Monday, July 30, 2007

Nice people at Fitch, a bit late with their warning

UK housing market 'overvalued by 20%'

The question is not "if" the UK housing market is overvalued, everybody knows it, even the BTLers every time they buy are confident to find a greater fool to sell to. The question is "when" a correction will happen, and what type of correction that will be: sudden burst, inflation catching up?

Posted by confused76 @ 03:37 PM (544 views)
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8 thoughts on “Nice people at Fitch, a bit late with their warning

  • Pundits and journalists refuse to accept that a “2-year fixed” is NOT a fixed rate mortgage, it is damn variable.

    Fixed rates are popular in US, Germany, Italy, etc, and are 20-years fixed. But of course are more expensive because have the added “insurance” feature of not being exposed to interest rate fluctuations…
    But in the UK no,… we are a bunch of punters: interest rates will never go up, why to pay higher IRs? I bet I will be able to afford the extra bedroom tomorrow, let’s do an interest only, cheap introductory rate today… and if I cannot afford it, who cares? I will sell it and make a mint! the more the leverage the more the profits!
    these are common example of financial illiteracy that the government (if the had balls) should have curbed. But forget!

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  • The BBC featured this story in “other news”, but they buried it very quickly this morning.

    Can’t have the polloi being told the truth now can we aunty beeb?

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  • 20%??? Hah!!!!!!!!!!! It’s a lot more overvalued than that!

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  • I bought my house in 1999, houseprices could fall 50% and it would still easily be worth more than I paid for it in 99, it just gives you an indication of how stratospheric house prices have been in the last 8 years. I recon a 40-50% fall is not off the cards.

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  • planning4acrash says:

    A 20% fall in real terms over four years is a 36% fall in nominal terms (assuming 4% RPI inflation), one would expect the market to overshoot, making a 45 to 50% fall in nominal terms realistic. Some here believe that there will be a 50% fall in real terms as a result of a drop in overall debt levels, but I think that’s unlikely, this didn’t happen in the 1930’s and there is a floor to how far house prices will fall, so long as society remains intact, that is, the price that local authorities are willing to pay to house people on their books and the amount that housing associations are willing to pay for accommodation that they are subsidised to provide.

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  • Interesting to look at the Nationwide statistics of house prices versus house price trend, which shows that house prices are currently 35% above trend. Also interesting to note that during the last house price peak in 1989Q2, house prices also just reached 35% above trend before falling back below the trend in 1991Q1. So how do they get their figure of 20%?

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  • I wonder how old Hilary is. My guess is under 30, as she is clearly talking out of her back side.

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  • Less not forget one of the main reasons that France is the most overvalued is speculators from over here. How the hell can the average French worker on a 35 hour week afford those prices!

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