In article , M Holmes writes
They were, but at rates that would be considered minuscule today. I have a feeling prices have been rising right through my history except during the early Nineties, by which time I had so much equity it hardly mattered [and they more than recovered within five years]
You said you count "back from there". I took "there" to mean 1952. But presumably you're counting to the present. That's *forward*.
No, it was the number of generations for which loans have been readily available. Do you think many of today's FTBs had great-grandparents who had no-collateral loans at their disposal?
Quite right.
However assuming that we keep stable and low interest rates for the foreseeable future and that we have a severe housing shortage: what will cause the bubble to burst?
M
People getting very worried about keeping their jobs would not help. But in reality, nothing, because at least 90% of people will always have jobs and as you say houses are in demand.
The way to halve house prices immediately is to relax planning controls....
If BTL'ers are exacerbating that shortage and if BTL yields are already tight then it wouldn't take much to see the pin being wielded by them.
Also, might G Brown decide it's easier to punitively tax BTL rather than build new houses? (Not until after the next election of course).
Also isn't the timing of a bubble-burst as irrational often as the underlying reasons for its continued expansion? Confidence is a frail creature.
I'd love to be able to tell you. However, if I knew these things, then I'd already have a personal spaceship from the last four busts I couldn't predict the tops of, and it'd be a while before these posts got to me.
FoFP
Houses have stayed in demand in Tokyo all through the deflation. Just at one tenth of their previous prices.
Think about it: houses were recently at much lower prices. Was demand any higher then than than it is now?
FoFP
Indeed. There are things that can be done to burst bubbles. The Chinese goverment is trying, so far unsuccessfully, to burst a property bubble there. Most people concede that tripling interest rates would work, but as Sir Printsalot noted, it would have some undesirable knock-on effects.
Eventually if left to themselves, they burst because of either borrower or lender panic. The ones which burst this way have the worst consequences.
As a libertarian, naturally I'm in favour of free markets, but bubbles and bursts are certainly an unfortunate phenomenon which would appear to be inherent to markets.
Of course it'd help to have a fully backed currency. I don't doubt at all that funny money exacerbates the problem. With any luck, one result of the bust will be a return to real money.
FoFP
Maybe if Interest rates creep up in the next year or so we may see more people (who bought recently with little/no deposit) no longer able to afford their mortgage payments even without losing their job? (especially those who have falsified their incomes to get the mortgage).
Wow, allow people to build houses? That'll never do :-)
Or maybe start building council houses again? No, that's much too left wing for a "New Labour" government!
M
:-)
I should have written "what _might_ cause the bubble to burst". I've haven't found a crystal ball that works yet either ;-)
I did predict a property crash in the late 1980's, but unfortunately I didn't do anything about it. Anyway I'm usually wrong :-)
M
I'm sound at predicting crashes, but I'm usually pretty early:
Shares crash 1987 : First bubble warning 1985 Housing crash 1989 : First 1987 Nikei crash 1989 : First 1986 Japan housing 1991 : First 1987 Shares crash 2000 : First 1998 Housing crash 20?? : First 2000
Pretty solid on identifying the bubble 2 to 3 years before the peak. Certainly enough that I should have the guts to run with the bubble in confidence that there's at least two years to run, but I'm very careful with money. (I did get caught for a few grand in 1987 because I lost confidence in my instincts and got back in just before the bust).
The earliest I spotted one was the Japanese housing bubble four years before the bust. Could be that UK housing will be a record for me if it holds out until 2005. As for what will start the bust, my guts still say credit dislocation in the US.
FoFP
1) If you rent the money you benefit from inflation increasing property prices. 2) If you rent the money you don't suffer from inflation increasing property rents.
Doesn't follow.
But if banks lent more, then prices would rise as people could afford to pay more.
but it'd be fantastic to stop some of the more exploitative stuff going on. Students pay £64 a week each for a room in a 4 bed flat. Thats outrageous. Not that I'm keen on students cos they all seem to park in my street.
£1110 a month for a 4-bed flat is hardly outrageous. Or were you suggesting the 4 students all share just one of the 4 rooms, so you could have 16 students in the flat?
What's "credit dislocation" ?
M
I think it is outrageous amount to be paying in rent for a fairly minimal flat.
Yes. It's similar to bonds - the price varies according to expected interest rates.
The limit would be the interest rate and maximum percentage of income used. eg
£19,500 take home pay Max. of 60% of take home pay - £11,700 Interest rate used 5.5% (for variable loan) Gives borrowing of £212,727Daytona
In article , John-Smith writes
Rubbish. Every study of planning controls has shown relaxation would have minimal impact on house prices. New homes are a small fraction of the total market.
In article , mogga writes
If you had such a flat you would, of course, charge well below the market rent. How altruistic.
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