Property Prices are still moving higher in the midlands

I think I am right in saying that the average UK property is now 5.8 times the average UK salary - which is higher than the last crash when the ratio was 5.2. I don't know what the highest ratio is but we must be close to it if not there. I fear if any of the mortgage companies reduce their rates then the ratio will climb higher and the boom will become a very nasty bust sometime in the next 12 months.

At which point, I will now post tomorrow night's winning lottery numbers! :-)))

J.

Is it really as much as that?....That is "scary"..I have'nt heard people exactly talking about a "crash" in prices..but I can't see how can first timers get on the ladder!

So I am wondering if all those cheap properties up in places like,...1/ Liverpool 2/ Hull 3/ Manchester 4/ Midland towns and of course not forgetting 5/ Bonnie Scotland..

Will there be a mass migration of businesses, jobs and people to these areas,,, simply because there is big demand for houses.....at low prices??

Could it turn out to be the next big thing?

Well, an edition of the Economist last month suggested a fall of 25% to 30%, and possibly higher, was coming in the UK housing market in the next few years.

It suggested, in its final paragraph of a 16 page item on house prices, that if anyone tells you there isn't going to be a housing crash to roll up that copy of the Economist and hit them on the head with it. :-)

J.

I have an simple economic model based on long run consumer ratio averages and the correlation between other markets. It has been predicting a 25%+ fall is required for the last 12 months in the South East/London. Given the recent moves in the property market elsewhere it would not surprise me that it also applies to other regions.

Property prices tend to ripple out from the most active market, the South East, where the market has been flat to negative in central London. The bubble has started to burst.

The residential property market is just that a market and with such high property prices at the first time buyer end of the market there is a substantial imbalance in supply and demand that is not being reflected in the prices. I do not know why this is happening but I suspect that it is because supply has dwindled as speculators in the buy-to-let market manage to retain even empty property on low interest rates.

BTW the top of the last property cycle was marked by property prices in Norfolk doubling in a 12 month period. Anecdotally I was told that has just happened !!!

I think the ripple effect is very apparent now with prices in London and the SE being flat - even falling in London so I am told - but still rising in places like the North and Wales.

J.

From the HBOS press release -

- All other regions have experienced double digit increases, but London has slipped to the bottom of the table with the smallest rise in prices of the 12 regions over the past year (11.5%).

- In keeping with the significant rate of house price growth in the north, all of the UK's top 10 property hotspots over the last year are in the North or Midlands. Macclesfield recorded the biggest rise in prices (51%), followed by Grimsby (49%), Spalding (48%), Halifax (46%) and Pudsey and Barnsley (45%)."

I see tradition rather than turmoil. Traditionally, house price rises ripple out from London and within these waves, higher quality property & areas rise first, lower quality last. I'm not sure, but I get the impression that lower quality property/areas rise furthest & fall furthest ie they're more volatile.

I publish graphs based on historic data on my website -

They can't, easily. This is traditional at this point in the cycle. However, this doesn't stop the exaltations from those with a vested interest, and those who are stupid, to 'get on the housing ladder now, or you'll never be able to afford to'.

No doubt they will rise and fall as the wave passes. Be careful about the phrase 'lack of supply'

Daytona

Yes, I've heard that the industry has gone into the doldrums...

Good Grief! West Wales, I was under the impression that wales was much more inexpensive than the rest of the UK

Thats what I wondered about! How can someone on the average wage of £20K afford to buy a house? Let alone people on minimum or median style wages.

It is too high and surely cannot stay that high. The second thing,

True also...I think it is more to do with the difference between cost of houses and wage earners.....thats the point..and the average price of a house.....

All souds a little ominous.

For any cloth eared financial man, such as yourself, it would and should be quite easy to understand that "median" is the "majority wage" in an area....whereas the AVERAGE is not necessarily what the median person is.

Come on old chap these are basics.....

So if that is true, why are lenders not lending more than three times their income as they where in the late eighties which they are NOT.

Don't be so pedantic, you know what I mean...unless your totally lacking in mental reasoning powers.

I know what median wage is, thank you very much, but apparently you don't, because it isn't "majority wage". Another trip to the dictionary. Look up "mean", "median", and "mode".

It's "style" that I was having trouble with in this context.

Marketing reasons. Too high LTV borrowing leads to increased risk of borrowers ability to repay being exceeded if interest rates should rise, which leads to action having to be taken against them. Executing too many repossessions gives lenders an "uncaring" image. Of course, they're uncaring anyway, but images are always make-believe.

In article , Stephen GoldenGun writes

It's probably a function of wage, interest rate, unemployment and house price, rather than just house price and wages. And it probably boils down to monthly repayments in reality.

The killer last time was when interest rates rocketed to 15% or so, and unemployment was quite high, (I think). The fact that mortgage interest payments were triple what they are now, (for the same level of loan), made them unaffordable, so the whole thing collapsed.

That's probably what is happening down south and, as prices continue to rise OOP North, it will happen here as well.

Prices will probably then stabilise, with a bit of settling back, but I think the big falls will only happen if there is a quantum change in one of the other factors i.e. interest rates rise dramatically, wages fall dramatically, unemployment rises dramatically, taxes rise dramatically etc.

Given that Gordon Brown does not seem to be able to keep his finances under control, there is a strong chance that one of these could happen but, if they dont, stability is likely.

A couple, (partners, friends, or whatever), on £20K p.a. each can borrow about £120K, add a 5% deposit, and they can buy for around the average house price. There are plenty of houses at this level and less, because it is the average.

If it were then suggested that this couple might not be able to buy where they want to - who can? The choice is then to not buy, or to move to where you can afford - I think that's what they call "Life" ?

. Executing> too many repossessions gives lenders an "uncaring" image. Of course,

RRR. (Respected Ronald RayGun)

Is this not just your own negative opinions comming out to taint what perhaps is a genuine lesson learnt by the banks and companies.....

I agree that business is business and for some they really only care about getting the money, but there are those companies around who do care about ethics, and even you may say, they genuinely care about the customer, due to their image...they are not wanting to repossess the properties as it would damage their image also..but more importantly, they won't be trusted..and more fundamentally it is bad business for them, they will loose money if all their clients go bust.....and they have to sell their houses at a loss....

So therefore it goes back to my point.

If their is an oversupply of credit why does it mean that people are borrowing more...if lenders are not lending them more to buy houses?

Richard, correct me if I'm wrong but I believe the height of the interest rates was during the turbulent period of the miners strikes and I think that employment was relatively high, it was just comming down from the days of the three million unemployment rates, which was in the late seventies early to mid eightees.....then the interest rate went up to 16%...

The fact that mortgage interest payments were triple what they are now, (for the same level of loan),

Sounds pretty logical and reasonable to me.

I just can't see the small properties around mancherster and Liverpool and such other similar places suddenly dropping in value...to be honest.

That has to be the correct scenario...

Well true, true, but then again the average person does not earn £20, 000 pounds.

IN my humble opinion the average wage earner does not in fact earn this amount of money.........there are many who are earning 20K and over...and many who earn below this amount.....

Around where I live, the wage for care workers, for farm workers, factory workers and shop assistance is all around £4.50 and £6.00 per hour.

Well Richard, it was thanks to you words of warning, that I adjusted my business model and made the decision not to proceed so rapidly without making further investigations..

I continue to investigate and to do research, but really it is not a bad thing to be an estate agent Richard...

I seriously would advocate it.

For example....let us say your shop charged 1.5% to flog a house twelve months ago.......and now you are still charging 1.5%....you then have just doubled your profits...

Your overheads ahve not doubled...but your income has doubled due to the doubling of house prices.....(assuming you are in an areas with large increases...perhaps let us say over two years!

But your cost of advetising has not increased! Your staffing costs and telephone bills have not increased, your cost of electric has not increased, if you own your own property then that is not having increased.....

So all in all!

A license to print money!

Further more you don't have to have any legal qualifications to set up in business as an estate agent......

After my thoughts on "buy to lets" and my particular business model...I see chances of a solid return, but the final adjustment in my business model..much of that info derived from the contents of this forum, was that the work and hastle factor involved needed to be adjusted...............

Therefore doing something like buy to lets in certain areas of the North, where and still are a good thing, and even better if the chance to become an estate agent exists!!!

Just imagine what would happen if someone set themselves up, had an estate agents, and also bought some small buy to let properties, and then they started to shoot up due to their affordability, due to the increased demand from all those people who need to "move" in order to afford to buy their own home......

(providing they could find local jobs)

Definitely still one of the strongest and most solid ways to make a living in the housing industry.......and with a bit more modelling it might be possible to make it recession proof....

In article , Stephen GoldenGun writes

Yes, but you're not doing it. I've been doing it for nearly 16 years.

You completely forget to mention volume of turnover. The fact is that the number of houses we are selling is not as high as when prices were lower and, due to this, competition amongst local agents has become fiercer, so fees, (in %age terms) have come down.

The grass is always greener!

Having said that, as long as you are on the ball, in it for the long haul, and are able to manage cash flow, 16 years has given me 2 booms and one recession, so I think I am ahead of the game.

Moreover - it's not just about money !

Regds

Yess yess, but Nigel Lawson was the chancellor was'nt he who presided over taking us the "debacle" that caused black wednesday...... Yes, it was late eightees and early nineteens....and I thought that was just the end of Maggies reign......

Oh well, I know the period your talking about anyway.

If you went ahead and became an estate agent, and put all your analytical ability into practice, I'm sure you'd be a millionaire, if your not already.

Which is exactly what happened in the last 'boom'. Why is this a suprise?

And will it be followed by a bust (just like last time?)

Tim

When I was on my 60K the Halifax in Swansea offered me a mortgage to the value of 500K. I could not believe this and this was 2 years ago. I walked away.

J.

I think unemployment is much higher than people think. A good example is my servbice sector industry of IT. Figures just being complied by various IT groups are now showing that between 120 and 150,000 self-employed IT workers in the UK have had no income in the past 12 months.

Only last week the Government claimed that there were 60,000 IT job vacancies in the UK but the biggest IT job board - ignoring job duplicates (A job on that particular IT board is usually advertised by at least 3, if not 4, separate agencies.) and many, many fake jobs placed by agencies - showed only 13,000 jobs listed. That 13,000 is probably well below 4,000 real jobs. Many IT jobs advertised there now pay less than MacDonalds.

I believe that in the '90s many hundreds of thousands of people in the UK became self-employed to service the, well, the service sector. Not just IT but all types of Engineers, Financial Services people, Media, Marketing & Communications, etc.. I believe a great many of these sectors have large numbers of people out of work but, being self-employed, they do not show up as self-employed.

It is a sobering fact that, having been self-employed for 10 years and, because of UK Company Law, I had to pay BOTH Employees and Employers National Insurance I can now NOT claim one penny in support from that State. At the same, because I have no income, my NI stamp is now falling behind as I am not paying any.

This country, economically, is in a bigger mess than many of us actually realise. Take away the housing and consumer boom and I think we would all have a nasty shock.

J.