House price bubble set to burst?

[looney]

http://news.bbc.co.uk/1/hi/business/3155582.stm


I tend to agree, if house price inflation continually outstrips wage inflation then more people are priced out the market till the market collapses.

 

[Gary Nelson]

Theyve levelled out in Brighton and have done so since May so no the buble wont burst but merely cool down

 

[Artois]

They better do. I need a house.

 

[looney]

Theyve levelled out in Brighton and have done so since May so no the buble wont burst but merely cool down

Brighton isn't the UK. Even if what you say is correct. If it pops the knock on effect would also hit the Brighton housing market.

 

[Gary Nelson]

I was just talking about brighton. It it does burst then yes it would eventually hit Brighton. However I dont think it will burst but cool off

 

[Rowdey]

I've read some figures (somewhere) that say London has over 40,000 people move into it each year, and they all need accomodation.. I'm assuming that even if they rent, then demand for a roof means the market with thrive, so propagating the market.....or is that all bollocks..?

I'm lucky to have got on the 'ladder' 2 years ago, (with good-earning chick) but would be stuffed I had to buy on my jack at any point....

 

[Goring Gull]

They better do. I need a house.

If you want a house in Brighton i hope you earn at least 40k a year based on the average lender givein 3.5 to 4 times your salary.

The prices need to go down but i can't see it happening maybe by 10k a property but not al ot more.


I blame London but i'm not going to get on rant about that god forsaken hovel and it's inhabitants.

 

[Gary Nelson]

If you want a house in Brighton i hope you earn at least 40k a year based on the average lender givein 3.5 to 4 times your salary.

The prices need to go down but i can't see it happening maybe by 10k a property but not al ot more.


I blame London but i'm not going to get on rant about that god forsaken hovel and it's inhabitants.

spot on

 

[SK1NT]

i need a house! and for the past year and a bit ive been deciding whether to get on the property ladder, or just wait for this so called market to crash! Help, anyone got any inside info.

 

[Goring Gull]

PLus you'll need a decent deposit being a first time buyer say at least 10% so thats a small matter of another 15k then

And if you ever want kids etc etc, you better get moving up North.

 

[Sorrel]

I tend to agree, if house price inflation continually outstrips wage inflation then more people are priced out the market till the market collapses.

Yes, but the point that occurs is when people feel it does, rather than at actual pre-determined wage to house price ratio. Which is why these things are so hard to predict.

A lot of people believe that this time prices will stabilise at their current level, and continue to rise with wages/inflation. This is the "bump along" theory. This does seem likely at the moment, but is not what has happened historically, and it's always dangerous when people start talking about things being "different" this time.

In every previous occasion there's always been some kind of quite sharp drop in prices, and it's probable that this will happen again. But it might not happen for two or three years. And then prices may not drop down to even today's levels.

If I or anyone else knew what the housing market was going to do we'd be out there making a lot of money on it. No one knows anything for sure, except that price growth cannot outstrip inflation/wages indefinitely.

 

[NMH]

House prices NEVER go down !

Anyone knows that - unless 'bubble bursting' means prices only gain slightly over next 6 months ?

 

[Seagull over NZ]

One of the big problems is people like me who are buying a house and living in it on my tod - 15 years ago the average number of people per house was something like 2.5 (with husband, wife and half a kid!) but I read somewhere now that its dipped under 2. House building hasn't kept pace with this so we see forever rising prices.

I got lucky as I bought a house 9 years ago for £47k in Southampton. Whilst I don't get rich from the equity gain (since I will be buying somewhere else anyway) I was lucky that this gain was on my first mortgage so when I move somewhere I will have a nice chunk of a deposit to put on a house.

A friend of mine has been wanting to buy a flat in Bristol for 5 years now. She keeps having to wait to get a promotion to be able to afford it but each promotion the house prices have risen further.

You'd think something would have to give eventually but I can't see it blowing up like it did late 80's early 90's.

PS Beats talking about Coppell going....

 

[Sorrel]

And if you ever want kids etc etc, you better get moving up North.

Too true. I own a terraced ex-council house in the midlands, but I have a wife and two children under four to support.

I'd be back in Brighton tomorrow if I could afford it, but my house is worth about the same as a one-bed flat in Brighton, and I don't want to cripple myself by trippling my (comparatively small) mortgage.

 

[Sorrel]

House prices NEVER go down !

They do, but not for long. Look at the graphs on this page:
http://www.nationwide.co.uk/hpi/monthly.htm

 

[looney]

I've read some figures (somewhere) that say London has over 40,000 people move into it each year, and they all need accomodation.. I'm assuming that even if they rent, then demand for a roof means the market with thrive, so propagating the market.....or is that all bollocks..?

Sort of. Theres something called Segmented market theory that says the market for rental property is not the same as the market for private ownership, there is a connection true butt its a question of how strong a connection.

The price/earnings ratio is over 5 at the moment higher than the late 80's.


As for the "expectations arguement" about the market responds how people think it will is a very dodgy assumption.

There are a lot of things that can precipitate a fall/rise in prises well before expectations adjust, ie unanticipated changes in inflation, intrest rates(as the article points out) or employment prospects plus other factors.

 

[Goring Gull]

Too true. I own a terraced ex-council house in the midlands, but I have a wife and two children under four to support.

I'd be back in Brighton tomorrow if I could afford it, but my house is worth about the same as a one-bed flat in Brighton, and I don't want to cripple myself by trippling my (comparatively small) mortgage.

I'm moving up North (Huddersfield) next week, mainly because of an opportunity that i couldn't turn down with work, but i've been able to go out and buy a 2 bed semi in a pleasant area with no probs at all getting a mortgage this means that my Girlfriend and i can can now have a child and we can afford for her not to work, which although some people may think is old fashioned is how i'd like my kids to be brought up, by there mother rather than a child minder.

But yes i will miss it down here

 

[Gary Nelson]

Good on you Goring.
I bought my 2 bed flat last March and just about to redecorate it again

 

[Pavilionaire]

The market has cooled and I could see it being static or minimal growth for the next couple of years.

Yes, prices are high compared to wages, but then alternative investments to property are yielding poor returns (e.g. stocks, shares, annuities, savings accounts) so many will continue to buy properties to let for rental income, to act as their 'pension' in old age, as an asset they can leave their families on death etc.

Also, interest rates on mortgages are still very low and the lenders are falling over themselves to get business.

None of the factors suggest that the bubble will "burst".

 

[chip]

I am don't care on the basis that even if the value of my house falls, so will the value of houses that I might buy in the future. Thus if I loose £50000 on my house, the next house I buy is likely to have fallen by £60000 - making it £10000 cheaper. On the other hand, the value of my home has risen by about £50000 over the period I have owned it and I made a similar gain on the previous one.

However, looking at houses in the local paper (Chichester Observer) and comparing prices with the salary that most jobs offer I wonder how people can ever afford to buy their first house. That is unless they want a beach hut in Bognor. Also, the biggest falls seem to be at the bottom and top ends of the markets so your studio or mansion is more likely to fall more in value and negative equity is then going to be a problem for lower wage earners who struggled to buy a house in the first place.

Also, with high borrowing to earning ratios, rising interest rates could mean very big changes in repayments and people who are stretched to buy a house now could find it all come crashing down if rates go up to a more normal 7%. Of course, if that happens and the value of you property falls below what you owe on it you are in deep shit. Then we get large numbers of reposessions (cf early 90s) and there is more property available. Its also cheaper as the lenders seek to recouperate their money quickly and so prices fall as more property becomes available.