Is the UK housing market heading for a 90s style crash?

Your home is owned by someone. They have a Buy to Let mortgage. They can't service the loan. The house you rent is repossessed by the bank and sold.

Therefore, you are kicked out of your accomodation.

Will that do?

Less disposable income as people service their negative equity position, stung and having to finance more debt. The economy slows. people buy less. Shops make less money. They close.

You have now lost your flat, and your job. Any more?

It could be argued that houses have been massively under-valued for the previous 40 (say) years and this is a "correction", but I'm not sure I believe that.

A desirable (not sure how likely) outcome is a change to mortgage products: given that house prices now far outstrip average earnings (and therefore the mortgage multiple), future mortgages may be based on different criteria. Like on a forecast of your future income.

Also, given the BoE's independence and their commitment to long-term stable inflation, there should be an increase in the number of mortgages which have longer-term fixed rates. This should come about if the Bank's strategy appears credible - which it has been so far (that is, no manipulation of interest rates for short-term political gain). This (more stable interest rates) should also encourage the different style of mortgage.

It can turn that the UK that you will see a reduction in tax revenue as a result of the decline, therefore to fund certain boosts you sell off the council houses.

A very unlikely one, but tried before. They may increase your rent anyway to supplement the increased demand for council housing (due to the problem of those having lost money) and to increase revenues.

A council house would probably be the safest place in this convoluted disaster scenario.

This is the problem...

I think, if you read back, you will see that bringing minority information in after the first (more wholesale point) kind of changes things.

If you haven't noticed though, the Halifax and Nationwide have both announced another recovery in the houseprice surge, and its back on for another 20% during 2004.

If I was a betting man I would have a fiver on interest rates going up 25bp on Thursday (half the economists reckon it will, but it is also a big move for the bank outside of being terribly dull). There was a good article by Larry Elliot in yesterdays Guardian on this.

The major issue for the UK is consumer credit - ie, not just the mortgages. All the unsecured lending on credit cards and stuff is at pretty much all-time highs.

You got to work on the assumptions of what might happen when all this leverages together, and rates move. The answer is that nobody knows, but everyone is concerned. Credit Cards and everything have only really become a big part in culture over the past twenty years, and have grown over the whole of that time. The debt on that, bank loans and everything is concerning.

There are other concerns - anyone who has withdrawn equity over the past year or so could be in for trouble. A lot of people have done this without even realising that this could, ultimately, put financial pressure on them. They see it as free money. It isn't in truth - it is realised against a bank loan and secured against your property.

Will there be a crash? I am not so sure. The Bank of England are going to try their very best to calm the situation as much as they can, because they are clearly shitting it (if you review the minutes to the last ten committee meetings, just the decision bit, you will see that virtually every month the topic of house prices is on the "increase rates" argument.

There is a lot they can't control though - if oil continues to rise, they have the inflationary pressure they need to rack up rates, and it will put a huge pressure on households. How much will the banks tolerate? If the banks are hard on things, it can be a lot worse.

The position I see is a long stagnation, possibly some falls. Some people are over-leveraged, and they will hurt. The one concern I have is that people seem to be using housing as a tangible equivalent to shares post-2000 crash of the Nasdaq and the FTSE. The move to buy-to-let and everything from the people who withdrew money very quick when it started to look bad. If that were to be repeated in the housing market, you have got your scenario.

Err...wrote a bit more than intended there, and can't be bothered proof reading. I'll do something more considered...

-- ___ (tripleunderscore__...), June 3rd, 2004.

Why would falling house prices hinder them paying the loan? (Or are you saying inflation would hinder them paying the loan?)
Surely, if house prices fall there is less demand for rented housing and a tenant is likely to get lower rent.

Even if you are correct, the bank re-posessing the house is good for someone else, on the lookut for a cheap house.

Will that do?

Less disposable income as people service their negative equity position, stung and having to finance more debt. The economy slows. people buy less. Shops make less money. They close.

You have now lost your flat, and your job. Any more?

-- ___ (tripleunderscore__...), June 3rd, 2004.

Their 'negative equity position' is a figure on paper, it means nothing until the property is sold for less than was paid. They're not paying any more in mortgage surely? If the housing market slumps, wouldn't mortgage lenders be forced to offer better rates, actually helping the person in negative equity?

Also, the main reason people would want to realise their 'negative equity' is to move house. People generally want to move to a larger and hence more expensive house. Say they intend to move from a £50,000 house to a £100,000 house, so it'll cost them £50,000 to upgrade. Suppose there's then a housing price slump of 10%, their current house is now valued at £45,000 and the new one at £90,000. The cost of the upgrade is now only £45,000!

Now many of my friends have flats and I the prospect of a housing crash brings out extreme selfishness and schadenfreude in me. Unforturnately (for me) things seem to be plateauing nicely, and the prospect of those predictions of the UK housing market's long-term upward march seem more and more likely, and with them, the prospect of being permanently priced out of it all unless I make a career move into serious money.

Prices are still going up in Glasgow, yeah. We're at the edge of the ripple, I guess. 10 years ago I visited my sister and comforted myself for several years at the thought of the seriously cheap, gorgeous flats one could always buy here. 30 grand for a huge fuck off tenement flat in the West End. Well I missed that chance too.

Part of me clings to the freedom of rented accommodation, and a belief that the British obsession with owning one's own home is wrong. But it would be a lot easier if the rest of you fuckers would 'go Paris-New York' with me.

But yeah, my fear is that the market won't crash, I'll never be able to pick up a cheap repossessed flat in an auction, and in 20 years time, property (certainly in London) will be the preserve of the extreme wealth or inheritance.

Roll on global catastrophe.

Even if you are correct, the bank re-posessing the house is good for someone else, on the lookut for a cheap house.'

Lower house prices lead to lower rents as people entering the housing market as landlord or owners pay less dragging the market down. It means that people who bought at the top of the market are in danger of not covering the mortgage through rental yields (It's all ready happeing in some areas, in London Rents have not kept pace with house prices mainly becuse there was a large rental housing stock pre-existing with very little outstanding debt connected to it.

'Also, the main reason people would want to realise their 'negative equity' is to move house. People generally want to move to a larger and hence more expensive house. Say they intend to move from a £50,000 house to a £100,000 house, so it'll cost them £50,000 to upgrade. Suppose there's then a housing price slump of 10%, their current house is now valued at £45,000 and the new one at £90,000. The cost of the upgrade is now only £45,000!'

But if their outstanding mortgage is £49,000 then they have to find £4,000 in cash just to be able to afford to put no deposit into the new house.

Rates go up - you lose disposable income. You are already allowed to borrow at 4x income, itself a paridigm shift in the mortgage market. Banks see rates go up and see arrears appearing in credit cards and overdrafts. As these are unsecured, they chase the person, which hits on their income. They now have less to pay off secured borrowings (car, house etc.)

Eventually, it means you just can't afford your house. Interest rates are transitary, but a sustained period of rates at 6% would cause serious discomfort for many.

If you are forced to downgrade, you have to sell (otherwise it will be reposession, which is a lot worse). But there are others in the same position. Prices start to fall. People who have investment properties see this, and join in the auction. It continues.

mei - I think you misunderstand the position on negative equity or a market fall. Yes, it realises cheaper housing. But the problem is one of herd behaviour. I could tell you there are 50 decent stocks that have been worth investing in the past three years and are bargains. But people see a market falling, they don't want to jump on something that looks like it will lose money. It has to bottom out. At the point of bottoming out, the banks will be in the mood to make money back - credit controls will be tighter, rates will be more punishing on the margin side.

Take alongside that that the withdrawal of money from a housing price collapse will hurt industry and everything - it is hugely bad for the economy. There are a small minority who can benefit from a housing market collapse.

And - the mortgage example used above. The situation of someone moving from a £50k property to a £100k property has probably not bought the first outright, so probably has a £75k mortgage (maybe more if they withdrew equity).

So, in the reality the fall means that they have borrowed £10k of money that they now have to repay, with little view of it ever coming back. There are many other ways I can analyse this for you to make it show the true problems that you get from property markets.

So, in the reality the fall means that they have borrowed £10k of money that they now have to repay, with little view of it ever coming back.

But doesn't that mean that there's MORE THAN £10k they WON'T have to borrow when they move to the more expensive house (and of course, as they won't borrow it, they won't have to pay it back)?

But how is this new or different? People usually have to find deposits for houses. Okay, if they owned a home then before a crash they could use some of it's value as the deposit, which they can't do now, but theyy're getting a cheap new house to offset that.

There are a small minority who can benefit from a housing market collapse.

Okay, so the money is being withdrawn (from housing) but it must go somewhere mustn't it? It doesn't just vanish. So someone else benefits? So why is it bad for the economy? Isn't it only bad for a part of the economy?

My idea of a property ladder is that it is just that - a ladder - you have to get off one rung to move to the next. Meaning that when you vacate your starter flat for a family home, you sell it on to another starter. Now it seems like anyone with property has to have a family home *and* several starter flats, which they then *rent* to other people, taking that property off the market, and meaning there's less available property at the bottom. If you squeeze the organisms at one end of the food chain, you will feel the repercussions at every other stage of the food chain.

Does this make any sense or am I just being a resentful first time buyer priced out of the market?

If the house was worth 50,000 and they mortgaged for 50,000 and the house is now worth 45,000 and the outstanding mortgage is 49,000 selling the house won't pay back the mortgage there will be 4,000 outstanding debt, which will have to be cleared before buying a new house; either by paying it from savings (taking away potentiial deposit money) or with an unsecured loan, which would be more costly than a mortgage and count as a liability.

Most people when treading up in the housing market use equity built up to buy a smaller equity share in a more valuable property.

OK, here's a question. How much do you think the "buy to rent" phenomena is responsible for much of the current horribleness in the housing market?

It's not really a new phenomenon, in fact buy or build to let is much older than mass home ownership. There has been a boom in investment properties, certainly in London but in some ways it was catchup from a very stagnent nineties. The real pressures on the hosuing market come from incresed prosperity since the mid to late nineties, more people able to buy; increased demand, more people living alone, more people moving to certain areas, especially london whose population had been in decline until the mid nineties; short supply, not a lot of land to build on, not that many building to convert, difficult planning rules, housebuilders stock-piling land.

Housing is always going to be relatively tight in the UK as there is not a lot of space in the places people want to live coupled with the detatched house as an ultimate ideal, which seems crazy to a lot of europeans. (Take Turin where the big houses in the hills above the town, with multiple acres of land are more often than not split between 4 apartments or so.)

Dpened on exactly how the duke of bedford rent, which is probably through the leasehold system. This is basically taking a hundred years rent up front, plus an annual ground rent.

But I'm not talking about what Buy To Let does to the rental market, but what it does to the buying market.

Mortgages worked (until recently) that a 25% deposit got you such low rates it was untrue - with Cap gains available on property, and people keen to rent it from you, many have seen it as a non-brainer. The interest is to see how these folks withdraw from the market - they are clearly there for capital value, and a sign of stagnation will bring a move to elsewhere.

I am sure he googles his name regularly, kate. Little else to do when all you fools are paying for him to live in the lap of luxury.

Can someone answer the Richard Ingrams question - in everything else, prices going up is generally a bad thing except in housing, where the opposite pertains. Krazy? I don't know.

Getting back to N. though - I like the fact that if I wake up today and the boiler has gone tits, then it isn't my responsibility to find the cash for that. I like the European system lots - question though - who owns the European properties that are rented? Is someone at the top of a very big tree, or is apartment ownership a poisoned chalice that isn't tied up as it is here with status, achievement etc (part of which seems to be entireloy due to being an Island - land is finite as bounded, and no revolutionary upheavals to redo land ownership, so layer upon layer built ontop of a feudal system that remains pretty untouched).

< /smug>

...also could someone see their way clear to going back in time three months and giving me a slap when i decided to have a tracker mortgage at .09% above base rather than the 4.71% fixed (for THREE years) i was offered...

we haven't even started paying the bludy thing yet, what with the whole moving thing taking FOR FUCKING EVER...

With your 0.9% tracker, you probably won't be too chuffed to hear that the most dovish of the UK Economists is forecasting rates at 5.25% by the end of the year.

i did the same as you steve, and went for a discounted tracker. It's swings and roundabouts, you can try to predit what will happen with interest rates, but there's always an element of risk.

If rates are looking like they are going up in the medium term rapidly, it is kind of nice to know I would have thought. And Vicky - I am well aware of what the game is like forecasting interest rates - its part of my job.

...i'll have little choice but to remortgage, the .09 is only for two years, then it goes up to 2% above base (why do banks do this? surely i'll inevitably end up going to another lender and then they've lost my business)

I doubt there will be a rate cut back end of 2005. The BoE is being pretty reserved in its rate movements. The US is still sat at 1%, and the EU stuck at 2.0%. The UK has already put in 4 rate increases (25bp each time) and has opened up a differential.

There is the inflation target, but if you analyse UK and US rates, they trend heavily together. The US will accelerate rates through 2005 I would expect. I cannot see anywhere that the UK will place a cut. The differential on Cable and the Euro will have the effect they require. I wouldn't price out 6% at close 2005.

From that description, it *sounds* like a typical bubble market. People have been saying that for several years, though.

http://www.guardian.co.uk/business/story/0,3604,1442134,00.html

http://www.thisislondon.co.uk/news/business/articles/timid399077?source=

What is a bubble market, in layman's terms.. ?

its obvious. prices will continue to rise at 20% per year, each year no matter what.
all this recent talk of a slowdown and crash is just that - talk. can you think of one good reason why they wont (rise)?

there is no reason house prices will not keep increasing above the rate of inflation forever. this is reflected by the numbers of fresh buyers running into the market. hundreds and thousands of them in fact, each hour 1132 new ftbs enter the markets in swansea, bristol and leeds.

this has never been a better time for an ftb to buy. prices are 10x wages and there are many new listings to choose from at fresh new prices. by the way. all the new instructions are just a sign that the markets moving - not a sign of people trying to dump debt liabilities to you. we always get a sharp increase of homes on the market compared to sales all the time. in fact this is normal for new instructions to be larger than actual new buyers.

with IRs at current lows its also perfect to get a deal which fits. as we know IRs will always be 4.75% or less. so peak out your mortgages to include any reserves of doubt and safety savings. you can use all of that to help another seller whos in trouble. houses will continue to increase at 20% each and every year. this is why so many new people are trying to sell them to you now.

hanging onto your money or keeping it in the bank is financial disaster. paying someone rent of £650 pcm compared with buying at £1100 pcm is financial folly too. you are just throwing away your money and will never own anything to cover your pension. saving ISA or deposits is just too risky as you could lose it all in one afternoon. also when you come to sell your property because of the 20% per year rises it will be worth so much more. this will allow you and your family and friends to retire abroad in sheer luxury at 55, or keep the property to rent out to a city professional, still collecting a dependable cool sum from your quiet, working, reliable and unable to buy for himself tenant.

at the end of the day, there are so many people operating this way, theres no way any government could rock the boat. any government worth its salt would try its best to keep bad lending habits alive at any cost. if the population are taking on debt they cant really service the government will make up new laws and also since our own government controls the world economy they could make money come in from other countries to stop falls. perhaps they would stop building to prevent us losing money. either way, the government will protect us as we said so. and dont worry about your job. this is just another thing the government controls.

all this talk about not being able to sell a 2 bed barratt flat for 225k is utter nonsense.

maybe i should apply as i have insider knowledge about the mice and the leaks and that's gotta be worth a discount. plus moving wouldn't be difficult - it's only 10 ft away.

so...

looks like the media has turned now.

but whats likely to happen next?

of course in many parts of england property has been falling in real terms for 2 years or so, its just not reported in the media.

so, will london now follow suit? or is london 'different'? is there life in the old beast yet? ie will london detach from the rest of the country like it always used to (flats in leeds were, very recently, the same as flats in southeast london, a definite anomaly).

plus that interest rate cut in 2005 that was intended to extend the bubble for another couple years, people are going to be coming off their 2 year fixeds soon and facing 40% increases in interest payments, is that going to be manageable for people?

and, if it does completely tank, what implications does that have for the uk economy? seeing as it appears to be built completely on spending of equity, which actually equates to masses of debt. isnt this effectively printing money, yet inflation doesnt include houses, the most inflationary thing of them all!

ie, could a bubble burst take the whole economy down with it? is it a question of controlling inflation vs keeping the bubble going (but raising interest rates surely has implication for businesses more than housing)

and will we see buy-to-lets/house-as-pension as the mid 00s version of endowment mortgages, pensions, dotcom stocks etc etc, another get rich quick scheme without doing any work

i think my question isnt really about the uk housing market as such, its more, are we heading for a bigstyle recession in 2008? or hyperinflation? i guess this is the question about america too.

Join the discussion. (my girlfriend is obsessed with this website.)

http://www.housepricecrash.co.uk/

<i>so, will london now follow suit? or is london 'different'? </i>

London is different because of the City, and the phenomenal amounts some people are earning there, and the gigantic bonuses they are using as property downpayments, creating a knock-on effect across London. That means that, essentially, London is a different sort of economy to the rest of the UK (and, indeed to the rest of Europe). Until there's some fairly hefty 'correction' in the financial markets, London prices won't change, no matter what they do in the rest of the country.

what did london prices do in 1991?

are a sizeable proportion of 1 and 2 bed flats owned by buy-to-let landlords?

is rent rising in london?

what did london prices do in 1991?

They crashed! But arguably it was a different world then. The amounts people were earning in the City weren't so hideously stratospheric, interest rates were at an all-time high and the country was in a severe recession.

if mortgages have gone from 3x salary to 6x salary over the last few years, will house prices continue to grow in larger multiples? when will they stop? 7x? 8x? 9x? if they stop doesnt that imply a fall in real terms? what do investors do if they are getting a lower rate than they could get in the bank? at the same time as interest rates are rising? and rent staying the same?

why are people wincing at the possibility of interest rates rising to a level 2% BELOW postwar average?

house prices falling and a recession happened at the same time, you say? interesting! i wonder if...

solution is we need more people working in the city.

welcome back to work on a Monday morning. I'm trying hard to care about this stuff. the buy to let market has fucked us all.

we need to work in the city

>> is rent rising in london?

Mine was rising above inflation when I lived in Muswell Hill, which is why I moved away from there.

to the city

There is definitely going to be a buy to let crash. rent is not rising as fast as mortgages are. yes, yes, that's why there are all these business type analyses requests in my inbox.

why would a buy to let crash be isolated? wouldn't it affect all buyers? if the prices are coming down, theyre coming down?

i think a reduction in B2L would affect non-B2L buyers in a positive way. people who bought homes to live in are going to carry on living in them. it's a very specific market, B2L.

isnt it the very same 1bed and 2bed flats that ordinary people might otherwise buy?

and credit tightening by the banks is going to affect ordinary buyers as well, and interest rate rises the same? houses could come down 30-40% and yet paradoxically be harder to buy, esp if you're in a sector of employment thats going to suffer during a recession

it depends how long-term you are looking at this as an investment i suppose. my flatmate and i were thinking about buying as a short term (3-4 years) thing (to live in), with the expectation that the prices will still be rising for a bit.

It's short term as we probably didn't want to be stuck with a joint investment and won't want the hassle of letting out the flat.

But we took too long looking for a place and now it doesn't look quite as sound an investment as before. so we'll probably wait and strike perhaps if and when a big crash happens.

letting out round there would be a nightmare, i looked at a one bed place to rent in tufnell park at under £700 a month, and it was pretty nice. can you imagine what the mortgage on that would cost though!

Hey Kate, or anyone - any advice on getting rid of an endowment?

i guess if you're deep in the game landlord bought ages ago sure, but a rookie is going to be losing money hand over fist on something like that

I think people are wincing because they have taken out mortgages that involve them paying out a much larger proprtion of their income than the post-war average and also they are in general more used to spending loads on useless shite.

but presumably they have factored in the fact that rates are still historically low, and could go up by quite a lot more yet;)

Do fixed-rate mortgages exist in the UK? They're very common in France.

Not longer than a 2 or three year fix. Not sure about france but we don't have the US style government underwriting of mortgages that makes long term fixes possible in the states.

Hmm, that's interesting. I bought my flat in France in 1999 with a 12-year fixed-rate loan. I did also have to take out insurance on the loan. (As it happens, I've no doubt lost money since rates have been historically low throughout that period.)

you can get longer than 2-3 years fixed, ours is for 10 years.

10 years?!¬?!? Blinkin' 'eck, you must have had a friend in the industry or something.

Obviously there's a price to pay for fixed rate loans, ie the rate is a bit higher, and unless rates go mad over the period you'll end up paying more.

I've been looking at 5 or 10 years fixed rates just now. There's a definitely levelling off of house prices round here (Central Scotland) at the moment, it's noticeable since I've been taking a v. keen interest in it over the last two months.

(and, Mark, how long have you had your endowment, how badly is it underperforming, etc - feel free to email me if you want. I haven't been in financial services for a wee while, but could give a bit of general info)

and, Mark, how long have you had your endowment, how badly is it underperforming, etc

Today's main story in The Observer:
'Housing boom over' as UK bank chaos grows
· Economist warns of sharp downturn
· Tory leader attacks Brown over crisis
Britain's house price growth will be halved next year as the global financial crisis exacerbates the impact of rising mortgage rates, according to Nationwide, the biggest mortgage lender.
After the dramatic bail-out of high street bank Northern Rock underlined the impact of the American 'sub-prime' mortgage crisis on Britain's financial sector, Fionnuala Earley, Nationwide's group economist, said she expected house price inflation to slow to around 3 per cent next year.

That's not really much of a story, is it? "Oh noes, house prices might continue to rise faster than inflation, but not by as much as before, we're all dooooooooomed!"

I would have thought there was a real possibility of prices falling, so this story is rather underwhelming.

Yeah, that's rubbish. Growth halving seems like a perfect outcome for the economy.

Prices fell in Glasgow last quarter, slightly, according to one survey.

and there's more:

Fears grow for British economy as panic over Northern Rock spreads
Experts warn that a decade-long borrowing binge has left Britain dangerously exposed to the fallout from the global liquidity crisis

US Treasury Secretary Hank Paulson flies in to London tomorrow to discuss the worsening global credit crisis with Chancellor Alistair Darling, as fears intensify that the lending squeeze could be the last straw for Britain's buy-now-pay-later economy. Thousands of anxious customers queued outside branches of Northern Rock to withdraw their savings this weekend, ignoring calls for calm from Darling, after he helped broker an unprecedented emergency loan from the Bank of England to rescue the bank.

City economists warned that a decade-long borrowing binge had left the UK economy dangerously exposed to the fallout from the credit crunch. 'I think the UK is extremely vulnerable to this,' said Danny Gabay, director of consultants Fathom. 'The UK has a double vulnerability. We are vulnerable because of our hugely over extended consumer sector, and because of our large financial services sector.
'This is a financial market event; but the longer it goes on, the greater the risk that it becomes a real economy event - and I think we are at a tipping point.'

As the Federal Reserve prepares to cut interest rates - perhaps by as much as a half percentage point - to restore confidence in financial markets, Darling and Paulson will discuss proposals for better transparency, to prevent a recurrence of the 'contagion' that has spread the impact of bad loans in the US housing market around the world.

But analysts are still scrambling to calculate the potential impact of the current squeeze. Ross Walker, UK economist at RBS, said: 'We were already looking for a noticeable slowdown next year, and now there are further downside risks.' He predicted that the Bank would have to cut interest rates twice by the end of next year, to prevent the downturn becoming too severe with growth slowing to 2.2 per cent, from almost 3 per cent this year.

Again, there's a strange sense of anti-climax in that article. "We've been on a borrowing binge! We're at a tipping point! Growth is going to slow from an above average level of 3% per annum to a frankly still quite good 2.2%! PANIC!!!!"

I thought the situation was much worse than that. If the worst we have to fear is slightly more sensible house price inflation and an average level of growth, then everything's alright with the world.

When I said "growth halving" I meant house price growth, btw.

also xpost but

Yeah, that's rubbish. Growth halving seems like a perfect outcome for the economy.

-- Alba, Sunday, September 16, 2007 8:32 PM (Yesterday) Bookmark Link

not for the frighteningly large number of citizens who made their retirement plans (etc) or borrowed against the rising value of their house.

People might expect their house value to rise in price for that reason, but to expect it to carry on at the same rate it has been for the last few years would be totally mental.

I have great sympathy for the mental, mind.

But there are other, non-mental people who make up a larger part of the economy.

Growth would still be growing, you realise, right? Just not at the same preposterous level as lately (and anyone who assumes 20% house price rises and bases their retirement income on it is seriously badly advised).

xpost

Of course, there's the chance that it'll stall completely: if buyers can't raise the funds to buy because all the banks are suddenly v cautious (likely) and sellers are reluctant to sell for reduced prices, the system just freezes up. It did this in the mid 1970s, and only emerged after a 20% drop in prices in some areas.

it's not the borrowers who are mental exactly. perhaps a little. but if the banks are lending, people will be borrowing, as with credit cards. there's a note of unwarranted schadenfreude in some coverage of what happens when people fuck up in that way, "middle-class recession" of the early '90s and all that.

I'm starting to wonder whether all the coverage and predictions might be a tad hysterical. It's kind of in the media's interest not to overhype or sensationalise this, self-fulfilling prophecies and all that. I mean, Britain came through the global downturn in the early 00s relatively well - chances of that happening again?

It's kind of in the media's interest not to overhype or sensationalise this

Is there an extra word there?

self-fulfilling prophecies

this does seem to be the case with northern rock, yep.

but the extravagant coverage of house prices has been going on for god knows how long. and there have been so many "OMG OH NO CRASH IMMINENT' mail/express headlines in the past... five years that there's also an element of crying wolf. because even cursory reading of filey camp's posts tells us that there has to be a correction eventually.

whether it's sped up by panic, as maybe the case now, or as it were by surprise.

Britain came through the global downturn in the early 00s relatively well

is there a possible argument that the housing boom is related to this survival? i'm just throwing it out there, but all the cash sloshing around hasn't changed the underlying lack of productivity. country gets rich by selling houses to each other.

Thing is, the fundamentals, as they say, are a bit different from previous crashes. You've got a speculative bubble, but there also aren't enough homes. Supply and demand, innit? If buy to let people get burned there will be floods of people who want somewhere to live who will see it as an opportunity and step in.

So any fall won't be a crash. There's a floor.

I think everyone, the govt included, would welcome a stagnation in house prices. A good few years of low growth for the earnings ratios to get sensible again, and allow them to bring down interest rates again. Bring it on.

(I don't want to move, so I don't really care what the price of ny flat is.)

there also aren't enough homes. Supply and demand, innit?

not really. the demand is for property as money-maker, not as property as such. there is enough housing stock to go round (kinda) -- or at least, the bubble is not to be explained by the lack of housing so much as the willingness of banks to lend. in a way the rise of house prices has been meaningless because the banks have just lent more. the rise in prices has not restricted the market.

If buy to let people get burned there will be floods of people who want somewhere to live who will see it as an opportunity and step in.

yeah, if the banks want to lend.

I think everyone, the govt included, would welcome a stagnation in house prices.

you need to read the mail!

You've got a speculative bubble, but there also aren't enough homes. Supply and demand, innit?

Is this true right across the UK though? I can see this being the case in London, but in Middlesbrough, say?

Maybe it's because I've been so conditioned by the last ten years, but the very idea of there NOT being demand for property in London, even factoring in rising mortgage rates and buy-to-let investors bailing, seems so improbable. Even though it might actually happen.

but if the banks are lending, people will be borrowing

OTM.

However, what confuses me is how anyone manages to over-borrow on a mortgage. Repayment rates being what they are. We mortgaged for 120K and that was our limit due to the amount that we could afford to pay back each month, this is with both of us in fairly well-paid, full-time, employment, mind.

Really, there aren't enough homes, no kinda about it. The price mechanism does still work to limit demand. Plenty of people moan about the impossibility of ever buying somewhere, and continue to rent or live at their parents till they're 45 or whatever.

Ludicrous price rises = 1 part bubble, 1 part housing shortage.

Barker review etc. etc. Post-war low in newbuilds. Erm not sure about the mail bit (I try not even think about it), but the plans to force local authorities to allow more housing and sell off their land, and the ludicrously unsustainable sustainable Thames Gateway thing are all a desparate attempt to stop house-price growth.

xposts there're more houses n the NW than we know what to do with, central Liverpool has a vast amount of flats lying empty, bought by by-to-let types anticipating an 08 boom which looks unlikely to arrive. There's street after street of empty terraces practically in city centres.

I mean I don't know how anyone who isn't doing houses up and selling them for a living would not welcome a correction. It's the best thing that could possibly happen.

Also it seems to be threaded right through the British consciousness now that owning property is a symbol of selfhood, as if you're somehow less of a human being if you can't get "on the property ladder". That's not going to go away overnight.

Regional variations - obv this is true - BUT haven't the biggest % rises in recent years been in prev "cheap" areas (wales, certainly, can't remember where else).

xpost

There's been a steep rise around here also, don't get me wrong. It touches upon different (but related) questions such as why are brownfields improperly utilised, what's with all the low density new-builds etc etc

However, what confuses me is how anyone manages to over-borrow on a mortgage.

interest rates be risin', i guess. but it's also about people using their houses as equity for borrowing cashmoney and shit.

jamie -- problem with correction for people without homes is the knocck-on effect, i guess.

xposts

i think "owning house as measure of selfhood" is pretty recent tbh, so it could go away easily too.

the pity of it is people are living too long and can't finance it.

lots of guess.

interest rates be risin', i guess. but it's also about people using their houses as equity for borrowing cashmoney and shit.

Second part aye.

We're on fixed rate, and sorted it before the current spiralling rise.

It seems to me to be largely a case of consumers be irresponsible. If you're buying something as big as a fucking HOUSE make damn sure you can afford it with a bit to spare

Anyway, the MAIN factor in a crash is employment. Unless there's a recession, there won't be a crash. I don't think a property correction or general indebtedness on their own are going to cause this, so things will tick along.

If, however, there was an exogenous shock, then we could all be fucked.

But $80 oil hasn't done it and even if there were to be a US recession (which is entirely possible), China and India would take up the slack. The party continues.

well yeah but the mad price rises somewhat encourage irrational borrower behaviour. as did the low rates.

xpost

capitalism: worst party ever.

Sorry, I left off my scare quotes.

"The party continues"

Anyway, the MAIN factor in a crash is employment.

Well one big driver of employment growth over the last few years has been in finance and a lot of those jobs don't look secure in the slightest. I suppose Britain has a cushion of high public sector employment but at the same time pay is low there. And that might not last if there isn't the tax revenue to support it, and where does most of the tax come from? Oh yeah, the City.

The labour market in china is getting tight, inflation is rampant there and export prices are rising. China has the ability to export inflation as well as it has exported deflation and will do so if it has to fee it's people to prevent another Tianamen Square.

There's been a steep rise around here also, don't get me wrong. It touches upon different (but related) questions such as why are brownfields improperly utilised, what's with all the low density new-builds

The idea that a home has no one else living above or below is part of the thatcher delusion that produced home ownership being part of a sense of self.

Agreed, but that concept has become attenuated to the extent that a home is not a home unless it's much larger than you require and is surrounded on all sides by garden.

Whilst high-rise is an ideal, it strikes me that high density terracing (of the sort which lies abandoned in swathes in central liverpool, bury, blackburn, parts of manchester) is an excellent compromise, and I fail to understand why redevelopment is not ongoing.

no commercial developer is going to try and tackle the delusion. The BtL crowd, to a certain extent have been renovating this kind of property but the marketing legwork is not being done. If/when the crash does come then the government should hoover up all of this as social housing and back the areas up with good schools and healthcare facilities and get people back into these areas.

Lack of mandated affordable housing meant developers could say houses were worth whatever they wanted them to be worth, which suited buyers just fine - the higher the houses were appraised, the more they could borrow against them later - and estate agents as well, who get a percentage. No one has had any incentive to prices houses at what they are actually worth. Which, all things considered, doesn't change too drastically over the decades - it's just boards and stone innit.

The govet is doing housing renewal programmes in areas of low housing demand. This involves demolition, refurbishment and building new housing. Unfortunately there has been too much demolition and not enough refurbishment - as ever, a good idea botched by incompetence/greed/ideology. But they are trying.

critical summary here:
http://www.civictrust.org.uk/policy%20and%20campaigns/campaigns/hmri.shtml "> http://www.civictrust.org.uk/policy%20and%20campaigns/campaigns/hmri.shtml

Why didn't that work? Click on the second one if you are interested.

Why should this be bad for the Buy To Let brigade? We're not expecting rents to fall and Bank of England interest rates aren't likely to rise much higher are they? So they'll still be receiving more or less the same rent and making more or less the same monthly repayments, won't they?

in terms of knock-on effects, i was talking to some older lawyers, and the boom has created a whole world of "legal" work mostly done by n00b lawyers, which is basically paperwork. it's always existed but has exapnded hugely -- just the sheer number of transactions. and most of it is standard-form shit, but it's kind of an interesting inversion, "professionals" doing what is basically service-industry-type admin.

The idea that a home has no one else living above or below is part of the thatcher delusion that produced home ownership being part of a sense of self

Uh right on Mr Elton but actually I'd quite like the privacy and lack of outside intrusion that a detached house would afford. Fuck knows when I'd be able to buy one but that doesn't mean it's not a reasonable desire.

None of this happens in isolation. Spike in interest rates -> run on the bank -> recession -> property crash -> large-scale unemployment -> return of migrant workers -> FALLING RENTS is a possible scenario, for example, and it's not a coincidence that it looks like the opposite of what got us here in the first place.

i'm not all that keen on high-rise living -- people pro tend to get arguments in favour from books about the fucking bauhaus -- but i think there is a middle way here. 'intrusion' tends to come from having selfish fuckwits for neighbours, rather than the fact of living among others in itself. i don't hate other people *that* much.

xpost

falling rents would be awesome.

http://patrick.net/housing/MrHousingBubble2.gif

But this is far from universal. Single family dwellings are much rarer in other European countries. Italy is a prime example. Sure the detached house ideal goes back further than thatcher but it is a mindset that is strikingly more prevalent in the UK than in the rest of Europe.

Having lived in an Italian tower block and a detached house in England I know which one I would choose if I ever won the lottery.

How dependent do you guys think London's housing market is on the finance industry? Because one of the theories going around about the NYC housing market, previously believed to be bulletproof, is that further finance industry turmoil (layoffs, pay cuts, smaller bonuses, etc.) will dampen demand for high-end condos here, which are pretty much all that's fueling the market.

we have bigger cities, earlier suburbs, less town planning... the ideological arguments *in favour* of high-density living are a bit top-down imo, and quite easily exploited. it's not lack of space that acccounts for the modern british landscape.

weirdly the new-builds all over the SE at the moment seem to be practically all one- and two-bed flats.

xpost

How dependent do you guys think London's housing market is on the finance industry?

more like

How dependent do you guys think London's economy is on the finance industry?

Quite a lot at the top end, which is fuelled by bonuses and Russian billionaires. Not sure how it filters down

or in fact the UK economy as a whole. We make nothing any more we just shunt people's money around.

and racing cars. and guns.

Uh right on Mr Elton but actually I'd quite like the privacy and lack of outside intrusion that a detached house would afford. Fuck knows when I'd be able to buy one but that doesn't mean it's not a reasonable desire.

me too but i'm not expecting to do that in London.

There's always Bishops Stortford

oh lord -- i was there saturday.

saw some shit you wouldn't believe.

i am ready. continue.

Ed, there are a lot of things which really are ridiculous luxuries to covet in this life, but are you really suggesting wanting to live in your own detached house is one?

'intrusion' tends to come from having selfish fuckwits for neighbours, rather than the fact of living among others in itself.

Agreed, but as an example - we live in a block of 12 flats with a small communal garden overlooked by our block and the one behind it. I have never used this garden, because no matter how decent and considerate our neighbours are, we're still completely visible to 15 households and I'm never going to feel comfortable with that.

I'm just saying that the mindset is by no means universal. COveting or no, it is going to be more and more unsustainable, especially in cities.

Single family dwellings are much rarer in other European countries. Italy is a prime example. Sure the detached house ideal goes back further than thatcher but it is a mindset that is strikingly more prevalent in the UK than in the rest of Europe.

Were you just talking about urban areas here Ed? Surely yes!

I'd quite like a swimming pool and tennis courts in my back garden as well but it's not the end of the world if I don't get it.

I think Ed might be overstating the case a bit here, I think most British people who don't already own would be happy with a decent sized flat that isn't in a terrifying high-rise, certainly with a mid-terrace house with a garden. I'm not sure it's seared into the British consciousness as the same way as the mentality that gives us "oh noes people can't get on the property ladder" headlines.

go up north?

The morality of high density living

Your own detached house in the middle of some of the most expensive urban real estate on the planet - yes Mark C, that is somewhat absurd!

Maybe it's my New York perspective. In New York, if you want a detached house you move to Long Island or New Jersey or way out in Queens or the Bronx (at distances that would no longer be London, if it were in London). And plenty of people did just that, in the 40s, 50s and 60s -- immigrants who had made good sent their parents out there and moved in after them.

I actually know a couple of people who own their own places in New York. One of them even owns an entire brownstone. It's not detached though!! I mean, to me the thought is just bizarre. That's not what cities are.

very good thread that (xp)

London's detached properties in places like Highgate and Barnes have always been v expensive but they still exist and will always be sought after.

I'm just glad the Victorians built sturdy terraced houses tall and long enough to make living above a family plus one dude in the basement not a problem for me, and these are still pretty cheap - even to buy tho vast majority are bought to let obv.

I'll just mention the fact that the density of housing suggested by prescott for all this new development is about half that of the georgian and victorian terraces of Islington (and that's considering them as single dwellings not subdivided, as many of them are, into maisonettes and flats).

From that other thread. I was just going to say something similar. Three-storey Georgian terraces are some of the most expensive and desirable properties in the whole world, so density isn't a problem. It's what attracts people to an area in the first place and the quality of the housing (both in design and build).

Plus you just make it illegal to build anywhere without a cellar, and you increase the density right there (every two-bed is now a three, three a four etc.) Plus lots of teenage rock band rehearsal space.

london is not so lacking in space that you need to make people live in basements, seriously.

part of the equation is we still have pretty weak and very expensive transport.

but this is mostly a bunch of people in their twenties and thirties talking. i'm not sure if being able to reach london's fashionable east london is as much of a thing for most people. people seem okay with bishop's stortford.

Ha. I lived in a basement with NO WINDOWS on Archway Road for three years. Apart from the mental health issues, it was fine.

But nice cellars, with light wells and that, are cool.

People of all ages need local facilities, and the higher the density, the better they are. Something magic happens at a certain number where it becomes worthwhile for people to provide stuff (including transport links). Even people who want to live in detached houses in a rural idyll still want their local pubs/post offices &c.

> But nice cellars, with light wells and that, are cool.

tell that to the people below me that just got flooded out for the second time in two years.

saw some shit you wouldn't believe.

so was this a joke or serious? fess

My main problem with high density living is that most of the Victorian/Edwardian terraces converted to flats have thin walls and you end up having to listen to yr upstairs neighbours' smoke alarm go off EVERY FUCKING NIGHT JESUS FUCKING CHRIST CAN'T THEY JUST TAKE THE BATTERY OUT IF THEY'RE GOING TO COOK THE FUCKING CUNTS.

xpost

yeah pretty much a joke. pretty much...

The risk has now been handily quanitfied at 10%:

http://news.bbc.co.uk/1/hi/business/7000598.stm

There is a one in 10 chance of a 1990s-style housing market crash in the UK, according the Royal Institution of Chartered Surveyors (Rics).
Rics has lowered its expectations for house prices over the next 12 to 15 months to no change from 3% growth. Its chief economist Simon Rubinsohn said that talk of a looming crash was legitimate and not irresponsible. In the last housing market crash, average prices fell by 35%, adjusted for inflation, from their peak in 1989. Mr Rubinsohn also said that there was a 20% chance of a 10% fall in London house prices over the next 12 months.

That's more like it.

Mind you even if that is more doomy than The Observer (that is The Observer's actual predictions, rather than the crazy headlines) it's still saying that a)they expect house prices to stay the same for the next year, and b)there's a 90% chance that there won't be a crash.

Thinking back to the crash/recession of 1989ish-1993ish inflation was around 8-10%, interest rates were around 10-15%, unemployment jumped from about 1.5M to 3M, house prices fell (it says above) by about 35%, the pound collapsed, we had negative 'growth' for a couple of years... This wasn't very long ago. The vast majority of Observer readers can remember this and were probably affected by it, so it seems ridiculous that they would stick headlines of the IT'S THE END OF THE WORLD type above an article saying that house price growth would slow to 3% a year.

http://www.guardian.co.uk/commentisfree/story/0,,2172246,00.html

Argh Simon Jenkins is a cockfarmer. His basic premise ("we are way too hung up on home ownership in this country") is correct, but the arguments by which he arrives at this are disingenuous or just plain facile.

"if you can't think of anything else to write, write about house prices"

-- robert cole of the times

i.e. "house prices UP"

"house prices DOWN"

"house prices FLAT"

i think simon jenkins is otm there. he is deeply capitalistic n'all, but can't fault what he says there.

he's agreeing with tracer, the obsession with house prices is silly. but also bad for the economy, tying up capital in an unproductive sector.

I've put me house back on the market with the expectation that it will NOT sell!

so - any top tips on how I can sell my house in this depression?

say there's a benevolent ghost who lives under the bathroom floor

Like Casper!?! why the bathroom? is he a fecal-thriver?

right before he died, he needed to pee

donate your old house to public radio

uk funky housing market

I'll donate it to the toilet

Is it on Rightmove? (want to post the link?) Are the pictures decent/ rooms not full of clutter? Our letting agent took some terrible pics, we provided our own. Have you noted all the genuinely good things about your property and made sure they're in the listing - don't rely on agents to do this. I was present when the agents showed prospective tenants around our place and they were so busy pointing out little quirks and nice things that were already obvious, they didn't play up stuff like brand new appliances, quiet neighbours, etc.

well, we do have a ghost in the bathroom.

I think the main problem is just the market is so bad for anything right now if its not at foreclosure price - I feel like I'm trapped here

well we had an open house and zero people showed up - great!
there has been allot of negative press lately taht's probably not helping our chances
I may have to end up becomeing a landlord if I can't sell it

i've worked in housing for five years, and i've had to run procedures i'm not proud of that didn't help vulnerable people (though not often, thank christ) but wow at panorama tonight.

Sure lookit when is the whole thing not like

sorted this did ever we get

Speaking from pov of results of our boom most of it got snorted