The Great House Price Crash 2005

Ooh, they can see into the future! Will they tell me what the FTSE

To be fair, the correct title includes a question mark.

Interesting paper here, hot off the presses, from Andrew Farlow, Economics Dept. Univ. of Oxford. He seems to think UK house prices are going to plummet ....

For my 2p worth I'm just wandering what on earth is going on. I and my piers all earn above the average for our area (a commuter town near London) and we cannot get on the first rung of the ladder. Not on our own and not in an area we might choose. So we sit there in rent world. And the numbers are building as most of the young professionals are now far more saddled in debt from university than ever before.

Is that Brighton or Southend?

Amazing how illiterate university graduates are these days, they should ask for a refund.

This attempt to kick-start a house-price debate is laughable. Everyone knows the crash has already begun, so there's not a lot left to discuss: hang on for the ride!

As far as I can tell, they arrive at university that way. I blame the skools.

FoFP

Interesting. I still think it depends on whether the credit bubble bursts while the house price cycle is bottoming. The South Korean flap and Fannie Mae problems could be the first signs of that happening but the jury's still out.

FoFP

It's the same here. I don't understand how anyone gets on the ladder. Maybe I could afford a 1 bed studio flat with all my savings and 4x my wage, but those will be the first things to drop when a housing crash happens. I'm earning just a bit under the UK average wage (academia, you see).

So I'm renting scummy places (and that's 1/3 of my income), in the hope I can ever save up enough to get on the first rung.

cd

The thing is that there's no human right to own a house. On the continent less than half the population do.

FoFP

Are you the fool that's been predicting a house price crash every year for the last seven years? I suppose soooner or later a crash will occur then you can spin around and say "see I was right". But that won't stop you looking like a Bozo.

It was the same in 1980 and in every year before that date and after that date. When houses cost on average £3000 I couldn't afford one as a student (annual income £300 to £750). When I had my first job I couldn't afford one (Average price £15k, income £3k).

So what's new? The average house still costs about 5x the average salary.

UN convention on human rights:

Article 25.

(1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.

Well, I'm paying probably what the mortgage would be for the place I live in for rent. There's no way I could afford somewhere which would be suitable, say, for starting a family. I'll have no security in my old age (I'm nearly 30).

Does it make sense that, maybe 80 percent of the population has a large capital and security, whereas the other 20 percent will never be able to have that?

Society should be about making the gap between rich and poor narrower, not pushing the poorer into serfdom. We have a crazy economical system where a house isn't somewhere to live, but an economical investment to leverage against others. A house is a human right.

I would be happy to rent from a housing association if I knew that my house couldn't be taken away from me at any time, it was kept in good condition, was of a good standard, the rent covered the expenses of the housing association, and the profit went into building and improving housing stock.

Now we have a short housing supply, excessive rents and house prices, and speculation of the price of homes.

cd

"criticaldensity" wrote

Don't say that too loudly - windymiller thinks otherwise! :-

Irrelevant. They could write in the right to a spaceship in there and it wouldn't enable me to get to Mars because positive rights are useless unless you have a means to compel people to build your spaceship or give you a house.

The above is just some wittering to enable pols and lefties to feel warm inside.

You can start a family in a rented house. If you don't know how, email me and I'll explain the mechanics.

You get security in your old age by building a pension, not by owning a house.

Whether one owns a house does not determine whether one has either capital or security. That things are inequitable is pretty much inevitable in that people have different talents which are worth different incomes and people also have different propensities to save.

Society should be about getting along and trading with each other voluntarily. The poor can then get richer by trading.

If it were, how are you going to make someone build the house you have a right to? Wouldn't that make them your slaves? Don't they have rights too? What happens if 100 people make *you* spend the rest of your life building the houses they have a right to?

See? The idea that anyone has a right to a house is quite transparently bollocks.

Who are you to say where someone else's profits should go?

Maybe if we got the government out of the building business, we'd be able to build more houses...

FoFP

Troll

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Have a nice day.

cd

"criticaldensity" wrote

Can't find anything constructive to say? Look's like you've lost the argument then ...

The dollar looks weaker than ever.

Re. house prices, check out The Economist which says that renting makes sense for first time buyers at today's prices (which are up to 60% higher than yields would suggest they should be based on price data from 1975-2000).

Anyone who still argues otherwise is living with a 70s/80s mind-set where high inflation was a very important factor. However, the inflationary landscape has changed so much as to negate this thinking. The Economist then runs through an example that shows that even if house prices do not fall in real terms (optimistic, they say) then you would be better off renting than buying at today's prices. (If prices do fall, it is obviously better rent and wait for the lower prices.)

Ultimately prices will correct to bring yields back into line with other equally risky investments. In the meantime (while the FTB waits for prices to correct) there is nothing to stop him or her building up their wealth through other investments e.g. shares. In any case, it is poor investment practice to put all your net wealth into one asset class: you should diversify.

For anyone looking to sell-up and retire on the proceeds of their property portfolio, the outlook is less rosy, of course.

"Sammy" wrote

But don't you think that high inflation & high interest rates go together? Conversely, that low inflation & low interest rates go together?

The so-called long-term figure of around 3.5 to 4.0 for the 'average house price : average earnings' ratio is also based on that "70s/80s mind-set where high inflation [and high interest rates] was a very important factor."

So if you accept that inflation and interest rates have reached a lower level than for the 1980's-90's, you should also accept that the 3.5 to 4.0 multiple will reach a higher level - perhaps between 5.0 & 6.0? :-

"Anyone who still argues otherwise is living with a 70s/80s mind-set where high [interest rates] were a very important factor. However, the [interest rate] landscape has changed so much as to negate this thinking."