Told You All!!
#1
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Told You All!!
The latest statistics from the Halifax claimed the average property was worth £161,466 in July, or 5.71 times the average wage. Pre-2004, the only time house prices have exceeded five times wages was at the peak of the last property boom in 1989. But data from the Halifax also confirms that, since January 1983, property has only been valued at 3.76 times incomes on average.
Thus it would seem that property prices will -- at some point -- have to fall back in line with the workers' earning power. Especially when you consider the country's three largest mortgage lenders -- Halifax, Abbey National and Nationwide BS -- still appear to operate with lending multiples around the traditional 3-4 times salary level (roughly in line with the 3.76 figure).
So, if house prices revert to their long-term earnings-multiple trend of 3.76 over, say, the next four years, and salaries increase by 4% per annum, the average house price in 2008 could fall to £124,330 -- down 23% from July's figure.
However, at the bottom of the last property crash, house prices were, again according to the Halifax, valued at just three times average incomes. If history repeats itself, the same 4% wage increase and four-year correction assumptions would give an average house price in 2008 of £99,243, down 39% from that seen in July. Factor in zero salary inflation, though, and the next market low could see the average property worth £84,833, down 47% from July.
Pete
Thus it would seem that property prices will -- at some point -- have to fall back in line with the workers' earning power. Especially when you consider the country's three largest mortgage lenders -- Halifax, Abbey National and Nationwide BS -- still appear to operate with lending multiples around the traditional 3-4 times salary level (roughly in line with the 3.76 figure).
So, if house prices revert to their long-term earnings-multiple trend of 3.76 over, say, the next four years, and salaries increase by 4% per annum, the average house price in 2008 could fall to £124,330 -- down 23% from July's figure.
However, at the bottom of the last property crash, house prices were, again according to the Halifax, valued at just three times average incomes. If history repeats itself, the same 4% wage increase and four-year correction assumptions would give an average house price in 2008 of £99,243, down 39% from that seen in July. Factor in zero salary inflation, though, and the next market low could see the average property worth £84,833, down 47% from July.
Pete
#3
"Thus it would seem that property prices will -- at some point "
hmmm, a property price genius.
if you keep saying it, one day you'll be right......in the meantime you are the mystic meg of house prices.
hmmm, a property price genius.
if you keep saying it, one day you'll be right......in the meantime you are the mystic meg of house prices.
#4
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"And what was it for lunch today Mr Lewis? A little porridge maybe? Something easy for the digestion? Must look after your movements Mr Lewis! Now how about a little nap? No you don't smell too pissy today Mr Lewis, this way please....."
#7
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And it seems the Halifax claim house prices are on the increase again - see Homes Online. Up 1.4% in the SE last month IIRC.
As people can't afford to buy, the rental market may well become boosted and so buy-to-let people will no doubt buy more of the property, seeing an opportunity to cash and thus inflating the prices further.
Having seen "place in the sun" the other night where you can get a 4 bed mansion with pool in Florida for £130K, I think I am leaving this country, last one out turn the lights off.
As people can't afford to buy, the rental market may well become boosted and so buy-to-let people will no doubt buy more of the property, seeing an opportunity to cash and thus inflating the prices further.
Having seen "place in the sun" the other night where you can get a 4 bed mansion with pool in Florida for £130K, I think I am leaving this country, last one out turn the lights off.
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#9
Abbey and Halifax both lend 4.2 times single salary. Abbey will lend 4.2 times joint and Halifax will lend 3 times joint (which is actually 8.4 times and 6 times national average salalry respectively)
These are standard lending criteria, but can be stretched on a case by case basis.
Can you please recalculate using 4.2 instead of 3.76?
These are standard lending criteria, but can be stretched on a case by case basis.
Can you please recalculate using 4.2 instead of 3.76?
#10
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No, because those lending multiples are suicidal - and those contemplating such figures should beware of losing their homes!
There were very good reasons in the past for limiting the multiple to 3 - those reasons still apply!
Personally, I would like to see interest rates at about 8% ..... that'll sort the men from the boys!
Pete
There were very good reasons in the past for limiting the multiple to 3 - those reasons still apply!
Personally, I would like to see interest rates at about 8% ..... that'll sort the men from the boys!
Pete
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