ours brun

This seems to be similar to Japan's experience over the last 15 years or so. A massive property bubble during which Japanese banks were the largest in the world followed by years of property declining in value for 13 straight years. During this time many of the Japanese banks have either folded or had to merge (e.g. Sumitomo with Mitsui) as they have been crippled by high levels of debt. Don't think that it can't happen here too!!

A brilliant bit of analysis. It shows that the reasons for the property boom and the inevitable Gotterdammerung are quite complex. Interesting to see how the UK compares to other countries in respect of these reasons. Some countries: e.g. Holland, Spain, Australia and part of the US have also experience major property booms over the past few years where other areas haven't e.g. Germany. Some of theh factors are obviously global e.g. low interest rates, stock market crash. Others seem to be peculiar to the UK: political leadership (or lack thereof), BTL mentality, changes to the banking system.

LOL "AN INTERNAL INSPECTION IS RECOMMENDED." ...what is it some sort of Tardis??

Removing (or reducing) stamp duty does nothing to help FTB's. The financial advantage is negligble and low purchase costs increase volatility. It is better to increase purchase costs. How about a 5% tax on all property purchases. This should also help damp down the BTL market a bit.

I'm sure its Victorian: "It was not a shabby, dingy, dusty cart, but a smart little house upon wheels, with white dimity curtains festooning the windows, and window-shutters of green picked out with panels of a staring red, in which happily-contrasted colours the whole concern shone brilliant. Neither was it a poor caravan drawn by a single donkey or emaciated horse, for a pair of horses in pretty good condition were released from the shafts and grazing on the frouzy grass." Charles Dickens The Old Curiosity Shop pub 1841 The only thing not Victorian is the asking price

Hasn't this happened already? Property prices on the Costa's are now even more outrageous than in the UK, thanks in large part to retirees and 2nd home buyers from Blighty.

Arguably, increasing stamp duty might in the long run help FTB's by reducing speculation, making BTL less attractive etc. In Europe I think many countries have VAT on house purchases of 5% or more. With notary costs etc it typically costs 10% or more to buy a place in many countries (France, Spain, Holland, Germany etc). Although property prices have risen in many European countries over the past few years (Germany being an obvious exception) it seems that the UK has the wildest boom/bust cycle. Increasing the costs of moving would help damp this down. It might not be a popular move to increase stamp duty but it could help. If the government was to be kind it might then use the extra revenue raised this way to benefit homeowners in other ways.

Yeah. This article makes a drop of 30% seem inevitable.

http://www.timesonline.co.uk/newspaper/0,,...1451817,00.html What if your house price crashes? Experts forecast falls of up to 30%. Clare Francis and Jessica Bown find out how you can protect yourself AN estimated 300,000 homeowners could find themselves in negative equity by the end of 2006, according to Capital Economics, a research group. Homeowners have been warned to brace themselves for house-price falls of up to 30% after the Financial Services Authority (FSA), the City regulator, warned that the risk of a big decline in property values posed a threat to the economy. In its annual Financial Risk Outlook, the FSA said it expected the economic environment to be “relatively benign†this year. But it added there were short and long-term risks that could threaten this — and cited the weakening housing market as one of the main dangers. The FSA is warning that consumer confidence would be adversely affected, which would lead to a slowdown in consumer spending. Unemployment would rise as industries such as construction, estate agents and retailing came under pressure. All these factors would have a negative impact on the stock market and consumers could see the value of their investments fall, as well as their homes. There are already signs that the housing market is slowing. Many estate agents and housing-market indexes have reported falls in property values over recent months. The Royal Institution of Chartered Surveyors said that property values fell for the fifth consecutive month in December, although the drop was the smallest for three months. The institution said it expected prices to continue falling for the next three months, after which the market will begin to recover, taking the average house price 3% higher this year. Halifax’s latest house-price index showed that values rose slightly in December, following two months of falls. The bank reported that the cost of the average home had gone up 1.1% to £162,086, although it said this was likely to have been a temporary blip. While it is not forecasting a house-price crash, Halifax believes values will fall by 2% this year. However, a number of commentators regard the FSA’s 30% slump scenario as highly probable. Neil Woodford, who runs Invesco Perpetual’s Income and High Income funds, said: “I think there will be a big correction in housing. Over the next three years, falls of 20% to 30% would not be extreme. In fact, I can see circumstances where prices could fall by more than 30%.†Durlacher, an investment bank, also foresees a slump of about 30% in the next few years, and Capital Economics is forecasting falls of about 20%, with a 7% decrease predicted for this year. If prices do plummet to this extent the FSA estimates that the number of homeowners who fall into mortgage arrears will increase from 83,000 now to about 345,000 by the middle of next year. However, the impact is not expected to be as great as the last time house prices fell sharply. Negative equity will only be a problem for those who need to sell, but the worst-affected will be those who have been relying on the wealth in their property for other aims such as paying school fees or supplementing retirement income. David Pannell at Durlacher said: “About 70% of homeowners expect to use their house as part of their pension, but if property prices drop people will start to look at other places to invest. Public confidence has already been hit by the equity bear market, mis-selling scandals and a general distrust of the financial industry, so I think a lot of homeowners will be cautious and look to cash investments, such as cash Isas and structured products that offer capital protection.†One of the best bonds that offers full capital protection is from Citibank. If the FTSE 100 rises by 30% or more in the first three years, the plan closes and you receive your initial investment plus 30%. Otherwise, it pays 130% of growth in the index over six years from February 18.

3. It is what the majority of their readers want to read. Since when have newspapers reported the truth!

I wonder what the re-valuation would have been without the phone mast going up. Reports over the last month seem to show prices dropping 10% or more. I smell a rat. Could it just be that the EA is using the tower as a way of getting the seller to drop her price to more realistic levels in order to make a sale (e.g. 5% off for the tower, 10% because the house was way overpariced in the first place)?

Want to save thousands on your new home? ---don't buy until at least 2007 !!

How many homes did these brickies put up before being found out. It makes you wonder about the quality of workmanship. What is incredible is that the poor quality was only apparently discovered when the houses were finsihed. Also I do wonder why only the brickies involved seem to have been disciplined. Strange that no-one saw that the work was not up to scratch. Didn't they have any supervision? Didn't the building company check qualifications? Why are the foreman and the site manager also not losing their jobs? Something doesn't smell very fresh here. :angry: I hope someone will take the trouble to look at the quality of other houses built by Whelmar. A cheap shot: never understood the term "Jerry built". In Germany houses a generally constructed to a higher standard, sell at acceptable prices etc. In the UK too often we have the real "Jerry built" housing. Come to think of it a lot of Germam housing was built by British brickies in the 1980's (see series 1 of Auf Wiedersehn, Pet). I assume they were better supervised

After watching ww.housepricecrash.co.uk for the last two months this is the about the most compelling evidence that the HPC is well and truly under way. Without first time buyers there is basically no-one to go into the bottom end of the market. (OK: there may still be the odd would-be BTL landlord out there---fools rush in where angels fear to tread ).

Personally I feel very sorry for this particular family. Just shows how you can be screwed up through no particular fault of your own. I does however highlight a fundamental flaw of the housing system in that buyers can delay, walk out of the deal etc without any financial penalty. In most countries an offer constitutes a binding contract and if either party pulls out there is a significant financial penalty involved.

Also I think it is possible to make decent fuel by fermenting alcohol (not bad to drink either ). I think cars were converted to run on alcohol years ago in Brazil and it is now being considered in Europe. In the longer term I think there is a major issue regarding a possible increase in fuel costs wrt housing as many places are not really suited to life without a car. My parents live in rural East Anglia where there are many villages without even basic amenities (supermarket, post office, doctor etc.). Also, even no pub or off licence. Still if your car runs on alcohol you can always syphon off the tank This will be even worse in the US where almost no-one could survive without cars. In most cities there is next to no public transport and even no sidewalks (sorry, pavements)!!

"Today’s experienced buy-to-let investors see property as a long-term investment, says specialist buy-to-let broker, Landlord Mortgages." A long-term investment is a short-term investment gone wrong!!

If we assume that properties take on average 2-3 months to sell (in a normal market) this would imply for an area with approximately 600 properties for sale there would be a turnover of the order of 50 properties per week. This 30 properties added in 3 days is roughly what one would expect. However the number on the EA's books is rising because almost no one is buying. Not surprising given the ludicrous prices!! I don't think there is any evidence yet that the market is being flooded with properties as sellers try to get out of the market. That may yet happen at a later stage of the crash when repo's etc. start to kick in.

The time to introduce a tax (or other means) to prevent a recurrence of the boom/bust cycle is obviously not now when we are just at the point of seeing the biggest housing crash in history. Otherwise we will be locked into these ridiculous prices forever. After the bust occurs then government might look at ways to prevent prices being escalated up to unaffordable levels. However in a free market the only sure way is to ensure that there is a plentiful supply of affordable, decent housing. Of course one difference between Germany, Switzerland etc unlike the UK is that most housing (including the rented sector) is of high standard, well maintained, spacious etc whereas in the UK it is often crappy shoeboxes! This is possibly one reason why Germans, Swiss etc are often content to rent, even when they have the means to buy whereas in Britain most couples want to get on the housing ladder at the earliest opportunity. The sad thing is most FTB's can't get their dream house, since that is way out of their price range. Therefore they hope to be able to trade up every few years in order to climb a few rungs up the ladder. The ironic thing is that although most home owners seem to welcome increases in property prices it makes their Shangri-la even more unattainable. 5 years ago moving up say from a terrace to a semi might cost an extra 30k. Now it is likely to be more like 100k!

The time to introduce a tax (or other means) to prevent a recurrence of the boom/bust cycle is obviously not now when we are just at the point of seeing the biggest housing crash in history. Otherwise we will be locked into these ridiculous prices forever. After the bust occurs then government might look at ways to prevent prices being escalated up to unaffordable levels. However in a free market the only sure way is to ensure that there is a plentiful supply of affordable, decent housing. Of course one difference between Germany, Switzerland etc unlike the UK is that most housing (including the rented sector) is of high standard, well maintained, spacious etc whereas in the UK it is often crappy shoeboxes! This is possibly one reason why Germans, Swiss etc are often content to rent, even when they have the means to buy whereas in Britain most couples want to get on the housing ladder at the earliest opportunity. The sad thing is most FTB's can't get their dream house, since that is way out of their price range. Therefore they hope to be able to trade up every few years in order to climb a few rungs up the ladder. The ironic thing is that although most home owners seem to welcome increases in property prices it makes their Shangri-la even more unattainable. 5 years ago moving up say from a terrace to a semi might cost an extra 30k. Now it is likely to be more like 100k!

Interestingly, in many countries (Germany, Spain, France, Holland etc) purchase costs (notary, tax etc) run at more than 10% of the purchase price. Even with the present stamp duty in Britain costs are much lower. Increasing the rate of tax (either stamp duty or introducing VAT on house purchase) might be one way of helping to stabilise the housing market by discouraging speculation. It might not be too popular with the voters, though and would certainly put a damper on job mobility.

Interesting article in today Times from Andrew Oswald. In my view spot on! http://www.timesonline.co.uk/article/0,,1072-1434763,00.html Bricks and mortar are ruining us This obsession with home ownership imposes a crippling burden on the economy OUR HOUSING market is a pain. Prices are too prone to large, speculative swings; buying and selling is difficult; house-sale chains make life a misery; workers find it impossible to move quickly as new jobs open up. The problem is that the British are fixated on owning. Two thirds of us are now owner-occupiers; only one person in ten rents from the private sector. The young, especially, cannot imagine any other world. Yet as a nation we do not have to live this way, and once did not. After the end of the Second World War most Britons went to their beds in privately rented accommodation. As with most addictions, the nation is reluctant to admit to a weakness, and has persuaded itself that owning is intrinsically good. Over the years, fostered by remarkable tax breaks, property has shot up in value, and what has been merely fortuitously profitable has acquired an almost moral sheen. Renting, somehow, is not thought of as what decent British people do, at least for long. Yet take a short flight eastwards. Switzerland, arguably the world’s most prosperous nation, has the highest proportion of renting in the Western world. Two thirds of Swiss are private renters. They disprove the common presumption that wealth and owning your home must go together. And renting is high in Switzerland not for arcane reasons but simply because property owning there has not been given preferential tax treatment. The British, by contrast, treat a house as though it were both a place to sleep and a giant piggy bank. This conflation of living and investing has undesirable effects. First, the British borrow as much as they can, and sink it into their home. People typically do not want to put money in a business and pay tax on the profit if they can get a tax-free gain merely by buying a bigger house. This, in turn, creates distortions. It pushes money away from the real, productive things going on inside an economy. That makes the economy prone to house-price swings, because we all become mini-speculators. If the UK were bold enough to set the rate of capital gains tax at the same level on homes as on business investment, the economy would probably grow faster and tick more smoothly. People would start to think seriously about renting. They would choose a house because it suited their family, not because it was an investment. Secondly, renting helps the country’s flexibility. In the 1950s, when not many people owned their homes, we had low unemployment. The United States, on the other hand, had a high owner-occupation rate of 60 per centand the highest unemployment in the Western world. Home ownership tends to damage the labour market. Because selling a home is expensive, owner-occupiers are less mobile than renters and consequently more vulnerable to economic downturns in their region. This is why West Virginia in the United States has historically tended to be the state with both the greatest unemployment and home-ownership levels. There is recent research showing that the American states with the fastest growth in owner-occupation went on to have the fastest growth in unemployment. Home-ownership also limits the ability of young workers to move to find a job. In Spain, for example, where 80 per cent of people own their own homes, there is the widespread problem of young unemployed people living at home, unable to move out because the rental sector barely exists. There the difficulty is not that unemployed people are home owners; it is that the unemployed cannot find accommodation in towns where there are jobs. High rates of home ownership also harm the creation of jobs in more subtle ways. In an economy in which people are immobile, workers do jobs for which they are not ideally suited. Immobility makes for an imperfect match of people and job openings. The resulting inefficiency raises the costs of production and lowers real incomes. The prices of goods thus tend to be higher, and real wages lower, than in a more fluid society. Thirdly, most owners need mortgages. Variable-rate mortgages have to take part of the blame for our past problems in the housing market. If we had had the American-style of mortgage we could have staved off the worst of the tearful repossessions we saw in the late 1980s. In the United States it is common to have a 20 to 30-year fixedrate mortgage. These are then unaffected if interest rates generally are pushed up by policy-makers. Fourthly, stamp duty makes the damaging effects of high levels of home ownership even worse. There is no good justification for such a tax: it hampers mobility. We need to encourage fluidity, not impair it. Finally, continuing trouble is caused in England and Wales by a system where, when someone agrees to buy a house, the contract is not legally binding. We should adopt throughout the British Isles the sensible Scottish system, where an agreement and a firm price mean exactly that. These three steps — long fixed-rate mortgages, getting rid of stamp duty and reforming the selling system — would reduce the tendency for high levels of owner occupation to ossify an economy. For the sake of the our future, as well as our peace of mind, we need a housing market that works better. A larger and healthier market for rented homes would be an important step forward. Andrew Oswald is Professor of Economics at Warwick University

This is absolutely NOT a buyers market. AT LEAST NOT YET!! Asking prices are still way too high and sellers won't come down by more than 5-10% at this stage. Wait until prices have come down at least 30% or so. This could well take another year or two. Remember also that markets typically overreact both up and down so that when the crash bottoms out there will be a REAL buyers market.

A really great article. I particuarly liked this bit: "If the people who gave real estate investment advice were accountable for their advice, there would be less people giving advice. Most real estate "experts" are not experts. They are unscrupulous salespeople earning fat commissions selling dud "investments"." In the UK we have been bedevilled by these so-called "experts". Not just in property but in the whole financial sector. Think about the dot com boom, mis-selling of pensions, endowment mortgages. I'm afraid the whole financial sector is rotten with misanthropes, out to make a quick buck. Because it is driven by obscene bonus payments, given as rewards for conning people out of their hard earned money, it will always attract the unscrupulous. Very often though the "experts" are preaching to the converted. For some reason most people seem to like rising house prices. If you are a home owner I guess it makes you feel good. Your main asset seems (at least on paper) to be worth more and you can always use MEW to finance the new car/bathroom/holiday etc. This is of course an illusion as the money still has to be paid back. Also, if prices are rising homeowners wanting to trade up to a larger house also lose out while the FTB's have no chance. Bears are always going to find it tough to get their message across since the majority of the public don't want to hear what they have to say (even when you know it makes sense). As with previous crashes, many people do not see it coming until far too late. Why is it that people are so gullible? Greed??

The situation here in Holland is rather different as mortgage interest payments are tax deductable. With a top rate of tax of around 50% there is little incentive to pay off ones mortgage and so most people prefer to have an interest only loan, saving money elsewhere, e.g. in shares or mutual funds. Nevertheless in the last few years a similar bubble has developed as in the UK with ridiculously high property prices. Likewise many individuals have withdrawn equity in order to pay for home improvements, luxuries, holidays etc.