house prices - always and forever upward?

Tokyo prices started rising last month. For the first time since 1989. The total price fall has been 90% in some reports, and that at an interest rate that's been zero percent for many years.

There was no mass unemployment and to a certain extent, no massive economic problem either. So the answer to your question is yes.

The most obvious is: unavailability of credit with which to bid on houses. See what's happening in the US subprime markets for an example of what happens when the credit dries up. It happened because the cost of insuring mortgage-backed CDO's went from 1% to 13%, making it pretty much impossible for the brokers to make loans (at maybe a 24% mortgage rate) even if someone would supply the money and the bank could find someone willing to borrow it.

FoFP

Why? To rent? You'd have to look at market conditions in the area. To visit and enjoy on a regular basis? To let out as a holiday cottage? Do you have the money to do it?

If you're buying it is dependent on it always being worth as much as you paid for it you might want to think again.

That would be great. I could move to somewhere much more palatial, without even selling my current home.

Major planning reforms and a free market in the right to develop (land) could depress the market, which is precisely why such reforms will never happen.

Government and monetary policy have made housing a one way bet.

New government embarks on a massive housebuilding campaign? Release of greenbelt land for (more) building? Mass emigration?

However, ISTM your problem may not be one of macroeconomic trends, but whether the price of _your_ second house rises or falls

Pete

I know there are circumstances which make the current "bubble" look sustainable, and that in the long run prices always head steadily upwards. But this decade long "end to boom and bust" had trodden new economic ground, financed by an unprecedented increase in debt (personal and national).

It may continue, but I can envisage a future in which this comes back to bite us badly. A halfway decent downturn could see a mass exodus from BTL (in part because of the immigrant workforce departing) and an unprecedented long term dip in house prices.

However you're probably better off just tossing a coin and deciding your purchase that way.

Andrew McP

I am currently helping a young person to try and buy their first property (somewhere in the prosperous south-east).

There is very very little available to buy at the bottom end of the market. However, there are tons of tons of one and two bedroom flats available to rent.

Talking to some of the rental agencies these have all been bought by BTLers who are having problems finding tenants, because the tenants are sitting at home with mom and dad trying to find somewhere to buy. Many are starting to struggle with their mortgages.

One more little rise in interest rates and I can see this little apple cart being upset and some bargains appearing.

The other question is: "Should these BTLers have some moral conscious about talking properties out of the market for first time buyers ?

Personally I`m looking forward to them getting burnt, they`ve caused a lot of trouble for other people trying to get on the first rung of the property ladder. I was lucky enough to be able to skip the flat stage and get a nice

3 bed semi as my first property, but it was only possible due to a nice combination of circumstances. Otherwise I`d be lucky to be able to afford a 1 bed flat!

Miss L. Toe wrote: upset and some bargains appearing.

It is nothing personal, just business, as they say.

I have a 2 bedroom flat that I rent. It was the second property I bought for personal use but when I moved abroad I wanted to keep it as a toe hold in case I came back to the UK so I don't feel any guilt about keeping it. Unlike these kidz sitting at home with mom whinging I didn't buy my first house until I was in my mid-30s after years of renting dives around the place and working hard to save up a deposit. Rentals havn't increased that much over the years.

I will confirm that there are a lot of BTLs that have been purpose built where I have my flat and this is having an affect on rents. However if landlords are over extended then the market will correct itself at some point.

If the current economic boom continues in asia then I would expect to see inflation pick up more. Raw materials prices have already increased so much that gangs are taking risks to steal such stuff as 2km of

25kvolt overhead catenary from my local railway line for sale as scrap. In fact anything copper not secured is being stripped out - from street lamp wiring to bits of substations. If inflation picks up again then expect interest rates to rise and whammo HPC.

all very well but probably not very practical in the south-east of England given the lack of water and road/rail infrastructure.

People could always move to areas where there are suitible resources for them, rather than moaning when they get stuck with a hosepipe ban every summer :-)

No. They are making the properties available, albeit to rent rather than buy. People in this country are too obsessed with buying property - in the current market renting is arguably better value, at least in the short term. So provided they aren't "wasting" property by deliberately leaving it empty, they have nothing to feel guilty about.

The ones who should feel guilty are those who buy second properties which they only use at weekends, or two weeks a year, and leave them empty for the rest of the time. And those who buy a house much too big for them, like a couple with no kids getting a

5 bedroom house. They are wasting property and contributing the the housing shortage, driving up prices, and causing more of our countryside to get ploughed up to build more houses.

The problem now is that BTL (in particular IMO) has turned housing into an asset rather than a home, and that is dangerous for society on far more than just an economic level.

When I bought my flat I did so because, despite the hassles and costs of ownership) it was cheaper than renting. It's not much of a flat but it was -- then -- a genuine first step on a genuine ladder. Now similar flats are inflated into assets an no longer represent any kind of step onto any kind of ladder.

Renting is nothing to be ashamed of, but until we get continental style security for tenants, it remains undesirable.

Andrew McP

That's the real fly in the ointment that could bring illiquidity overnight. They're working abroad to make money, often to send home and build a house for their family there. They'll go where the jobs are and ihn a recession, that will be Somewhere Else. The flats they leave empty will sooner or later overhang the market.

FoFP

I like to think of them as people who have unselfishly put their wealth between the rest of the country and harm.

FoFP

There appears to be a contradition between your first and third paragraphs. The third para suggests renting is desirable, provided tenant security is offered. Tenant security cannot be offered other than by long-term landlords who will never need to recover the property for their own use, or even to re-sell (other than to another landlord investor). To such landlords, housing is therefore a pure asset.

So what's it to be? Dangerous for society, or desirable?

At the moment protection is geared too far in the landlord's favour, encouraging BTL speculation, asset inflation, and reducing tenant's rights... it's their *home* after all, not the landlord's, and the legislation should take that into account (while providing protection against bad tenants).

There is plenty of room in the market for good landlords in it for the long term, seeking to attract good, long term tenants at fair rents. There should be no room for the modern, amateur "it's my pension" breed who are more concerned with their asset than their tenants. Housing is a social issue affecting all of us, not just a business opportunity affecting an affluent, speculative minority.

Andrew McP

I wouldn't put it as strongly as that [*]. If the market needs rental properties for tenants to move into, someone has to provide them, and so landlords are required, and therefore need to be encouraged.

It's unfair to blame landlord-friendly legislation [*] for this. Medium-term excessive house price inflation, coupled with easily available credit, is what fuelled BTL speculation, but BTL has been responsible for only a small fraction of actual house purchases, so it's not true that BTL has been the sole contributor to accelerating HPI, though it will have had some effect.

[*] Landlord-friendly legislation means you can, if you wish, regain possession from a tenant at 2 months' notice (provided 6 initial months have elapsed). This isn't much security for a tenant and doesn't give much time to seek alternative accommodation. How would you like to see this changed? Would you like a rolling 6 months' notice? 12? Bear in mind that a quid pro quo would be needed. A tenant would need to give more notice of wanting to move out too. After all, people (even those who have bought their homes) do move around (not long ago the average stay was about 7 years for owner-occupiers, and is presumably shorter for tenants).

But the more you restrict landlords' rights, the more you push the market into even smaller and even more affluent minorities. Speculation may still happen, because properties can always be sold at market value whenever natural breaks in tenancies occur.

What's wrong with an "it's my pension" attitude?

My opinion of the whole housing situation is there will be an unprecedented bust in the coming years.

What's keeping it all going is bank lending, which is historically cheap, and lax about who they lend to, whatever the ability is to service the debt.

Just look at the unfolding subprime disaster, both in the United States and now here. Rising default rates will ultimately make, housing finance more expensive, and harder to get.

There are many other factors that have also contributed to the current madness. Amateur BTL, Baby Boomers (who are also big amateur BTLers).

Houseprices are a huge, and often quite emotive subject, further information can be found at the below websites: