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Sancho Panza

House Prices To Recover By 2021/800,000 Families In Deep Debt/1 In 3 Houses Belong To Pensioners

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http://www.telegraph.co.uk/finance/personalfinance/10172791/Families-face-perilous-debts-if-rates-rise.html

' If the Bank Rate, currently at a record low of 0.5pc, rose in line with market expectations to 2pc by 2017, the number of families using 50pc of their pay on mortgages and other debts would soar, the Resolution Foundation claims.

If rates climbed to 4pc, more than 1.2m families would face a “perilous” debt situation, it added.

“A large number of households already burdened with debt could collapse under its weight if economic conditions tighten,” Matthew Whittaker, a senior economist at the Resolution Foundation, said.

Earlier this month Bank of England Governor Mark Carney indicated that he was in no rush to raise rates given the weakness of the economy. '

http://www.telegraph.co.uk/finance/personalfinance/houseprices/10172343/House-prices-will-not-recover-until-2021.html

' Although PWC expects prices to rise 3pc to 4pc annually over the next four years and to be back at their 2007 high in cash terms at the end of 2014, households will have to wait a further seven years to make up the ground lost after factoring in inflation.

Currently, house prices are 18pc below 2007 levels in real terms, PwC calculated, although they are down just 3pc in headline levels. The property market has been surging back to life in recent months, on the back of the state-subsidised Funding for Lending and Help to Buy schemes.'

http://www.dailymail.co.uk/news/article-2359490/One-homeowners-65-soaring-prices-killed-house-buying-dream-Generation-Rent.html

'Around one in three homeowners in England are pensioners as crippling house prices freeze younger generations off the property ladder, official figures revealed yesterday.

In a sign of the property crisis facing young people, the Government’s English Housing Survey revealed homeownership has dropped to its lowest level since the 1980s.

At its peak in 2003, 71 per cent of householders were ‘owner occupiers’.

Today it is just 65.3 per cent amid predictions it will drop even further.

Of the 14.4million homeowners in England, the largest number - by a considerable margin - are people aged 65 and over, equal to a record 30 per cent of the total.

There are 4.3million homeowners in this age group, which is more than a million higher than the total number for any other age group.

By comparison, there are just 2.6million ‘owner occupiers’ in the 35 to 44 age group, the age at which parents are raising a young family, with many desperate to do so in their own home.

And the number between the age of 25 and 34, also with young families but likely to have had to pay an even higher price for their home, is nearly half this number at just 1.4million.'

So the marginal buyers ie young families/25-34 year olds are parked in what looks like some deep trouble on the sidelines in rented accomodation.Yet from nowhere,they'll sustain house prices back to 7/8/9 times average salary in a fiscal squeeze where the public sector is artificially keeping median average salaries afloat?

It seems mathematically and demographically impossible to believe.

And what do you know,Britain's banks are now ready for the next banking crisis.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10171317/UK-banks-ready-for-new-crisis-Moodys-declares.html

'“We believe that UK banks are sufficiently well capitalised to absorb expected losses from both our central and adverse stress scenarios,” it said.

“Once the large UK banks execute their capital plans to address the additional buffer recently imposed by the Prudential Regulation Authority, Moody’s believes that UK banks will be well capitalised for the risks they face and will compare favourably to their European peers.” '

You can't win forever at the casino without the casino going bust.

Edited by Sancho Panza

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So the marginal buyers ie young families/25-34 year olds are parked in what looks like some deep trouble on the sidelines in rented accomodation.Yet from nowhere,they'll sustain house prices back to 7/8/9 times average salary in a fiscal squeeze where the public sector is artificially keeping median average salaries afloat?

It seems mathematically and demographically impossible to believe.

Not as in as much deep trouble as home-owners BTLers who consider their homes 'crash-proof', if enough of them can resist buying, perhaps. If we get an event such as interest rates rising or perhaps something else closely associated with settling out such imbalance and unfairness in markets. To liquidate out of the mid 30 and 40+ year olds with jumbo mortgages that Merv seems so concerned about, who chose to over-pay for housing and get into big debt.

Meanwhile we get BBC3 shows glamming up 'the ladder' and encouraging the young to find the blessed deposit, even 5% under Help-To-Buy, and Halifax adverts wanting primary school sports teachers to come and borrow to become heroic FTBs.

We've paid for it during all the malinvestment years, for those of us who refused to buy, and now again during 6 years of measures to help the massively over-indebted to keep house prices high, and the prudent people who worry about debt-value mostly all still renting.

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Just see to it that we can all have access to as much borrowed cash as we need at as low as price as possible, pay as little as possible of it back....kick or rollover the debt into the future to see it magic itself away with inflation/devaluation...we can then all get rich with what ends up being nothing left to pay.....have a nice day. ;)

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Not as in as much deep trouble as home-owners BTLers who consider their homes 'crash-proof', if enough of them can resist buying, perhaps. If we get an event such as interest rates rising or perhaps something else closely associated with settling out such imbalance and unfairness in markets. To liquidate out of the mid 30 and 40+ year olds with jumbo mortgages that Merv seems so concerned about, who chose to over-pay for housing and get into big debt.

Meanwhile we get BBC3 shows glamming up 'the ladder' and encouraging the young to find the blessed deposit, even 5% under Help-To-Buy, and Halifax adverts wanting primary school sports teachers to come and borrow to become heroic FTBs.

We've paid for it during all the malinvestment years, for those of us who refused to buy, and now again during 6 years of measures to help the massively over-indebted to keep house prices high, and the prudent people who worry about debt-value mostly all still renting.

There are a lot of people in deep trouble,not least those who don't think they are.

Their exit plan relies on socio economic groups that are already struggling, to live beyond their means for perpetuity.That's just not going to happen for a whole variety of reasons.CRE is already red flagging the future for those sat on residential housing equity/debt/50%+ LTV.

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http://www.dailymail.co.uk/news/article-2359490/One-homeowners-65-soaring-prices-killed-house-buying-dream-Generation-Rent.html

'Around one in three homeowners in England are pensioners as crippling house prices freeze younger generations off the property ladder, official figures revealed yesterday.

In a sign of the property crisis facing young people, the Government’s English Housing Survey revealed homeownership has dropped to its lowest level since the 1980s.

Top rated comment on that article with 501 up arrows:

It has never been easy to buy a house. We bought our first house in 1968. We went without everything possible. to save £1,100. My husband was earning £25 pw and I was earning £14. We got a £4,000 mortgage with interest rates reaching 15%. some days we could only afford jam sandwiches for work, we had no car or even a landline but managed. This is what you have to do we were 21 by the way. We even took an evening job for 2 years before starting our family.

- miserablereader, Ashford, United Kingdom, 10/7/2013 18:09

So 44 weeks of main earner's salary for the deposit and a mortgage of 3.07x main earner's salary at the age of 21 with plenty of pay rises ahead. What would that put the house price at if this was possible today, about £80k? That's the trouble with some of these oldies, they don't know they're born.

Edited by Dorkins

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In order for house prices to 'recover' they need to be allowed to crash first!

That's the irony.

Also there's no notion of the possibility that house prices could recover downwards.

To build a sustainable savings based economy,some sort of major readjustment in banking leverage is necessary.

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They appear to be saying that house prices will recover to peak level by 2021 in real terms. That looks flipping bullish to me. Even with the recent bounce we must be still be about 25% shy of where we were in 2007 in inflation adjusted terms. so they are saying that we can expect about 5% growth every year til then assuming the MPC stick to their 2% target, or inflation plus 3% if not.

Edited by crashmonitor

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For prices to rise to that level AND VOLUME RECOVER wouldn't we have to have the same level of mortgage borrowing as the boom including 125% mortgages, no deposit etc... ?

For prices to 'recover' like that in real terms you MUST have UNSUSTAINABLE credit expansion.

Also I am strongly opposed to the word recover being used where house prices are concerned. Recovering would mean get better or improve, but for this to happen they would need to reach UNSUSTAINABLE levels, thus prices are not recovering they would be deteriorating.

For the market to 'recover' transactions would have to reach around their long term average.

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It seems mathematically and demographically impossible to believe.

It doesn't take into a/c wage rises.

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They appear to be saying that house prices will recover to peak level by 2021 in real terms. That looks flipping bullish to me. Even with the recent bounce we must be still be about 25% shy of where we were in 2007 in inflation adjusted terms. so they are saying that we can expect about 5% growth every year til then assuming the MPC stick to their 2% target, or inflation plus 3% if not.

Let's face it, PWC doesn't have a clue.

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Top rated comment on that article with 501 up arrows:

So 44 weeks of main earner's salary for the deposit and a mortgage of 3.07x main earner's salary at the age of 21 with plenty of pay rises ahead. What would that put the house price at if this was possible today, about £80k? That's the trouble with some of these oldies, they don't know they're born.

Ah, the key thing is the affordability, according to todays pundits. Us oldies remember paying 1/6 th of the outstanding mortgage each year in interest. As a comparison, your 80K house, 10% deposit would give £10,800 as just the interest payments each year if we had 15% interest today. So it was very hard, and that DID mean no holidays or foreign travel, eating out (I'm staggered at the amount of restaurants nearby nowadays), driving crap motors and all that. My son's mortgage at the moment is significantly less than that on the house he bought a couple of years ago.

However, we had a light at the end of the tunnel via wage inflation and job security, and you can do it for a few years. The young nowadays have no such promise, in fact, there's a big red warning flag: interest rates can only go one way now.

If it's greedy boomers who are keeping house price high, why don't the like of Barrats and Persimmon cut the legs from under them by supplying cheap houses? It's the price of land, and that's under government control by too much restriction on planning consents. The banks pumped up the prices, the landowners benefit, not the pensioner who worked 50 years to buy his crib.

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"Greedy" boomers are only part of the problem but part of it none the less.

Maybe land prices would be cheaper if there were less nimbys around objecting to development.

I would like to build my own house, as would many others. What is the chance that if I tried to get pp nimbys would block it ?

Now to be fair not all nimbys are boomers. But since the vast majority of nimbys are homeowners and increasingly homeowners=boomers/pensioners ...

I agree with your comments that in the old days people saved harder. Partly because there were less opportunities to spend money in other areas. Quality of life is not constant. You can't really compare spending patterns between generations. People in the 40's had it a lot harder than people in the 60's. People in the 20s probably had it a lot harder than people in the 40's (or maybe not because of the war). You can only really compare an average quality of lifestyle. The key issue is to compare an average quality of lifestyle now with then, and look at house price affordability within that context.

Ah, the key thing is the affordability, according to todays pundits. Us oldies remember paying 1/6 th of the outstanding mortgage each year in interest. As a comparison, your 80K house, 10% deposit would give £10,800 as just the interest payments each year if we had 15% interest today. So it was very hard, and that DID mean no holidays or foreign travel, eating out (I'm staggered at the amount of restaurants nearby nowadays), driving crap motors and all that. My son's mortgage at the moment is significantly less than that on the house he bought a couple of years ago.

However, we had a light at the end of the tunnel via wage inflation and job security, and you can do it for a few years. The young nowadays have no such promise, in fact, there's a big red warning flag: interest rates can only go one way now.

If it's greedy boomers who are keeping house price high, why don't the like of Barrats and Persimmon cut the legs from under them by supplying cheap houses? It's the price of land, and that's under government control by too much restriction on planning consents. The banks pumped up the prices, the landowners benefit, not the pensioner who worked 50 years to buy his crib.

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Ah, the key thing is the affordability, according to todays pundits. Us oldies remember paying 1/6 th of the outstanding mortgage each year in interest. As a comparison, your 80K house, 10% deposit would give £10,800 as just the interest payments each year if we had 15% interest today.

In the example that commenter gave, their deposit was £1100 and the mortgage was £4000 so they were on 78% LTV. On an £80k house at 15% that would be £9.4k pa in interest or £784pm. The house cost 4x main earner salary which I think we are assuming was about £20k in today's money, plus they had a second income which was 14/25 = 56% of the main income so would be equivalent to about £11.2k in today's money. Somebody on £20k now takes home about £1370pm and £11.2k gets you £870pm, so £2240pm combined take-home pay. Take away £784pm interest and you've got £1450pm for mortgage repayments and living costs for two people. Not exactly the breadline...

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"Greedy" boomers are only part of the problem but part of it none the less.

Maybe land prices would be cheaper if there were less nimbys around objecting to development.

I would like to build my own house, as would many others. What is the chance that if I tried to get pp nimbys would block it ?

High land prices are an effect of HPI, not the cause so please stop using it as an excuse to whinge about people who don't want more crap built everywhere.

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  • 242 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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