Thursday, Oct 12, 2006

The final phase of the boom

The Times: House price surge suggests more than mini-boom

HOUSE prices have staged a remarkable recovery and are now rising at a faster pace than at the peak of the last property boom, a survey suggests today.

Posted by sold 2 rent 1 @ 08:38 AM (527 views)
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42 Comments

1. Nohpc said...

Yet more evidence of a housing boom. I definately cannot see a crash of any significance. Maybe a mild correction at the worst.

Thursday, October 12, 2006 09:37AM Report Comment
 

2. Rimmer said...

They might be partially right but a lot of vested interests here, soft landing in 2007 well maybe but unless your simple that doesnt leave a lot for " Short Term Gains " given stamp duty etc, i still hold to the view that a 20% reduction is required just to correct things before we even talk of a crash!

Thursday, October 12, 2006 10:00AM Report Comment
 

3. holding out said...

I don't think it represents a boom because the volumes are down. There seem to be few houses coming onto the market at the moment. The interesting time will be in spring when there is usually a surge of properties. At that point interest rates will probably be 5 or 5.25%.

Then we shall see - they could still press upwards (Who's got the Luger ?)

Thursday, October 12, 2006 10:11AM Report Comment
 

4. inbreda said...

Maybe we should all write to Mr King and tell him that if he's so concerned about protecting house prices he should raise rates now before prices get any further out of control.

Thursday, October 12, 2006 10:14AM Report Comment
 

5. inbreda said...

nohpc - I think you're getting a little ahead of yourself their.

The low volumes of buyers, sellers and sales suggest quite the opposite to me.

To exaggerate the situation - every normal person is completely priced out of the market. People are holding on to their properties because 'house prices only ever go up'. There are few forced sellers as interest rates haven't risen significantly and unemployment is still low.

Basically the only movement in the housing market is due to those with large bonuses or the very wealthy.

A small number of wealthy individuals does not a housing market make.

And it also adds bias to the house price figures. Wealthy people tend to buy expensive houses.

To me these figures don't suggest there will or won't be a HPC. They do suggest that the market isn't going to require much of a shock to begin a freefall.

Thursday, October 12, 2006 10:22AM Report Comment
 

6. Surfgatinho said...

"the runaway conditions that forced the Bank of England to raise interest rates five times between 2003 and 2004"
Really, I didn't realise the BOE did house prices. And that must be why they lowered IRs last year as well, to make sure the property market got that extra shot in the arm it really didn't need.

"The survey said that prices were being driven higher by firm economic growth and strengthening employment. In London and the South East the booming stock market and the expectation of strong bonuses is clashing with limited property availability to force up the value of homes."
Ah, the houseing market is now based on city bonuses! Hmm, don't really think this shows the whole picture

Thursday, October 12, 2006 10:28AM Report Comment
 

7. Sam said...

I agree inbreda. The data we're seeing now, the way it is presented to us suggests that while technically correct, holds little value for the majority of us. Buyers and sellers seem to be holding their cards close to their chests.


Thursday, October 12, 2006 10:53AM Report Comment
 

8. devil's advocate said...

Same old spin from the usual suspects, prices are rising and we've all made a mistake. These is the same load of cr*p comments that were posted on the site three years ago. I wonder if you'll all be sitting there posting blogs that statistics are false, its all spin, price are really dropping.

Stop deluding yourselves.

Thursday, October 12, 2006 11:23AM Report Comment
 

9. uncle chris said...

DA - if I saw it happening in my area then I might agree with you, but I don't. Call me a cynic, but I've learnt to trust my own eyes rather than rely on anything told to me by the establishment. After seeing the self-serving culture of deception that has developed in this country since the arrival of New Liebour, I cannot understand why anyone would trust anything told to them. We all swallowed 'Weapons of Mass Destruction' hook line and sinker, and now 600,000 Iraqi's are dead. When will people open their eyes to reality and stop living in fantasy land. We cannot continue borrowing forever, which means house prices cannot sustain the past decades rises. Australia now realises that, America now realises that and without question it will come to the UK.

Thursday, October 12, 2006 11:43AM Report Comment
 

10. devil's advocate said...

I see house pricing rising in London across lots of areas. With the Olympics coming they can only go up. It seems like there is less movement, however, if the properties are BTl then it will reduce the supply. The only reason the BTl mob will sell is if the rates go up considerably and then they will have fixed for a period so the effects will be delayed. I cannot seea crash happening and if it does then it will be in 4-5 years.
What a mug I was selling up in 2003. The blogs were all the same then, which makes me think we'll just be saying the same thing in 3-4 years time, whilst the market continues to rise and people continue to make money.

Thursday, October 12, 2006 11:49AM Report Comment
 

11. David20040_0 said...

Now is probably be the time to just accept that property will never crash and that many of us will never be able to afford a home.

Thursday, October 12, 2006 11:58AM Report Comment
 

12. C'mon Correction said...

DA - not everywhere is rising, here in south wales I can hand on heart state (from watching the market on a daily basis) prices have been static for the last 3 years (to be fair - small houses/flats - are up, medium/large size houses are down - overall static). So for me to seeing headlines that state '...prices booming ..' etc are mis-leading here.

Fact is a lot can be made up from a set of stats - if you think the mortgage companies won't issue reports in a good light for their business, then sorry you are naive.

Thursday, October 12, 2006 12:23PM Report Comment
 

13. miniftse said...

inbreda - house prices only ever go up? over a 5-10 year period yes they do. fact. usually massively. fact, with lots of proof. you can get on the ladder if you take home a 1000 a month. just not where you want to, city centres, desirable neighbor hoods, this has always been the case. business is healthy, everyone can get a job, we have so many jobs people come from all over the world to work here, so repayments of a 1000 a month are possible by people on average salaries. business is so good we can employ people how read web forums all day and still make money. sure you aint gonna do aswell as you would have buying 10 years ago, sure, missed the boat, but dont let it sail out the harbor again. flats are 10x salaries in central london. yeah, no change there, get out of london, commute. rents are just behing mortgage repayments (10%-15%) on average, inflation is happening, that difference will be eroded in less than 3 years. sure lots of people are in debt, so they'll print more money, they dont want a riot, they'll print more money. take the plunge, finacial suicide, buy a place.

Thursday, October 12, 2006 12:33PM Report Comment
 

14. harold said...

DA, I wonder how old you are. I guess you cannot be over 35 as you seem unaware or cannot remember the last property crash - and I mean CRASH - we had in this country in the early 90's. You moan on as if a crash is an impossibility, which, in truth, say more about your knowledge of history and economics than about the current asset boom, of which property is only one bubble. If you really are going to play devil's advocate, then do it with some knowledge.

Yes, we all know that a crash has not yet happened, but in a sense it is the waiting/watching/expecting that makes this site more interesting. If prices were falling, the self-congratulatory atmosphere would be fun - but tedious.

Thursday, October 12, 2006 12:43PM Report Comment
 

15. harold said...

miniftse

And from 1990 to 1995? Fiction.

Thursday, October 12, 2006 12:50PM Report Comment
 

16. Renter said...

I sold up 1 year ago because I equated the bullish psycology to that of the late 80s ("you cannot afford to be out of this market"). Since then ,that psycology has become even more extreme. I was obviously premature but no one will ever sell right at the top. You try selling into a falling market where there is NO liquidity. It's not like phoning up your stockbroker to get out of a non-performing stock where you can get out in seconds - it takes MONTHS to sell a house. I am nervously awaiting a crack in prices for which there appears to be no obvious sign. Interest rates are supposedly going up to 5% next month but that is already priced into the market so I'm unsure from where the change in sentiment is going to emerge. Unlike Devil's advocate I am not ready to capitulate but I sympathise with your position. These are cruel times for contrarians but the bigger the hullaballoo now the bigger the pop when it comes.

Thursday, October 12, 2006 12:50PM Report Comment
 

17. inbreda said...

miniftse - not sure what you're saying here. Surely 1989 to 1994, a 5 year period would have been a really bad investment. Even 1989 to 1999, a ten year period isn't a remotely good investment. Things could be even worse this time round. And that's not to mention the fact that far more properties are being bought as investments rather than homes.

PS - I did buy 10 years ago - almost exactly ten years ago.

Thursday, October 12, 2006 12:54PM Report Comment
 

18. Cstanhope707 said...

Actually what is interesting is the boom in overseas property investment, this will eventually bring it all down anyway. The spending spree in India and China will create large inflation in those countries which will ultimately lead to hevy IR increases being forced on the BOE.
Also keep in mind spend 200k in the UK and make maybe 20 in the short term or spend 70k in Beijing and tripple that, what would you do, that is why eventually property investment in the UK just will not be worth it.

Just as IT outsourcing created reality for all those highly paid IT people at the start of the millenium this effective property investment outsourcing will eventually do the same.

Thats why I say go for it guys buy buy buy overseas......

Then these clowns will have debt problems in several countries....

Thursday, October 12, 2006 01:03PM Report Comment
 

19. Cstanhope707 said...

Oh yes and by the way what happens when the Chinese Government introduces special heavy taxes for overseas property investors......

Thursday, October 12, 2006 01:03PM Report Comment
 

20. Sheeda said...

Look at the newspaper headlines in the last crash 1988 - 1991. You will see headlines that are being reported now are alsmost identical to the headlines then . The last time house prices stalled they then boomed for a few months and then took a downturn and we all know what happened next. Funny but the circumstances are "different this time" yet the trend appears almost identical.

Late Q1 2007 will be start of the major downward trend ....... my opinion anyway .......

Thursday, October 12, 2006 01:12PM Report Comment
 

21. bidin'matime said...

I'm with Harold - old enough to remember standing in my garden in 1989 thinking I should sell, if only I could uproot the wife and kids from the family home... Had we done so and bought in again at the bottom, we'd now be sitting on over a million pounds in equity, instead of which, we sold our house in 1995 for the same as the (smaller) building plot over the road went for in 1989. It pained me to look at lovely big houses that they couldnt sell in the mid nineties for less money that ours had been worth 5 years earlier. If only..

Economics is cyclical. Its a physical impossibility for house prices to continue to outstrip wage rises forever and, eventually the pendulum will have to swing back. Its a bubble prices keep fooling everyone in a bubble but the real fools are the ones left holding the baby when the bubble bursts.

Thursday, October 12, 2006 01:43PM Report Comment
 

22. Inflation Is Eating My Savings said...

Sorry guys,
I just bought. It's been interesting and addictive. I've learnt a great deal. Thanks for the company.
But money is being printed and inflation is eating my savings.

Thursday, October 12, 2006 01:54PM Report Comment
 

23. Inflation Is Eating My Savings said...

Sorry guys,
I just bought. It's been interesting and addictive. I've learnt a great deal. Thanks for the company.
But money is being printed and inflation is eating my savings.

Thursday, October 12, 2006 01:54PM Report Comment
 

24. sold 2 rent 1 said...

Miniftse,

What you are saying is a HPC will be avoided by letting inflation rip.
I cannot see how this will happen when the MPC has specific inflation targets

The government would have to change the mandate of the MPC.

There may be some inaccuracies with the CPI but sooner or later inflation will show up in the official figures

My take is HPC will start in 2008. The tories will get voted in during 2009. We will need another Chancellor like Norman Lamont to get inflation down

Any economist will tell you that the reason we have endured such a long period of economic growth is because of tough decisions of high IRs and unemployment were taken during the last recession. This ensured that inflation was beaten.

Printing money is a short term solution that will have some serious long term problems

Thursday, October 12, 2006 01:58PM Report Comment
 

25. Me said...

In hindsight, even buying at the very height of the last boom would look like a good investment, given prices today. Sure, you would have made more money buying in 1985 or 1995, but you would still be quids in, and have a roof over your head. The point is, that buying a house to live in is a long term commitment and should not be looked at as a short term money making exercise.

Thursday, October 12, 2006 02:25PM Report Comment
 

26. Time To Raise Petrol Prices said...

11. David20040_0 said...
Now is probably be the time to just accept that property will never crash and that many of us will never be able to afford a home.


Just pause a moment and think of what would happen if you're right.

Lets assume that property prices continue to climb into the stratosphere and significantly outstrip wage growth for at least the next 5 years. At that point, there will be no true FTBs whatsoever. The only way people in this bracket will be getting homes will be through inheritances, but imagine the shock of homeowners, as every household in the land will pay IHT, without realising that you cannot pay the bill from the proceeds of the estate. In other words, if you die with a house worth 1M and no other assets (for example), you have a tax bill in the region of 300,000 to pay, which cannot be raised by selling the house or from the assets of the estate, as probate is not granted until the IHT bill is paid! Ignorance of basic tax concerns will land ever more people in hot water.

Families will shrink and the birth rate will fall further, though the people with property portfolios will continue to refinance and become 'richer' in capital terms. More immigration will result in a weaker sense of Britishness as we tiptoe around increasingly extreme minority groups, alienated by being unable to buy property at all. More brains will emigrate, taxes will rise and Britain will decline further as a developed nation, until we're on a par with Spain or Italy.

The most likely outcome I see is a vast asset-poor majority, ruled by a media-obsessed plutocracy who will still be oblivious to the damage they have caused.

Thursday, October 12, 2006 02:32PM Report Comment
 

27. d'oh said...

If inflation were to really let rip, then interest rates would have to follow it up. Would you want to be in possession of a 180k mortgage with mortgage rates at 15%+. Last time is Australia mortgage rates were over 20%.

Emotionally, I do understand the response of Devil's Advocate and others who take a similar position on this forum. I considered things to be crazy back in 2001, and have seen the craziness continue for the 5 years since. The one thing I hold onto is that this sort of thing has happened repeatedly over the past 300 years in many, many countries and many sorts of markets and the sorts of "this time it is different" hope/despair comments have also been said every single time, and every single time the whole thing has come down like a house of cards. It is very uncomfortable to sit on the sidelines and watch, especially when one has so much invested in the outcome. Perhaps this time it will be different, but I'm backing history and the common sense that the average house must be worth a certain portion of the wages earned by an average human in an average working lifetime. Either wages must go up (i.e. the currency is deflated) or houses must come down, or a bit of both. In neither circumstance do I wish to be holding a huge mortgage at present.

DA, I'm sure that many people on this site have the same fears that you do. Although I'm very much a "crash" believer, I certainly sit and worry that I may be wrong. One of the roles of these forums is that of a support group for those of us who believe that in the long run economic fundamentals must assert themselves. But the timescales for this are long in human terms: 3 to 4 cycles in a lifetime. The same old comments that are posted with respect to every article are just the reassuring noises of others who also need reassurance that they aren't completely mad, even though day to day experience and everyone else around them keeps telling them so.

Thursday, October 12, 2006 02:44PM Report Comment
 

28. Jimmytennor said...

Well, all I can say is have a look at the House Price chart to see where we are heading!!!!!

Thursday, October 12, 2006 02:45PM Report Comment
 

29. Chillilizard said...

I agree with 'Time To Raise Petrol Prices '.

If house prices only ever go up, then the nature of our society will fundamentally have to change. Over the extreme long term, house prices have to match inflation exactly; if it outstrips inflation, then there will be a new land owning class.

Lately I've been wracking my brains to find differences between the UK and other markets. What I've identified so far:

Polish/Eastern European Migration
Disproportionate size of the 'City Market' compared to the rest of the UK.
Lack of development in new housing. (not counting Birmingham) (over supply is a big part of the US downturn)

These are the things, I feel, that are driving property prices up.
When these things 'level out', then I think we will finally see a return to a sane world.

Thursday, October 12, 2006 03:21PM Report Comment
 

30. Mystie010 said...

Hi I've been watching this blog for a while now and really enjoying it although I'm really really scared that as a family of renters that we are going to get left behind. I know this is going to sound really stupid but please can someone tell me what a VI is? I've worked out all of the other abreviations but not this one. Please help!!

Thursday, October 12, 2006 04:17PM Report Comment
 

31. Maggot said...

rising prices - more unstable market - more chance of a crash - bigger crash - go on get them higher - BANG!!!

Thursday, October 12, 2006 05:26PM Report Comment
 

32. Eddie_lomax said...

Its all smiles and good news now that oil prices have eased off, the trigger does appear to have been the half arsed terror alerts. However the fundementals are all there, lower oil production, more personal debt, more goverment debt, rising unemployment and sky high balance of trade deficits. This economy cannot create growth purely from high house prices as the prices themselves are really just more debt, so far I have not heard on credible reason why prices should rise apart from "they always do".

Still my hunch at the moment is oil, gas, unemployment, taxes and debt will all have their effect on the nation but immediate shock could well be the US house market crashing, if it does crash then I'll be out of a job along with plenty more people working in our few export companies. Looking to the longterm I really do not believe there is a bright future ahead of us either as that oil price is going to go up and up, 2008 should be the year supply and demand really part company, although the peak oil date will probally be 2010 barring a recession.

As for buying a house, I'd say go for it if you are planning to stay, personally investing 40k abroad somewhere like Canada for a detached house with land on all four sides sounds like a wiser investment, afterall it would take you 50 years with a decent salary to get the equivalent property in the UK, thats my game plan anyway, as crash or no crash it doesn't look pretty in the UK.

Thursday, October 12, 2006 05:27PM Report Comment
 

33. Rocket Robbie said...

I read a lot about people borrowing 5 or 6 times their annual wage to buy a house and what a problem this is. But to me is seems that interest rates are that much lower than 10 - 15 years ago so people can afford to borrow more, surely that is just common sense. Taking this into consideration until a big IR rise (if it ever happens) i can not see a hpc. Buy Buy Buy!!!!

Thursday, October 12, 2006 05:45PM Report Comment
 

34. Ilejustwait said...


The more they talk up on how things are getting better & better the more chance the BOE will increase the interest rates again this year even maybe by 0.5% , this is what is needed to bring house prices back to a realistic price, so to all that has this dow`t that there is not going to be a house price correction, think again, we need more interest rate hikes to make this happen

Thursday, October 12, 2006 07:44PM Report Comment
 

35. Hook Line And Sinker said...

A very simple and highly significant quote from perhaps the World's greatest and most consistent speculator of all time, was recently made at an after dinner speech:

'The party is always liveliest right before it ends'.

Warren Buffet 2006

I'll add to this my own small contribution:

'After the last guests leave, there is usually one hell of a mess to clean up and lots of poor souls with very sore heads'.

When the great crash hits, poverty and misery will be rife and the hideous face of a truly unbalanced economic bubble will be seen by all.

Fair warning is given...

Thursday, October 12, 2006 09:09PM Report Comment
 

36. sirgoogle said...

This is just the rush before the next IR rise - that is all. After the next IR rise there will be tumble-weed blowing down the High Street and in and out of the EA offices.

NB. To trigger the next HPC we need at least three .25% IR rises. Without this there will not be enough Forced sales to bring a glut of housing onto the Market. Ergo No HPC for some time. Sit tight, save up and wait - do not give in and buy unless you really HAVE to... if you do do it for the long term as there will be a period of negative equity beforethe next property boom in 2020ish (as I doubt any Govt will ever have the balls to reguate the market - so there will be another bubble).

Thursday, October 12, 2006 10:29PM Report Comment
 

37. indiablue19 said...

mystie101...
The discussion is thick and fast and no one seems to have answered you yet. A "VI" is a vested interest. This refers to those individuals/institutions who stand to gain from sustaining the rise of house prices in this case, but can also be construed in tangential discussion that go on here to mean those who are artificially keeping interest rates low, and/or controlling the currency or investment markets. For instance, some obvious vested interests in relation to inflated house prices are estate agents, mortgage companies and those politicians who happen to have invested heavily in the housing market themselves.

Thursday, October 12, 2006 10:58PM Report Comment
 

38. Nohpc said...

I will repeat it again because you guys dont' seem to get it. Interest rates trippled overnight during the last property boom. Of course that would crash the market and it just wont happen again. Do you really see interest rates going up to 15 % again. 0.25 % interest rate rises may sting a little but I can't see anybody being stretched so much they can't work a few extra hours a week to make up for it.

Thursday, October 12, 2006 11:18PM Report Comment
 

39. Mystie010 said...

Thanks indianablue19 - I feel like I can properly join in now.

Thursday, October 12, 2006 11:37PM Report Comment
 

40. This comment has been removed as it was found to be in breach of our Blog Policies.

 

41. Micthemike said...

guys i cannot see an end to the inexorable rise in house prices, as someone mentioned the .25 % has already been factored in. i am a londoner but have been living on the gold coast australia for the last ten years, lived in melbourne for about 5 years came up to gold coast qld bought a duplex for 150000 dollars cash ( all i could afford as i just got divorced) just had an estate agent estimate who values my duplex (a duplex is like a terraced house) at somewhere in the region of 270000 dollars, basically what im saying even if i could muster up say half a million australian dollars there is no way i could consider coming back to london, i remember way back in 1970 i bought a semi detached house in hanwel london for about 7000 pounds, so guess how old i am !!!

Friday, October 13, 2006 01:38AM Report Comment
 

42. inbreda said...

Disappointed though I am at alleged rises in house prices, I must say that I find arguments such as those from nohpc and devils advocate extremely unconvincing.

They seem to rely on a few major future events. They assume interest rates will not rise - for example, Rocket Robbie says "interest rates are that much lower than 10 - 15 years ago so people can afford to borrow more, surely that is just common sense", when in fact common sense would dictate that you are careful how much you borrow in case interest rates do go up. He completely misses all the evidence that rules out significant drops!

And in addition to this the bulls are convinced that inflation will wipe out their debt. I haven't heard a single convincing argument as to how inflation can be high and interest rates low without any negative impact on the economy. Until I do, I'll wait.

Friday, October 13, 2006 09:57AM Report Comment
 

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