Please Explain To Me How We Will See House Price Rises....

[TheCountOfNowhere]

Wages...stagnant.

Cost of living Up.

Interest rates 0.5%

FLS shot it's bold

HTB pushing up price of new builds to unrealistic levels

HTB2 mortgage rates are high,

Land registry not showing the same 'facts' as the media state.

We are being told house prices are about to shoot up. There is nothing to indicate this is possible, is there ?

Please, can someone show me how prices can/will go up, is it remotely possible ?

Is anyone on here actually house hunting now ?

Does anyone know anyone who thinks buying a house right now is a good idea ?

[Gigantic Purple Slug]

Wages...stagnant.

Cost of living Up.

Interest rates 0.5%

FLS shot it's bold

HTB pushing up price of new builds to unrealistic levels

HTB2 mortgage rates are high,

Land registry not showing the same 'facts' as the media state.

We are being told house prices are about to shoot up. There is nothing to indicate this is possible, is there ?

Please, can someone show me how prices can/will go up, is it remotely possible ?

Is anyone on here actually house hunting now ?

Does anyone know anyone who thinks buying a house right now is a good idea ?

While people have disposable income it is possible for house prices to rise. People are still buying Xboxs, BMWs and having holidays. Therefore this money can all be spent on houses without them dying.

All that needs to happen is the banks need to increase the lending multiples or relax restrictions. So 6,7 8x average salary.

Also in the SE, foreign money coming into London, and banker bonus money.

is this a good idea ? No, not really. Convincing the general public of that might be a tricky issue though.

[LC1]

I'm as bemused as you are. It can only be the power of collective delusion. It's our own fault for underestimating this power, probably.

Still can't see (LR) prices rising outside London though... And perhaps it will be London that leads the way with a crash?!

I'm not going to bet the (rented) farm on it, obviously. But stranger things have happened...

[TheCountOfNowhere]

While people have disposable income it is possible for house prices to rise. People are still buying Xboxs, BMWs and having holidays. Therefore this money can all be spent on houses without them dying.

All that needs to happen is the banks need to increase the lending multiples or relax restrictions. So 6,7 8x average salary.

Also in the SE, foreign money coming into London, and banker bonus money.

is this a good idea ? No, not really. Convincing the general public of that might be a tricky issue though.

The people who were border line financial basket cases in 2007 and were bailed out through low interest rates must be basket cases again by now. The bottom of the housing pyramid must surely be mighty shaky again.

Where are the FTBs going to come from to under pin the crazy asking prices we see. Is the whole pyramid now being supported by BTL FLS liar loans ( that would be my suspicion) ?

The next collapse wont take down the banks, it will take down the country, i.e. you and me.

[The Knimbies who say No]

The people who were border line financial basket cases in 2007 and were bailed out through low interest rates must be basket cases again by now. The bottom of the housing pyramid must surely be mighty shaky again.

Where are the FTBs going to come from to under pin the crazy asking prices we see. Is the whole pyramid now being supported by BTL FLS liar loans ( that would be my suspicion) ?

The next collapse wont take down the banks, it will take down the country, i.e. you and me.

Stopping the market clearing reposessions at distressed prices via forbearance likely has quite a bit to do with the current situation too. Keep allowing high earners to buy in low numbers (since there are not many of them) and prevent, insofar as is possible, houses being repossessed on any meaningful scale.

There are houses near me that have been up for sale for years, probably 20% of the adult lifespans of the owners. It just defies logic that this can happen as part of a functional market amongst motivated participants. There will always be the odd person trying it on, but most people attempting to sell their home do so for a reason.

[Dorkins]

I think the banks must be lending into London like crazy. I was talking to a couple of 30something teachers at the weekend, they said their friends are buying places for £400k+ on joint incomes in the £70k-£90k range. In fact, I don't know anybody in my group of 30something London acquaintances who wanted to buy but wasn't able to secure finance to do so.

My guess is that much looser lending standards are being applied in London than in the rest of the country, either because banks really have bought into the 'London is a unique global powerhouse' meme or because they think the political class are personally attached to London property and will fight a London HPC with a lot of taxpayer cash.

[zugzwang]

The people who were border line financial basket cases in 2007 and were bailed out through low interest rates must be basket cases again by now. The bottom of the housing pyramid must surely be mighty shaky again.

Where are the FTBs going to come from to under pin the crazy asking prices we see. Is the whole pyramid now being supported by BTL FLS liar loans ( that would be my suspicion) ?

The next collapse wont take down the banks, it will take down the country, i.e. you and me.

Sadly, Osborne can still do more borrowing, printing and asset stripping.

We either collapse or have decades of financial repression to look forward to...

[Gigantic Purple Slug]

The people who were border line financial basket cases in 2007 and were bailed out through low interest rates must be basket cases again by now. The bottom of the housing pyramid must surely be mighty shaky again.

Where are the FTBs going to come from to under pin the crazy asking prices we see. Is the whole pyramid now being supported by BTL FLS liar loans ( that would be my suspicion) ?

The next collapse wont take down the banks, it will take down the country, i.e. you and me.

Maybe. Some people when they go through a crisis learn from it. Others don't.

The government isn't interested in kicking people out of houses because they will just have to rehouse them anyway.

The FTBs will come from the same places as before. People will take on enormous debt to buy a house because "its the right thing to do". It's not about whether they can afford it, its about whether the banks will let them do it.

I think BTL does support the market to some degree. In many ways it is good for the government to get BTL to own the housing stock because then it will be the evil BTLers that kick out non paying tenants and not evil banks or politicians. It's a good way to offset blame.

I don't see a major collapse in the offing unless caused by outside forces. This will continue until some major outside event causes things to happen otherwise. Probably a recovery in the US economy is the best hope. This is starting to look more likely now.

Even so, rises in interest rates in the US and rises in interest rates here don't necessarily mean house price crashes. The policy makers have already shown that they want to move to more sector specific targetting like FFL rather than have the blunt instrument that is interest rates, so an interest rate rise could be met with some accomodation for mortgage owners.

I think the situation as it stands at the moment wrt house prices could continue for a long while yet.

[koala_bear]

I think the banks must be lending into London like crazy. I was talking to a couple of 30something teachers at the weekend, they said their friends are buying places for £400k+ on joint incomes in the £70k-£90k range. In fact, I don't know anybody in my group of 30something London acquaintances who wanted to buy but wasn't able to secure finance to do so.

My guess is that much looser lending standards are being applied in London than in the rest of the country, either because banks really have bought into the 'London is a unique global powerhouse' meme or because they think the political class are personally attached to London property and will fight a London HPC with a lot of taxpayer cash.

+1 Exactly what I'm seeing too. London is the FLS mortgage capital. My dad remarked the other week he noticed asking prices had doubled in one participial area in London since 2008.

The BLT's point about "Keep allowing high earners to buy in low numbers" also aligns with this - it also prevents margin calls all round aka the emperors new clothes.

HTB1 also allowing new build price rises nationally along with more volume.

You need to be smoking whacky baccy to see any significant price rises in most of the country outside the SE not caused by HTB1

Edited December 10, 2013 by koala_bear

[Dorkins]

The BLT's point about "Keep allowing high earners to buy in low numbers" also aligns with this

It's not just high earners who are buying, ordinary 30somethings on salaries in the £30k-£40k range are too.

[TheCountOfNowhere]

Sadly, Osborne can still do more borrowing, printing and asset stripping.

We either collapse or have decades of financial repression to look forward to...

I fear we might have decades of financial repression...followed by collapse.

[terryturbojr]

My guess is there is a shift to higher wage earners combined with a limited supply. Someone posted a graph of the change in salaries of house buyers through time on another thread and I'd imagine that trend has continued and is in combination with limited supply along with support from low ingest rates, which is making current repayments cheaper for aforementioned higher income buyers, but also reducing forced sales, so removing downward pressure on prices.

The continually higher salaried buyers can't go on forever though, but I would imagine the reduced supply and rock bottom interest rates will be here for a while though.

[tomandlu]

If FTBs are buying in London, all I can say is that 50% of the population must be below average intelligence. I was chatting with my niece and some of her friends a couple of weeks ago (all London). Not one of them was even contemplating buying, and all were resigned to a life of flat-sharing (albeit with a fair amount of gallows-humour).

[The Knimbies who say No]

It's not just high earners who are buying, ordinary 30somethings on salaries in the £30k-£40k range are too.

Households with £40k income are around the top 20% of earners, which was what I was getting at. These people will disproportionately be found in London of course. If your household income is over £40k and you don't live near London, as a ninth decile household you ought to have a choice of many good properties and locations to buy. But instead you can get a 3 bed semi in a decent area for 4 or 5 times salary, and a very good area can be 6 or 7 times a solid ninth decile household income. It's inevitable that until this changes transaction volumes will be very low.

[worried1]

Does anyone know anyone who thinks buying a house right now is a good idea ?

Whilst I don't personally know anyone who thinks it is a good idea to buy a house now, the general 'buzz' seems to be that it is a great idea based on the premise that it is a one way bet and the fact house prices have gone up so much this year means that they can only go up twice as much next year.

In parts of the country, we are now so far above the previous 2007 peak that those prices are actually looking ridiculously low now. Remember how unaffordable it actually was to anyone halfway sensible back then? People on here have been (rightly) banging the drum since 2003!

The latest example I have come across is this one:

http://www.greenfield-property.co.uk/property-full-details?profileID=100031003499&section=floorplan

Open day was planned for this coming Saturday, but I have just found out that it has already been sold for well in excess of the asking price. I have actually given up disbelieving EAs because the Land Registry figures seems to always back them up when they come out a few months later.

This would have struggled to sell for much more than £400k at the 2007 peak, and similar houses were still selling for not much more than £500k up to start of this year, so how does this suddenly have a value of £650k+ on it? Must be that 9'6" x 4'6" third bedroom that is pulling the punters in!

Clearly, whoever has borrowed a big amount to buy this has only done so on the basis that it will be worth a lot more by next year.

I used to be a big believer in HPC when houses prices started to get seriously out of whack with fundamentals, but they are now so far away that I don't think the government even know how to start pulling the plug on the support they are giving the market. They have build a monster so big that even when we do start registering proper growth figures in the rest of the economy, there will always be the spectre of a massive house price crash to wash it all away.

The only positive change that I have noticed is that the type of people who would previously be boasting about how much their house was worth sometimes now seem a little embarrassed about how high it is.

You don't have to be 'in the know' to realise that this cannot continue, you just need to think about it for 2 minutes. If I was buying that terraced house for £650k now, it doesn't take me very long to work out that there will be very few people with £1m to but it from me in a few years time. The trouble is, people don't like thinking about it.

[LC1]

Whilst I don't personally know anyone who thinks it is a good idea to buy a house now, the general 'buzz' seems to be that it is a great idea based on the premise that it is a one way bet and the fact house prices have gone up so much this year means that they can only go up twice as much next year.

.

.

.

The trouble is, people don't like thinking about it.

Good post, but it comes back to the question posed by the OP - what are the things keeping prices up. That people think prices will or 'should' continue to rise is indeed part of the issue, but it's not sufficient to hold up prices in the face of realities on the ground. And your experience that some people seem embarrassed by how much their house is 'worth' just goes to show that many people know it to be la la fantasy land stuff

[worried1]

BTL, seen many (Greater London). Properties on for sale, sold then on to rent. I guess many think that a 4% return from a BTL with capital appreciation is better than a 2% savings return. Probably not done the sums correctly but it fuels the HPI fire.

I have seen plenty of this as well. Generally the 50+ generation who have seen property doing so well for them and can't believe it will ever be different (despite being in their 30s at the time of the conveniently forgotten 1989 crash!)

In my area, it seems to be the BTLs that are propping up the flat market, where otherwise supply would massively outstrip demand. There is still plenty of money going into the rare houes that do come up from people wanting to live in them, but flats are a different matter.

I still don't see many unoccupied, though, and they are going up in value (although a much smaller % than houses), so there has been nothing to prove them wrong so far.

The mantra that I always hear trotted out by these type of people is that 'property always doubles in price every 10 years', and that is probably true, but I wouldn't want to be holding on to a recently purchased investment property when prices do come off by 35% or whatever happened in 1989.

[Bear Necessities]

Two couples I know in their early 30s have purchased in the last couple of months. One couple has purchased a house off plan!

[dances with sheeple]

Wages...stagnant.

Cost of living Up.

Interest rates 0.5%

FLS shot it's bold

HTB pushing up price of new builds to unrealistic levels

HTB2 mortgage rates are high,

Land registry not showing the same 'facts' as the media state.

We are being told house prices are about to shoot up. There is nothing to indicate this is possible, is there ?

Please, can someone show me how prices can/will go up, is it remotely possible ?

Is anyone on here actually house hunting now ?

Does anyone know anyone who thinks buying a house right now is a good idea ?

Recorded "Daybreak" because I thought Mike Tyson was on, didn`t see him, but the house price ramping was quite sickening (or funny because it is not going to happen) They had little graphs with house prices shooting up 33% but rent going up 39% better commit now before it`s too late! Sick and twisted little smiles from the presenters as they talked about the "good news", and the guy from Priced Out giving a very weak and unconvincing response to the presenters VI nonsense like "Well why should you be able to buy a house?" "Well millions are priced out, but millions are making money from this" Sorry to burst your bubble Windbreak, but if millions can`t buy I don`t see how millions can sell?

Edited December 10, 2013 by dances with sheeple

[Guest unfunded_liability]

Wages...stagnant.

Cost of living Up.

Interest rates 0.5%

FLS shot it's bold

HTB pushing up price of new builds to unrealistic levels

HTB2 mortgage rates are high,

Land registry not showing the same 'facts' as the media state.

We are being told house prices are about to shoot up. There is nothing to indicate this is possible, is there ?

Please, can someone show me how prices can/will go up, is it remotely possible ?

Is anyone on here actually house hunting now ?

Does anyone know anyone who thinks buying a house right now is a good idea ?

• BTL'ers using existing equity to buy more

• cash rich foreign buyers seeking safe haven in politically stable, oligarchy-friendly environment

• 30-40 somethings getting fed up of waiting to buy, seeing prices climb, using BOMAD for help

• it's a self-sustaining bubble - for the time being

• the music hasn't stopped yet

[worried1]

Good post, but it comes back to the question posed by the OP - what are the things keeping prices up. That people think prices will or 'should' continue to rise is indeed part of the issue, but it's not sufficient to hold up prices in the face of realities on the ground. And your experience that some people seem embarrassed by how much their house is 'worth' just goes to show that many people know it to be la la fantasy land stuff

There is nothing fundametal holding up prices, nor is there anything remotely sensible that possibly could hold them up in my opinion. The only thing that could do it would be significant and widespread pay increases for the next 10 years to help the average salary to catch up with prices. How likely is that to happen? Oh, and obviously they'd need to hold interest rates at 0.5% whilst perpetuating this wage inflation.

Whilst I am seeing an increasing amount of people who are embarrassed at how much their house is worth, I'd bet that every single one of them would snap out of that as soon as they considered actually putting their house on the market.

People do realise that it is la la land stuff, but so many of them still put that to the back of their mind when making life changing financial decisions because a small part of their brain believes that this madness will continue and leave them behind if they don't.

Take the people that have bought the £650k terraced house I linked to earlier. I'd bet that they will be good earners (£150k+), but relying on the security of two jobs for that income, probably a £200k deposit from their parents and they will still have taken on £500k of mortgage debt. That is the standard profile I am seeing moving into this type of house that was built for servants 150 years ago.

They justify it partly because 'prices will keep going up' and partly because the IO payments on that £500k mortgage are only £1,250 per month which is easilty affordable on a £150k joint salary. The other thing that they don't think about is what happens if rates go up and one job is lost so they end up paying £2,500 per month on a £60k single salary.

Doesn't happen, though, does it?

[worried1]

It sold for £499,950 27 March 2008.

In that case, I guess they will actually be a little upset with their tiny 30% 'profit' in 5 years when their neighbours have made more in less time!

I still think that it is an obscene increase on an already completely obscene price.

[TheCountOfNowhere]

There is nothing fundametal holding up prices, nor is there anything remotely sensible that possibly could hold them up in my opinion.

That's what I believe.

We haven't seen the real public sector cuts filter through neither.

One bloke that I know lost his job 14 months ago and still hasn't found "suitable" work ( i.e. well paid ) has now spanked his redundancy and is starting to live off his savings. He said to me and I quote "I dont wont to eat into my savings so I am going to invest in property".

I fear for his future.

[gimble]

Wages...stagnant.

Cost of living Up.

Interest rates 0.5%

FLS shot it's bold

HTB pushing up price of new builds to unrealistic levels

HTB2 mortgage rates are high,

Land registry not showing the same 'facts' as the media state.

We are being told house prices are about to shoot up. There is nothing to indicate this is possible, is there ?

Please, can someone show me how prices can/will go up, is it remotely possible ?

Is anyone on here actually house hunting now ?

Does anyone know anyone who thinks buying a house right now is a good idea ?

I think what's happening right now is that the crazy low interest rates (like 2% 2 year fix of 3% 5 year fix with a good deposit) are still feeding into the market. These low rates only arrived about 12 months ago when FLS kicked in properly. The housing market having so much inertia I think the effects of these cheap mortgages started feeding in the spring and the process is still ongoing. It think it will peter out at some point next year and then it will be flat as a pancake again or maybe falling slowly because FLS is being withdrawn.

Re these low rates - they have allowed banks to increase lending multiples on salaries. I know this because I was enquiring about mortgages recently and the lower rate short term fix they would lend me nearly 5x my gross salary. The higher rate long term fix they would only lend me just over 4x my gross. That makes me think their 'affordability' calculation is nothing more than what your mortgage costs on the day you start paying it. There is no calculation based on potentially higher rates further down the line. Add that fact to the fact that many (not all but many) people don't understand or don't care about interest rate risk and will borrow as much as the bank lends them and you have your rising market today. It won't last IMHO.

[TheCountOfNowhere]

Re these low rates - they have allowed banks to increase lending multiples on salaries. I know this because I was enquiring about mortgages recently and the lower rate short term fix they would lend me nearly 5x my gross salary. The higher rate long term fix they would only lend me just over 4x my gross.

That's just crazy. They will lend you more for the short term lower rate...what do they think will have at the end of that introductory rate ?

We are back in 2007.

We we the loonies?