UK house prices fall by record 3.6% in a MONTH!
Nov 15th 2010, 1:25 am
#106
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Joined: Apr 2005
Location: Melbourne
Posts: 4,553
Re: UK house prices fall by record 3.6% in a MONTH!
They're doing it for speculative reasons. They're overlooking low yields and ongoing investments losses because they think they can make huge capital gains.
Investors buying rental properties on the proviso of capital growth could create a housing bubble, a central bank official says.
Reserve Bank head of financial stability Luci Ellis, in an address to a CPA Australia conference in Brisbane, said lower rental yield will mean there is a limit on how far house prices can go.
Asked if the lower yields meant a limit to the rate of price appreciation, Dr Ellis said: "The short and simple answer is - yes".
"If rental yields are very low, investors are buying properties without really thinking about the rental yield," Dr Ellis said.
"Buying an asset just because you are expecting the price to rise in the future, well that is actually the academic definition of a bubble.
Reserve Bank head of financial stability Luci Ellis, in an address to a CPA Australia conference in Brisbane, said lower rental yield will mean there is a limit on how far house prices can go.
Asked if the lower yields meant a limit to the rate of price appreciation, Dr Ellis said: "The short and simple answer is - yes".
"If rental yields are very low, investors are buying properties without really thinking about the rental yield," Dr Ellis said.
"Buying an asset just because you are expecting the price to rise in the future, well that is actually the academic definition of a bubble.
Nov 15th 2010, 1:39 am
#107
Account Closed
Joined: Jun 2005
Posts: 9,316
Re: UK house prices fall by record 3.6% in a MONTH!
Or another way of looking at it. In a rising market you can speculate anywhere in the world. So why doesn't the same rent to mortgage difference exist in the UK during a rising market? The reason is because the UK doesn't have negative gearing on properties.
Last edited by MartinLuther; Nov 15th 2010 at 1:43 am.
