willing Posted February 1, 2006 Share Posted February 1, 2006 House prices are rising at the fastest rates since the peak of the boom, FTB have no chance of ever getting on the ladder. Buy quickly, Buy Now or regret it for the rest of your life!!! Yep the usual bull cries have all gone up and we cannot deny the figures - house prices are rising again. However, the funamentals remain the same: 1. FTB new entrants falling. 2. BTL yields below acceptable margins in most places So what's changed? Nothing! Before the data from Nationwide came out I had almost convinced myself that the chances of a house price crash had receded and that I had been wrong for the last 2 years. Now I'm sure I am right. If prices are rising without a change in the fundamentals of the market to have increased affordability then we must be in a bubble. Even disregarding the skew in the data from regional variations etc. no viable argument exists as to how affordability has increased or how a market can be sustained without new entrants or profitable investments. Now I know BTL bulls will say that you can still find profitable BTL properties, but even they must admit that they are now few on the ground. If prices are rising and are sustainable then it must be because property is undervalued, either as an investment or due to constraints in supply. Neither has changed markedly in the last few months which suggests this current push cannot be put down to fundamentals. What we are seeing here is the classic last push of an over inflated market. I remember a quote (I can't remember who from) which goes 'If you want to try to time a crash, look for the period when the last bear turns into a bull'. That time has now come. I now expect serious falls by year end, and once again I can call myself a bear. We bears should be rejoicing at this news, not trying to pooh-pooh it. Quote Link to comment Share on other sites More sharing options...
woody Posted February 1, 2006 Share Posted February 1, 2006 (edited) Yes but no but. The fundamentals have been changing over the last year - the interest rate fluctuations have an impact (albeit delayed). Therefore, things haven't been standing still. Edited February 1, 2006 by woody Quote Link to comment Share on other sites More sharing options...
shermanator Posted February 1, 2006 Share Posted February 1, 2006 House prices are rising at the fastest rates since the peak of the boom, FTB have no chance of ever getting on the ladder. Buy quickly, Buy Now or regret it for the rest of your life!!! Yep the usual bull cries have all gone up and we cannot deny the figures - house prices are rising again. However, the funamentals remain the same: 1. FTB new entrants falling. 2. BTL yields below acceptable margins in most places So what's changed? Nothing! Before the data from Nationwide came out I had almost convinced myself that the chances of a house price crash had receded and that I had been wrong for the last 2 years. Now I'm sure I am right. If prices are rising without a change in the fundamentals of the market to have increased affordability then we must be in a bubble. Even disregarding the skew in the data from regional variations etc. no viable argument exists as to how affordability has increased or how a market can be sustained without new entrants or profitable investments. Now I know BTL bulls will say that you can still find profitable BTL properties, but even they must admit that they are now few on the ground. If prices are rising and are sustainable then it must be because property is undervalued, either as an investment or due to constraints in supply. Neither has changed markedly in the last few months which suggests this current push cannot be put down to fundamentals. What we are seeing here is the classic last push of an over inflated market. I remember a quote (I can't remember who from) which goes 'If you want to try to time a crash, look for the period when the last bear turns into a bull'. That time has now come. I now expect serious falls by year end, and once again I can call myself a bear. We bears should be rejoicing at this news, not trying to pooh-pooh it. A very wise observation. I think there are 3 characteristics of a bubble; 1. I goes on longer than most imagine 2. I sucks in every last bit of air (money) it can 3. Every bear throws in the towel (as Willing said). All told, I still expect falls. 2006 is the time. Quote Link to comment Share on other sites More sharing options...
?...! Posted February 1, 2006 Share Posted February 1, 2006 (edited) The reference to the last bear throwing in the towel is pyramid scheme theory. Only when there is no more money left to absorb, when cash stops flowing into the market does everyone realise the gains are unobtainable. It is this flash point realisation that would be required to establish a crash (in the true sense). Bubbles burst when those involved realise en masse they cannot realise their desired returns. Endless high HPI just stretches the ladder to the point where nobody can move up. Such a scenario would establish a crash as nobody could sell for gains. I find it amusing when posters on this board post monthly or even quarterly figures, to try and deduce where the market is going. These are the people who bounce the dead cat. Do not go near EA's until they start cold calling. Edited February 1, 2006 by ?...! Quote Link to comment Share on other sites More sharing options...
CrashIsUnderWay Posted February 1, 2006 Share Posted February 1, 2006 These are the people who bounce the dead cat. Do not go near EA's until they start cold calling. Arf! How true! Couldn't agree more - see it all the time in the markets - take it up one last time before you slam it down, CRUSHING the morons who panicked at the very peak... Quote Link to comment Share on other sites More sharing options...
willing Posted February 1, 2006 Author Share Posted February 1, 2006 Yes but no but. The fundamentals have been changing over the last year - the interest rate fluctuations have an impact (albeit delayed). Therefore, things haven't been standing still. I think this is a common misperception. Monthly interest rates can contribute noise, trigger falls, rises, booms and busts but don't really change funadmentals in the long run. It sounds odd, but think about it. House prices remain unaffordable for many FTBs not because they cannot borrow enough for the mortgage, but because they cannot produce the deposit required to borrow enough for the mortgage. On the other end of the scale for BTLs the problem is competition not high interest rates. BTLs find their investments do not pay a good return becasue they are competing in a near saturated market and need to offer lets below market price to attract tenants. In the case of BTLs, yes, lower IRs do make their profit margins higher by reducing their mortgage payments. However, this does not change any of the fundamentals - the market remains near saturation. All it does allow them to do is offer their let at a lower price to attract tenants, but as every other BTL can do this due to the lower IRs it just shifts the whole BTL market rate downwards. The only other source of transactions within the market are OOs. IRs do make a difference to these guys as they can now afford more, but it still has not changed the fundamentals of the market. BTLs still find it hard to make a profit and FTBs still cannot buy. The result is that trading drops off at the margins and market becomes locked. Small fluctuation in IRs cannot change the funamentals. Quote Link to comment Share on other sites More sharing options...
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