Wednesday, July 25, 2007

Short, sharp and to the point… Sir Landlord, post this on your site!!

A housing perspective

Quote a couple of uncontentious figures, connect two dots... the London housing market can only go in one direction: DOWN

Posted by confused76 @ 12:32 AM (856 views)
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4 thoughts on “Short, sharp and to the point… Sir Landlord, post this on your site!!

  • There is no link – has it been turned off? I wonder why?

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  • It’s an interesting article and painfully correct. I’m no bull but if you factor in the interest rates during the two periods mentioned then even though income to price ratios are 3 and over 10 then because of the low interest rates the repayments from the period of 3 * salary and 10 * salary are significantly less extreme. However, in my very humble opinion allowing house prices to run amok because of a period of low interest rates is utter madness and will create a disaster if rates rise significantly again.
    I do still struggle to see where the crash will come from as at this point in time I don’t see interest rates tipping 7% causing forced sales. I still see a period of froth being blown from house prices of up to 10% and then either tiny rises or falls which will look and smell like stagnation.
    I would like to be wrong and see a really big slap in the face to financial services sector and money markets who appear to have taken leave of their senses over the last 5-10 years.

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  • dohousescrashinthewoods says:

    Denzil, I believe the case for a crash at less than 7% is on the basis of leverage.
    To oversimplify, if it took 7% to crash a 3x leverage, 6x leverage would only require 3.5%

    Clearly it’s not that simple, but the point is that masses more debt creates a lower IR pain threshold/tipping point. I wouldn’t be surprised to find out next spring that a crash kicked off in earnest this autumn.

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