Killer Bunny Posted October 9, 2014 Share Posted October 9, 2014 Yet again people mistaking that HPI and HPC are primarily to do with int rates. It's lending mateys. rates fell to rock bottom in 2009 yet HPs were flat in most of country H2 2010 to end 2012. What changed? HTB! Quote Link to comment Share on other sites More sharing options...
Grandmasterspank Posted October 9, 2014 Share Posted October 9, 2014 Yet again people mistaking that HPI and HPC are primarily to do with int rates. It's lending mateys. rates fell to rock bottom in 2009 yet HPs were flat in most of country H2 2010 to end 2012. What changed? HTB! Note sure you are right on that at all. HTB didn't cause the boom IMO. Have a look at the economist site on global house prices: http://www.economist.com/blogs/dailychart/2011/11/global-house-prices HPI took off across the world around Q1 2013, even in countries without HTB! IMO it was the resolution (temporary) of the Eurozone debt crises and QE3 that light a fire under global asset classes. It's all about yields in my opinion. Mortgage rates drive affordability. Quote Link to comment Share on other sites More sharing options...
Neverwhere Posted October 9, 2014 Share Posted October 9, 2014 BTL pay higher mortgage rates, therefore they should logically be the first movers in any crash as they are most sensitive to any rate movements. I can't understand your table as it hasn't come out well, but I don't think from your final figures that you've taken into account the interest only component of BTL. Interest only loans are common in this sector, as are 75% LTVs (25% deposit being the general requirement), so a very small change in rates would cause a very large change in their monthly payments (for instance moving a 2.5% IO loan up by only 0.5% causes a 20% increase in monthly payments). Killer Bunny is right, interest rates don't have to move for prices to move. We are already reaching an affordability ceiling at these rates so if they simply do nothing at all effective demand will continue to dry up. Each time a buyer and a seller transact they reset the value of all other equivalent properties, very few transactions therefore actually need to go through for a market to crash so only a tiny number of property owners need to be in a position where they seriously want or need to sell into this market for us to get price movement. Quote Link to comment Share on other sites More sharing options...
Neverwhere Posted October 9, 2014 Share Posted October 9, 2014 It's all about yields in my opinion. Mortgage rates drive affordability. HPI is yield, without HPI yields drop away. Mortgage rates and prices drive affordability. Price movement alone can make property unaffordable and kill effective demand. Quote Link to comment Share on other sites More sharing options...
dances with sheeple Posted October 9, 2014 Share Posted October 9, 2014 I can't understand your table as it hasn't come out well, but I don't think from your final figures that you've taken into account the interest only component of BTL. Interest only loans are common in this sector, as are 75% LTVs (25% deposit being the general requirement), so a very small change in rates would cause a very large change in their monthly payments (for instance moving a 2.5% IO loan up by only 0.5% causes a 20% increase in monthly payments). Killer Bunny is right, interest rates don't have to move for prices to move. We are already reaching an affordability ceiling at these rates so if they simply do nothing at all effective demand will continue to dry up. Each time a buyer and a seller transact they reset the value of all other equivalent properties, very few transactions therefore actually need to go through for a market to crash so only a tiny number of property owners need to be in a position where they seriously want or need to sell into this market for us to get price movement. But as the headlines keep saying we have reached the peak, and drops are coming, more and more people will be inclined to try and sell? Quote Link to comment Share on other sites More sharing options...
Damik Posted October 9, 2014 Author Share Posted October 9, 2014 It looks like the sentiment is changing as well: Has the London house price bubble burst? Telegraph.co.uk-3 hours ago House prices in London have fallen for the first time in nearly four years, and will continue to do so, according to a leading property market ... London property prices fall: Bubble bursting? AnalysisBizNews-22 minutes ago London house prices fall in September for first time since 2011 - RICSReuters UK-4 hours ago London House Prices Fall for First Time Since 2011International Business Times UK-4 hours ago London house prices fall for the first time in four yearsEvening Standard-24 minutes ago Quote Link to comment Share on other sites More sharing options...
Grandmasterspank Posted October 9, 2014 Share Posted October 9, 2014 HPI is yield, without HPI yields drop away. Mortgage rates and prices drive affordability. Price movement alone can make property unaffordable and kill effective demand. Sorry meant to write all about rates and yields. It's the spread between them that is important. I take your point about affordability being driven by debt and interest rates but...check out the affordability data per Nationwide: http://www.nationwide.co.uk/about/house-price-index/download-data#xtab:affordability-benchmarks Earning ratios are through the roof for London but mortgage affordability well below past peaks. When rates rise people will suffer but mortgages are afforabie at the moment because of low rates. Quote Link to comment Share on other sites More sharing options...
Neverwhere Posted October 9, 2014 Share Posted October 9, 2014 But as the headlines keep saying we have reached the peak, and drops are coming, more and more people will be inclined to try and sell? Absolutely. Most of them are going to be disappointed. Quote Link to comment Share on other sites More sharing options...
Liquid Goldfish Posted October 9, 2014 Share Posted October 9, 2014 Will this be the ripple-less boom? Like the London boom of 1996. Quote Link to comment Share on other sites More sharing options...
Neverwhere Posted October 9, 2014 Share Posted October 9, 2014 Sorry meant to write all about rates and yields. It's the spread between them that is important. I take your point about affordability being driven by debt and interest rates but...check out the affordability data per Nationwide: http://www.nationwide.co.uk/about/house-price-index/download-data#xtab:affordability-benchmarks Earning ratios are through the roof for London but mortgage affordability well below past peaks. When rates rise people will suffer but mortgages are afforabie at the moment because of low rates. Affordable housing is normally defined as under 30% of take home pay so that data suggests that London FTB mortgages are grossly unaffordable at 62% of take home pay. In fact the index section - where "higher index values indicate worsening affordability" - has London at a ridiculous 98.1, the highest its been seen Q2 2008. It has gone even higher than this in the past but MMR may well have lowered the inflexion point. Quote Link to comment Share on other sites More sharing options...
Neverwhere Posted October 9, 2014 Share Posted October 9, 2014 Will this be the ripple-less boom? Like the London boom of 1996. Isn't that still the one we're in now? Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted October 9, 2014 Share Posted October 9, 2014 It looks like the sentiment is changing as well: Has the London house price bubble burst?Telegraph.co.uk-3 hours ago House prices in London have fallen for the first time in nearly four years, and will continue to do so, according to a leading property market ... London property prices fall: Bubble bursting? AnalysisBizNews-22 minutes ago London house prices fall in September for first time since 2011 - RICSReuters UK-4 hours ago London House Prices Fall for First Time Since 2011International Business Times UK-4 hours ago London house prices fall for the first time in four yearsEvening Standard-24 minutes ago The bubble burst 6 months ago. These people are just drip feeding the bad news to the sheeple now. Sentiment is about to go down the drain. Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted October 9, 2014 Share Posted October 9, 2014 Bit of an anecdote for you today, which is linked to london. Mate of mine locally has been trying to sell his house for 3 years + now. Tried for 2 years at £145K nothing doing. The house is an absolute dump, bad area, falling apart, pretty manky inside. He recently found a buyer locally, willing to pay full asking....fell through after they went to the banks Anyway, he house has now gone SSTC and the buyer is from guess where ? Yip, London. Cash buyer, sold their crap hole in London and are now buying a crap hole in Northampton. They've already sold by all accounts so he's certain to sell ( he tells me ). Asking price....£180K. A londoner and their tax free unearned money are soon parted it seems. Peak 2007 price for his street. £160k ( i know cause he paid it ). Not found out what he's been offered yet but it's £90K too much whatever it is. The London bubble has to burst so people outside London can get a stab at buying a house at a level relative to the local income. Quote Link to comment Share on other sites More sharing options...
Ultra Fox Posted October 9, 2014 Share Posted October 9, 2014 The bubble burst 6 months ago. These people are just drip feeding the bad news to the sheeple now. Sentiment is about to go down the drain. Its a bit of change from last April where the general message was 'Houses prices were going to rise indefinitely' Quote Link to comment Share on other sites More sharing options...
Killer Bunny Posted October 9, 2014 Share Posted October 9, 2014 (edited) It's all about yields in my opinion. Mortgage rates drive affordability. Yet Globally bond yields at lowest in history! So we had HPI in 2011 and 12? Yeah right And they had HPI in Spain and Ireland and US since 2007? Yeah right And they have HPI in UK Canada Oz China due to easy lending - NOT low rates. Edited October 9, 2014 by Killer Bunny Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted October 9, 2014 Share Posted October 9, 2014 Its a bit of change from last April where the general message was 'Houses prices were going to rise indefinitely' I thnk that's when I started the propaganda thread. The media onslaught at that time was incredible, I think people really started to believe there was a recovery. If it was Osborne's intention to use this feel good factor to win the election I can only hope the whole thing is in tatters by March next year, Quote Link to comment Share on other sites More sharing options...
mobfant Posted October 9, 2014 Share Posted October 9, 2014 It looks like the sentiment is changing as well: Has the London house price bubble burst? Telegraph.co.uk-3 hours ago House prices in London have fallen for the first time in nearly four years, and will continue to do so, according to a leading property market ... London property prices fall: Bubble bursting? AnalysisBizNews-22 minutes ago London house prices fall in September for first time since 2011 - RICSReuters UK-4 hours ago London House Prices Fall for First Time Since 2011International Business Times UK-4 hours ago London house prices fall for the first time in four yearsEvening Standard-24 minutes ago Have you seen more think-pieces/op-eds though? Most stories over the past couple of weeks are a re-hash of press releases, rather than journos coming out and saying Don't Buy now/bubble about to burst. Moneyweek is the one exception I can think of Quote Link to comment Share on other sites More sharing options...
Liquid Goldfish Posted October 9, 2014 Share Posted October 9, 2014 (edited) Isn't that still the one we're in now? No. House prices went up about 30% in total in London over the two years 1996 and 1997 then HPI then fell back and there was no ripple. This bubble started a couple of years later and rippled to the North in about 2001. That's how I think about it anyway! Edited October 9, 2014 by oldsport Quote Link to comment Share on other sites More sharing options...
Liquid Goldfish Posted October 9, 2014 Share Posted October 9, 2014 Its a bit of change from last April where the general message was 'Houses prices were going to rise indefinitely' Do you mean April 2013 or April 2014? Quote Link to comment Share on other sites More sharing options...
Grandmasterspank Posted October 9, 2014 Share Posted October 9, 2014 Yet Globally bond yields at lowest in history! So we had HPI in 2011 and 12? Yeah right And they had HPI in Spain and Ireland and US since 2007? Yeah right And they have HPI in UK Canada Oz China due to easy lending - NOT low rates. I'm confused by your post - yeah bond yields are lowest in history - that's my point. Bond yields set the risk free rate for the economy. If bond rates are low, low rental yields will be tollerated by investors because other opportunities for higher yields are scarce and their funding costs low. i.e. Bond yield directly influence mortgage costs. So yeah, bond yields collapsed in 2013 during QE3 - from memory the 10 year Treasury touched 1.5% in 2013 - and it was that that stuck a firework under every asset class under the sun. Look at the the S&P500, Corporate bonds, FTSE etc. etc. HTB did have an impact but a very minor one - this is a global macro thing. The global risk free rate of interest fell therefore asset prices went up. It's that simple. I can't remember what this exchange is about but all am saying is I can't see a massive +10% correction without a rise in interest rates / bond yields. If for example prices fell 30% then rental yields would jump in London to c. 7%, money would flow back in to take advantage of the spread between mortgage rates and rental yields. Maybe next year when rates start to rise. I am massively bearish on London property, it's going to crash (+30%)...but when!? Quote Link to comment Share on other sites More sharing options...
Sancho Panza Posted October 9, 2014 Share Posted October 9, 2014 SW16 8/21 38% SW8 4/21 19% of which 6 are off plan flats. SW4 6/11 54% SE4 2/3 66% E4 3/13 NE4 2/4 N4 1/7 Quote Link to comment Share on other sites More sharing options...
Ultra Fox Posted October 9, 2014 Share Posted October 9, 2014 Do you mean April 2013 or April 2014? Pretty sure I saw stories in April 2014 about a never ending raise to house prices. Quote Link to comment Share on other sites More sharing options...
Liquid Goldfish Posted October 9, 2014 Share Posted October 9, 2014 (edited) Pretty sure I saw stories in April 2014 about a never ending raise to house prices. I did too! But if I were to say "last April" at this particular time of year I'd be meaning April 2013. That's why I was unsure - I thought you probably meant April 2014 but I just wanted to check! Edited October 9, 2014 by oldsport Quote Link to comment Share on other sites More sharing options...
FreeTrader Posted October 9, 2014 Share Posted October 9, 2014 56 Kilmaine Road, Fulham, SW6 [bought for £1,300,000 Sep 2013] 09/10/2014: Price changed: from £1,495,000 to £1,450,000 19/07/2014: Price changed: from £1,575,000 to £1,495,000 17/06/2014: Initial entry found6 Tabor Grove, Wimbledon, SW19 08/10/2014 Price changed: from £1,100,000 to £950,000 15/08/2014 Status changed: from 'Under offer' to 'null' 13/07/2014 Status changed: from 'null' to 'Under offer' 06/06/2014 Price changed: from '£1,295,000' to '£1,100,000' 17/04/2014 Initial entry found Quote Link to comment Share on other sites More sharing options...
Grandmasterspank Posted October 9, 2014 Share Posted October 9, 2014 SW16 8/21 38% SW8 4/21 19% of which 6 are off plan flats. SW4 6/11 54% SE4 2/3 66% E4 3/13 NE4 2/4 N4 1/7 How do you do those stats? Just browse and count? Quote Link to comment Share on other sites More sharing options...
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