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UK house price gauge hits four-decade high - RICS


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26 minutes ago, Clarky Cat said:

Hmm. Highest since 1988. What happened in 1989 I wonder..

I bought a flat for £63k and sold it for £62k in 1996 since your asking right  in the middle of London

Edited by GregBowman
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Always a boom before a crash, I've been generally quite bullish until a saw the RPI inflation rate, US at 4%

Interest rates must rise.  Get on the best fixed term rate as soon as possible, even if you have to pay redemption fees

     

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4 minutes ago, GregBowman said:

I bought a flat for £63k and sold it for £62k in 1996 since your asking right  in the middle of London

What would you say it would be worth now now on the open market?

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3 minutes ago, GenZ said:

Interest rates must rise.  Get on the best fixed term rate as soon as possible, even if you have to pay redemption fees

I would be cacking my pants right now if I had a mortgage.

 

2 minutes ago, GenZ said:

What would you say it would be worth now now on the open market?

I'm guessing a cheeky mill or more.

 

7 minutes ago, GregBowman said:

I bought a flat for £63k and sold it for £62k in 1996 since your asking right  in the middle of London

Yeesh. Can't lose with bricks and mortar, right? What was inflation around that time?

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7 minutes ago, msi said:

Bring. It. On.

I was surprised to see such a forthright prediction of bad news (i.e. good news) for house prices from a serious paper.

The real economic pain of Covid has yet to hit. I maintain my position that house prices will not be immune from this.

Edited by Voice of Doom
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11 minutes ago, Voice of Doom said:

I was surprised to see such a forthright prediction of bad news (i.e. good news) for house prices from a serious paper.

The real economic pain of Covid has yet to hit. I maintain my position that house prices will not be immune from this.

Just waiting for the Fed to sneeze

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39 minutes ago, Locke said:

I would be cacking my pants right now if I had a mortgage.

 

I'm guessing a cheeky mill or more.

 

Yeesh. Can't lose with bricks and mortar, right? What was inflation around that time?

Wasn't that high around 2% and now would be worth £300k + 

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And there's another article on the same theme:

https://www.thetimes.co.uk/article/this-property-frenzy-is-likely-to-end-in-tears-mm3b2n99l

It's behind a paywall so if anyone can judiciously quote from it, that'd be good. The headline is good though:

This property frenzy is likely to end in tears

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This property frenzy is likely to end in tears

 

Buyers making offers on houses they haven’t even viewed should beware the risk of higher inflation and interest rates

It was the moment a month ago when a firm of estate agents grandly declared themselves too busy to return calls that we decided, as renters, not to get involved in the latest property boom.

A few days earlier we had seen a house that we were only moderately interested in booked out for viewings within minutes of going on the market. No, we were told, it was impossible to actually walk inside the house before placing an offer. Perhaps we could look at it on Google street view? We passed and the sale moved rapidly to a closing date.

Since then, like many others, we have watched awestruck as the home property market spins ever faster. House prices rose by an average of 8.2 per cent in the past 12 months, according to the Halifax, as buyers fear “missing out”.

 

That fear is classic bubble behaviour, when consumers clamour mainly just to join in. The trend appears to be accelerating. Prices jumped by 1.4 per cent in April compared with March.

The British love a good property frenzy but even by our standards this is ridiculous. There’s a pandemic on. How on earth can it be that house prices are rising in the midst of a health emergency that has caused an economic disaster on a scale rarely seen outside wartime?

 

The answer is easy and we’re not unique. Across the West, the normal rules of the economy — and supply and demand — have been suspended by governments understandably keen to protect jobs and incomes.

When unemployment rises in a recession, significant numbers of buyers and owners become financially distressed. Then house prices tend to fall. This time, unemployment has not risen as steeply as expected because taxpayers have spent billions paying wages with furlough schemes.

Central banks have set interest rates at even closer to zero. And this after a long period where they have also used QE (quantitative easing, described loosely as money-printing) to keep the financial system awash with money.

There are additional explanations for the bubble. There are fewer houses on the market as older Britons with properties they like and decent-sized gardens that suit lockdown stay put. It also seems likely that the freezing of the labour market disrupted the usual stream of internal migration by families moving when the breadwinner has to relocate.

 

Simultaneously, those buyers with piles of cash are eager to move out of cities in search of the rural idyll. Supply is limited, money is cheap, prices go up. On top of all this, the chancellor, Rishi Sunak, introduced what turns out to have been an entirely unnecessary stamp-duty holiday that comes to an end in England in June.

This is a rocket-fuelled boom propelled by government action. What could possibly go wrong? Quite a lot, as it happens.

Surging prices depend, for now, on cheap borrowing costs. If interest rates have to rise, probably sooner rather than later, that will financially stress anyone who has over-borrowed in a panic.

Rates have to rise when inflation (prices other than property) appears. And here it is, in the US, the world’s leading economy. Yesterday it was revealed that inflation has surged to 4.2 per cent, well above the widely expected 3.6 per cent.

It has been spurred by rising commodity prices, increases in costs because Covid has disrupted global supply chains, and higher wage demands. Recklessly, the new US administration under Joe Biden has exacerbated this with about $6 trillion of extra spending, loading yet more fuel on the fire.

This is not a hysterical prediction of imminent doom, but with a strongly recovering economy there are big risks. One of those is an overheating housing market that threatens the wellbeing of millions. Incidentally, if there is inflation and a crash, it will blow up politics in the process and make most of the calculations of this week about who is likely to be in office for ever and who is finished look like deluded chatter.

A soft landing is still possible. A short burst of inflation in the wider economy may not be sustained and the air might go out of the property market gradually. Housebuilders have responded to the surge in prices and demand by beginning more projects. But the warning signs are there.

I made my own declaration of interest earlier about not wanting house prices to go too high. Yet unlike squeezed younger Britons, fighting to get on the ladder, we are lucky, having been through several housing cycles already. We are in no hurry and in a year or two plan to go somewhere far cheaper than London, as there is no need to be there five days a week after the crisis.

It was an interesting experience earlier this year, though, seeing how quickly one can become part of the property frenzy. We started looking in several areas, tentatively at first, in February after we had our first jabs and felt more confident.

You start with a few light episodes of Kirstie Allsopp and Phil Spencer’s Location, Location, Location on TV, and before you know it you’re on the hard stuff, tracking houses and opening the Rightmove app every five minutes.

Allsopp has been by far the most sensible voice on all this. In the spring, she spoke about the risks of the market overheating after noticing that people were bidding crazily on houses they hadn’t seen.

It is worth remembering that a house is just a place to live in before the next buyer takes it on. Ashes to ashes, dust to dust and all that. Listen to Kirstie, and beware that US inflation number. It’s time for us all to be careful.

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1 minute ago, Sprrite said:

 

It is worth remembering that a house is just a place to live in before the next buyer takes it on. Ashes to ashes, dust to dust and all that. Listen to Kirstie, and beware that US inflation number. It’s time for us all to be careful.

I accidentally copied the full article and can't amend my post.

The most interest quote I find is above.

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9 minutes ago, Sprrite said:

I accidentally copied the full article and can't amend my post.

The most interest quote I find is above.

Really interesting read and would be great bear food.

Sadly it's likely to be drowned out by the full on ramping rhetoric across most other mainstream media, I think the BBC have had a property ramping fluff piece every day this week so far.

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This is not a bubble. Those who buy are just making a sound judgment in my opinion, from a personal finance point of view. 
The UK government have decided the housing market and the mortgage market can’t collapse. If you have some spare cash, would you put it on the FTSE or on a deposit plus a 30y mortgage the Prime Minister would be happy to pay with tax payers’ money in case you loose your job? 
 

Edited by NoHPCinTheUK
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1 hour ago, NoHPCinTheUK said:

This is not a bubble. Those who buy are just making a sound judgment in my opinion, from a personal finance point of view. 
The UK government have decided the housing market and the mortgage market can’t collapse. If you have some spare cash, would you put it on the FTSE or on a deposit plus a 30y mortgage the Prime Minister would be happy to pay with tax payers’ money in case you loose your job? 
 

I do find it interesting we are seeing articles like the above especially in places like the Times. I have seen similar stuff on the FT and Guardian recently too. AFAIK, this has not happened previously.

In regards to your second point, I think looking at a home as an investment is one of the reasons we are in this mess. A house should be somewhere to live in, not a commodified asset. Having looked at your analogy though, I still think that the FTSE 100/All Share accumulation would have outperformed average house prices in the last 30 years. If you hold stocks long-term, they will always provide a decent return.

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8 hours ago, Voice of Doom said:

And there's another article on the same theme:

https://www.thetimes.co.uk/article/this-property-frenzy-is-likely-to-end-in-tears-mm3b2n99l

It's behind a paywall so if anyone can judiciously quote from it, that'd be good. The headline is good though:

This property frenzy is likely to end in tears

Just go into you settings and disable javascript, then you can judiciously quote from it yourself. 

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3 hours ago, Trump Invective said:

At the weekend, bojos sister stated that "this is one bubble that has to burst". Everyone knows, deep down, that society cannot remain stable in such circumstances. Funny money has to be paid back by real money sometime.

Nope - just print print print until the fiat price reflects the value of the asset.

By that stage, a loaf of bread should be about 20 quid, of course.

 

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