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Sybil13

Property Prices Rising But I Am Happy To Rent For Now

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Posted this on the News Blog but thought it was worth a discussion on the forum. Article repeats the same FACTS that despite their continued repitiion seem to be ignored by those that keep RAMPING house price increase, that is market is being driven by the cash rich and any house price increase in unsustainable so further falls this winter .

However, her quoted loan to income are interesting.

The average house price, according to our figures at Savills, is at present 6.4 times the average household income, down from 8.1 at the market peak in 2007 and compared with an average of 5.0 over the past 39 years (these figures vary widely depending on whose statistics you use.) This has led some analysts to say that property values have to continue falling by another 20-30 per cent to reach a proper level.

8.1 is a far cry from the CML's 3. 5 isn't it ?

And her current 6.4 a far cry from the much quoted 4.5 , but perhaps her figures are more realistic. However, if she get 20 - 30% falls at a historic average of 5x's income, what kind of falls would she see at the historic average of 3.5 ?

So with current falls of 20%and future falls of 20 - 30% to fall back in line with income that's not a bad article for the Times !!

Asked a few Q's yesterday Here with regards GDP etc., but obviously my thread was too long and too complicated or just too boring. The point I was trying to make though was how much longer can economists / politicians / BOE etc ignore ALL the historic stats related to the value of property in relation to income /mortgage debt / GDP etc., and ignore the FACT that the bubble was driven by the RMBS market and that is a source of supply that is no longer available?

....Further, although there's been a big brouhaha about the latest HSBC 1.99% home loan offer, don't expect many other lenders to follow suit. A lot of lending power has now left the market for good. Almost £300bn of UK mortgage debt was securitised, i.e. packaged up and sold off from bank balance sheets onto the bond markets, between 2005 and 2007.

"That represents more than 90% of the growth in mortgage debt over that period", says CreditSights. And "the world isn't exactly clamouring for British securitised mortgages anymore, and won't be for a long time", says Matthew Lynn on Bloomberg. "With less money coming into the market, there won't be the same kind of demand for houses".

Yet a Rightmove survey at the end of August gave the "encouraging" signal that 78% of respondents reckoned UK house prices won't fall any further this year. And also that "the UK property industry is now seeing a virtuous circle of confidence building upon confidence".

Why's this another worry? Well, as Fidelity's Anthony Bolton explained in the weekend's FT about the stock market, "if everyone is positioned for the market to rise, it means these bullish expectations are already discounted" – i.e. factored into the price. As a result, "the market often moves to make the majority wrong and does the unexpected… so at turning points especially, the correct is the minority view".

And while there are plenty of differences between shares and houses, the principles of crowd behaviour are the same for every asset class. When almost everyone is bullish, get ready for a price fall. The near-8.5% bounce in property prices within the last six months (using Nationwide's figures at least) now looks ripe for a reversal.

Edited by Sybil13

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Guest KingCharles1st

"...Further, although there's been a big brouhaha about the latest HSBC 1.99% home loan offer, don't expect many other lenders to follow suit. A lot of lending power has now left the market for good. Almost £300bn of UK mortgage debt was securitised, i.e. packaged up and sold off from bank balance sheets onto the bond markets, between 2005 and 2007.

"That represents more than 90% of the growth in mortgage debt over that period", says CreditSights. And "the world isn't exactly clamouring for British securitised mortgages anymore, and won't be for a long time", says Matthew Lynn on Bloomberg. "With less money coming into the market, there won't be the same kind of demand for houses".

So this in a nutshell then, is the keystone of HPI-

Nice to know they give a ******. They can't sell goods that now have a poor reputation, so apart from some tacit finger wagging by the BOE, it's game over.

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Sybil...arent the CML talking about the average mortgage with their ratios?

and again, HOUSEHOLD is the key word for me.

borrowing 5 times household income seems doubly risky to me.

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Sybil...arent the CML talking about the average mortgage with their ratios?

and again, HOUSEHOLD is the key word for me.

borrowing 5 times household income seems doubly risky to me.

Ah yes see what you are saying, 4x's average wage for ONE PERSON , would be 8 x's HOUSEHOLD income, never seen it put like that , just showing what a bear of little brain I am.

Edited by Sybil13

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Agree with the overall sentiment - long way to go (down) before things are sensible again.

Of course, securitisation of 90% of lending in the past didn't mean that the burden of that lending disappeared elsewhere outwith the British mortgage industry; a lot of them were securitising to each other, or buying in loans that they would otherwise have lent themselves in the first place anyway.

The death of securitisation just means that if they can't play pass the parcel they'll have to be a bit more careful about the present they buy for themselves... and that also works for us :)

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