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House Prices Face A Reckoning - Roger Bootle

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http://www.telegraph.co.uk/finance/comment/rogerbootle/10901558/Roger-Bootle-At-some-point-there-will-be-a-reckoning-on-house-prices.html

My favourite measure of long-term value, the ratio of average house prices to average incomes, is currently standing at about 6.3, below its recent peak of 7.5pc but still in line with the previous peak reached in the boom of 1989. The fact that prices are not yet back to the recent bubble’s peak is hardly reassuring.

The affordability measure is seriously flawed because it reflects the effects of interest rates. These are currently at all time lows. Even though, in my view, they are unlikely to rise very soon, at some not too distant point they will rise. A Bank Rate at 3pc would imply mortgage rates of 5pc. That would be devastating for many borrowers.

Letting Focus View

http://www.lettingfocus.com/blogs/index.php/2014/05/house-price-bubble/

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Letting Focus View

.....

LOL. Is this guy a UKIP councilor? Uncontrolled immigration driving house prices eh? 2.4 million Roma Gypies arrived in Kent last week, each with €400,000 in cash, looking to snap up a bargain. Or is that point 1 the overseas investment? Could be either I suppose. But both of them very sustainable and will go on for the next 40 years. Not to mention those "attractive yields".

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Immigrants may eventually become useful in the BTL market as recipients of housing benefit, they then take a unit out of the supply chain. We have a good deal of property hoarding, we have a reluctance to move because of stamp duty and we have zombies that can't move.

There are enough properties to go around, but whilst prices continue to go up there is a wasteful attitude.....boomers buying before they sell etc. the reverse of sell to rent. (on my road all moves have recently been boomers moving before selling and either renting or marketing empty at a later date - a form of property hoarding) All this constricts supply and is artificially keeping prices up at present.

Edited by crashmonitor

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LOL. Is this guy a UKIP councilor? Uncontrolled immigration driving house prices eh? 2.4 million Roma Gypies arrived in Kent last week, each with €400,000 in cash, looking to snap up a bargain. Or is that point 1 the overseas investment? Could be either I suppose. But both of them very sustainable and will go on for the next 40 years. Not to mention those "attractive yields".

Roma (for example) are becoming significant tenants in certain areas of cities such as Sheffield

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Roma (for example) are becoming significant tenants in certain areas of cities such as Sheffield

I would imagine that the extra 100,000 units built each year might just about be enough for the immigrants who come in, let alone our shrinking households and boomers desire to own multiple properties. It's got to a factor, our houses have remained up whilst Europe has crashed.

Of course, if the mindset changes suddenly owning lots of property wouldn't be seen as quite so smart.

Edited by crashmonitor

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The UK’s property market is an unmitigated disaster – born of misguided public policy, reinforced by the worst sort of short-term politics, of which “Help to Vote” is the most egregious recent example.

In a nutshell!

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I'm puzzled by his own contradictions

* Wages won't rise - hence there won't be any wage inflation

* Interest rates WILL rise - because there will be higher inflation/wage inflation

* Some time (after 2003) there must be a correction in nominal house prices. Well, it's now 2014...........

* London can't crash 'cause it's a 'different country'. Huh??? Does he own property in London/SE one wonders?.

Edited by R K

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I would imagine that the extra 100,000 units built each year might just about be enough for the immigrants who come in, let alone our shrinking households and boomers desire to own multiple properties. It's got to a factor, our houses have remained up whilst Europe has crashed.

Minor factor. Supply of credit - by far - the most important factor in house prices as with all asset prices, Look at Margin Debt in S&P for example.

cotd-143.jpg

Edited by Killer Bunny

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I'm puzzled by his own contradictions

* Wages won't rise - hence there won't be any wage inflation

* Interest rates WILL rise - because there will be higher inflation/wage inflation

* Some time (after 2003) there must be a correction in nominal house prices. Well, it's now 2014...........

* London can't crash 'cause it's a 'different country'. Huh??? Does he own property in London/SE one wonders?.

you get inflation without wage rises by issuing more credit. which is their aim to keep the sharks trading.

wage freezes though means there is financial repression of the middle classes at the same time.

It is the inevitable result of the favoured few receiving more than their share of the wealth.

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