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Are house prices really invincible?

July 5th, 2010

Author: Jeff Taylor

According to Harvey Jones of lovemoney.com the UK property market is invincible. Not due to any scientific analysis but more because of our irrational view to the ownership of property in Britain.

“Perhaps the most astonishing thing about the credit crunch is the relatively mild impact it has had on the housing market.” He rightly says. He points out the long term damage that the economic downturn has had on the stock market, pensions, savings, salaries and employment. But how come the UK property market has been spared so far?

When the recession came many people hoped that it would put an end to the madness of 125% home loans and income multiples for mortgages of over five times salary. Then it was surmised prices would have to come down. Well to an extent that is what happened. 125% LTV loans did go and the income multiples insisted on by mortgage lenders started to get more sensible. House prices also began to fall. But miraculously even with credit tightening and a further squeeze possibly on the way, house price buoyancy recovered and still remains.

There are many factors at work, supply and demand, the number of cash or big deposit buyers, the overall number of transactions etc but the big one always remains – a house is only worth what the buyer will pay and the seller will allow it to go for. Many people forget the second part of that statement.

We are in a position at the moment where sellers can afford to wait and hang on. They have valued their house and will not sell for less unless forced to do so, even if it means waiting a few years.

With job losses coming and possibly higher interest rates there will be downward pressure on house prices. But the government will be working double overtime to try and limit the effects. This may lead to the consequence of government action inadvertently continuing to hold house prices up. After all that seems to be what has happened thus far.

What we may see is a stagnation of prices where inflation gradually erodes the value until traditional stability is reached. That won’t help frustrated buyers today but may be good for the economy in the long run.

Read more: http://www.economicvoice.com/are-house-prices-really-invincible/50011503#ixzz0soR0vOCP

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try again

That works, my router seized up and caused all manner of sh!t to happen

A very good article. All should read this.

Part of the reason we have not yet suffered/enjoyed the same HPC as in the USA is that their unemployment has gone significantly higher and there were more % subprime loans there than here. However, as we are now forced to 'rebalance the economy' or suffer a worse fate still, our unemployment and confidence level will now change places over the coming months. The house market has certainly stalled and is ready to wobble off the time honoured cliff. Australia will join in sooner or later. Their jolt after the financial crisis blew up was only a few months and confidence was restored on the back of Chinese demand. If, as I have suspected and posted here before, the Chinese figures cannot be trusted, then Australia will be feeling a colder wind very soon. They live off their mining sector and almost nothing else as primary industry. The Baltic Dry index of shipping has fallen 40% + since May 2010 and one big reason has been found to be a big fall in Chinese trade, but not entirely shown in their own data. That is for imports and exports. The other is US and Eurozone weakening.

Anecdote: I see several properties near me that had posted 'sale agreed' boards have all come back to 'for sale'. Only one sold board in my neighbourhood now and that's been there for at least a month. Last May -October there were a fair number of 'Sold' boards on show.

Edited by plummet expert

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Are house prices really invincible?

July 5th, 2010

Author: Jeff Taylor

According to Harvey Jones of lovemoney.com the UK property market is invincible. Not due to any scientific analysis but more because of our irrational view to the ownership of property in Britain.

“Perhaps the most astonishing thing about the credit crunch is the relatively mild impact it has had on the housing market.” He rightly says. He points out the long term damage that the economic downturn has had on the stock market, pensions, savings, salaries and employment. But how come the UK property market has been spared so far?

When the recession came many people hoped that it would put an end to the madness of 125% home loans and income multiples for mortgages of over five times salary. Then it was surmised prices would have to come down. Well to an extent that is what happened. 125% LTV loans did go and the income multiples insisted on by mortgage lenders started to get more sensible. House prices also began to fall. But miraculously even with credit tightening and a further squeeze possibly on the way, house price buoyancy recovered and still remains.

There are many factors at work, supply and demand, the number of cash or big deposit buyers, the overall number of transactions etc but the big one always remains – a house is only worth what the buyer will pay and the seller will allow it to go for. Many people forget the second part of that statement.

We are in a position at the moment where sellers can afford to wait and hang on. They have valued their house and will not sell for less unless forced to do so, even if it means waiting a few years.

With job losses coming and possibly higher interest rates there will be downward pressure on house prices. But the government will be working double overtime to try and limit the effects. This may lead to the consequence of government action inadvertently continuing to hold house prices up. After all that seems to be what has happened thus far.

What we may see is a stagnation of prices where inflation gradually erodes the value until traditional stability is reached. That won’t help frustrated buyers today but may be good for the economy in the long run.

Read more: http://www.economicvoice.com/are-house-prices-really-invincible/50011503#ixzz0soR0vOCP

I don't think the tenet of this article is right. There are just too many chnages to confidence, employment propsects and mortgage finance for the house market to hold on. For it is only just hanging on with a very small number of sales compared to 'normal'. All evidence points to a weak and weakening market.

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What I wish to happen and what will be are often different.

I remember back in the 1980s interest rates of 18%

property droped only 5%

People held on rater than sell,

House prices were only $75,000 not the $500,000 we have now in Australia.

I recon if we have a full blown depression than we will see 50% drops

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Apart from difficulty in obtaining finance i.e. bigger deposit required and earnings multiple being more restricted I suspect lack of job prospects is also causing many to stay put. For the past few years there have been plenty of job opportunities, especially in the public sector and changing jobs is one of the major reasons to move house. In good economic times it was also commonplace for employers to assist with relocation expenses.

The combination of very limited hiring in both private and public sectors and threat of further widespread job losses will cause many to pospone plans to move house, especially if they are having to fund their own moving fees which are not trivial. Furthermore the lack of confidence is removing another incentive to move, namely the formerly common practice of trading upwards to maximise gain from HPI. My view is that the downturn in the economy will be long lasting given the sheer scale of the debt to be addressed. It will be interesting to see what prices are obtained by those 'forced to move'.

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  • 146 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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