Friday, October 26, 2007

2011-2012 or even longer

When Will US Housing Bottom?

If Europe follows the US in its 2 year house price movements time lag then it will be 2013-2014 or even longer for the UK to bottom out. A fall of 40pc-60pc will probably take 6-8 years to work out.

Posted by sold 2 rent 1 @ 01:14 PM (2701 views)
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9 thoughts on “2011-2012 or even longer

  • 40-60% drop – dream on!

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  • There is no IF really. People in the UK are using their credit cards to pay their mortgages. Do you think the boys in the backroom at the banks have got that new little correlative factor adjusted?

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  • The US has a benefit we don’t. They genuinely have oversupply. We will have falling prices and a shortage at the same time. So rents for us won’t fall. Rents will fall in the US. If you accept the view that renting is just extortion on workers, then rents going down will increase the wealth and spending power of renters. Cheap housing is good for society. So its not so bad for the US. We won’t get a reduction in London, although maybe some Northern cities will. So effectively we won’t benefit from the crash from that point of view. Also, given the often quoted time to bottom of 4/5 years with the possibility of the 15 years of Japan, we are dealing with time scales too long to wait to ever consider buying. Ideally, for our real wealth, what we need is a double downward spiral on both property prices and rents. Manchester has the downward spiral for rents and the house prices will chase afterwards, how can this sentiment be changed quickly given how long people tend to stay in flats for !? Could be decades maybe.
    Perhaps Germany and the other majority renting countries in Europe also had this situation in the past.

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  • I’ve decided I’m not going to hang around to watch this crisis unfold. I’ve got loads of transferrable skills, and England don’t pay engineers enough anyway.

    Anyone care to reccommend a country?

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  • stillthinking: I disagree, I think UK rents have quite some margin to rise. Over the last few years rents have been extraordinarily static, despite strong economic growth, immigration, etc. One of the main reasons rents have remained static is the sheer number of BTL investors entering the market. Just as the BTL crowd boosted demand for buying houses and pushed up prices, the same BTL crowd have flooded the rental market thereby keeping down rent levels.

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  • Sinner_the_saint says:

    I think there are a lot of people making the assumption that rent is inversely proportional to mortgage. This is simply not true. Take for example the past decade, have you seen a correlation (or any type of equation) between rent and mortgage? Rent follows inflation because there’s a true correlation between standard of living and affordability of living standards for the majority of people. We don’t generally tend to rent more properties due to speculation the renting price of a property will go up. For those who understand this, will also see that an argument such as “renting will go up, buy-to-let investors will therefore buy, and property prices will go up again” is not true. Renting will follow inflation. If inflation goes up, it will be prevented to do so by increasing interest rates (Note that if we don’t control inflation in such a difficult climate, then it will be more than a disaster for not only UK but Europe as a whole – this is a separate argument, but please do some research). A rise in interest rates in the ‘credit-crunch’ era has even more powerful impact on house properties and other assets such as cars, tvs, caravans etc. If I have to spell it out for you in other words it is as such: people will have enough trouble paying out electricity, phone and debt bills to be able to afford rent increases. Before rent can increase, young people will be moving back to parents place and single people, at a larger scale, will be house-sharing. Families will downsize in living standards by moving to different areas. There’s a lot more arguments to be applied here, but all the conclusions need not be reached after those arguments because there’s one very flawed fundamental used by the media – that of shortage of supply. If we were mostly homeless and looking for new houses to live, then the ‘shortage of supply’ argument would hold true. The incoming of new households due to immigration is not at a high enough level to cause a real impact here – I think most people have realised this by now, even the media has changed the way they want to formulate ‘shortage of supply’ by speculating (the same way speculation was done that house prices can only go up) that population will be increasing to an X amount by year 5000 (apologies of the exageration, but this makes me chuckle everytime I hear it on the news – I am not in a position to categorically say this will not happen though). The best explanation will be given very soon as it all falls out in the open. If you however want a peak into the future, this can be arranged. Have a look into history, this will be the best time travel device you have at hand. For those who want to choose between renting and buying – be very careful on that choice because if you make the wrong one, you might have to wait another 18 years before you can capitalise on your mistake. If you are an old chap like me, then you might not be able to ever do so – then again it won’t matter after you die.

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  • eyeoftheweasel says:

    On the other hand, salaries have, on the whole, remained pretty static since around 2000. Landlords can’t push rents up too much, otherwise people just won’t be able to afford them, so you’d probably see an increase in people looking for cheaper alternatives such as sharing flats, moving back with mum and dad, etc.

    With the number of flats available for rent at the moment (even in London) it’d currently be difficult for many landlords to push up rents without risking their property sitting empty.

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  • Si, try Australia. We emigrated a year ago and unlike the UK, it still has tangible things to trade (commodities), it is self sufficient in energy (including oil if it wanted to convert its vast coal and gas reserves to oil) it even still manufactures things, and of course theres the life style. Australia also has massively hyped up inflated house prices, but renting is cheap and the cost of living is cheap. Much better value than the UK and with many redeeming features. It doesnt have political correctness to any where near the same extent as the UK and there are no where near as many surveillance cameras and Gatsos.

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  • A Scenario !!!! – But isn’t it the case that if the UK goes into full recession (which quite a few economists are now predicting) and job losses start to occur countrywide, then the migrant workers that have come here over the last few years could disappear back to their own countries looking for better prospects which will leave an oversupply of rental accomodation and hence must cause a decrease in rents in some areas. There will be a few landlords I guess with vacant accomodation just unable to let at the prices they are asking. I hate to think of the yields they will be getting on BTL if this happens. I can see the house market being flooded with BTL houses.

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