eric pebble Posted August 8, 2010 Share Posted August 8, 2010 Watching the housing bubble with ever increasing interest. Published on 5 Aug 2010 Sorry, but I just can’t share in the enthusiasm for the rebound in Scottish house prices or the return of bumper bank profits which underpin it. Is it sensible for a city such as Edinburgh, so dependent on public services and bank subsidies, to be growing its very own housing bubble on the eve of the biggest cuts in public spending in British history? Cuts that will lead to many thousands of job losses. Perhaps they know something we don’t. You might have thought Edinburghers would be counting their pennies instead of taking on ever greater debts by bidding up house prices. Glasgow’s property market shows more rational behaviour for a country struggling to emerge from deep recession. According to the Registers of Scotland, prices in the west have declined in real terms over the past quarter, leaving average home values in Glasgow not much more than half of Edinburgh’s – £127,566 as against £213,915. http://www.heraldscotland.com/comment/iain-macwhirter/watching-the-housing-bubble-with-ever-increasing-interest-1.1046011 Quote Link to comment Share on other sites More sharing options...
lulu Posted August 8, 2010 Share Posted August 8, 2010 http://www.heraldscotland.com/comment/iain-macwhirter/watching-the-housing-bubble-with-ever-increasing-interest-1.1046011 Right on the ball, as usual. How the Herald is giving him the column inches I don't quite understand. It all comes down to this key section though; "How many of those taking out mortgages in Edinburgh will be able to keep up the payments if interest rates return to normal, as they surely must?" Quote Link to comment Share on other sites More sharing options...
Pole Posted August 8, 2010 Share Posted August 8, 2010 Right on the ball, as usual. How the Herald is giving him the column inches I don't quite understand. It all comes down to this key section though; "How many of those taking out mortgages in Edinburgh will be able to keep up the payments if interest rates return to normal, as they surely must?" Very few people care about future payments. The last 10 years have taught them that the more reckless you are the more support you get from the government. I agree that Edinburgh average house prices are now beyond crazy. However, FTB properties are clearly heading down. Quote Link to comment Share on other sites More sharing options...
nohpc Posted August 8, 2010 Share Posted August 8, 2010 Very few people care about future payments. The last 10 years have taught them that the more reckless you are the more support you get from the government. I agree that Edinburgh average house prices are now beyond crazy. However, FTB properties are clearly heading down. The more people that take on debt now the less likley the BOE will be able to raise interest rates in the future. Quote Link to comment Share on other sites More sharing options...
ccc Posted August 8, 2010 Share Posted August 8, 2010 Very few people care about future payments. The last 10 years have taught them that the more reckless you are the more support you get from the government. I agree that Edinburgh average house prices are now beyond crazy. However, FTB properties are clearly heading down. Yep. And from the bottom the rest will gradually follow. Quote Link to comment Share on other sites More sharing options...
lulu Posted August 8, 2010 Share Posted August 8, 2010 The more people that take on debt now the less likley the BOE will be able to raise interest rates in the future. It is not a question of being able it will become a question of need. They will need to put rates up and they will have to at some point. Quote Link to comment Share on other sites More sharing options...
Pole Posted August 8, 2010 Share Posted August 8, 2010 Not for a very, very long time if they can help it. If they can't help it, it will be very sharp to protect the pound. Bit of a binary outcome really. So, looks like house prices will crash either very slowly (0.5% for years) or very quickly (IR back to normal levels). They're not going to go up anytime soon. It's the speed of decline that bothers me. One thing's for sure - nobody has learnt any lessons from this 'worst ever' crisis. It'll happen again and again and again... The biggest winners are banks. They have now even more power than ever before. And unless we have a natiowide revolution (which in itself would be hugely destructive), things will only get worse in the long term. We're doomed! Quote Link to comment Share on other sites More sharing options...
non frog Posted August 8, 2010 Share Posted August 8, 2010 One thing's for sure - nobody has learnt any lessons from this 'worst ever' crisis. It'll happen again and again and again... The biggest winners are banks. ... The ONLY winners are the banks Quote Link to comment Share on other sites More sharing options...
yellerkat Posted August 8, 2010 Share Posted August 8, 2010 One thing's for sure - nobody has learnt any lessons from this 'worst ever' crisis. It'll happen again and again and again... The biggest winners are banks The ONLY winners are the banks BINGO! Quote Link to comment Share on other sites More sharing options...
eric pebble Posted August 9, 2010 Author Share Posted August 9, 2010 The ONLY winners are the banks As ever.... Quote Link to comment Share on other sites More sharing options...
guitarman001 Posted August 9, 2010 Share Posted August 9, 2010 Good posts, all. The girlfriend and I were looking at houses this weekend, something to do. Still very expensive - ruining our bloody lives by dictating where we can stay! And even if we get one (IF prices fall) there's rip-off council tax you have to pay for living in a nice area. She's tempted to move WAY out of town but then petrol costs for work would be enormous. Sucks. I agree - an actual revolution is needed, but it wont happen. People are stupid and lazy and our society is fragmented. Quote Link to comment Share on other sites More sharing options...
Pole Posted August 9, 2010 Share Posted August 9, 2010 Good posts, all. The girlfriend and I were looking at houses this weekend, something to do. Still very expensive - ruining our bloody lives by dictating where we can stay! And even if we get one (IF prices fall) there's rip-off council tax you have to pay for living in a nice area. She's tempted to move WAY out of town but then petrol costs for work would be enormous. Sucks. I agree - an actual revolution is needed, but it wont happen. People are stupid and lazy and our society is fragmented. The more I learn about the money/banking system, the more certain I become that there'll be no justice there. In a few years time, during another crisis the government and the banks will come up with yet another way of screwing up the prudent. If we think that people-sheeple are stupid - where does this leave us (the informed ones)? In other words, if we're so smart and we claim to know how the system works, why aren't we milking it? Quote Link to comment Share on other sites More sharing options...
ccc Posted August 9, 2010 Share Posted August 9, 2010 why aren't we milking it? A few of us are. I receive my 'compensation' from the 'evil' Banking industry on a daily basis. Does make me feel a little dirty but who cares. They will ****** us all over whether we like it or not. May as well get something in return. Quote Link to comment Share on other sites More sharing options...
Timak Posted August 9, 2010 Share Posted August 9, 2010 I was at a party this weekend and chatting to some friends (around 30 years old) who mentioned they had just put in a bid for a house in the Hertforshire, they currently have a flat in a not that nice bit of south London. They bought the London flat for £300k a couple of years ago, currently on the market for £280k but there are lots on the market at the moment and the offers they were getting were very low. Selling for £280k would cover the outstanding mortgage and fees but leave nothing left. The house they are buying is significantly more expensive, but thanks to an inheritance they can just (just) afford it, in their opinion. However they were talking about renting out the London flat until the market "picked up". Their bank were apparently fine with them renting it out without any change to their current mortgage, which they agreed seemed strange when I picked them up on it. However when they had approached other lenders they apparently insisted on "ridiculous" stress tests like mortgage rates going to 7% and them being unable to get a tenant for 3 months. If they do end up renting out the flat they'd have mortgage liabilities of nearly £600k on a combined (public sector / quango) income of £100k a year. They are my friends so I wish them well, and to be fair they were hoping they could get shot of the flat asap, but some of their economic logic was amazing. One of them (first from Oxford) said "oh well if interest rates do go up at least prices should go back up just as fast" Quote Link to comment Share on other sites More sharing options...
WiseBear Posted August 9, 2010 Share Posted August 9, 2010 The more people that take on debt now the less likley the BOE will be able to raise interest rates in the future. The BOE doesn't determine interest rates - the market does. Quote Link to comment Share on other sites More sharing options...
Guest_FaFa!_* Posted August 9, 2010 Share Posted August 9, 2010 They are my friends so I wish them well, and to be fair they were hoping they could get shot of the flat asap, but some of their economic logic was amazing. One of them (first from Oxford) said "oh well if interest rates do go up at least prices should go back up just as fast" Oh dear God. What do you do in this situation? They are financially dead, but don't realise it yet. Should you tell them? I'd at least ask them why they think an increase in the cost of borrowing will lead to house price rises. I assume their thinking is that an increase in interest rates would reflect increased inflation and there would be inflationary salary rises? Assuming they are thinking at all.... Quote Link to comment Share on other sites More sharing options...
Timak Posted August 9, 2010 Share Posted August 9, 2010 Oh dear God. What do you do in this situation? They are financially dead, but don't realise it yet. Should you tell them? I'd at least ask them why they think an increase in the cost of borrowing will lead to house price rises. I assume their thinking is that an increase in interest rates would reflect increased inflation and there would be inflationary salary rises? Assuming they are thinking at all.... I think the logic was that interest rates have gone down recently and that was what lead to their flat being worth less than it was 3 years back?! Both their sets of parents are relatively well off so it won't ever be a massive problem but it still strikes me as a crazy risk to be taking. Quote Link to comment Share on other sites More sharing options...
Guest_FaFa!_* Posted August 9, 2010 Share Posted August 9, 2010 I think the logic was that interest rates have gone down recently and that was what lead to their flat being worth less than it was 3 years back?! Both their sets of parents are relatively well off so it won't ever be a massive problem but it still strikes me as a crazy risk to be taking. I think they may have difficulties navigating the choppy waters to come if their financial acumen is that piss poor. There will be a bonfire of the quangos, in all likelihood. Quote Link to comment Share on other sites More sharing options...
Tired of Waiting Posted August 9, 2010 Share Posted August 9, 2010 Watching the housing bubble with ever increasing interest. Published on 5 Aug 2010 Sorry, but I just can’t share in the enthusiasm for the rebound in Scottish house prices or the return of bumper bank profits which underpin it. Is it sensible for a city such as Edinburgh, so dependent on public services and bank subsidies, to be growing its very own housing bubble on the eve of the biggest cuts in public spending in British history? Cuts that will lead to many thousands of job losses. Perhaps they know something we don’t. You might have thought Edinburghers would be counting their pennies instead of taking on ever greater debts by bidding up house prices. Glasgow’s property market shows more rational behaviour for a country struggling to emerge from deep recession. According to the Registers of Scotland, prices in the west have declined in real terms over the past quarter, leaving average home values in Glasgow not much more than half of Edinburgh’s – £127,566 as against £213,915. http://www.heraldscotland.com/comment/iain-macwhirter/watching-the-housing-bubble-with-ever-increasing-interest-1.1046011 Good article Eric. This guy is good, this Iain Macwhirter. Well, I mean, actually he is just sensible, really - but this is still so rare that it looks good when published in the main media... Quote Link to comment Share on other sites More sharing options...
Mancghirl Posted August 9, 2010 Share Posted August 9, 2010 Good article Eric. This guy is good, this Iain Macwhirter. Well, I mean, actually he is just sensible, really - but this is still so rare that it looks good when published in the main media... MacWhirter has been a lone voice of sanity in the Scottish media for years, on a number of subjects. Trouble is, he's so often drowned out by the VI nonsense dressed up as journalism that streams from the offices of The Hoots-man. Quote Link to comment Share on other sites More sharing options...
ccc Posted August 9, 2010 Share Posted August 9, 2010 MacWhirter has been a lone voice of sanity in the Scottish media for years, on a number of subjects. Trouble is, he's so often drowned out by the VI nonsense dressed up as journalism that streams from the offices of The Hoots-man. How did you manage to say word for word what I was about to type !! Quote Link to comment Share on other sites More sharing options...
Mancghirl Posted August 9, 2010 Share Posted August 9, 2010 How did you manage to say word for word what I was about to type !! Spooooooooky Quote Link to comment Share on other sites More sharing options...
South Lorne Posted August 9, 2010 Share Posted August 9, 2010 The BOE doesn't determine interest rates - the market does. ...if they get the right number of people on the committee..the Government decides base rate movements.... although officially it's the committee.... Quote Link to comment Share on other sites More sharing options...
eric pebble Posted August 10, 2010 Author Share Posted August 10, 2010 They are my friends so I wish them well, and to be fair they were hoping they could get shot of the flat asap, but some of their economic logic was amazing. One of them (first from Oxford) said "oh well if interest rates do go up at least prices should go back up just as fast" '....ing unbelievable... Quote Link to comment Share on other sites More sharing options...
scepticus Posted August 10, 2010 Share Posted August 10, 2010 Not for a very, very long time if they can help it. If they can't help it, it will be very sharp to protect the pound. Bit of a binary outcome really. are there historical instances in which putting up interest rates did actually save the pound? Quote Link to comment Share on other sites More sharing options...
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