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Bbc London House Price Madness

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On the BBC Business Live page they used the phrase London House Price Madness..... am I dreaming?

YziFnWF.png

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.....so if you pump money in at one side it has to go somewhere, assets property or stocks.......doesn't mean any wealthier or that it may bubble up and burst at a weak spot..... ;)

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.....so if you pump money in at one side it has to go somewhere, assets property or stocks.......doesn't mean any wealthier or that it may bubble up and burst at a weak spot..... ;)

F0JX8UKGGC2TTBH.MEDIUM.jpg

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Probably even worse when you think of what they've done to houses since then. How many decent family semis and victorian terraces have been converted to flats and bedsits. Put it in sq ft terms and you can add a couple more multiples to that.

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Probably even worse when you think of what they've done to houses since then. How many decent family semis and victorian terraces have been converted to flats and bedsits. Put it in sq ft terms and you can add a couple more multiples to that.

Well, that's the thing...house prices haven't doubled since 1999, they'd quadrupled because the sizes have halved.

What we need is a good old fashioned collapse

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On the BBC Business Live page they used the phrase London House Price Madness..... am I dreaming?

YziFnWF.png

according to that chart, lessons have not at all been learned from the last financial crisis.

it's going to be a bigger drop this time.

even with technical analysis type approach, it looks straight down from 10* earnings to 7* earnings(last resistance line) is easily do-able.- that's about a 30% retracement.

50% and 61.8% reversal are the next big fib values.

this chart only goes back to 1995.

anyone got a long term chart(say 50-100 years) for standard deviation of HP's to income??

I think typically it's been about 4 for london- 2.5 to 3 for the rest of the country.

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One major factor in increasing multiples of course is the participation of women in the workforce, so between the 90s and now you need to adjust for that somehow. large majority of households now have double incomes so prices per household are not on the same multiplier.

Even assuming 100% participation the average is 5.0x which is all time high and insane of course.

Also interest rates are much lower increasing borrowing capacity.

Would be interesting to see the prices as share of net outgoings, has probably gone up much less.

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One major factor in increasing multiples of course is the participation of women in the workforce, so between the 90s and now you need to adjust for that somehow. large majority of households now have double incomes so prices per household are not on the same multiplier.

Even assuming 100% participation the average is 5.0x which is all time high and insane of course.

Also interest rates are much lower increasing borrowing capacity.

Would be interesting to see the prices as share of net outgoings, has probably gone up much less.

No

The dependency ratio is higher than ever I believe

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One major factor in increasing multiples of course is the participation of women in the workforce, so between the 90s and now you need to adjust for that somehow. large majority of households now have double incomes so prices per household are not on the same multiplier.

Even assuming 100% participation the average is 5.0x which is all time high and insane of course.

Also interest rates are much lower increasing borrowing capacity.

Would be interesting to see the prices as share of net outgoings, has probably gone up much less.

Either way, people are working more for the same house, and that is the problem. All this extra economic activity and it mostly goes to landlords and landowners.

Also adds to the risk, since people have no spare capacity to deal with unforeseen circumstances. People have to work at 100% capacity, just to keep the roof over their heads.

Edited by BuyToLeech

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http://data.worldbank.org/indicator/SL.TLF.CACT.FE.ZS?page=3

It has gone up - but not by us much as I expected (only 3%).

If you like data, check out the Bank of England series for bank and building society SVRs, IUMTLMV. (Go to Interactive Database>Interest rate and exchange rate data>Quoted household interest rates>Secured lending (mortgage) rates.

I'd argue that mortgage rates aren't that much lower.

Look at 2002, 2003, even first quarter 2004, SVRs are around 5.5%. With MMR in place at time of writing you are going to be stress tested for affordability at about 5%. Hardly a big margin relative to 5.5%. Rates arguably only went materially higher later on to choke off the asset boom. A 2% 2-year fix at 65% LTV is a massive blessing for somebody trying to pay down a big mortgage, but in terms of new lending for purchase to set prices, particularly in the FTB market, I'd argue that the impact of the low rates that some borrowers are accessing is often oversold.

A big chunk of present transactions are all cash or BTL. In the latter case the growing role of interest-only lending is a confounding factor when comparing pre-1996 prices to 2016 prices.

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Either way, people are working more for the same house, and that is the problem. All this extra economic activity and it mostly goes to landlords and landowners.

Also adds to the risk, since people have no spare capacity to deal with unforeseen circumstances. People have to work at 100% capacity, just to keep the roof over their heads.

A great, great exposition of this - and you may even be referring to it - is this speech by Elizabeth Warren. It really opened my eyes back when I first watched it. Always worth a repost, and even an occasional re-watch.

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A great, great exposition of this - and you may even be referring to it - is this speech by Elizabeth Warren. It really opened my eyes back when I first watched it. Always worth a repost, and even an occasional re-watch.

Thanks for that - really well presented.

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