can accept slow incremental shifts. however, if anyone can convince me that there has bene a paradigm shift in places lilke Wakefiled, Middlesborough where property prices have gone ballistic in the last couple of years i will consider taking up self flaggelation as a new hobby it will all end in tears

no rational person can conclude that house prices can defy gravity. ok so what will trigger the crash? it has to be a loss of confidence by vendors, buyers and the middle men(EAS) i remember after the last crash took hold , the recovery was expected when the first time buyers ability to buy was better. that was taken to be when interest rates dropped. we have the same problems with FTB ability to buy, but interest rates are only part of the equation as the amount of debt taken on is now proportionately more. added to tghsi is credit card debt etc interest rates in real terms are as high as last time. 2 things were different before. a) fewer specualtive BTL almost no IO mortgages. probably things would stutter along and slowly slide without an extertnal shock. however, the shock is coming from UNCLE SAM who will have to put up IRS at a rate and with the US economy probably going to slide back into recession. "its the economy , stupid" or perhaps "it's Bush who is stupid" ( as well as those who put him back in the white house again

i agree with much of what marina has said. in older houses there was normnally more space as well as bigger gardens. also due to the absence of major devoers such as barratt, there was much more individuality. although victorian terraces might seem the same there are often subtle differrences that add character as well as more imaginative use of features on the elevations. todays houses are built to much improved standards in terms of insulation. etc however, developers building many units buy the lowest value materrials they can get. they will save £200/ house by using chep bricks when the extra could have allowed them to create a better appearance through some more attractive bricks. maintennce on old houses is often a combination of dealing with neglect( eg roof) form previous owners as well as modernisng by installing 21st c entury kitchens, bathrooms etc. the worst modern houses were probably the ones built in the 60's / 70' which were very drab( fletton bricks, concrete roof tiles) and uninspiring elevations. some of the building standards were also poor

I am involved in thesupply of building materials-clay roof tiles and bricks-to the construction industry. this year it is expected that over 50% of the "housing " starts will in fact be flats and apartments. this is because developers have had to comply with john " 2jags" prescott's directives on meeting certain development density levels. it bears no relation to what the consumer wants- is it unreasonable in the 21st century to want a tiny garden and somewhere to park a couple of cars? if this trend continues there will be an imbalance in dwelling types. the developers so far have ben making easy money and selling surplus units to BTLS- not likely to continue once the price crash bites properly