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UK House prices: News & Views


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Gold price to house price ratio

 

Illustrated is a a property I was involved with on the gold to price ratio in London

 

year 2000 £250,000 value 171oz of gold

Year 2011 £500,000 value 462oz of gold

Year 2013 £675,000 value 829oz of gold

 

So property over 11 years has greatly outstripped gold as an investment.

 

 

The

http://www.sharelynx.com/chartstemp/UKHousePrices01.php

 

 

I can't see how your ratios work. Sure in the last 2 years gold to property has taken a hit but back to 2000?? Gold was what 300$/oz. (av was 279.11) or about £220. 220 x 171 is £37,620 or $51,300.

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Over the last 2 years London property has outstripped gold as an investment.

 

But so has the FTSE or Dow. Question is, is this just an anomaly or the end of the PM bull run? Gold could be seen to have been orchestrated lower and the UK help to buy and lowest IRs and QE push up the housing market, esp London and foreign money.

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(2) : London Property, in Gold Ounces

 

If you had bought 171 oz @ £230/oz (£39,330) in 2000 and sold in 2011 (171 oz @ £1050 (£179,550) you would have made 140k.

Even if you sold today at £820 you would have made 100k.

If you had £250k in 2000 and bought gold @£230 you'd have bought 1087oz.

 

Sell that in 2011 @ 1050 = £ 1, 141,350, profit of £891,350.

Even selling today @ £815 would give you £885k (635k profit).

And at 11 years you'd probably only be part way through a large mortgage.
Mind you in London you would've spent a small fortune on rent...

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Does the UK really need this ?

 

Herald Scotland - ‎43 minutes ago‎
Mortgage applications worth £365 million have been received by the UK's major lenders in the first month of the extended Help to Buy scheme.
== ==
I had an agent (IP Global) cold call me, to offer me London properties today.
I live in HK. I don't think that's a good sign for the LT future of London's property market
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TODAY's NEWS

== ==

Govt-supported B.S. ?:
The Government’s Help To Buy scheme is creating 75 new homeowners every day, show initial figures.
Average income first-time buyers make up the majority of more than 2,000 people who have taken out a Government-backed mortgage since the second phase of the scheme opened its doors for business last month.
Around £365 million of home loans have been granted to buyers who need only have saved a deposit of 5%. On average households have asked to borrow around £155,000 for homes typically worth £163,000.
(...and this is a GOOD thing?
Maybe those who buy earlier enough while be ahead, but eventually the bubble will peak, and those that buy after that will soon find themselves underwater. Who de we blame for the pain? Obvious answer: criminally idiotic Tories. I hope UKIP eats their lunch, and buries the Bastids! Cameron has replaced Brown, at the top of my UK politicians Villains list : You, sir, are a horse's arse!)
. . .
Calls for increased home construction have intensified in line with spiralling house prices. Yet in many parts of the country, opportunities to better utilise properties already standing are going to waste, according to the analysis by Savills.

It found that there are one million more homes than households across England and Wales, and the majority of the surplus is within the private sector.

Overall, the estate agency found that 4.7 million homes are permanently empty, left vacant or are under-occupied.

It defined under-occupied as homes where one person lives in a three or more bedroom home or two people in a four or more bedroom home, and found there were approximately 3.9 million such homes.
. . .
ZOMBIE=SLAVES ??
British people pay the highest levels of property taxes in the developed world, more than twice the average for the 34 rich countries in the Organisation of Economic Co-operation and Development, according to a think-tank.

Council tax, stamp duty, inheritance tax and capital gains tax amount to 4.1% of GDP in the UK - the highest in the OECD and well above the average 1.8%, found Policy Exchange.

By comparison, Canada levies 3.5% of national income in property taxes, the USA 3%, Japan 2.8% and Germany 0.9%.
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The Independent - ‎8 minutes ago‎






House prices surged at their fastest annual rate in almost three years in September and remained close to an all-time high recorded the previous month,

official figures have shown.

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A sub prime minister with a sub prime chancellor for a sub prime economy and a sub prime future.

UK economy is housing. That's all. Still. A vote winner nevertheless.

 

Expensive property sold at high prices to naive foreigners and highly-geared local dupes

 

Whatta thing to based an economy upon

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I saw an interview recently with Kris Hopkins MP, the current housing minister. He was being quizzed on whether the Help to Buy scheme would perpetuate another housing bubble. He explained that we were nowhere near a bubble, his justification was that housing transactions are only 60% of the level they were at pre-crash. So his benchmark for 'normal' volume is the euphoric frenzied activity prior to a crash.

 

Surely he's not being serious. It just seems to be unofficial government policy to keep the housing plates spinning eternally.

 

I've just been to his parliamentary web page, Kris has a degree in communications and cultural studies from Leeds University so clearly he is the right person for this job, ie stating the Help to Buy scheme is for one reason rather than the actual real reason.

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It just seems to be unofficial government policy to keep the housing plates spinning eternally.

 

 

I read Alistair Darlings autobiography. I can't quote it directly, as it has been a long time since I read it. But what I remember, is that in Whitehall, there is an institutionalised drive to maintain house prices. No MP will let house prices fall.

 

I found an old post that I made on HPC;

 

he writes how home prices are linked to consumer spending and therefore the wider economy. This is what I believe they are still thinking in Whitehall with the current administration. Ensure interest rates are kept low and not let the housing market fall (with the help of no heavy handedness with the state owned banks).

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House prices in the UK. Thats all there is. No MP will let them fall (so long as they can). It's that important because that's all there is of import to almost everyone. If you are ex pat you can clearly see that whenever you go back. It's an obsession. You can see it clearly in the very language estate agents employ. Often they are not selling a property per se, rather they are selling a locale. A range of coffee shops and boutiques, a catchment area. Location location location. You better believe it. That's all there is. IMHO this is a big mistake, a mirage. You could buy into the dream and the locale fall down the toilet, the coffee shops will disappear as fast as they appeared. The boutiques drown in their rental fees...someday.

Collective madness very prescient of a mentality living on the excesses of its bubblicious delerium.

For the time being though, on it goes.

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In the US, home prices could fall as the economy can rebound better - they have the worlds reserve currency, the worlds largest stock market, nuclear submarines, aircraft carriers, a degree of manufacturing, and innovation in silicon valley, etc. The UK is much smaller, and so if they can keep home prices up with housing benefit, and restricting land development via national parks, green belt, and Grade listing buildings we will. And it appears to have put a break on dramatic falls.

 

However, the UK government has fallen back to its last lines in keeping the plates spinning. We have been and will continue to sell off the family silver.

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If you were an advisor to the PM + Chancellor in 2009 / 10 what would you have been saying:

(1) If property prices fall the banks crash - but if property prices rise the banks are saved

(2) If property prices fall the middle classes become destitute - if prices rise the wealth effect trickles down

(3) If property prices fall local and national government income from property taxes fall etc

(4) Mass unemployment is a risk - increased construction activity soaks up a lot of unemployed / unskilled people. Rising prices drive construction. When property prices fall construction slows

(5) In 2009 / 2010 would you have been worried about the next 'bubble' - no - you were worried about a 1929 style depression

 

Think the current environment is a reflection of thoughts similar to the above in 2009 / 2010 in the corridors of power.

 

Remember that property prices are usually not properly reflected in inflation numbers. And the GDP reported on TV is usually the 'real' GDP which is computed by taking the nominal GDP and subtracting inflation. So if nominal GDP is growing rapidly due to construction and property transactions (ie estate agents etc being active) and parts of this activity are not being recording or leaking out of the inflation numbers then inflation is underreported so the 'real GDP growth rate' goes up faster and we appear to 'recover' faster.

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The concluding act of a 40+ years binge on fiat money is going to play itself out over the next few years.

There has never been a WORSE time in history to commit to a 25 year loan on an asset that has only one way to go.

 

When it finally goes, the repercussions will be tremendous.

 

- negative real interest rates

- government guaranteed mortgages

- a dysfunctional vampire economy totally reliant on credit expansion

- public finances that continue to decline month on month, year no year

 

I have lived enough years to know that these conditions can go on longer than anyone suspects they might, but eventually it will end, and as history has shown, life will not be the same for anyone from that day on.

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That depends on:

- is the loan fixed or variable

- what is the nature of the tenant and the duration of the lease

 

Eg:

A commercial property (ie office) leased to the govt. on a 20 yr lease at 5.5% yield (full repairing and insurance) but with a 5 yr upwardly only CPI linked rent review and a 20% fixed rate commercial loan for 5.0% (ideally interest only) - probably want to take that.

 

A residential property on a 25 yr variable rate mortgage; with a LTV of 95% and in an area where rent yields are currently 2.5% and the market is frothy; with tenants typically staying only 3-6 months and long voids - probably give that a miss.

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Interesting thoughts from Van and Roddy.

Van says "40 year binge on fiat money" has "another few years".

Roddy states that responsibly held fixed mortgages on property lent to government tenants are good investments.

"based on the nature if the tenant" and thus their ability to afford the rent.

Things look fine for the moment for the UK. I wonder how long that lasts?

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If you were an advisor to the PM + Chancellor in 2009 / 10 what would you have been saying:

(1) If property prices fall the banks crash - but if property prices rise the banks are saved

(2) If property prices fall the middle classes become destitute - if prices rise the wealth effect trickles down

(3) If property prices fall local and national government income from property taxes fall etc

(4) Mass unemployment is a risk - increased construction activity soaks up a lot of unemployed / unskilled people. Rising prices drive construction. When property prices fall construction slows

(5) In 2009 / 2010 would you have been worried about the next 'bubble' - no - you were worried about a 1929 style depression

 

Think the current environment is a reflection of thoughts similar to the above in 2009 / 2010 in the corridors of power.

 

Remember that property prices are usually not properly reflected in inflation numbers. And the GDP reported on TV is usually the 'real' GDP which is computed by taking the nominal GDP and subtracting inflation. So if nominal GDP is growing rapidly due to construction and property transactions (ie estate agents etc being active) and parts of this activity are not being recording or leaking out of the inflation numbers then inflation is underreported so the 'real GDP growth rate' goes up faster and we appear to 'recover' faster.

 

Bubbles are inevitable, if we think the economy can take no pain

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Van, I share your positions and have done for years... it's criminal what's going on and I can't begin to explain how pissed off I am that I am almost priced out of the market... A personal scenario to show briefly my quandry:

 

With a 40% deposit saved, in 2006 I nearly bought a 3-bed house in Harrow for £270k. I chickened out - we could afford the mortgage but with no breathing room. Fast forward 7 years and that house is on the market at £365k (but probably sell for £340-350k). If I had bought it then, I would have been a third of the way through my mortgage (hindsight is great!).

 

In the meantime I'm renting a 3-bed flat and with 2 little kids now (and a half-decent job) we want our own place/garden.... And in the market right now? People have plumped up their asking prices because the government is bank-rolling mortgages. The thought of continuing to live in a place I don't especially like is not good, but the alternative is buying at these prices, which I agree are due a fall inside a few years. How I'm going to convince my wife that it's another 3 years of waiting though after I told her that story 3 years ago is another problem. I have no idea how typical my situation or the follwoing is, but here's the history of the house I nearly bought:

 

June '06 - Sold for £272k

Sep '10 Marketed for £300k

Dec '12 Marketed for £320k

Nov '13 Being marketed at £365

 

If I'm not mistaken Help to Buy government cash will end up in the pockets of developers and people that have inflated their asking prices. This would be funny if it wasn't so tragic.

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84% - I got two of them exactly right!

 

Something wrong with this site? I was replying to someone who posted a link to guessing 10 property prices - but it ended up at the bottom.

 

Edit. No, nothing wrong with this site. A lot wrong with Internet Explorer 11 it seems. Changed to Firefox to use this site.

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Van, I share your positions and have done for years... it's criminal what's going on and I can't begin to explain how pissed off I am that I am almost priced out of the market... A personal scenario to show briefly my quandry:

 

With a 40% deposit saved, in 2006 I nearly bought a 3-bed house in Harrow for £270k. I chickened out - we could afford the mortgage but with no breathing room. Fast forward 7 years and that house is on the market at £365k (but probably sell for £340-350k). If I had bought it then, I would have been a third of the way through my mortgage (hindsight is great!).

 

In the meantime I'm renting a 3-bed flat and with 2 little kids now (and a half-decent job) we want our own place/garden.... And in the market right now? People have plumped up their asking prices because the government is bank-rolling mortgages. The thought of continuing to live in a place I don't especially like is not good, but the alternative is buying at these prices, which I agree are due a fall inside a few years. How I'm going to convince my wife that it's another 3 years of waiting though after I told her that story 3 years ago is another problem. I have no idea how typical my situation or the follwoing is, but here's the history of the house I nearly bought:

 

June '06 - Sold for £272k

Sep '10 Marketed for £300k

Dec '12 Marketed for £320k

Nov '13 Being marketed at £365

 

If I'm not mistaken Help to Buy government cash will end up in the pockets of developers and people that have inflated their asking prices. This would be funny if it wasn't so tragic.

 

I'm not sure what one can say ... other than to sympathise with your position. I was one of the early members of the infamous HousePriceCrash site. I started posting there in 2003 - completely convinced we were in a bubble reminscent of the bubble that took place in the mid to late 1980s.

 

So convinced was I that I sold to rent in late 2003. At first things went my way, the money in the bank earnt enough to pay my rent and for a couple of holidays a year and, until late 2005/early 2006 prices did go down - a bit. But, I had not allowed for the lengths the Labour government would go to - they ignored inflation and the massive growth in M4 money and cut interest rates (after a series of small rises from their (at the time) 50 year low of 3.5%) in August 2005. This was taken as a signal that interest rates had peaked and the market went mad again.

 

I toughed it out, convinced that this madness had to end. In the end, after another landlord decided he wanted us out, and unable to face more moves - we bought in late 2010. I reckon I could sell now for 100k more than I paid! Lunacy. Thinking back to that 50 year low bank rate of 3.5% after 9/11 - if you had predicted then that bank rates would subsequently go down to 0.5% - people would have sent for the men in white coats.

 

What's my point? Not sure to be honest. I keep reading on sites like this that 'this can't go forever', 'it's only a matter of time', 'sooner or later ...' etc. etc. Yet, it never happens!

 

I'm in my early 60s. House prices have, generally speaking, been going up for the 40 years I have been an adult. If you had bought in 2006 you'd be quids in now. As you say, you'd be a third of the way through your mortgage.

 

What to do? Against everything I have said over the last 10 years in endless forum posts - I am completely admitting defeat and would say to you: 'If you can afford the mortgage, and have a bit of a cushion - just bloody buy and take a chance.' Time goes by very quickly and being in private rented with kids is a real drag. I know, I did it between 2003 and 2010.

 

Already I can hear the siren voices ... but interest rates can only go one way ... sooner or later ... where's the money coming from to sustain the market .....

 

Who knows? I don't. The bloody market keeps going up though.

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