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Isn't that outrageous?
The biggest drop in UK house prices in 10 years.
Any fall in UK house prices is always temporary. The trend is upwards, and will continue to remain so for the reasons I stated before.
The usual reason for a fall in UK house prices is that people are finding it too expensive to buy a new house.
But, ignore it. Various news coming out over the last six months has had prices "rising substantially", "dropping", "on the increase again", "flattened out" or "on the increase". The prices will only come down when ronin et al actually do move to Turkey :) i.e. demand and supply. And may all interfering, meddling government bodies keep their noses out of fiddling and trying to "manage" house prices; let the market take care of itself. (I know that doesn't help those who want the prices to come down but any artificial reduction will make houses more affordable only at the expense of storing up negative equity problems for new house owners.)
Not exactly true. Remember the last crash. No one buys in a falling market.
The demand is there as long as prices are rising.
The demand is there as long as prices are rising.
The market reaches an equilibrium price at the point where demand meets supply. That economics principle hasn't changed in thousands of years.
No one buys in a falling market
The smart ones buy at the bottom or near the bottom not when prices are falling.Anyway do not want to get into an a argument on economics.
I take it you are a house owner oddsod?
The smart ones buy at the bottom
As there is no way of knowing for sure when the market has hit bottom or top - you'd normally buy only when the prices are going down or going up. :) The smart ones buy when the prices are going down. I'll explain...
Rental rates are not very elastic (to use another economics term) and changes in property prices tend to take longer to translate into changes in rental values. Hence, in a market of falling house prices and constant short term rental values the rental yield keeps rising till rental values drop. That's why property investors buy when prices are falling - to benefit from higher yields - and sell when prices are rising.
But to get the discussion back on topic - I feel that the major reason for high prices in the UK are the high taxes. We are taxed at one of the highest rates in the developed world if not the highest and, despite the impression they give, stats from places like the IMF don't disclose how high the taxes really are. They try to base it on % of GDP or tax-freedom-day but that's all skewed. Sticky me if you want an example or two of how it's skewed (to keep the thread from going astray again :)). Successive UK governments have gotten very skilled at fleecing you but not showing in the books how much they are really screwing you for. And it's because of all this govt greed that general prices are so high here.
This meant house prices were 7.9% higher in March than a year previously - the first time the annual growth rate has fallen below 10% since 2001.
That is from the BBC story posted earlier.
Basically this means that the rate of growth has dropped to the lowest point in some years. There is not a slump. House prices are not falling dramatically. It is the rate of growth that has slowed - to a mere 7.9%. That's better than money in the bank..;-)
That's the story - for now. Wait 'till the next one comes along.
The UK is so expensive because us Brits, in the main, love to profiteer. Any excuse for a price hike and we'll do it - and blame rising costs, blah, blah, blah, blah. What's worse is that we love to profiteer from ourselves.
My rent has just gone up by an amount that bears no relation to inflation - it's the same every year (mind you, it is Islington!). Beer (by that I mean beer, wine & spirits) goes up on an all too regular basis courtesy of the breweries. Cigarettes went up by 7p a packet courtesy of the Budget - even though the tobacco companies & wholesalers have put the prices up about three times so far this year.
A few weeks ago I was surprised to find that my weekly shopping was 20-30% higher than normal. Next week, about the same amount again; and so on.
Everything goes up here because this is what we seem to like to do.
Syzygy
I imagione teh tax on fuel for lorrys to be a major factor in the price of goods on sale in a store.
Average British wages at £22,000 ($NZ59,000) a year have climbed 15 per cent since 1997. During the same period the average price of a home shot up over 140 per cent to nearly £164,000 ($NZ432,000)according to HBOS Plc, the nation's largest mortgage lender.
Fair Value = annual rent/borrowing rate
That is because people can use the annual rent to pay the bank the interest on the mortgage.
>>Demand doesn't exist because prices are rising. Taken to its inevitable conclusion will prices eventually max out at infinity?
It does partially. Demand can change with the mood of the market. In a market of rising prices (when borrowing rates fall) the greed factor creates a "rational bubble" and the price overshoots this "fair value" as buyers pile in and speculate on capital gains.
The house of cards comes tumbling down when people begin to subsidise the interest payments from their pocket when the rent is not enough.
Then as after any bubble you get a panic stage when nobody buys and the price plunges. When the price overshoots and goes below "fair value" the real investors start buying again.
Right?
The only way house prices can rise now is if borrowing interest rates fall or a bubble situation is sustained (where the rent does not pay the mortgage). But that must eventually end in tears.
Demand doesn't exist because prices are rising. Taken to its inevitable conclusion will prices eventually max out at infinity?The market reaches an equilibrium price at the point where demand meets supply. That economics principle hasn't changed in thousands of years.
This is true in the textbook case. It is true in the real world if you are dealing with a market in a single good or service (or single set of goods or services). But things get complicated when markets interact.
The housing market interacts strongly with the labour market. In the case of the market for homes in the South-East of England, the major driving force behind increased demand for homes is the demand for workers in the financial sector. The rise in house prices in this region over the last few years is the result of an extra one million jobs in the UK financial sector, most of them in London.
As more workers move into London, the price of homes rises - simple supply and demand. But the response of the financial sector, as with any industry faced with a shortage of labour, is to increase the salaries they offer. The salaries paid by the London financial sector have to be high enough for their employees to live within travelling distance of work.
The equilibrium that will stop this process is therefore not an equilibrium of supply and demand in the housing market, but an equilibrium in the financial sector labour market.
However, an equilibrium here will not bring the rise in London house prices to an end. This is just the current major factor in ther rise. Other factors exist, one or more of which will become more important. There exists pent-up demand in the form of "children" in their mid-20s (and older) living with parents, etc. Other sectors may move into the place of the financial sector in the labour market, etc.
In other words, the forces behind the long-term rise in London house prices prices are somewhat bigger than just the housing market, and they will only end when London's economic expansion ends.
they will only end when London's economic expansion ends.
OR
When people have to sit in their cars for 8 hours per day just to commute to london on the infamous M25.
Prices flew like a rocket until it became law and then the next day nobody was buying. Prices dropped 30% more or less overnight.
House prices are begging for a correction and any shock will frighten off ALL the buyers.
Are most people in debt up to their eyeballs? I mean apart from the mortgage debt?
Retail prices look miles higher than when I left but salaries have only grown 15% so what gives? Everyone living on the never never?
What happens when the credit card companies cannot lend anymore or when the card interest payments become too painfull?
In the U.S., since the exchange rate between the British Pound and the U.S. dollar are nearly 2 to 1 (Pound = $1.90).
A 900 Euro apartment would run about $1150-1200 here, which is standard for the U.S. eastcoast suburbs. The same space in New York City would run about 1500-1600 Euros.
I don't know what the talk is in Europe but in the U.S. they have been talking about a housing bubble for a little more than a year. (Which may mean it is has more time before it deflates.) But it seems that if there is a housing Bubble in Europe as well (or at least significant portions of it) and Asia which has already had their housing Bubble and is now reigniting a new one. The global housing market may peak all at around the same time.
Certainly, even in New York City suburbs such as Staten Island (one of the boroughs) which is a dump, tiny little houses on 50 feet x 100 f (15m x 30m) plots of land sell for $450,000 in a queasy neighborhood.
Which governments are pumping this money into the global economy, they appear to be setting the world housing (real estate) markets for a huge fall... At this point, the guessing is about what will cause the Bubble to burst [as it was with the stock market in the late 90's/early 2000's].
But then again the going wage rate in the exepensive eastern part of the U.S. is about $8-10 per hour (6-8 Euros per hour). So who knows what the outcome will be.
Regards,
I live in Poland and all the UK/Irish are coming over here throwing their money about buying property because you can still get an 8% rental return here.
I remember the UK when you could borrow at 8% and still make enough profit to pay for a few beers each month.
The real problem is money is too cheap. I think the banks have under-estimated the risk of a price fall. They might see their money go up in smoke where they have lent 80 or 90%.
I'm sorry to be off subject, i just wanted to comment on this:
I've been in America for 1.5 years now, I've been to LA suburbs, Detroit Suburbs, and Chicago Suburbs....Hell, i found houses that looked like mine in all three. If you look at arial images, you see "rows" and "rows" of the same houses. To me, that's sick. It's sorta like, communism if you know what i mean. Everyone has the same food, everyone lives in "almost" identical homes, everyone dresses basically the same.
Back in Syria (home country) you can travel by car 5 hours and end up in a community 180 degrees different. I really like that, it gives cities their identity....
i know, pointless, just haven't had any chance to express it before.
Not getting into a north/south debate here but it is still the case that some of us northerners are seen to live in the middle of nowhere?
I live in Leeds and have about 6 other cities within an hours drive of my house. It's also only just over 2 hours on the train to London which I bet is a lesser commute than some people driving into London from nearby?
Fair enough, the sun only rises in summer and in winter we are shrouded in mist but apart from that ;)
