It doesn’t matter what the government does – UK house prices will fall

The government’s latest plan to prop up the UK property market has been criticised by almost everyone.

And rightly so. Encouraging lenders to give first-time buyers 95% home loans is downright immoral in the current climate. There’s a reason that lenders require big deposits and are reluctant to give people money just now – it’s because they think house prices are more likely to fall than to rise.

If the coalition really wants to help, they’d let prices fall. Of course, that’s not a vote-winner, so there’s no chance they’d endorse that policy.

But whether they like it or not, that’s what’s likely to happen…

The coalition’s first-time buyer scheme is a waste of time

Merryn Somerset Webb, our editor in chief, has already laid into the government’s ill-considered plans for propping up house prices on her blog: David Cameron is mad to spend £400m on the housing market. But you can never lambast a stupid scheme too much, so let’s have another crack at it here.

It’s hard to know where to start. The coalition makes a big noise about cutting red tape, then introduces a fiddly little scheme like this. It’s like Gordon Brown never stepped down.

In short, as Allister Heath in City AM points out, it’s all about giving banks a safety cushion. The price of a house bought under the scheme could fall by 14% and the bank will “still break even if they sell a repossessed property”. The lender has the security – it’s the naïve first-time buyer along with the taxpayer, who’s taking all the risk.

The team at Capital Economics also made some very good points about the overall impact of the scheme on the housing market. For one thing, it won’t boost the overall supply of home loans. Lenders remain “under pressure to boost their capital reserves”. And “wholesale funding has become more expensive and less freely available in recent weeks”.

In other words, there is a fixed pool of funds available. If more of this pool goes to first-time buyers, it won’t be available for anyone else. So you’re just shifting funds around. Worse still, the government is interfering in the credit allocation process, and reintroducing moral hazard into the market – which is partly what got us into this mess in the first place.

There’s an even more pertinent point. The government, and others with a vested interest in propping up house prices, blame high deposit requirements for “locking first-time buyers out of the market”.

But this is nonsense, notes Capital Economics. “Remember that the share of home loans advanced to first-time buyers fell to current levels in 2003″. In other words, first-time buyers have had a tough time for nearly a decade now.

This is nothing to do with high deposits or even a lack of finance. Back before the credit crunch, anyone with a pulse could get a loan. The only thing locking first-time buyers out of the housing market is the fact that house prices are still ridiculously high compared to incomes. And this scheme does nothing to help with that.

The only problem with the housing market – houses cost too much

This is the fundamental problem that no one wants to admit to. Houses cost too much, and the price needs to come down. And until that happens, the UK economy is going to be walking on eggshells.

It’s easy to see why the Bank of England slashed interest rates in March 2009. It’s also easy to understand why it’s reluctant to raise them again. Preventing house prices from collapsing probably did more to prop up bank balance sheets than any other action in the crisis.

But it means we’re now sitting on a time bomb. How many people could maintain their repayments if interest rates went up? And how long will that remain the case? Yes, the Bank of England rate will probably remain low for the foreseeable future. But if there’s a full-blown banking crisis in the eurozone, mortgage finance for home loans will get even tighter.

And there are several other reasons to expect prices to start falling harder. Unemployment is on the rise again. As more and more people lose their jobs, the chances are that you’ll see more and more ‘forced sellers’ on the market, which will drive down prices overall.

This is one area where the US has a definite advantage over the UK. The Federal Reserve has far less ability to influence mortgage rates directly than the Bank of England does. As a result, the cost of home loans could never reach the lows we saw in Britain.

Yes, it means that US property prices crashed. And it looks as though they’ll remain weak for some time. But it also means that the threat of a terrible slump in prices no longer hangs over the entire economy. Chances are, in a few years’ time, that’ll mean the US is in a much better position to recover while we’re stuck with either stagnation and paralysis, or another recession.

We’ll be looking more closely at the long-term outlook for the US economy and housing market in a future issue of MoneyWeek magazine. Meanwhile, getting back to the state of our own market – we recently got a panel of property experts in to discuss the outlook for house prices in the UK. You can read their views here: How much further will house prices fall? Suffice to say, we wouldn’t be encouraging first-time buyers to take up the government’s offer just yet.

• This article is taken from the free investment email Money Morning. Sign up to Money Morning here .

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59 Responses

  1. 23/11/2011, Carol Massey wrote

    Why is no-one blaming the buy-to-let culture which is constantly removing houses from the market, and driving up costs? The arrival of the buy-to -let landlord and the simultaneous spiralling cost of housing must give us a clue.

  2. 23/11/2011, Eleonor wrote

    As a subscriber, you mention house prices going to suffer more.
    What about in London where they are seeing prices going up and up?
    Do you think they will also go down in price?

  3. 23/11/2011, Caveman wrote

    An excellent analysis. It’s all about trying to stop the living daylights being blasted out of bank balance sheets. It is the government’s biggest nightmare. Back in the real world, I have always struggled to see why rising property prices are a good thing. One person’s selling price is another’s buying price – it is largely a zero sum game. Instead, too many of us are saddled with debt and paying too much to put a roof over our heads. Lower house prices and lower mortgage payments will mean that there is more disposable income which may lead to a better economy. Getting to this position will be extremely painful but the longer the politicians meddle the worse the endgame will be.

  4. 23/11/2011, FTB wrote

    But will prices fall fast enough to make it more worthwile renting than owning for first-time-buyers?

    I’m currently renting (as I can’t afford to buy even a starter home on my 40k+ salary!) but prices would have to fall fast for a long time if my ‘dead money’ renting was to beat the gains I would make in equity on a mortgage…

    Would love to hear people’s thoughts on this?

  5. 23/11/2011, alex wrote

    “house prices are still ridiculously high compared to incomes”

    No they aren’t. The average house is around occuupied by the average couple earning the average wage is approximately 3.2 times income. It’s higher than the long term average……but hardly ridiculous.

  6. 23/11/2011, Anthony wrote

    This is a very silly scheme. – A better one to get the housing market moving again would be to remove stamp duty – or at least reduce it a lot. Above 250k it is a huge disincentive to move so the market clogs up. Above 500k it’s insane. Buy a 600k house and pay 24k tax? Mad. Not surprisingly transactions are at record lows – so revenue from this tax is lower than it would be if the tax were lower and the transactions were, as a result, higher.

    Apart from anything else Stamp Duty is a tax on mobility – which is bad for the economy. And when people move house they buy stuff – which is good for the economy. And what after all is the rationale for such a tax? It raises money only – but does lots of bad things to the economy. You may as well tax honey or exercise. Stamp duty: it’s just a random, silly, tax which stifles the economy.

  7. 23/11/2011, lucky peasant wrote

    i think that if all mortgage lenders had to lend at 1% interest, it would solve many problems,,,,,,,,a house costing £200,000 to buy could be secured for £40 a week in interest only payments,,,,most people could afford this,,,,we could do away with the £20 BILLION a year in housing benefit for a start, anybody could afford to buy ‘their home’, even on minimum wage,,,and if the government ‘had’ to ‘help’ £40 a week of taxpayers money handed over to a mortgage provider, is a lot better than £200 a week to a private landlord,,,,,the government needs to understand that a ‘housing costs’ are a business cost,

  8. 23/11/2011, john wrote

    It depends where you live. In parts of the NE, NW and Midlands properties are half the price that they are in London and the SE. In those areas properties are far more affordable and therefore the ratio wages to price is much less than the SE. With demand for property still outstripping supply I don’t see any likelihood of property prices diving in the short-term. Certainly buyto let landlords could be cashing in but they are merely catering for a demand for rented property that’s there. After all if you’re right and prices are going to crash then they’re doing the first time buyer a favour. But I think you’re wrong.

  9. 23/11/2011, Mark Lauriston wrote

    When you say “The Federal Reserve has far less ability to influence mortgage rates directly than the Bank of England does” and “But it also means that the threat of a terrible slump in prices no longer hangs over the entire US economy”- was this a misprint or do you actually believe it? US citizens get massive tax breaks on offsetting their mortgage costs against income and the Fed has done everything in its power to stimulate the US housing market- ZIRP, QE 1,2 soon to be 3, then 4 etc, trying to flatten the 5s30s yield curve, bailing out the US (and UK) banks to shore up their dreadful property loan books plus CDS books (AIG, GS, MS, JPM etc) etc. None has worked. But no one cannot say that the Fed haven’t done their worst to make the situation worse. The US property market has had a terrible slump but if you think US house prices can’t go any lower – just wait.

  10. 23/11/2011, Ellen wrote

    The fear now is that the eurozone crisis is going to force British bank to push up their interest rates anyway. But it will be a dilemma as the banks need the high valuations on their balance sheets to make them look solvent. If there are huge numbers of forced sales, taking 30% or more off house values, the banks will have to revalue what they’ve got. Will they then be allowed to trade while they are technically insolvent or will there be more bailouts. However, significant numbers may well struggle to hold onto their homes, the majority will soldier on with negative equity. Although it might be in the economy’s best interest to allow house prices find their equilibrium, if the banks are allowed to trade while they are insolvent – does that start bank runs?

  11. 23/11/2011, Silverbug wrote

    If couples can’t afford a house then how is a single man in his 30′s supposed to afford a house on £23,000 per year. Or are all single men expected to live with their mum until they are about 50 years old?

  12. 23/11/2011, modsa wrote

    The Government is desperate to get the unemployment rate down or at least appear to be doing something which, given the labour content of house building, it will probably do. The effect on house prices will, if anything, be down.

  13. 23/11/2011, DavePage wrote

    “No they aren’t. The average house is around occuupied by the average couple earning the average wage is approximately 3.2 times income. It’s higher than the long term average……but hardly ridiculous”.

    Yes they are. 3.2 times joint income is 6.4 individual income, or must I get married to live in your VI nonsense world?

  14. 23/11/2011, DavePage wrote

    Mark Lauriston is spot-on with his observations. Among my colleagues here in the US (yep, former patriot tired of high house prices on way out of door etc.) the sole determinant of how much to spend on a house is how much they need to borrow for the mortgage interest to fully offset their tax-bill. This is like the cleaners in the City of London paying more tax than the CEOs whose buildings they clean, only much, much worse, as it involves the large majority of the professional working and middle classes.

  15. 23/11/2011, DavePage wrote

    There is an even crazier element to property tax here. Each state sets its own income and property tax, sometime with wild differences. For instance, Texas and Illinois have huge property taxes (I have a colleague paying $60,000 / year council tax in Chicago) but small income tax. It’s the opposite in Washington DC. If you earned $20 million a year, where would you live somewhere with tiny income tax and a small-change property tax-bill, or somewhere where property tax is low and your income tax is 25%?

    Like Mark said, you aint seen nothing yet in the US, but it’s such a shame that the UK must work so hard to emulate so many of the US’s mistakes, this taxpayer-funded mortgage indemnity scheme effectively Fannie Mae and Freddie Mac for the UK. Except the Americans couldn’t afford it — and we certainly can’t…

  16. 23/11/2011, Shaun wrote

    Why does everyone think that a rise in interest rates will spell disaster for the housing market? The average mortgage rate is currently around 4.5% whilst the base rate is 0.5% & Libor is around .85%. In other words, banks are making a huge profit on the mortgages they’re offering (no wonder they’re not interested in increasing the volume of lending). Just because the base rate will inevitably increase, it doesn’t follow that mortgage rates will increase to the same extent. It just means that the banks currently huge margins will be eroded.

  17. 23/11/2011, Terry wrote

    FTB – there is a false assumption that rent is dead money and mortgage repayment is not. With many switching to interest only mtges the repayments are for interest only. And yes that interest goes to the bank. So you have a choice between paying a landlord or a banker. There has to be a cost for housing and the days of house price increases are over. The central London market is distorted by foreign investors who find the house prices relatively cheap as there own currency has benefited from the falling £. But the main argument is that mtge interest is falsely low and at some stage will rise. Then house prices will fall. How often do we have to hear those tired cliches – you have to get on the housing ladder and rent is dead money

  18. 23/11/2011, Steve Brennan wrote

    Low interest rates, 95-110%+ mortgages and interest-only mortgages all contributed to our property bubble here in Ireland. A fair few (greedy) people thought they could become property magnates aswell as their day job, expecting to buy off plans and sell properties when they were built for twice the cost, rolling over and leveraging so called ‘equity’ to finance multiple properties on interest-only mortgages. It was this that squeezed the first-time buyers out of the market – the older generation who had equity to release.

    I think the only solution is to just face facts that the properties are just not worth the ridiculous prices they are fetching. Every single bubble in history had resulted in quotes of “this is different because…”.

  19. 23/11/2011, Steve Brennan wrote

    If you don’t want the taxpayer to have to bear the brunt of reckless lending by the banks, I would suggest you make the directors legally liable for the loans they are giving out. Here, it turned into a competition between the banks to lend more than each other, in the end neglecting to verify basic details like proof of income. Then when a few people lost their jobs and the interest rates rose a percent or so, the chickens came home to roost.

    For first time buyers, I’d recommend just to sit there and wait a couple of years. It turned out here that rent wasn’t dead money after all – dead money is paying the mortgage on a house that’s in negative equity by 50% or more.

  20. 23/11/2011, Terry wrote

    Mortgage guarantees have been around for many years. Throughout the 60′s,70′s,80′s and into the 90′s lenders required the mortgagor to take out a mortgage insurance guarantee and required a one-off premium that was payable with the mtge application. So although the mortgagor had to pay a 5% deposit the mtge offer would show the loan as say 80%. If the mortgagor defaulted ( btw most borrowers go in to arrears in the first year) then the insurance company would pay 15% of the pty pp. Consequently it was quite common for building societies to report negligible losses or none at all in their annual acounts as a result of borrowers defaulting. There are still mtge guarantees and an example I saw on the net showed a 100% mtge of £145,000 with a MIG premium of £4350. In days gone by the premiums were much lower and obviously this reflects the current attitude to risk.

  21. 23/11/2011, alex wrote

    No Dave you don’t have to get married, nor do you need to buy a house with a partner, but that’s precisely what the vast majority of people who represent the market do. Which is why prices are where they are.

    If you like you can live in a tent and eat forest food. It won’t change the fact that most people meet someone they like, buy a house with that person and shop at Tescoes.

    As for the lad in his 30′s who can’t afford to buy his own place and think’s he might live with his mum until he’s 50, I suggest you rent a place so you ahve your own pad, meet a nice girl, buy a house and stop mucking about.

  22. 23/11/2011, Bee Gajudhur wrote

    Totally agree with you there John.
    Didn’t we learn anything from the US melt down then?
    When I look back, I always wonder how come the banks were giving out loans even after doing their KYC procedures, they knew that traditional renters would not be able to cough up the repayments.

    Yet, what they had in mind was this, one or two years down the line, after receiving the initial payments, they are ready to pounce on foreclosure once they default. It has always been about the greed of bankers.

    Are we still competing on who can be greedier, us British or the Americans?!!

    X

  23. 23/11/2011, jonathan wrote

    Alex you are full of it:

    No way is the average house 3 times the average salary. We make a combined income of 80k and cannot afford a house where we live (inner Herts). Maybe if you put 1 bed flats into the mix then you can pretend the average is only 3 times salary but then its not average “house” its average ‘property”.

    Facts are for a family its nearly impossible to buy a real house without either an income over 100k or a big hand out from your parents. If you work in London and want to live in commuting distance I think its really 15x average salary at minimum!

    100% prices are going down a lot over the next few years……….

  24. 23/11/2011, Just Bought wrote

    In the past 2 years in London, rent has become horrifically expensive. Over the period of our new mortgage, we would have paid a minimum of £320k in rent and the only thing facing us after 23 years would be more rent payments. So it does not much matter to us whether house prices fall or stay flat.

    However, I would not touch a house purchase on only a 5% deposit with a bargepole as that is not going to be a home, it is going to be a millstone unless you want to turn into a landlord and hope that rents stay high. Especially if you buy a new-build because these are always sold at a premium to second hand even when they clearly look like the slums of the future! PLUS although developers are meant to contribute 3.5% they will clearly just inflate the asking prices or employ some dodgy spin to cover their stake.

  25. 23/11/2011, Lord Lucan wrote

    “No Dave you don’t have to get married…”

    “As for the lad in his 30′s who can’t afford to buy his own place and think’s he might live with his mum until he’s 50, I suggest you rent a place so you ahve your own pad, meet a nice girl, buy a house and stop mucking about. “

    So which is it, married or not? Certainly seems unaffordable on a single income.

  26. 23/11/2011, Jimbo wrote

    It’s not the people that own the houses in this country IT’S THE BANKS!! The sooner everyone realises that the better. How can you possibly say that you own anything when you pay for it with a 5% deposit?!

  27. 23/11/2011, Max wrote

    The focus of markets is very selective. At the moment they have discovered that a lot of states in the euro zone are bankrupt. Thus the bond bubbles over there are popping at the moment. In the shadow of this the UK and the US seem to be save havens and capital is flowing here. But it won’t be long until the markets discover that the UK is not better than Greece and the US is actually worth and when that happens, the gilt and treasury bubble will pop. That will lead to a massive run of capital out of the country and house prices will fall. I think we are a maximum of 2-3 years away from that point, but it may even start next year.

  28. 23/11/2011, Geoffrey wrote

    Mr Market is by no means always right but in this case he probably would be were he left to his own devices rather than being messed about by the Government. It stands to reason that the longer would-be first-time buyers hold off, the faster house prices will fall until they reach the truly affordable level. Those house-owners who find themselves in negative equity have nothing to worry about if they can maintain their mortgage payments and should they decide to sell they will be able to buy again at correspondingly lower prices.

  29. 23/11/2011, Solomon wrote

    So many mortgages were based on ‘self-cert’, i.e people running their own businesses declared they were able to afford a mortgage – which they probably were – as most small business people don’t declare all their income to avoid excessive taxation. Millions of such people are now locked into living in homes too big for them – but they can’t move to smaller properties because the current credit restraints make them re-apply under the new mortgage limits where they have to show 3 year accounts which prove income! Come on! This is not going to work, so now we have people willing to trade down, therfore releasing millions of larger properties, who, though being able to afford the larger property, can’t under current credit seaches, afford the lower cost properties!!! Which of course they can.!! Whoever can solve this hiccough will solve the current housing crisis. Simple as that.

  30. 23/11/2011, az wrote

    House prices will gradually fall whilst inflation gets out of hand making the cost of living tougher. The only weapon the BofE has to slow the severe inflation when it hits will be to massively increase interest rates causing people to default on their mortgages leading to a fire sale of property and collapse in house prices. Those with savings will continue to flee to precious metals as the purchasing power of their cash evaporates. Its inevitable…..

  31. 23/11/2011, Colin wrote

    There is a need to build more housing to create employment in the building process and meet the housing shortage caused by a rising population.
    Housing Developers want this new subsidy to sell the houses at current values and thus maintain profit levels.
    An alternative to this subsidy would be a tax on undeveloped housing sites. This would bring more sites forward for development driving down land values and thus the new house prices which will make new housebuilding schemes viable without subsidy.

  32. 23/11/2011, Colin wrote

    There is a need to build more housing to create employment in the building process and meet the housing shortage caused by a rising population.
    Housing Developers want this new subsidy to sell the houses at current values and thus maintain profit levels.
    An alternative to this subsidy would be a tax on undeveloped housing sites. This would bring more sites forward for development driving down land values and thus the new house prices which will make new housebuilding schemes viable without subsidy.

  33. 23/11/2011, 121 wrote

    A tiny one bedroom flat in my area of London is minimum £300k. That’s six times me and my partner’s combined income! Sure we could go cheaper, £250K, £200K, but I do not want to own an ex-local authority flat. I may as well just go on benefits and get one for free. If we ever start a family, a decent house is min £600k so 12 times our combined income. What a mess.

  34. 23/11/2011, Paul, London wrote

    Totally agree with the majority of posters and article written here. House prices are wildly overpriced when considering the economic turmoil the world is in at present. Employment will continue to rise in the short term, banks will be ever reluctant to lend, high inflation, no wage increases, will all make affording a home even less realistic in the short/medium term. Banks are already being forced to rise the mortages rates which will be worrying to those overleveraged BTL investors, and people who are barely covering there monthly repayments. I couldnt think of a poorer investment or time to get on the property ladder at present. The market will be driven down, no matter what silly ideas the government come up with. And also, when foreign investment dries up, the London bubble will soon lose steam, it cannot continue forever, there simply isnt the money to fuel another house price boom. What goes up must come down, be patient fellow FTB’s

  35. 24/11/2011, Paul wrote

    Have all you people living in London considered moving away?
    The figures you’re quoting sound crazy.

    I’m looking at nice 4 bed detached houses for sale at the minute in Leicester for £210k ish. I’ve had a 120k house on my own since 2005 and will be upgrading together with my girlfriend. We both earn about £35k each.

    Sounds hellish living in the capital.

  36. 24/11/2011, alex wrote

    @Jonathan.

    The average house price in the UK is @ £162k. source land registry

    The average male wage is £28,400, female £22,900 .source ONS

    Ratio of price to combined average income ( assuming a 10% despoit ) 3.21

    You may not like the facts that I am presenting to you. But unlike you I am using facts rather than anecdotes.

    So IMO it is you that is “Full of it”.

  37. 24/11/2011, alex wrote

    No Paul they won’t have considered moving away from London because that would require effort and imagination, they simply want to sit around dreaming of a day when houses will fall to the the same price as they were in 1991, and blaming the Government, ‘powers that be’ and ‘evil bankers’ if they don’t.

  38. 24/11/2011, Cymru am Byth wrote

    As usual, you are bashing the housing market .
    I must say that you are the most negative site I have ever come across.
    It would be too much to ask for you to be positive about anything.
    Talk about the ‘prophet of doom’, you are definitely a strong contender.
    If people believed half the s*** that you propound on this site, they would most likely go out and top themselves.

  39. 24/11/2011, Bob wrote

    I can’t see how house prices will fall in areas of the country, such as Wales, which are dominated by the public sector.

    Interest rates are not rising and the Public Sector is not cutting jobs so I cannot see any pressure causing house prices to fall.

  40. 24/11/2011, Bob wrote

    I have nothing to do with Cymru am Byth I hasten to add – other than, most probably, the desire to see Shane Williams continue to side-step and confound English backs.

  41. 24/11/2011, Kieran wrote

    Alex,

    You are taking the average wage which is skewed by higher salaries in the south, and saying they allow people at a 3.2 multiplier to buy the average house, of which there are lots of cheaper houses in the north.

    You’re ignoring regional variations.

    I haven’t bought a house for a long time but when I did they didn’t apply 3 or 3.5 to our joint income. Has this changed?

  42. 24/11/2011, alex wrote

    Kieran. House prices vary regionally as do wages. In the North & Wales houses are much cheaper than the SE and wages are much lower. That’s not a coindence.

    And yes to answer your question lenders now tend to consider both incomes on a mortgage application fully so you’ll find a couple can easily borrow 3-3.5 joint income. The days when a women getting pregnant in the office automatically got her P45 are long gone.

  43. 24/11/2011, Caveman wrote

    Alex. I see your arguments and your numbers but perhaps you could consider this:

    As a child of the 1970′s I remember it was quite possible for households to be supported by one wage earner in order to pay the mortgage. The fact that it is now commonplace that two salaries are needed to pay a mortgage and that this joint income is equivalent – as you say – to a long-term house price earnings multiple (3.2x) that is historically based on one salary seems to suggest to me that house prices are probably quite expensive – 2x the long term average it would seem.

  44. 24/11/2011, Lemus wrote

    The government web site has the ratios of Median Earnings to Median House Prices for the UK: http://www.communities.gov.uk/documents/housing/xls/322286.xls

    The ratios for Northamptonshire were 3.23 (1997) and 6.7 (2010) – close to the median for all areas. The Nationwide – East Midlands Valuation Calculation for a typical Median House Price for Q4 1997 is £150,453 and Q4 2010 – £384,459 – also a property located in East Midlands which was valued at ££384,459 in Q4 of 2010, would be worth approximately £389,977 in Q3 of 2011.

    The nub is that these median values for Northamptonshire show house prices have risen by a factor of 2.56 – 7.48% per year for 13 years against inflation at 2.34% for the same period (Office of National Statistics RPI Index figures).

    The median house price in Northamptonshire has risen over 3.0 times the rate RPI. If a market correction is applied to redress this imbalance it will hurt hard, but it seems to be the only solution for the UK economy.

  45. 25/11/2011, Rob wrote

    Jonathon can’t buy a house in Hertfordshire on an 80k combined income. There are currently 730 3 bedroom houses for sale in Hertfordshire under £200k. If they are not good enough for you and you prefer to pay rent then obviously thats your decision

    I’ve said before the Moneyweek staff are all running their own agenda having said how clever they were to sell to rent some time back. It took me 18 years to get mortgage free by overpaying when my interest rates went down from 15%.

    The reality is that for most people it will take 20-25 years to become mortgage free, those currently in the market are enjoying record low interest rates and low repayments. Those in rented accomodation have yet to begin their countdown and are just helping their landlord become wealthy.

  46. 25/11/2011, Chris wrote

    @16. That’s the point of BoE policy. The banks are making hay while the sun ‘sort of’ shines, in order to shore up their balance sheets before house prices inevitably drop further. It was a bubble – and the government, the banks and the smart money knows it…

  47. 26/11/2011, Clive wrote

    Does the average house price include flats? Out of interest what is the sq ft?

    Without this information the 162k number is a joke.

    As for 3 bed houses for 200k near London in a kind of decent safe area. No way!

  48. 28/11/2011, alex wrote

    @Caveman, it really depends how you look at it, women going out to work allowed couples to bid house prices up to a level where it is now necessary for them to work for the average couple to afford an average house. But then again I don’t know any couples where the woman doesn’t work, and more to the point most women actively want to work these days.

    @47, what you mean places like this, a 30min train journey from Paddington?

    http://www.rightmove.co.uk/property-for-sale/property-31119715.html

    …..Jonathan your prayers are answered.

    If some of you lot started actually looking for houses to buy rather than whinging on about them being totally unaffordable and worth £25 after “the great house price crash” you might actually find yourself owning a house.

  49. 28/11/2011, Chris wrote

    Hello Alex.
    I take your point, although you do not come across particularly well with that last lecture and an earlier post or two. I’m also not on here to whinge… Not least because I do actually happen to be ‘alright Jack’…
    However, try and get the point that a property like this would probably have been priced at less than £100K a little more than a decade ago, and that a buyer(s) would now still need a £40K deposit to access the better affordability mortgage rates on such a place. Then take a moment to compare this to when you heroically bought your first house and simply accept that there are MASSIVE affordability issues here in the UK. Your lack of empathy about the actual position of current FTBs in this country amazes me.

  50. 29/11/2011, alex wrote

    Chris, if people can afford to rent, which they can ( unless I’m missing massive numbers of young people sleeping rough ) they can also afford to buy.

    Harking back to the world a decade ago really isn’t going to help, I wish I could teleport back to 1991 and buy a 5 bed house in Ealing for £150k ( now worth over £1m ) as a friend of mine did……however the fact it was once that price doesn’t imply that it ever will be again.

    My point remains that with the average wage where it is, and the average house price where it is, they are not actually anything like as expensive as people on here seem to feel they are.

  51. 29/11/2011, Chris wrote

    Hi again Alex. Thanks for the reply.
    Again, I get your point and for me it really gets to the rub of the matter.
    Firstly, the sheer scale and proliferation of house price inflation over the years (witness your mate in Ealing) has seen a large swathe of home owners now banding around financial sums well into the £10K multiples that have quite literally grown on the magic property tree; £50k deposit here, made £30K on my house, £10K, £100K, £200K, house in Ealing over £1 million etc… This has to be underpinned by new buyers at some stage.
    The London stuff might be underpinned by wealthy types who can either access marvellous international loan deals or simply pay cash. The rest of the unhealthy price increases nationwide mainly came about from idiotic bubble lending that accelerated nightmarishly from late 1990s, detaching from any previous normal affordability index.

  52. 29/11/2011, Chris wrote

    I strongly disagree that 2 income multiples is healthy or the way forward in determining house prices. As economic uncertainty takes hold, a household would now have twice the chance of unemployment striking and with no buffer of the partner re-entering the workplace in reserve. There is far more chance of default. Then, in almost all cases, every household is suffering stagnant wage inflation and real erosion of disposable incomes as energy bills rise and inflation begins to bite. It means a lower savings rate in the long run and more immediately less money spent out on the high street. This is in nobody’s interest.

  53. 29/11/2011, Chris wrote

    Shift this scenario to the current FTB demographic currently renting (while their rents are also increasing) and all that I see are friends with decent jobs struggling badly to get even a deposit together. I won’t even mention the catastrophic longer term impact on savings and pensions which is another time bomb waiting to happen.
    This is the reality out there. It presumably isn’t a great place to be and it is the reason for the emotive reactions on this site.

  54. 05/12/2011, Stewart wrote

    Usual over-simplification of the UK market with a heavy south east bias. I buy investment properties outside of this area and very often buy them for same or less than the insurance re-build value! What that means is I’m getting the land for nothing which indicates to me that the value has got to go up otherwise no builder will ever build another house; afterall would you buy land, build a house and only get the build costs back when you sell? Didn’t think so. So come on let’s have some market comment that isn’t so metropolitan orientated.

  55. 01/03/2012, kaz corleone wrote

    well what do we do,wait for how long?the average living ex is 60 to 65 so im a first time buyer do i sit around till im 40 or 50 and only have a few years left of my life to enjoy my first property.its sounds so nice the idea of prices falling but the question is how long do we wait an in the mean time do we miss out on propertys we have seen and not buying due to articales like this.tough position to be in.at the moment im looking at a house thats £35000 cheaper then it was in 2007 an i raelly like it an its articales like this that make me feel i should question everything and i fall off the band wagon.theres no unity as it is anywhere in the globe.so its very hard to take on the fed reserve an our banks here an our politicians.it continues

  56. 01/03/2012, kaz corleone wrote

    the way i sum it up is like this in 1997 the av income was 15k the gov and banks only borrowed 3 times your income witch is 45 to 50 k at the the time 1997 av house price was 53 k hence.now we have money left over the gov an stats people an the eye in the sky can see where going on holidays buying things an living good basicaly money left over in our acounts at the end of the month.the big guys want all of it at the end of the month hand to mouth living.this whole world runs off intrest basicaly,at the time there only makeing points an intrest on 53 k av house price 1997 so how do we get more intrest off home owners easy and this is what they done NEXT.the gov and the big boys pushed the banks to lend 6 to 8 times an pushed all the bad lending agender

  57. 01/03/2012, kaz corleone wrote

    so if the banks lend 6 to 8 times =house price an av house price peak 2007 153k av wage 20k times 8=160k at the time people were blinded with all the buz that was in the air with loads of credit cards store cards an loads of money an credit available to people even on the dole was in the air thats why people never

  58. 01/03/2012, kaz corleone wrote

    bothered getting together an saying this is wrong an i wont last your streching our wages 6 to 8 time an basicaly we are intrest slaves to the people who are runing banks an reserves with no gold to even back it up.i ghess we took the sweeets like children and went along with it.everthing you see is well planed ahead so how can you hanicap a handicaper lol.thats all for now mail me if you wnat to no more or discus things. im very sorry about my gramer im dislexic.
    imslippin84@yahoo.com

  59. 01/03/2012, kaz corleone wrote

    questioned it,we never stoped an said you want us to be like sheep slave working our whole lives an signing 25 or 35 years contracts with the banks an the big guys.people do things in your face i use to think they were clever an snidey i now no were dump an even if we saw it comeing wed still be conformist.im sory about gramer as im dislexic mail me if your into dicusions imslippin84@yahoo.com

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