pommie bastard

Think of a number and cut it by a third on the housing merry go round?




House prices are expected to fall by as much as 30% over the next few years, according to a report by an economic consultancy.

http://news.bbc.co.uk/1/hi/business/2577069.stm

Buying a house is still well within the means of most Britons, despite three years of double-digit property price growth, according to new research.

http://news.bbc.co.uk/1/hi/business/2955268.stm

etlniwd

Your first link points to a news item about a report into the housing market by Capital Economics. This report makes a lot of sense. I would recommend anyone to read the series of articles in this month's Economist magazine (the CE report is in there) about the global housing market.

The second link points to a 'news' item that shouldn't even have been published. I am getting sick of the propaganda being pumped out by mortage lenders and the fact that organisations such as the BBC give them so many column-inches. The headline in this case reads 'Buying a house is still well within the means of most Britons, despite three years of double-digit property price growth, according to new research' What a load of bollox. When I started work in 1985 I was on a pretty crap wage but I had no trouble buying a two bed flat in Brighton. To buy that same flat in 2003 you would need to earn about £55k - hardly a graduate's salary. Why do these banks and building societies continue to publish this drivel ? And why does the BBC fall for it every time ?

There will be a crash and in the UK house prices will fall by way over 20% possibly even 30% in the South East. I have no doubt about this. You don't need to be an economist to see it - just an elementary mathematician.

Don

Too right! The UK housing market will go back to longterm trend as regards average house price as a multiple of average earnings. It always does. Common sense, really, barring external factors, because it's a reflection of affordability. External factors include demographic changes, new housing starts etc - but none of these are in the longterm likely to mean affordability stays so out of range compared to trend.

In short, it means a fall of 25-30% in real terms (South) to get back to trend.

Cheers - Don

pommie bastard

Its near impossible to look at all the UK market at one time , my sons first home is 3 bed Detached and cost 114K in the midlands and they have a joint income of 80K a year , but that was last year.
I have seen a BBC program Location,Location and I am amazed how much first time buyers are borrowing , given the max is 3 times income it does show the wage levels around the country?
What goes for a 100K up in Yorkshire can cost 3 times that in the South East , it has to do with earnings.

AndrewR

Agreed, but whether the bubble bursts with a pop and lots of people are left with negative equity, or whether it slowly deflates over the next decade, as rising wages and inflation bring prices back in line remains to be seen....personally i think london/parts of the south east are due for a quite major price correction given that the financial sector and tourism are both suffering there, but the rest of the country probably won't be hit, at least not severely.

dotty

With all this press/opinions it certainly makes people like myself who plan to buy in the UK hold off and see what happens.

My husbands opinion is the housing market in QLD has a way to go up yet. Based on the demand v supply and variety of other factors such as interstate migration/ overseas migration, low and possibly lower interest rates, aussies fear of the share market it looks good. One estate here in Kawana held a land ballot and had 50 people average per block.

Qld has certainly begun to shed its Brisvegas reputation, (Brisvegas by the way is a sarcastic term given by young aussies in the late 90's about the lack of entertainment, as in complete opposite of las vegas). Much improved here since then.

Downside of all this is I may stay in OZ for another year :scared:
Purely for housing market sake.

Dinky

Hello Dr Doom!
There is a place for people like you at Tony's top table.
The first link is from December last year. Me thinks that we're in a period of slow down rather tan crash. Tony's toy boys couldn't afford for the only positive element of the economy to go off the boil.
The second is just rubblish. House prices in the south are still very high and the rest of the country is catching up. Affordability is driven by low interest rates. Great for spenders but bad for savers.

Lust you wait until you get back here. You'll find the great pension debate far more interesting.....

Dinky

pommie bastard

Yeah its all bollocks come and build here instead.
By the way my super went bust by 30% here last year so it comes down to what pension?


AN estimated $25 million to $30 million of residential building work has to be redone in WA every year to correct shoddy work, according to an industry expert.

Building consultant and former TAFE lecturer Neville Davis said the housing boom had resulted in a severe skills shortage.

Building companies were making do with semi-skilled or unskilled labour and many houses had been pulled down and rebuilt because the standard was so poor.




http://www.sundaytimes.news.com.au/c...5E2761,00.html

pommie bastard

Pensions thank God my wife has a Goverment one from the NHS as well as a state one , the super funds here are crap.
PS the super here is to stop you getting a sate pension.


Australian superannuation funds look set to turn in a worse result than the 4.3 per cent loss they suffered last year.

Australia's retirement savings, which totalled more than $500 billion at June 30 last year, have fallen almost 11 per cent, or more than $50 billion, in the 12 months to February 28.



http://new.theage.com.au/articles/20...826530354.html

PeteY

Funny how everyone is saying prices in the UK are going to drop. They are still on the way up at the moment. Median prices went up 1.5% accross the country for the month of May.

Check out www.ft.com

Dinky

Agreed!
http://www.thisislondon.com/news/bus...d63717?source=

However, prices are dropping slightly in London.
The good news is that rentals are increasing as people dive out of houses as a result of the "anticipated" fall and wait.

Me thinks I'm going to rent my house for a few years and see.

Also we're going to rent in Sydney and wait and see what happens to the "over inflated" prices there.

PB when you finally moving back to the UK? Would be interested in hearing your perspective once your here!!

Dinky

Sindy

Totally agree pete,

This is an issue of market confidence rather than anything else. The housing market crash of the 90's was brought about by specific economic indicators. Those indicators are currently not a factor (Interest rates, unemployment etc) and consequently the market should not crash.

Two things are having an impact though, all of the media hype about a collapse in the market is holding some buyers back until they see which way the wind blows and first time buyers are finding it difficult to get on the property ladder, also when they hear that the market may collapse they hold back hoping for a drop in price.

The overall impact is that fewer people out there are buying and some are reducing the price to attract a buyer.

If we are not careful this will become a self fullfilling prophecy and the market will colapse, not because it should, but because we made it happen.

Last two points, PB's first link pointed to an article fom last december claiming a 30% drop this year. We are now 1/2 way through the year so where is the evidence (Outside London).

The second link to an article from 2 June also stated

"The main UK property market monitors say house price growth will slow sharply this year, but do not believe there will be a crash."

So the immediate state of the housing market will have more to do with perception rather than reality.

Optimistic Bill

etlniwd

Real interest rates are not that different from what they were in the eighties. How easily people forget those days of high inflation. Yes, that high inflation that meant that your net borrowing cost was not much higher than it is now. I don't know about you but I used to get 10-15% cost of living pay rises every year. Net result of that was that peoples debt got cheaper every year. And prices STILL crashed in 1988-89. Now we are living in an era of low inflation interest rates are not that low when you look at them in real terms. However for the market to correct itself without a crash will take many years. Are those first-time buyers really going to wait that long ?
What media hype ? All I see is the Nationwide and the Halifax going on and on about how there has been x% increases in the last month. This is the hype. They are talking up the market to boost their own profit. It's funny how they go quiet when the market starts falling.
It's not a self fulfilling prophecy - it is an inevitability. It's called 'a bubble'. For the majority of people a collapse is a good thing. The only people that benefit from high house prices (other than investors who bought low) are people who are downsizing or moving abroad. The vast majority of owner-occupiers will tend to move up to a bigger house as their family expands. They don't want a large gap between their old and new prices.
You should have read the article properly. They were predicting a 20-30% drop over FOUR years. In fact they predicted a 20% increase in 2003 and so far they are right on track.
Who are these 'market monitors'? They wouldn't be the banks and building societies would they ?

I suggest you leaf back through the archives and see what the stock market 'analysts' were saying in 1999. If I remember rightly it was something like 'share price rises may slow down a little in 2000 but there won't be a crash'.

I hate property price instability. But, I am not foolish enough to go into denial about what seems inevitable.

Sindy

Point taken about the 30% fall this year but the same article also stated:

"Martin Weale, director of the National Institute of Economic and Social Research said he viewed the predictions with a certain amount of caution.

"House prices have risen sharply, in part that is because we've had very low interest rates. "

Is he Foolish or will you chose to disregard this also?

Bill

Sindy

One last point on this:

For many people this will be a subject of who do you believe?

As Nick has suggested ambigous statements like " Market Monitors" do not tell us everything.

I take this point and have searched for a reputable source. I think most would agree that the Royal Institute of Chartered Surveyors are an impartial body. They have this to say,

16 May 2003

RICS housing forecast, 14 May - house prices are still a safe bet for investors, with the RICS (Royal Institution of Chartered Surveyors) forecasting 10% growth in prices, despite the weakening market, this year. But for those unable to come up with a hefty deposit for their mortgage, the struggle to get on the property ladder is likely to get even worse.

While the housing market is providing a healthy investment for some, with house prices expected to continue to rise in 2004, many first time buyers, particularly public sector workers, are unable to save the substantial deposit required to bridge the ever widening financial gap.

Taken from http://www.rics.org.uk/ricscms/bin/s...5&faculty=RICS

Thier current Housing market forcast states,

2003 has seen growing evidence of a slowdown in the housing market
·However, low interest rates and the end of the Iraq war will put upward pressure on house prices, mainly outside of southern England
·Downside risks exist mainly due to the poor state of the global economy
·We expect house prices to rise 10% this year followed by a slowdown in 2004 to 5%

Taken from http://www.rics.org/ricscms/bin/show...sts.html&id=18

As always time will tell