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Economist: Global House Price Over/undervaluation Chart

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Being a landlord in Germany or the United States and being a tenant in France, Australia, Spain or the UK seems to be the best strategy if one believes in long run mean reversion and if the relative yields make sense on a cashflow basis.

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Surprised Britain isn't higher, I'd have thought we were currently around 40% overvalued, down from the 50% peak, although if we do finally get a crash the undershoot should gives us a good 40% overall drop from where we are now.

Governments of the world should be learning from this crisis and implementing policies to stop these booms, which always end in tears. A house should be a nice stable asset that one can buy when good and ready, not an investment vehicle that needs to be jumped on and off at the right stages in the cycle.

People being 'priced out' needs to stop and the media need to stop ramping this HPI is good claptrap.

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Surprised Britain isn't higher,

Global house Prices: Economist. [Previous Thread]

Many articles state that the UK's housing bubble was [iS] the most inflated in the world.

Edited by Dan1

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Global house Prices: Economist. [Previous Thread]

Many articles state that the UK's housing bubble was [iS] the most inflated in the world.

Thanks for that - it seems that according to the Economist, things are inching in the right direction, down a couple of % in a quarter. On that basis, there's another five years to go just to reach parity.

One of the more interesting stats in this updated table is that UK HPI from 2006 - 2011 is listed as 'nil' :D

Edited by rantnrave

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FWIW - this is using the Nationwide quarterly figure, so the Economist consider an average UK house price of £130.5K as fair game.

Edited by rantnrave

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None of these "leading" economists suggested house prices were anything but a one-way bet in the boom years - why should we think they are any more correct now?

60% falls from peak for the UK.

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Surprised Britain isn't higher, I'd have thought we were currently around 40% overvalued, down from the 50% peak, although if we do finally get a crash the undershoot should gives us a good 40% overall drop from where we are now.

"Against long-run average of price-to-rents ratio"

I think you are right. House prices here are more overvalued than that. The last column in that table measures "price-to-rents ratio", but since rents are also being artificially pushed up (by housing benefits), it understates the overpricing.

They do say "long-run average", which does reduce the distortion, but they don't say how long this run.

Governments of the world should be learning from this crisis and implementing policies to stop these booms, which always end in tears. A house should be a nice stable asset that one can buy when good and ready, not an investment vehicle that needs to be jumped on and off at the right stages in the cycle.

People being 'priced out' needs to stop and the media need to stop ramping this HPI is good claptrap.

+ 1

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None of these "leading" economists suggested house prices were anything but a one-way bet in the boom years - why should we think they are any more correct now?

60% falls from peak for the UK.

Basically they have been full of shite for the whole decade - what they counted as growth was nothing but debt and that debt has wrecked the real economy and driven a lot of it abroad - what a result!

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the stench of dogturd is overwhelmingly.

UK house prices have been so overinflated by so much more, and for so much longer than any other area than chinkoidland, any reference to "long term averages" going back to 2000 is utter toilet.

no other country west of dim sum land has a situation where both people work on above average incomes struggle to service interest only mortgages at 0.5% interest rates because the prices are so high.

it is such a bubble. if its more "overvalued" in these other countries like Australia how can they afford interest rates at a level which would lead 5million plus houses being repossessed in the UK???

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prices to RENTS? RENTS?

they do realise RENTS in the UK are so high because there are 10 poles living in one bedroom paying it, and a bunch of Nigerians claiming housing benefit next door, and others paying 80% of income.

is that how it works in Singapore?

Rents and house prices are too high in UK. By epic levels. to compare them both and say that makes UK not so "overvalued" is utter baloney.

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the stench of dogturd is overwhelmingly.

UK house prices have been so overinflated by so much more, and for so much longer than any other area than chinkoidland, any reference to "long term averages" going back to 2000 is utter toilet.

no other country west of dim sum land has a situation where both people work on above average incomes struggle to service interest only mortgages at 0.5% interest rates because the prices are so high.

No-one struggles at 0.5% interest rates, because such rates aren't actually available to buyers

tim

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Here's the article:

http://www.economist.com/node/18925999

And here's the chart:

An international perspective - America's crash has happened and is in the process of undershooting. Britain of course, is resolutely hanging on to damaging overvalued house prices at all costs. Hoorah for Blighty!

Thanks for sharing. I've put this on the blog as well.

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tim the senior veteran pedant. he probably gave fashion critiques to holocaust victims. the man has no idea how insane it is out there.

interest rates are 0.5%. as a result many people on variable rate mortgages are paying ludicrously low mortgage rates. in additions, millions and millions of UK mortgages are on interest only arrangements, illegal in any other country in the world except Eire. yet loads of overindebted mewed couples are having to firefight with 2 good incomes because of the obscene amount of debt they have accumulated.

If UK had interest rates of australias at 4.75%, and had interest only mortgages disbanded, there would be millions and millions of repossessions. the collapse would be epic.

so the economist putting UK house prices as less overvalued than Australian prices by comparing mortgages since 2000 to rents, or whatever sleight of hand they have done is cretinous. it makes me spew my guts.

Victorian slum housing in slum areas of London like Tooting cost £600,000. The comparable price anywhere else in the world would have a zero taken off.

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None of these "leading" economists suggested house prices were anything but a one-way bet in the boom years - why should we think they are any more correct now? (...)

Basically they have been full of shite for the whole decade - what they counted as growth was nothing but debt and that debt has wrecked the real economy and driven a lot of it abroad - what a result!

To be fair the The Economist has been warning about this bubble for almosta decade. In 2003 they even had a very comprehensive special report about it. But the country didn't want to listen.

Some links here: (2003 special report) http://www.housepricecrash.co.uk/forum/index.php?showtopic=159795

This was another great article:

" Britain’S Home-Ownership Manias Serve The Next Generation Ill"

http://www.housepricecrash.co.uk/forum/index.php?showtopic=149260

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Good thing rents have reached a permanently high plateau, otherwise those numbers might be a bit optimistic.

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great links Tired.

they woke me up for sure.

unfortunately the latest offering makes the Daily Express read well researched.

Yes, I'm having the same feeling - that in the past few years their quality is going down. Perhaps since that editor left. ("Eliot", was it?)

Though I'm not sure if it's me/us that are becoming more demanding? Nah, it's them - they are approaching the mediocre average. I think.

Pity, they were really brilliant.

Didn't help though, nobody listened. :(

.

Edited by Tired of Waiting

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Being a landlord in Germany or the United States and being a tenant in France, Australia, Spain or the UK seems to be the best strategy if one believes in long run mean reversion and if the relative yields make sense on a cashflow basis.

I am not sure that there is a tendency to revert to the mean. Rents are rising in the UK and Sydney as due to hugh LTVs(UK) and high challenging affordability (AUS). This simple valuation metrics ignore causality, which is captured by a econometric model. Some analyst have suggested that economic fundamentals in Australia justify the level of house prices.

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I am not sure that there is a tendency to revert to the mean. Rents are rising in the UK and Sydney as due to hugh LTVs(UK) and high challenging affordability (AUS). This simple valuation metrics ignore causality, which is captured by a econometric model. Some analyst have suggested that economic fundamentals in Australia justify the level of house prices.

Germans can get 100% LTVs for multi family houses.

I think that planning restrictions and social rent levels are what seem to drive prices. High LTVs are a necessary but not sufficient condition for a bubble.

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I am not sure that there is a tendency to revert to the mean. Rents are rising in the UK and Sydney as due to hugh LTVs(UK) and high challenging affordability (AUS). This simple valuation metrics ignore causality, which is captured by a econometric model. Some analyst have suggested that economic fundamentals in Australia justify the level of house prices.

Careful with the "it's different this time" arguments.

A more objective tool is to see what is the average cost/sq.m to build a house, compared to the average selling price/sq.m. I bet the ratio is above 2, or even above 3.

They can't really use the "small crowded island" argument down there, right? ;)

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Germans can get 100% LTVs for multi family houses.

I think that planning restrictions and social rent levels are what seem to drive prices. High LTVs are a necessary but not sufficient condition for a bubble.

Yep, particularly for a sustained, long term bubble. I mean, a credit bubble triggers a price bubble, but also a construction bubble, and the extra supply would bring prices back down - in a few years. (See Ireland, Spain and the USA.) But add a planning blockage and the bubble takes longer to come back down (UK).

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Here's the article:

http://www.economist.com/node/18925999

And here's the chart:

20110709_fnc140.gif

An international perspective - America's crash has happened and is in the process of undershooting. Britain of course, is resolutely hanging on to damaging overvalued house prices at all costs. Hoorah for Blighty!

House prices in Japan undervalued? The article got to be joking. A reasonable 600sqf flat in Tokyo still cost £400k+.

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They underestimate Chinese over-valuation because so many chinese flats are built empty - as speculative flats - and teh shortage of rental properties pushes yields up. Once distressed sales put these on the market the true 30+5 overvaluation will be revealed.

Germany is a bargain, especially towns and cities in the former East Germany where you can pick up whole good quality pre-war city blocks for a song.

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  • 276 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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