House Prices Hit A Standstill

[benjamin]

with so much news hitting it's difficult to track if this has already been posted - apols. if it has:

http://www.telegraph.co.uk/money/main.jhtm.../bcnprop128.xml

[Lone_Twin]

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No not seen that one yet.

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And of course house prices don't have to actually fall becuase of IRS, or Credit Crunch in order to start the HPC cascade.

A stagnation should do it too, and this is why I think so.

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It was an analyst from (I think) ABN Amro who said about a month back that becuase the housing market was now mostly based on a speculative model (ie. less influence of OOs and long term "investors" and more from flippers and short term BTLs) that something like up to 40% of the current prices of houses is based on continued increase at the current or faster rate.

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I.e. The only way you can justify/afford buying a house at present levels is if you expect that it will increase in value at +10% per year. This is why BTLs are prepared to subsidise rent and why so many people are prepared to take IO mortgages. (experience tends to bear this out)

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When the market slows that value attached to the house attributed becuase of its ability to increase in value is lost or reduced. This lowers its price which lowers further the expected future return.

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And so the cascade begins.

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Can anyone find any holes in my logic.

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ST

[BTLlivingthedream]

.

No not seen that one yet.

.

And of course house prices don't have to actually fall becuase of IRS, or Credit Crunch in order to start the HPC cascade.

A stagnation should do it too, and this is why I think so.

.

It was an analyst from (I think) ABN Amro who said about a month back that becuase the housing market was now mostly based on a speculative model (ie. less influence of OOs and long term "investors" and more from flippers and short term BTLs) that something like up to 40% of the current prices of houses is based on continued increase at the current or faster rate.

.

I.e. The only way you can justify/afford buying a house at present levels is if you expect that it will increase in value at +10% per year. This is why BTLs are prepared to subsidise rent and why so many people are prepared to take IO mortgages. (experience tends to bear this out)

.

When the market slows that value attached to the house attributed becuase of its ability to increase in value is lost or reduced. This lowers its price which lowers further the expected future return.

.

And so the cascade begins.

.

Can anyone find any holes in my logic.

.

ST

this is essentially a summary of one of the major points of the Miles report back in Jan....

[Lone_Twin]

Thanks I shall google that report.

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ST