tony de wonderful

Which is why I said that building a factory with debt can be a good think, but taking on debt to buy assets of each other....not so much. How is growth in housing sustained if it requires exponential growth in debt to fuel it?

hodgy0_2

I agree it's not, I just wanted to squash the notion, for the economically illiterate out there, that the concept of "debt" in itself is a problem - it isn't.

davegtt

Tit for tat, how do you think interest rates are returned from bankers, if theyre not sharing a partial wealth of those theyre taking it of? In simple terms

tony de wonderful

That's part of a greater debate about the merits of usury I think?

In so far as one might need to take on this thing we call debt in order to build our factory, then it's better perhaps that it is build with debt than not built?

davegtt

Oh I completely agree, as I said, tit for tat. Give with one hand, taketh with the other.... Its all relative, one happens hand in hand with the other

pslewis

I haven't read the whole thread - but - the low rates of interest and yields are of a worry.

12 months ago Sainsburys Bank were paying 3.9% .... this is now 1.7% from August - that is a drop of 2.2%.

When you have a reasonable size of cash on deposit that amounts to a considerable drop in income, for example, £400,000 means that I am now around £8,800 WORSE off per year on just that Portfolio Item. In ADDITION, the Inflation Rate of 2.7% loses still more!

It is getting to be very painful and a true nightmare ..... there is the reason for the uplift in house prices!

I am buying property now for 25% higher than I was in the winter of 2008 to Summer 2009 ........ but, I simply cannot take the loss of cash deposits.

This is financial engineering by the Government on a massive scale ...... oh, I would LOVE to be a borrower at todays rates, love it!

Spend, Spend, Spend, I'm afraid!

tony de wonderful

How does in pan out over the next few years Pete? What's your 'experience' telling you?

Incomes are flat and there is only so much people can afford to borrow. Surely there is a 'real' brake on house price inflation there?

Dingdongler

Now now don't fib Peter. You've made it quite clear in your previous posts that you sat on your hands for too long after the 'crash'

You didn't buy any property because you didn't see the market recovering any time soon. You must be kicking yourself now

It's still not too late but I reckon you are paralysed by indecision and fear when it comes to investment

EddScott

Property isn't going up everywhere though. Its still very stagnant where I live in West Wales.

Problem down here is that there is not enough middle management that can afford houses in the £250K - £500K price bracket. Having said that 500K can pretty much buy you a small village round these parts. We've pretty much doubled in physical size in our new house and it was £176K.

What I would say is that getting a mortgage is becoming easier. I think the days of stuffing the farm onto interest only are long gone but I was very surprised to be granted the mortgage for the new house even though I still have borrowings on the old house. They ignored the old house because the rental income is much higher than the mortgage (a good one on .50% above base for life of the mortgage) only downside its interest only but I'm not worried just yet. I doubt I would have been successful a year ago.

I also think the issue with rubbish savings rates from banks is that they were given money in order to lend to business to get the economy going and they held onto it. As they have more money they don't need to offer such good rates to us common folk.

Chip

Prices good here in North Cardiff. Daughter bought a little 2 bedder for £133k two years ago and was offered £148k for it just a few weeks ago. Spent very little on it apart from decorating.

EddScott

That sort of priced house should be able to move pretty quickly - assuming theres nothing wrong with it.

My mother has a place in St Mellons. She put it with Darlows on Friday morning and got an offer over the weekend. She said she put it up for sale just as she went into John Lewis and it was gone by the time she came out

If you look at houses in the 250K to 400K bracket (even as low as 200K) in West they hang around for months. The people we bought ours off were on their 2nd attempt at selling the property.

Rental is good here. We have been renting the house next door to our old house for my wifes parents for the last 6 months. We are giving that house back on Monday and they already have people going in. I asked them if they could help with our house next door and she said fine no problem we have people waiting.

Matteeboy

I bet she spent £15k in fees, interest and that bit of decorating though.

House prices are healthy (as always) in London but in most places, houses just aren't selling - yes the Estate Agent gets overexcited and values something at crazy 2007 prices but does it sell? No.

We live in a very expensive area (annoyingly) and several average bungalows are on for over a million - and have been for over a year.

I'd love an honest "re-alignment" of prices to realistic supply and demand levels not some pie in the sky loony numbers that make life pretty tough for anyone wanting to live somewhere that isn't in a ghetto.

While we will eventually buy, we'll most likely buy land and build on it rather than pay some utterly daft price dreamed up by an agent still living in the artificial boom.

I still think prices will plummet - they'll hang on desperately for a good couple of years then fall off a cliff edge.

ReallyReallyGoodMeat

People have been saying that for 10-15 years!

Chip

Not really Mattee, fees were not much as she had a quite large deposit. No stamp duty was paid either. We quite often get flyers from local estate agents asking if we want to sell. Just lucky to live where we do I suppose.

Chip

Yes and it just hasn't happened.

EddScott

The only true way to bring house prices under control is impose far stricter criteria on mortgage lending.

Limit LTV. Limit multiples.

Restrict lending and prices have to fall. Yes they've all but killed off interest only but one reason why house prices are recovering a bit is that lending is becoming relaxed again.

Only thing with imposing strict limits is that the british tend to value themselves by their properties and forcing prices down is never going to be a votes winner so no government would ever put those limits into force.

Matteeboy

It will. Conditions have never been as they are today. We owe five times our GDP in debt. Only Ireland and Greece are worse off. Despite austerity measures our debt is sky rocketing not going down. Europe is dragging us down too. We have nothing to fall back on. We can't afford the welfare state or the NHS.

At some stage, it'll all cave in. The government just relies of people like yourselves thinking "oooh, we're alright jack, everything must be fine."

It's not.

Chip

Maybe you'll be right, who knows.

For me personally I just don't worry about it, I'm well happy with my lot but do feel sorry for those starting off, though youngsters do seem to want everything in life as soon as they start work these days rather than having to work and save for them.

Dingdongler

Yes lending criteria are being relaxed again. 90% mortgages are available at what are by historical standards reasonable rates. My own bank has recently removed all arrangement fees on btl mortgages, they used to be £2-£5k. The btl lending is also available easily on an interest only basis.

dpb

All to enable people to stretch their credit cards that little bit further
.and politicians to get back into power

tony de wonderful

True. Has been avoided by state financial engineering though. Putting base rates at 0.5%, paying mortgages of unemployed, giving cheap money to lenders, now help to buy.

On top of that you could argue that mass immigration helps demand too I suppose, but the main reasons are financial.

You could argue to that it is also propped up by housing benefit and mortgage tax relief on BTL.

ReallyReallyGoodMeat

And even after all that, people still think the housing market will crash - it won't, the government (whichever party it is) just won't let it.

tony de wonderful

That's what is being offered with help to buy though. Giving money to people who ordinarily couldn't afford it.

Only the mugs seem to save up these days (like me ), they then get punished with lower than inflation interest rates. If you'd bought recklessly during the boom you'd be fine.

Dingdongler

Nobody has a crystal ball and anything could happen but I don't think we'll see a crash anytime soon because

1) The govt will always do anything it can to prop up the market due to vested interest groups.

2) It has always been in the UK psyche to own your own home. However due to mistrust of financial instruments it is now also in our psyche to use property as a primary investment and pension tool.

3) Whenever the prices dip (which they always will) there is always a group of people waiting in the wings to take advantage of this and enter the market. This demand then pushes prices back up again.

4) Unlike countries like Japan where property prices stagnated for decades we have a growing population. Some of this is of course due to immigration.

5) The UK is an international property market and viewed as a safe haven by many countries. Money floods into property here from Europe, India, Middle East, China, Russia etc

So prices will always go up, down and sideways, but I'm not sure we'll see a cliff edge crash anytime soon

dpb

4) We have a growing population of OLDER people

As we go on fwd only people over 45 and Russian oligarths will be able to buy

ReallyReallyGoodMeat

That's already true for many parts of London - we need to tax second+ home owners, and foreign investors, massively.

tony de wonderful

I think that could be true for a long time but economists like to tell us that governments can't hold back market forces indefinitely.

john banks

Many good points made. I do think house prices should have come down more in nominal terms in many areas as it would have represented fair value by (m)any metrics and helped the younger generation who are working (too) hard for the assets of the baby boomers. However, house prices have been propped up at the expense of savers, volumes of transactions etc. Whether the treatment is worse than the disease is debatable, a short, sharp crash in housing and banking with protection of depositors only may have got rid of the problems long ago and a sharp recovery would now be underway on a just footing, or maybe it would have scarred many for life?

I felt so justified in my previous decisions based on any rationality I could muster, but the crash didn't work out how I predicted. I learned a cynicism through that about trying to get on the right side of the political and economic climate, to a point, as no matter what the government does if the international markets deem that we are the next PIGS then that is what we will become. In purchasing power terms, I had my house price crash in my favour far beyond what I expected as inflation did far more than house price drops, and have moved to the other side as I simply couldn't find anything safe to invest in except to become a borrower again. The withdrawal of new NS&I index linked certificates was a bellweather for me.

Dingdongler

John, I too became cynical after seeing political and central bank manipulation of the economy. As you said markets can't be held back forever but my stance is now also to just ride the wave. It's about getting the timing right so that you are never exposed for too long and can jump off in time.

My nsandi certificates recently matured, they were on 1% +rpi tax free. They have been rolled on to 0.15% +rpi. Though the rate has been cut to nothing I've kept them as it could still equate to 3-4% tax free, which is impossible to get elsewhere.

tony de wonderful

Interesting article in the mail.

One in three homeowners now over 65.

This graph too. Renting is on the increase.