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Spectator - Uk Housing Market


twatmangle
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Spectator

Same story, but requiring precious mouse clicks

Although highly speculative and short of evidence, this article tells of the possibilities of a Japan-style deflationary slump.

Probably nothing new to most on here, but a nice link to send to your friends and colleagues.

Make sure you're there when they read it, so you can see the blood drain from their faces in real-time.

Don’t be surprised if by this time next year your bank will only lend you twice your annual earnings. What then would be a sensible price for a typical British home? How about twice the average income, which would put average house around £60,000?

Given that the average home, according to the Halifax, is still worth £159,896, we could still only be at the beginning of this housing market crash. That, for the moment, may seem a wildly speculative possibility, but then no living British homeowner has experienced a period of sustained deflation.

If it happens, we will learn just how much we have invested our futures on the shaky premise that prices only ever go up.

EDIT: I've posted the link to the 'print this page' page as the normal page had to be read in small chunks then move to the next page. I find that annoying.

Edited by twatmangle
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Spectator

Same story, but requiring precious mouse clicks

Although highly speculative and short of evidence, this article tells of the possibilities of a Japan-style deflationary slump.

Probably nothing new to most on here, but a nice link to send to your friends and colleagues.

Make sure you're there when they read it, so you can see the blood drain from their faces in real-time.

EDIT: I've posted the link to the 'print this page' page as the normal page had to be read in small chunks then move to the next page. I find that annoying.

Well written article, I like the easy to understand Eur Mortgage analogy for deflations potential impact on those with mortgages. Best get those BTL's on the market soon as....

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There was a lot of talk on here a while back about 'going japanese' but this has gone quiet lately. Good to see that its rearing its head again as I still see this being a real possiblity.

The point is when you covered something will numerous posts evaluating etc.. there comes a point were you stop.

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Er, houses/apartments are still massively expensive in Japan, i.e 5/6 times average earnings for small 2/3 bedroom places in des/res areas i.e. within 40 mins train travel time of major cities. :ph34r:

The decade of hell here was nothing of the sort. Nicer than most British boom periods in fact! :lol:

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Twice average income? Wouldn't that be around £17,000 and a price of £34k?

A lot of articles seem to quote average earnings of £30,000. Don't know where they get this figure from but it seems rediculously high to me.

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Perhaps the £30k is the average City salary?

no no, 30k is the average salary of someone wishing to purchase a 1 bed ground floor studio flat in the the city centres crime ridden spots. seems to be the perspective im getting from our EAs

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Well written article, I like the easy to understand Eur Mortgage analogy for deflations potential impact on those with mortgages. Best get those BTL's on the market soon as....

Up to a point. Ross Clark is usually good. This raised a query:

"If inflation turns negative and remains negative, it wouldn’t matter how well you keep up your repayments; every month your debt would get larger.. "

er, no, on a repayment loan you will repay the debt. Not to say that it's a good use of your money, of course!

Agree that those on I/O expecting HPI to magic their debt away are, happily, screwed!

EDIT: for clarity

Edited by dryrot
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Spectator

Same story, but requiring precious mouse clicks

Although highly speculative and short of evidence, this article tells of the possibilities of a Japan-style deflationary slump.

Probably nothing new to most on here, but a nice link to send to your friends and colleagues.

Make sure you're there when they read it, so you can see the blood drain from their faces in real-time.

EDIT: I've posted the link to the 'print this page' page as the normal page had to be read in small chunks then move to the next page. I find that annoying.

They would almost convince you to put everything you have(or could borrow) into Gold.

Ho' they sell Gold too.

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"If inflation turns negative and remains negative, it wouldn’t matter how well you keep up your repayments; every month your debt would get larger.. "

er, no, on a repayment loan you will repay the debt. Not to say that it's a good use of your money, of course!

Depends how large the debt and how high the deflation rate..

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This article trots out the same old - and incorrect - chestnut that average house price is directly related to a multiple of average salary. This is just plain wrong - it is only true for first time buyers, who will be seeking a mortgage based on their salary and have no equity, so need a deposit to compensate for this. Many people, having bought their first house, subsequently trade up as a result of putting more savings, bonuses, inheritances etc towards a better property. Such sales put up the average house price, even if salaries stay the same.

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This article trots out the same old - and incorrect - chestnut that average house price is directly related to a multiple of average salary. This is just plain wrong - it is only true for first time buyers, who will be seeking a mortgage based on their salary and have no equity, so need a deposit to compensate for this. Many people, having bought their first house, subsequently trade up as a result of putting more savings, bonuses, inheritances etc towards a better property. Such sales put up the average house price, even if salaries stay the same.

I don't think you understand how a pyramid scheme works.

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This article trots out the same old - and incorrect - chestnut that average house price is directly related to a multiple of average salary. This is just plain wrong - it is only true for first time buyers, who will be seeking a mortgage based on their salary and have no equity, so need a deposit to compensate for this. Many people, having bought their first house, subsequently trade up as a result of putting more savings, bonuses, inheritances etc towards a better property. Such sales put up the average house price, even if salaries stay the same.

...... and all this Ponzi trade-up pyramid depends on the FTBs and their median salary and mortgage multiples.

25K X 2 = 50K

Edited by threetimesdead
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Twice average income? Wouldn't that be around £17,000 and a price of £34k?

I await the inevitable mean/median debate.

£30k is the mean avergae full time earnings (and it does take into account people like Jonathan Ross and city bankers). A better measure is the median, whichy is around £25K.

And we're off.............. :rolleyes:

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This article trots out the same old - and incorrect - chestnut that average house price is directly related to a multiple of average salary. This is just plain wrong - it is only true for first time buyers, who will be seeking a mortgage based on their salary and have no equity, so need a deposit to compensate for this. Many people, having bought their first house, subsequently trade up as a result of putting more savings, bonuses, inheritances etc towards a better property. Such sales put up the average house price, even if salaries stay the same.

Aye right !

Every house transaction is a chain leading back down to the FTB.

For everyone in the chain to "release" equity, the chain has to complete right down to the bottom.

Thats why prices will always relate to average earnings.

At the moment, the chain is waving about in mid-air looking down a long way to connect to the first link.

Off topic, but who is going to fork out 10-20k in transaction & moving costs on a falling asset ?????????

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Good article. Of course, it's (in my opinion) almost impossible to work out exactly what's going to happen to the UK economy over the next few years - so many variables to take into account, plus the certainty of as yet unknown "events, dear boy."

You'd need a brain the size of Heathrow Airport (or one of Kirsty Allsop's buttocks) to figure it out.

I think we can safely say though - it's not gonna be good, and the journalist has outlined one possible scenario.

And as for the housing market, it's always been 100% certain this was gonna end in tears.

You'd have to be thick as sh1t to think otherwise...

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Can't see this happening as japan is a country of frugle savers and britain a nation of shopaholics with no idea about savings or finance.

However, I would like to know if the japanese were similar to use before their crash?

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