ours brun

Fine. But let's keep things in perspective. See the Rockall Times for a bit of satire: http://www.therockalltimes.co.uk/2004/12/2...atastrophe.html Asian tsunami catastrophe: UK house prices unaffected Relief for millions as Britain rides out the storm by our housing disaster rapid response team City analysts have expressed cautious optimism that the terrible tsunamic catastrophe which engulfed a number of Asian countries over the weekend will not have a devastating knock-on effect on the UK's wobbling house prices. One man in a smart suit and tie — who bought a small terrace house in Hackney in 1982 for three-and-sixpence and is now sitting on a £4.2m goldmine — told The Rockall Times: "As the first reports started to flood in it looked for a while as if the disaster might knock back prices in the south of England by as much as 0.073 per cent, bring the average price of a one-bed flat in the Home Counties to a three-year low of £765,000. Mercifully, the market rode out the storm and we are able to report no casualties among those who were planning to regale relatives with dinner-party anecdotes about exactly how much their bricks-and-mortar have risen in value since Christmas Eve." One visibly-relieved Basingstoke hostess said: "It's been a rollercoaster couple of days, I can tell you. We've had a terrible six months what with worries about further rises in the Bank of England base rate and then came this Boxing Day body-blow. I'm a bag of nerves but I can tell you that I had the estate agents in the other day and they confirmed that our three-bed semi had risen in value by 1.2 per cent during December. Thank God we've survived this nightmare." The outlook is not quite as rosy for homeowners in other parts of the world, however. House prices in parts of India, Malaysia, Sri Lanka and Sumatra fell by 100 per cent over the weekend, with beachfront property particularly badly hit by the sudden slump. Lots and lots of foreigners perished in the aftermath of a submarine earthquake measuring 98.8 on the breathless newsworthiness scale. Mercifully, only four of these are reportedly British, and Her Imperial Majestyness Liz II's embassy in Bangkok is hopeful that a party of UK paedophiles enjoying a winter break in the sun-kissed holiday paradise of Phuket has survived without injury.

I think the practice was also quite common during the last crash. It got the name gazundering (as apposed to gazumping). Both gazumping and gazundering are a consequence of England's stupid property laws. In Scotland (and in most other civilized countries) the price is fixed on both parties when the offer is accepted.

There willl be a time when it will be necessary to consider the economic impact etc of the disaster in the Indian Ocean. However, with respect, I don't think that this is now. I wonder what kind of perspective on life those of you have who think the most important aspect of this tragedy is its impact on British house prices. Remember that millions in the Indian Ocean have no longer any form of home.

To be honest I have never understood why owners of 2nd homes should qualify for any sort of discount on their council tax. If they can afford to have two homes they should be able to afford to pay the full coucil tax. The present situation means that in many tourist areas e.g. cornwall, cumbria, yorkshire dales etc. locals have no chance of owning their own homes because all these rich b@$#ards with their City salaries buy up all the decent housing.

I would take issue with the title of this article "Buyers' market as house prices drop". Although house prices are dropping it isn't a buyers' market...yet. Prices are still way overvalued and it will probably be at least couple of years before it becomes a buyers' market.

If you are building the bungalow to live in then go for it. Even if prices drop 30% you will still break even and you have your own place. However if you are doing this purely as an investment I would have thought that it is much more dodgy as there is the risk that you don't cover your building costs.

I don't know how easy it would be to get a Euro mortgage in the UK but I know that here in Holland (where I live) the Dutch banks will lend for UK property in Euros. Although interest rates are lower (eg 2.8% pa for 1 year fixed, 3.6% for 5 year fixed rate according to ABN-AMRO) you are obviously at risk if your earnings are in sterling because of possible exchange rate fluctuations. In the long run one would expect the value of the pound to decrease, thereby increasing both the effective cost of repayments and the loan (also with the risk of negative equity). Not for the faint hearted.

There comes a point where house prices have risen so high that decreasing interest rates will have no effect on the HPC. This happened in Japan where despite the lowest interest rates in the world (with the base rate around 0%) house prices have dropped for 13 years in a row. If a drop in interest rates was to precipitate further house price rises it would only make the resulting crash worse!

Probably more of an issue are houses that are in danger of flooding. This seems to be happening more frequently. In some areas it may be impossible to get insurance against flood damage. This must have some impact on house prices.

Two years ago this Christmas I spent several days staying on one of the islands off the coast of Thailand most affected by the tsunami (on Koh Yao Noi island). Although we have not yet heard of casualties there I fear the worst as there is nowhere there to escape as it mainly low lying. I really fear for the holidaymakers there and also the residents. Most of the islanders there live in small wooden shacks by the beach. Even if they escaped with there lives I imagine their homes have been destroyed. There but for the grace of God go you or I. At this time I couldn't care %@$#%# about the price of houses or oil. Frnakly I find it despicable that there are people that think the most important effect of the Indian Ocean disaster is the effect on the world economy and the HPC. Have a nice Christmas.

There comes a point where lowering interest rates will not prevent a house price crash. In Japan property prices have declined every year for the past 13 years despite the lowest interest rates anywhere (with base rates at some periods at 0%).

Net population growth in the UK is about 0.4% per year. On a population of roughly 60 million this works out at 240000: roughly 100k households. Compare this to the approximate 200,000 house builds per year and it is obvous that immigration is not resulting in a shortage of housing although it will tend to reduce housing supply by a small amount. As the BBC article points out there are however wide regional variations but I don't think these have very much to do with immigration. They are probably more a result of where the jobs are (i.e. SE England).

According to government statistics UK population will increase by about 10% to 65 million over the next 25 years. http://www.guardian.co.uk/population/Story...,594319,00.html The present net population growth rate is about 0.4% per year. Although such an increase could have some small effect on housing in the long run I can't myself believe that this will have any effect on the coming house price crash.

...and other countries with a very high price to income ratio are also in danger of collapse. Not long ago the IMF warned of this. http://news.bbc.co.uk/1/hi/business/3682144.stm

Just be patient my friend.

Looking at Paragon's calculator: http://www.paragon-mortgages.co.uk/mortgag...toletcalculator It is easy to see how they have come up with these figures. This is real voodoo accounting! However a return of 29.5% (or whatever) relies on being able to sell at the right time. I wonder how many BTL'ers have been able to get out. Now that prices are falling I would expect a stampede of landlords trying to get out whilst they are still ahead. Makes me even more convinced that we are about to see a crash of epic proportions. Also, the capital gain that Paragon quote is I think based on a 75% interest only mortgage. With such a high level of gearing falls in property values also magnify the losses. It would only take a 25% to realize a 100%. Beyond that one is in negative equity (and potential bankruptcy). What I have realized over the years with investments is that it is important to be able to sleep well at night, even when things aren't going so great. I wonder how many insomniacs we have right now among the BTL crowd? One other point. I think I have just realised one group of people who stand to gain from the coming crash. That is the lawyers! If what Paragon claim is typical of other mortgage companies I would wonder whether borrowers might have a claim that they have been mis-sold these mortgages (check the small print).

Course it's a good time to buy....for the estate agents.

It is easily possible to have lost out by not being invested to the max in property the last few years. A regret I have is that I didn't trade up several years ago when I had the opportunity. However even if it was right then it doesn't make it right now. Do not use the past as a guide to the future!! I am in no hurry to move now as I know the market is moving DOWN.

Also, in Japan house prices have been falling for the last 13 years in a row. During this time interest rates have remained consistently at rock bottom. During this time the Back of Japan even cut rates to 0% in order to try and stimulate economy! The worst type of forecasting is simply to extrapolate from the immediate past: i.e. since prices increased 20% last year then they will do so this year. Although most people are not that naive there are many who assume that in the long run house price inflation will outpace other forms of investment. WRONG!! There is no fundamental reason why this should be the case. Long periods of falling prices can happen (as in Japan) and lowering interest rates will not necessarily help to create a new boom.

I'm absolutely no expert on BTL but the estimated rent per house is 5200 pounds pa. At a price of 92k this gives a gross yield of 5.6%. From this I assume one needs to subtract tax, cost of maintenance and letting agents fees so I would think that the real yield (assuming 100% occupancy) is nearer 4%. Can someone explain to me why this is a better investment than putting ones money in a savings account? Getting a mortgage for this type of "investment" seems to be financial suicide in todays market, even with a 20% discount. For BTL a more realistic sales price would I think be something around 60k. Am I missing something? Seems to me that anyone thinking this is a good investment must have a screw loose!

Not as bad as an infinite year mortgage (which is effectively what an interest only mortgage is). Interesting definition of the word "help". Like giving an alcoholic another drink.

I'm not sure about Dubya but I seem to remember Bush Snr to have a famous aversion to broccoli. Is this a secret US plot to rid the world of the beloved green vegetable? We shoul dbe informed.

...but are we sure the photos were taken spring 2004 ....or 2003??

Key is that there is now deflation of goods (rather than services) in the UK. See article in yesterday's Telegraph: http://www.telegraph.co.uk/money/main.jhtm...5/cninfla15.xml "The headline rate masks the continuing difference between inflation in services, which is rising at 3.5pc a year, and goods, where prices now stand 0.4pc lower than 12 months ago. John Butler, economist at HSBC, said that core goods deflation was running at 2.6pc year on year, as discounting on the high street was intense." With the prices of goods in the high street decreasing manufacturers and retailers are being forced to lay off people in order to cut costs. If long term deflation sets in then as Japan has shown it becomes very difficult to shake off. Everyone becomes used to lower and lower prices. In this climate there is no incentive to rush out and buy non essential items. This in turn puts more pressure on manufacturers and retailers resulting in more lay offs and bankrupties. Since the effect of this is to dampen the economy further prices drop even more. The last time round reducing the interest rates helped to stimulate the economy with the result that we have enjoyed 10 years of growth. This time round it will be more difficult to do the same trick as interest rates are already quite low (although admittedly having risen a bit over the past few months). In a global economy I guess this will also depend on what happens elsewhere (especially China which seems to make most of the world's electronics these days) and exchange rates. If deflation really kicks in expect really massive decreases in house prices (anything up to 70-80%). This might be the real doomsday scanario but we have got so used to inflation that we have never really experienced long term decreases in prices although I think this has happened in previous centuries in the UK with massive social upheaval. A simple house price "correction" will seem like a picnic.

Still, it is interesting to compare UK vs German house prices. It has been argued that if UK house prices were to fall 50% then builders would not be able to make a profit. This must be nonsense since German labour costs must be as high as in the UK, the quality of German construction is higher than in the UK and yet prices of new houses are maybe only 50% of those in the UK. Just goes to show how far UK prices need to fall. The high cost of buying is a factor on the continent however. In most countries, taxes + notary costs etc work out at more than 10% of the purchase price. Therefore people don't move on very often.