Observer Article Yesterday

[IPOD]

There doesn't seem point in me arguing against this, since it supports my argument heh.

Actually it doesn't, but you can't seem to see this; that does not surprise me.

The nominal interest rate is VASTLY lower now than it was in 1990, by your logic making houses vastly more affordable in 2006.

Rubbish. Nominal interest rates are about 3 times lower than in 1990; nominal house prices are well over 3 times higher, making them less affordable.

The whole point is you'd have had to devote 70% of your post-tax income to afford an equivalent hovel in 1990.

Would you like to try and prove this? Or are you somewhat stymied by the fact that you can't, because it's b0ll0cks? Also, if you are saying that house prices are just as overvalued as in 1990, you are backing up the case for a HPC, are you not? That is what is called "shooting yourself in the foot", I believe.

Also you totally ignore the effects of MIRAS (and the effect of it's removal).

[OzzMosiz]

20 times your salary when you consider the interest. Thats nearly all your disposable income gone on a 25 year mortgage! Moreso if salaries are before tax!!!!

[Guest Time 2 raise Interest Rates]

Teletext page 532 Channel 4

BILLS SWALLOW 46% OF A HOUSE INCOME.

[EmpiricalBear]

Jellybean wrote

Not sure I subscribe to the little brittain attitude so often seen here. My father is a construction manager and he says he would far rather have indian or eastern european labour. Says they are polite educated and hard working. Generally the kind of people you want in a country. Says the majority of natives are a waste of space. Maybe an export policy would be better?

Totally agree. Two foreign guys spent fifteen minutes washing my car last week for 5 quid. Work out the hourly rate. Can't see the locals doing it, they are more likely to want to lob a molotov cocktail into the car.

I think there should be an exchange scheme. Each one that comes in is balanced by one of our wasters who is sent to their country.

[Alex]

Did you see the article in the blog yesterday where Nationwide are tightening their lending criteria on interest only mortgages.

If others follow suit, it could become very difficult for anyone to get an interest only mortgage, they won't qualify unless they already own a house with £150,000 worth of equity in it, and the mortgage they are applying for is less than 66 per cent loan-to-value or they must now include full details of the repayment vehicle chosen to pay off the loan

http://money.independent.co.uk/property/mo...ticle330980.ece

The end of First Time Buyers and interest only mortgages.

This doesn't surpise me at all and I have been waiting for banks to begin tightening their lending criteria. This will eventually begin to depress the housing market further just as a steady relaxation in lending criteria pushed the housing market up over the past few years. It makes sense for banks to tighten lending criteria becasue 1) in a stagnant to falling market the risk of the mortgage being worth

more than the property is rising particularly where no prinicpal is being repaid; 2) to the extent that banks are repackaging mortgages and sellling mortgage-backed securities, buyers of these securities will demand more stringent conditions or push the yield on these securities up making it less profitable for banks to undertake issuing mortgage-backed securities.

[Marina]

Not sure I subscribe to the little brittain attitude so often seen here. My father is a construction manager and he says he would far rather have indian or eastern european labour. Says they are polite educated and hard working. Generally the kind of people you want in a country. Says the majority of natives are a waste of space. Maybe an export policy would be better?

The current situation in this country is an export policy. 350000 decent hard-working people are leaving these shores every year.

[jellybean]

The current situation in this country is an export policy. 350000 decent hard-working people are leaving these shores every year.

I dont have any great moral or intelectual position on any of this. I am quoting my father who has been on both ends of the imigrant labour thing.

Interestingly, he says during the German boom of the 70's & 80's families had to take out multi generation mortgages to pay for thier homes, but it all went pear shaped there as well, long before reunification.

Take from that what lessons you will.

Ed : The problem as I see it is that the 3500000 who are leaving are probably the ones we want to keep.

Edited December 5, 2005 by jellybean

[North London Rent Girl]

Jellybean wrote

I think there should be an exchange scheme. Each one that comes in is balanced by one of our wasters who is sent to their country.

A return to the days of empire, you mean!!

[Red Baron]

Yeah, read this yesterday. Problem is people will just say but these are average properties, you're supposed to start with a one-bed flat or studio flat at £100k, which is, allegedly, affordable, build up equity, trade up, yadeeyadeeya. That you don't get to the average property until your second or third one, you get pay rises, etc etc, and any ftb who thinks they should be jumping straight into these average properties has utterly unrealistic expectations, etc etc. You can fill in the blanks here!

All of which is true, of course, but kind of misses the point. People didn't "build up equity" to any significant level in the past by paying off their mortgages, the equity they built up came directly from HPI. So in a period of low wage inflation when people are already stretched to the limits and are taking out IO mortgages in large numbers (over 25% of current mortgages IO - yikes!) means equity won't happen in this way in the foreseeable future. Globalisation will make sure pay rises don't happen in the UK to any meaningful extent.

So where does that leave us? Well, sure, mortgage to the hilt for the one-bedder, but realise you'll NEVER move up the ladder unless you're paid far more than average. Talking to a friend of mine a couple of days ago whose brother has a £650k house and thinks he's quids in for ever more. But who will buy it in the future? Say he sells to someone who sells a £500k house, all paid for - they have to raise a £150k mortgage. Their buyer sells a £350k house, all paid for, raise a £150k mortgage. Their buyer sells a £200k house, all paid for, raise a £150k mortgage. They sell to an FTB with a 10% deposit, they have to raise a £190k mortgage. If this chain is all couples, all working, and all of them (except the FTB, of course) have completely paid off whatever mortgages they have on their properties, then every single person in this chain (except the two selling up) are earning ABOVE the NATIONAL AVERAGE (that's average, not mean or mode, meaning a wage skewed upwards by high earners). And also every single couple except the FTB and the couple at the top of the chain have completely paid off their mortgages. And there's nothing exceptional in this chain...so how is this supposed to keep on working?

Total fantasy land. What seems to have been lost in all this is the reality of paying debt out of income - of paying off mortgages on houses at present price levels out of income. That's what people need to bear in mind and that's why sooner or later the housing market WILL crash.

Read this post carefully folks because it's one of the most cogent posts ever seen on this forum. It points precisely to the fundamental impossibility of house prices remaining at their current absurd levels.

[VacantPossession]

QUOTE(nodumsunreader @ Dec 5 2005, 03:20 PM)

You might just as well quote the earnings ratio to Google shares or gold prices. When will you HPC dreamers realise that FTB's are irrelevant to the housing market of 2005? The housing market is now predominantely driven by investors as it used to be around 50 years ago. The phenomenon of house purchase by 20 something FTB's was a late 20th century anomaly NOT the historical norm. Houses are merely a commodity just like oil, gold and equities and are seen as a good long term bet for investors (and an even better bet after April 2006) to provide an income/future equity release mechanism. You wannabe FTB's who have missed the boat permanently will just have to get used to renting in the same way that your great grandparents had to.

What a pleasant man you are.

I won't even bother with the rest of your post...

Well I will. Nodumsunreader: You are completely up a gum tree here. FTB are the root of the whole market and have the key to everything that moves above them. The problem is that because 90% of them believe all the rubbish they are fed, they are perpetually frightened into joining a market which would move their way if only they were brave enough NOT to believe all the hype.

Without FTB's the market "above" them would function exactly like the antiques trade. with people just exchanging property amongst themselves. For those at the top of the pyramid to make a profit, the ones at the bottom have to pay it. The higher up the pyramid you are the more your profit is paid for by those on lower layers. The profit HAS to come from somewhere...it doesn't magic itself out of thin air. And it comes almost entirely from first time buyers. Once FTB's stop playing the game, the only thing others can do is to barter property between themselves with little or no inflation. And investers have to adjust their new build and old stock prices to accomodate those on the bottom rung, otherwise they don't get a sale.

So your point is factually wrong. There is no such thing as a market being "driven" by investers, the market is "driven" by those who are willing to buy. If FTB's declare disinterest in a market which has priced them out, there is no market. As with all Pyramid schemes, the illusion is based on the denial of an END USER existing. In practice it is no different than someone placing an ad in a paper saying, "send £30 and a stamped envelope and I will show you how to make money". You open the reply and it says "to make money, place an ad in the paper inviting people to pay £30", and so on. The housing market operates exactly in this way, with a heirachy of profiteering at the top, reducing on the way down until you reach the "end user" who is the FTB.

VP

[NJP]

You might just as well quote the earnings ratio to Google shares or gold prices. When will you HPC dreamers realise that FTB's are irrelevant to the housing market of 2005? The housing market is now predominantely driven by investors as it used to be around 50 years ago. The phenomenon of house purchase by 20 something FTB's was a late 20th century anomaly NOT the historical norm. Houses are merely a commodity just like oil, gold and equities and are seen as a good long term bet for investors (and an even better bet after April 2006) to provide an income/future equity release mechanism. You wannabe FTB's who have missed the boat permanently will just have to get used to renting in the same way that your great grandparents had to.

Letting residential property is only worthwhile for investors while it offers a better return than the alternatives.

If house prices stay as they are, we'll start to see a decrease in investors too, because yields will be too low: At work, we're renting a (serviced) 500 sqft office for £1500/month. At home, I'm paying £500 for a similarly sized flat. Both are in the city centre.

If it's a good investment for an investor, it's also a good investment for s first-time-buyer. The only reason why our great-grandparents didn't buy homes is because they had no access to credit.

[Pheno]

IPOD: I wondered when you'd start getting nasty and it didn't take long!

As they say on Dragon's Den - I'm out

[eric pebble]

QUOTE(nodumsunreader @ Dec 5 2005, 03:20 PM)

You might just as well quote the earnings ratio to Google shares or gold prices. When will you HPC dreamers realise that FTB's are irrelevant to the housing market of 2005? The housing market is now predominantely driven by investors as it used to be around 50 years ago. The phenomenon of house purchase by 20 something FTB's was a late 20th century anomaly NOT the historical norm. Houses are merely a commodity just like oil, gold and equities and are seen as a good long term bet for investors (and an even better bet after April 2006) to provide an income/future equity release mechanism. You wannabe FTB's who have missed the boat permanently will just have to get used to renting in the same way that your great grandparents had to.

Well I will. Nodumsunreader: You are completely up a gum tree here. FTB are the root of the whole market and have the key to everything that moves above them. The problem is that because 90% of them believe all the rubbish they are fed, they are perpetually frightened into joining a market which would move their way if only they were brave enough NOT to believe all the hype.

Without FTB's the market "above" them would function exactly like the antiques trade. with people just exchanging property amongst themselves. For those at the top of the pyramid to make a profit, the ones at the bottom have to pay it. The higher up the pyramid you are the more your profit is paid for by those on lower layers. The profit HAS to come from somewhere...it doesn't magic itself out of thin air. And it comes almost entirely from first time buyers. Once FTB's stop playing the game, the only thing others can do is to barter property between themselves with little or no inflation. And investers have to adjust their new build and old stock prices to accomodate those on the bottom rung, otherwise they don't get a sale.

So your point is factually wrong. There is no such thing as a market being "driven" by investers, the market is "driven" by those who are willing to buy. If FTB's declare disinterest in a market which has priced them out, there is no market. As with all Pyramid schemes, the illusion is based on the denial of an END USER existing. In practice it is no different than someone placing an ad in a paper saying, "send £30 and a stamped envelope and I will show you how to make money". You open the reply and it says "to make money, place an ad in the paper inviting people to pay £30", and so on. The housing market operates exactly in this way, with a heirachy of profiteering at the top, reducing on the way down until you reach the "end user" who is the FTB.

VP

Here here!!!

[IPOD]

IPOD: I wondered when you'd start getting nasty and it didn't take long!

As they say on Dragon's Den - I'm out

LOL, if you think that was nasty you must have led a very sheltered life indeed. Come back when you've reached puberty!

[eric pebble]

Yeah, read this yesterday. Problem is people will just say but these are average properties, you're supposed to start with a one-bed flat or studio flat at £100k, which is, allegedly, affordable, build up equity, trade up, yadeeyadeeya. That you don't get to the average property until your second or third one, you get pay rises, etc etc, and any ftb who thinks they should be jumping straight into these average properties has utterly unrealistic expectations, etc etc. You can fill in the blanks here!

All of which is true, of course, but kind of misses the point. People didn't "build up equity" to any significant level in the past by paying off their mortgages, the equity they built up came directly from HPI. So in a period of low wage inflation when people are already stretched to the limits and are taking out IO mortgages in large numbers (over 25% of current mortgages IO - yikes!) means equity won't happen in this way in the foreseeable future. Globalisation will make sure pay rises don't happen in the UK to any meaningful extent.

So where does that leave us? Well, sure, mortgage to the hilt for the one-bedder, but realise you'll NEVER move up the ladder unless you're paid far more than average. Talking to a friend of mine a couple of days ago whose brother has a £650k house and thinks he's quids in for ever more. But who will buy it in the future? Say he sells to someone who sells a £500k house, all paid for - they have to raise a £150k mortgage. Their buyer sells a £350k house, all paid for, raise a £150k mortgage. Their buyer sells a £200k house, all paid for, raise a £150k mortgage. They sell to an FTB with a 10% deposit, they have to raise a £190k mortgage. If this chain is all couples, all working, and all of them (except the FTB, of course) have completely paid off whatever mortgages they have on their properties, then every single person in this chain (except the two selling up) are earning ABOVE the NATIONAL AVERAGE (that's average, not mean or mode, meaning a wage skewed upwards by high earners). And also every single couple except the FTB and the couple at the top of the chain have completely paid off their mortgages. And there's nothing exceptional in this chain...so how is this supposed to keep on working?

Total fantasy land. What seems to have been lost in all this is the reality of paying debt out of income - of paying off mortgages on houses at present price levels out of income. That's what people need to bear in mind and that's why sooner or later the housing market WILL crash.

Read this post carefully folks because it's one of the most cogent posts ever seen on this forum. It points precisely to the fundamental impossibility of house prices remaining at their current absurd levels.

I'll second that!!! READ THIS ALL YOU FTB's!!!!