The real reason the housing market isn’t moving

The weekend papers were full of misery for mortgage holders. “Lenders move goal posts” said The Telegraph ahead of a story about lenders going through contracts “with a fine-tooth comb”, looking for ways to get rates up.

Manchester Building Society has, for example, found a way to decouple its tracker mortgages from the Bank Rate. Tracker rates for some clients will now hit 4.74%. For some of those clients, the move will represent a quadrupling in rates. They aren’t the only ones: Skipton BS removed the 3% over-base-rate cap recently, quoting “exceptional circumstances”. This seems fair given that we are indeed experiencing exceptional circumstances but nonetheless, I dare say it came as a shock to a good many borrowers. 

The Observer had a similar story headlined “Mayday for borrowers.” This one referred not to sneaky contract changes but to the fact that next week, the standard variable rate (SVR) rises announced by several lenders actually kick in.

Halifax, Bank of Ireland, Clydesdale and Yorkshire banks are all putting up their rates on 1 May, as is the Co-op. The Times covered the same story but added in a few more depressing numbers: the average two-year fixed rate has risen from 4.27% at the start of the year to 4.6% now. That adds an extra £500 a year to the cost of a £200,000 repayment mortgage. 

Leah Milner also notes that the big price-rises announced by the Halifax and the like are not the end of it: “week by week, prices are creeping up and within the last seven days” she has counted nine lenders who have put up rates. All in all, “over the coming months, more than a million borrowers’ payments will rise by about £630.”

If you think that the average holder of a £200,000 mortgage probably has a household income of say £45,000 (given the lax lending standards of the 2003-7 period), that’s nearly 2% of their post-tax income. Nasty.

 

But apart from this individual misery, there is a wider point worth extrapolating from the numbers. There is much talk about the low level of volumes in the UK market – and about how that is the thing that is keeping prices up. People, convinced their house is still worth a bubble number, won’t sell at the new market price. So supply is crunched and prices have stayed higher than they should have. Soon, or so the story goes, sellers will blink and cut their prices properly, allowing volumes to rise and markets to clear. 

But what if the reason people aren’t moving isn’t all about the price they can get for their house? What if it is all about the price they have to pay for a new mortgage on the next house they buy. The FSA has pointed out that the UK is home to hundreds of thousands of mortgage prisoners – people who can’t move because they can’t get a new mortgage at all. They have too little equity or too low an income for our newly prudent mortgage lenders to touch with a bargepole. 

However, you can be stuck without being a technical mortgage prisoner. Some mortgages are sold as being portable – even if you move, you can take them with you. But this is never guaranteed: it is still effectively a new application and applicants have to meet the terms and conditions the lender has in place on the day.

Those T&Cs have changed significantly over the last few years. At the same time, falling house prices are likely to have pushed up most borrowers’ loan to values (they owe more as a percentage of their house than they did a few years back).

That means that very few mortgages are likely to be genuinely portable. And that almost everyone moving house is going to have to get a new mortgage. For which read expensive mortgage. Move house and whatever the cost of your new house, your monthly payments are very likely to be higher than they were (and that’s before we start on mortgage arrangement fees).

The point? The lack of volume in the market might not be about sellers not being able to cope with the price of houses but something that lies behind that – sellers not being able to cope with the price of new credit.

  • DickyJim

    How can 5%, let’s say, plus an arrangement fee be considered expensive when throughout the 1980s and 90s interest was typically charged at 8% and more?

    The problem is not the interest rates charged which are actually historically low but the amount of debt that people have taken on as shown in your example of £200,000 against a£45,000 income.

    There’s no way around it, one way or another folk people that acted foolishly are going to reap the whirlwind, sadly so will many people who did not act foolishly.

  • Agabus25

    It’s not one single thing but the combination: higher rates, fees that you can no longer capitalise, withdrawal of interest-only, no extended maturities (ie no longer than 25 year loans), no excessive salary multiples, no sky-high LTV plus the squeeze on middle class earnings. Combine just a couple of these and the total effect is substantial enough to become a deal breaker.

  • Boris MacDonut

    I simply do not accept that the “real resason” the house market is frozen is a 0.33% increase in fixed rate mortgages. The average mortgage is £111,000 so it represents just £30 a month more. Even on a £200k mortgage it is only £55. Merryn seeks to make it look bad by using the example of a £200k mortgage and a £45k income, but not all mortgages taken out in the 2003 to 2007 period were for ridiculous multiples and most were takem out before or since. Rates are still at historic lows and payments are down about 17% since the 2007 peak. The real reason is not a modest cost increase but fear and distrust.

  • Mike

    My favourite person Kirsty Allsop (that is sarcasm and and don’t really care whether I have spelt her name correctly, did say one thing that made sense. The housing market is driven by the 3 D’s Debt’, Divorce and Death. I’ll let someone at MW cobble an article out of that – I would but there is a word limit on comments.

  • dr ray

    @boris

    An increase from 4.27 to 4.6 isn’t a 0.33% increase. It is a 7.73% increase.

    This is the working: ( 4.6-4.27/4.27) x100

    A lot of innumerate people make this mistake. For example when the BoE predicted inflation at 2% and it came in at 4% their error wasn’t 2% but 100%

  • JREwing

    Actually, the reason the housing market cannot go up any more is that the cost of living is going up substantially due to rising food and energy costs. Diesel prices hit a record high recently and they will keep going up as the pound weakens further. This means that the average consumer is completely flat out. This combined with rising interest rates will bring property prices back to the historic mean (around 3 times income). This can happen in two ways – either we get a 70 percent nominal crash (that won’t happen) or we get the market going sideways with double digit inflation for a decade or more and that destroys the value of property as an investment.

  • Ellen

    The high cost of buying and renting in the UK is making us uncompetitive and its long past time that government forced the central bank make a commitment not to resume QE and help drive the cost of housing down. If people in the UK have to spend substantially more to house themselves, they need to be paid substantially more to do so. The health of the economy should not be made the sacrificial lamb at the altar of the construction industry and the misfortune of individuals who bought their houses at too high a price should not. Housing costs need to be driven down to give us a chance of being globally competitive.

  • Mike

    Agree with Ellen, though I don’t think that it is the construction industry that was the main beneficiary of the boom. The banks got the cash supported by the BoE and their political chums. Who have too much to gain and not enough (personally) to lose by their economic mismanagement. The people need to take some responsibility too, for taking on the debt which caused the boom and made it possible for the banks to keep lending.

    Who was it who said all markets need regulation? (and that is what hasn’t been done properly)

  • Boris MacDonut

    #5drray. A tediously predictable bit of pedantry. Again you have nothing to add but nit picking. To be strictly accurate I should have said 0.33 basis points.
    Of course the rise is 7.7% but the market responds to what people actually pay and 0.33% extra on £111k is £30 a month. For the average mortgage holder this represents barely a 2% increase in total payment as the capital element does not budge. Try as you might, it is difficult to portray an extra 0.33% interest rate as a catastrophe. Typical family income after tax is at £3,050 amonth so it really does not register. Petrol prices are probably more relevant than this trivial rise.
    Oh, and one thing I definitely am not is inumerate as I played a lot of darts as a boy.

  • Boris MacDonut

    The housing market is moving. Average age is now 78 and the average time as a homeowner is 46 years. Half that is 23 years ago, 1989, HP’s are up 250% since then, and home equity is up 3.7 times in spite of bigger mortgages (the overall cost over 25 years is down 6% in the same time).

  • Ellen

    @ Boris MacDonut. All your various analysis to try to justify the absurdly high cost of housing in the UK just underlines how dysfunctional it has all become. The idea is that people leave their parents home and start work, set up home on their own, maybe get married, maybe have children. Homes are merely part of the equation in a persons life but our dysfunctional economy has turned them into and all consuming pre occupation and putting them out of reach of even the most qualified and hardest working people to pay those, mostly older folk, who own property and want to off the fat of land! Why subsidize them?

  • Boris MacDonut

    #11 Ellen. I do not seek to justify, only to comment on the facts and point out how the doomsayers are trying to bend the truth by ignoring anything except the last 4 years. It is a fact that housing is up up up and no amount of gloom can detract from that and neither can jealous sniping by those who find the free market has made life difficult. When those “older folk ” made sacrifices to buy, interest rates were 15% and they had next to no inheritances on the horizon,just plain hard work.

  • Ellen

    The climate of QE and ZIRP is as far away from the free market economy as you can possibly get … and Marvyn King, by his own admission, is trying to keep asset prices higher than the free market would let it. That includes the houses people need to live in!

    People over 40, and that includes me, did not need to be remarkable to be able to buy a house, even in London. Sacrifice? pah!

  • Keith Parsons

    I have sold my house twice now, and each time the sale has been shafted by the surveyor. The first valued it at £100,000 less than the buyers were willing to pay, so they walked away. The second valued it at £120,000 less than the buyers were willing to pay, even though we had agreed a second price £55,000 less than the first sale. As far as I can see, surveyors are so scared of getting sued by mortgage lenders if the mortgage defaults that they are playing ultra-safe and depressing the market accordingly with unrealistically low valuations. In any case what skill do surveyors have if their valuations vary by £75,000
    for the same property, as in my case. Precious little.

    I’ve been told by a person who trained as a surveyor that his boss told him that every house is worth at least 2 survey fees. If you rubbish the property the first time, you -or a colleague – gets another fat fee. So they can depress the market and live off the fat of the land. A bit like bankers, really.

  • Peter

    The area where I live has been blighted by speculative DIY property developers,buying up houses under the guise of their ‘home’ only to redevelop and sell on for a fat tax free profit.The sooner HMRC wise up to this the better.This tax evasion has skewed the market massively and the poor naive souls who have bought these tarted up properties are realising that they have borrowing large sums of money to buy depreciated fixtures and fittings. The only houses that are selling are taking 20-30% hits on the asking prices, which explains some of the upward creep in asking prices! Debt is too cheap by historical comparisons and when the cost of debt return to true historical averages of 6-7% interest, I think we will see some sanity returning to house prices relative to incomes and therefore affordability.Those people who bought houses after 2006,but continue to market them today at higher prices, don’t deserve sympathy,they deserve contempt for their utter greed.

  • Bob
  • Noneleft

    #10 Donut boy your figures are surely impressive but totally irrelevent and misleading as you completely omit the key item – deliberate inflation engineered BOE for last several years, and guarranteed to continue if as you predict collapse is avoided.
    Inflation decimates your figures purporting to show house prices holding up -in real terms property prices have SLUMPED. Pay is not rising and £ is devalued. Energy and commodities are rocketing. Wake up smell coffee etc.

  • Paul

    #9 Boris, “Typical family income after tax is at £3,050”, that’s the mean figure. The median figure, which is more typical is £2100.

  • Boris MacDonut

    #18 No Paul .You refer to household income which includes one person households,pensioners and the like. I specifically invoked families…..i.e two adults +two kids.
    #17 House prices are up 6,000% in the last 45 years.We have seen inflation at over 20% during that time. Did the 1970’s inflation decimate the house price or did those who took a £2,000 mortgage in 1967 end up with a £200,000 house in 2012?

  • Noneleft

    #19 Boris, You’ve just illustrated my point. The 70s are not analogous with today because house prices were increasing then, and did so generally during 20th C. Now they are not, and this is despite the current unprecedented, deliberate, long term inflation – house prices ought to be shooting up with everything else, but instead we see general price rises everywhere except in housing.
    Nominal house prices have been roughly static for years now, and will be for a long time (if they don’t actually reduce) – an ongoing loss of capital when you consider the £ is worth less every day and you can invest your £ in something else with an increasing nominal value instead.
    During most of your 45 year timescale, we did not have the economic backdrop of unsustainable sovereign debt levels, QE, negative interest rates, credit contraction, wage squeeze etc. which we have today. A situation unlikely to change without a miracle.

  • Boris MacDonut

    #20 Noneleft. You need to read some economic history. Between 1930 and 2000 House prices fell in 20 of those years. 1931-8, 1951-5, 1981-3 ans 1989-96. Figures before 1930 are less relaible but I expect many years saw falls.
    As for debt being unsustainable. UK debt to GDP has been above 100% for 220 of the 320 years since the BOE started in 1692( and for all of the period 1916 to 1966, and was above 200% for the years 1945 to 55. By historic standards the current 74% is low.
    and perfectly sustainable. We should be borrowing a bit to invest in capital projects as Merryn says.

  • Critic Al Rick

    @ 21. Boris.

    Times have changed; remember, past performance is no guarantee of future performance.

    As Noneleft infers @ 20. without a suitable miracle there will be no so-called ‘recovery’. This time around we will not achieve a positive Balance of Payments and Budget Surplus without real and serious austerity.

    In the longer term, relative to wages, there is only one direction for house prices for a very long time, the way things are going. And it isn’t up.

  • Boris MacDonut

    #22 Rick .There you go again. Just like Noneleft, you ascribe too much importance to today. You make what is in fact an arrogant assumption that we live in unique or special times, that everything is now different. It is not. Remember, History never repeats itself ,but it often rhymes. History can teach us a lot. Misplaced guessing based on very recent events is of little use.
    In the long term, the short term always loses.

  • Ellen

    @ Boris. I am guessing you are a BTL landlord by the position you are taking on house prices and your reference to those who would like to see the cost of housing fall as ‘doomsayers’.

    There is a stark difference in the nature of debts and debt for capital investment is totally different than debt for consumption. The high cost of housing and high tax policies are two of the major thing that is making us uncompetitive globally.

    If you want to peruse the history books, something I read recently pointed out that after every major technological breakthrough that changed the nature of how people lived and linked us closer together preceded a major boom and then major bust. And if the internet is the invention of our time, as the car, phone and train were in their’s, it may just be history repeating itself.

  • Boris MacDonut

    #24 Ellen. I am most definitely not a BTL landlord,but do have a reasonable grasp of history. You are correct to point to the apparent boom/bust surrounding some major technological advances. But others had no such effect, air travel for example, the printing press (this had a politco-religious consequence rather than economic) or bicycles or TVor three masted sailing ships. So perhaps these advances just happen and so do the booms and busts ,completely unrelated.
    Debt is historically cheap and relatively low. Don’t panic.

  • Critic Al Rick

    @ 23. Boris

    No, they are your words. We do not live in unique times, in my opinion we are living in times rhyming with the last decades of the Roman Empire.

  • Christopher

    As an FTB (albeit in a good position), I can confirm that debt is’nt exactly cheap. The deposit required to access a better rates comes at a staggering opportunity cost. Look also at the New Buy scheme accessing up to 95% LTV deals with rates of 6% or so. Interest repayments might look ok, but without salary inflation happening this time, the total cost of the debt and the sheer scale of the borrowed money versus the real downside risk is unequivocal. Prices need to be sustained by new buyers and at the moment I suspect many are’nt biting. Let’s see the figures over the next months.

  • Roberto Birquet

    Boris
    …point out how the doomsayers,….
    ———–
    Why are those expecting cheaper housing doomsayers? I would say that very comment reveals your own dysfunctional sentiment.
    Cheaper housing would be a boon for our society, not doom.
    New buyers would need to save less, and therefore buy earlier. that would leave more money avaible for buying other products – essential to our consumer-based economy.

    It would also mean less debt: lower debt for FTBs, obviously, but also for those using their homes as credit cards. That economic model is dysfunctional, and is the major reason that the world economy recently suffered its largest crash in a century. Govt and bank action the last five years has been driven by a desperate need to hide that fact, in case the entire financial system collapses.

  • Boris MacDonut

    #28 Roberto, expecting cheaper housing is patently ludicruous. Over time housing costs roughly the same in relation to income and wealth. A £200,000 house on an 80% mortgage at 4%interest costs the same over 25 years as a £118,000 house on a 90% mortgage at 12%. At face value the second is “cheaper housing”…..but you pay the same in the long term. The total housing cost over 25 years has stayed at or near 7.2 times income for the past 35 years and never strayed outside the range 6 to 9 times. It is once again at 7.3 so we are close to average.

  • Critic Al Rick

    Boris, you want it all your own way.

    As a public servant your income and pension are largely inflation proof; at the expense of the (ex cartel,etc) private sector middle class whose incomes and pensions are open to the vagaries of market forces.

    However, regarding house prices, public servants have no such privileges. The present artificial stimulus to house prices will eventually be over-ridden by market forces; okay, that may not be until the (ex cartel, etc) private sector middle classes have been annihilated; by then the parasites will have killed their host anyway. The Fall of the West completed, lock, stock and smoking barrel.

    Clever aren’t they not – the powers-that-be and their zombie minions and cronies?

  • Boris MacDonut

    #30 Rick . This is tiresome. The choice to work public or private is open to everyone. It is a free market. I do not need to apologise for making the right decision to protect myself from such market forces. I should be applauded for showing such foresight.
    You refer to an “artificial stimulus”. No . Absolutely no. What we have is the current reality,nothing fake,just time to get used to new rules. But if you read some history you’ll see it has all happened before ten times or more.

  • Critic Al Rick

    @ 31. Boris

    I refer to stimulus as being ‘artificial’ in terms of ‘unsustainability’.

    You say it’s happened ten times or more before – I rest my case!

  • Boris MacDonut

    Unsustainable is a very over used word, especially as regards debt. We have debts at a level that has only been seen for 100 of the last 320 years, but the doom-mongers say this is unsustainable. For no reason beyond a puritan timidity to live with liabilities. Credit cards are a great liberating force for good among traditionally deprived people. They offer more opportunity and greater quality of life than any lip service democracy ever did. I think China has alrerady understood this in terms of buying the passivity of it’s masses.

  • Christopher

    Boris. China has a few $trillion worth of reserves. You are muddling credit and debt with wealth. Again!

  • Andrew

    Boris, “Credit cards are a great liberating force for good” Do you work for Barclaycard or something?

    Never heard such rubbish to be honest, and you ought to check your facts before you post. The Chinese people mostly live a frugal life. There is an inbuilt ‘saving’ culture and generally if they want something then they will save for it.

    Saves them getting into the same mess as we all have done in the UK because of the ‘Buy now Pay Later’ culture you so clearly seem addicted to.

  • Romford Dave

    35 comments!

    Must be a house thread…….

    It is, but after reading through the usual blah blah that housing threads always attract, two comments arrive with content that floats them upwards on their own merit rather than the more usual reason associated with floaters.

    Peter’s insightful insight as to why prices are creeping up yet being sold for less and Boris’s teasing truth about the liberational qualities of credit availability to deprived areas.

    Both suggest that the future is more of the same. I fear they’re right.

    Depressingly I find myself for the first time ever, not envying future generations.

  • Noneleft

    #21 Donut:The problem is your wriggling, not my grasp of history. You now deny your original point by saying HPs did not rise during the 20thC. Make your mind up.
    I wrote that they *generally* rose, not always rose. HPs don’t rise when economic backdrop prohibits- like now, & as you point out, interwar/post war period and some bust periods in 20thC. You are splitting hairs.
    You did not address my facts in #20: Why are house prices now nominally static and remain so for yrs, while everything else is inflating furiously? There’s no post war recovery to cause that, nor can there be another credit boom to help- we’ve had that, exhausted it & now it’s unwinding.
    Only endless currency devaluation to erode sovereign debt burden remains. Nominal prices are relative and your property is worth less every day now & for years to come, whatever twisting of history you use to prop up your failed thesis.
    Stating “history rhymes” without understanding when and why will loose you a lot of money.

  • Realist

    Boris.
    One thing that you overlooked that inflation didn’t decimate house prices in the 7o’s. Wages went up with inflation back then, they are not doing that now.

    Noneleft
    House prices remain static?.
    Energy, fuel, food are all things you have to buy, hence they go up in price. People are putting off buying or moving house and renting and staying with relatives instead, therefore prices will not rise. Nobody wants to buy at present prices and sellers will not reduces their price, result stalemate. The only thing that will bring prices down, is higher interest rates, which will force sellers to actually HAVE to sell, because they can’t afford not to.

  • Begsbelief

    Had the Government insisted the bank bailout money pay off the nations Mortgage Debt FIRST the money would have still gone back to the banks…and THEN used to pay off the banks indebtedness (two birds one stone) then we would not still be in the same or worse position as we are now! (just wait till interest only loans are taken away) The economy would have benefited too…ie write off struggling families mortgages..(or even just 50%) which would then have released more money into economy…people could keep their homes and we could restore equalibrium and fairness for new buyers…simplz!
    Plan B…as the above didnt happen…let Bank of England supply Mortgages at 0.5% interest..(or is that too radical and damaging for the banks to cope with)!?
    Its the corruption and manipulation of interest rates by lenders that causes ALL the problems.

  • Puzzled Jack

    Read all above comments re; housing market being stagnant and percieved reasons why. Could someone explain then, why my friends house put on market on Monday at what I thought was at least £20,000 over priced, now has two buyers fighting over it and going asking price and over in a bit to secure it. This is an avarage terraced house, nothing special. Puzzled.

  • AL

    Puzzled Jack, I can’t explain your observation, but it’s paralleled in nature by unseasonably cold winter days at the same time as global warming

  • Boris MacDonut

    #37 Noneleft. Please read my posts with more care. I have not said house prices did not rise, but that they fell in 20 of the 70 years from 1930. That is fluctuating but overall trending upwards.
    House prices are indeed static if measured annually and have moved little in 5 years. But they are well up in the last decade, more than well up since 1992 and have burgeoned since 1982,1972,1962……

  • Homes Needed

    The builders don’t seem to want to build many houses unless they get overpriced sales.
    The State should build Council Houses or whatever they are called these days on State land. Quality builds with unemployed builders.
    More houses built means less people need a council house so house prices fall back to affordable prices.
    No need for Government to keep house prices artificially high with foolish incentives. Build more houses then the free market will maintain house prices at the correct level.
    Stop giving Buy to Let properties tax breaks since they usually compete directly with First Time Buyers (FTB).
    Second Homes should have a new tax at 5 times the Council Tax as an incentive to stop second homes competing with FTBs.

  • JJ

    “The choice to work public or private is open to everyone. It is a free market. I do not need to apologise for making the right decision to protect myself from such market forces. I should be applauded for showing such foresight.”

    Most of your many posts are posted during a working day at regular intervals. Please stop pi$$ing my taxes away surfing the internet and do some work. If you’re on holiday……… I apologise (but get a hobby).

  • Boris MacDonut

    #44 JJ. How very rude you are to part time workers. You must be one of those smug loadsamoneys from the private sector who spent most of the years 1985 to 20oo telling me I was a mug for working in the public sector. Now the boot is on the other foot it hurts , doesn’t it ?

  • Peter Thornton

    The build cost of a basic home is about £80,000. Agricultural land is worth, say, £8,000 per acre and you can get 10 – 15 homes on an acre.
    We need government to produce the land, by compulsory purchase if necessary, then to provide the infrastructure in exchange for a tax of, say, £15,000 per house. Work it out!

  • JJ

    Boris,
    I have nothing against public sector workers (or part-time workers as you call them). In 1985 I was six. I guess as a schoolboy I was a public sector worker myself back then.

  • Boris MacDonut

    #47 JJ………and I do have a hobby thanks. Penny Farthing racing. That is why I need to work part time, it can be quite demanding and the races are held in remote parts.

  • Critic Al Rick

    @ 47. JJ

    The main thing I have against public sector workers is there are at least 3 million more of them than the UK can sustainably afford; notwithstanding the (ex cartel, etc) private sector having to subsidise index linked salaries and pensions during the period of the necessary ‘cull’.

    But, as usual, anything done will be too little too late but this time around coinciding with completion of ‘The Fall of the West’.

    Generally:

    The real reason the housing market isn’t moving is because anything which would make it move is not considered to be in the selfish interests of the powers-that-be; they, like most, don’t look to the long term.

    Almost 25 years ago I predicted a future food shortage in the UK and that it would begin with eggs. That food shortage may well have begun. And that predicament is merely a symptom of the self-perpetuating self-destruction of the zombified West.

  • Begsbelief

    Why cant Government/Bank of England issue mortgages at 0.5%??? Take the SCAM/MONOPOLY away from the Banks and Lenders and stabalise the housing market once and for all?
    (Sorry if thats too simple a solution)!
    The Buy to Let market and reintroducing Mortgage Tax Relief are other issues that want sorting.

  • Noneleft

    #42 As usual the facts you cite agree with my arguement, which you persist desperately to evade . You would make a great politician.
    The fact remains that house prices cannot rise when ecomomic factors prohibit. This applied to some periods last century as you agree, and it has applied over recent years this century as you cannot deny. Since the same prohibitive economic factors now persist indefinitely (I described them in #20 and you failed to address them), it will continue to apply into the future.
    You can’t or won’t face those persistent economic factors, and prefer to keep quoting history which does not address my point.

  • Ed Mackenzie Smith

    Good article. There are many reasons why the market is where it is.
    Cost of moving (stamp duty probably takes care of 80%+ of the cost and is seen as ‘dead money’). The difference between price bands puts people off – example – Trading up from a 3 bed detatached to a 4 bed detached in 1992 – £40,000 give or take. Roll onto 2012 and make that
    £150,000+.
    The difference between this recession and the last property slump (1989 – 94) is interest rates. Then we had higher rates but access to credit – this time low rates but real difficulty in obtaining funds. This means sellers who had to sell last time don’t have to this time round.

    The lack of supply underpins values which under normal circumstances would have fallen. In 89 – 94 we had a fall of 30% but spread over 5 years; in 08 values fell by 20% in 1 year. They have bounced back entirley down to lack of supply.

    Rates are unlikely to change in the short term so neither is the market.

  • Boris MacDonut

    #51 Noneleft. You are in a spin. Try to sit down and breathe deeply for a while. You cannot predict the future. You choose to rubbish the only clear evidence we have, the past. Instead you choose to offer hope, conjecture , maybes, possible scenarios. That is no good for anyone except a charlatan who seeks to pretend he knows what will come. You do not.
    You refer to unsustainable debts. But we have had treble the current rate in the past and are still moving forward in an optimistic fashion. You sir are an arch pessimist.
    #52 Ed is correct.Stamp duty is a ridiculous and unnecessary drag on the market. Put in place to reap a benefit in the good times . It should be shelved for all houses under £500k.

  • jj

    Boris,

    I’ve just spent an enjoyable few minutes watching the penny farthing world championships 2008 on Youtube. Superb. Brightened my evening no end.

    http://www.youtube.com/watch?v=qsanHNYZA0Q

    Is that you in the red?

  • Boris MacDonut

    #54 JJ, Brilliant isn’t it? Only down side as usual is the Aussies are better at it than we are . Did you see the Sunday Times article about the Penny Farthing postal service in Cornwall? Undercuts the Royal mail by 60% .It really could be the future. Next up is a Clown’s car Taxi firm, complete with collapsable sides and buckets of confetti.

  • Noneleft

    Boris #53 You are simply using the past to predict the present. Not very clever, especially when you misapply what you see there. Much harder to look forward at what will be happening in the future based on the present conditions (which are unprecedented on a global scale, making your historic approach even less useful than normal).
    The only spinning being done will be in your head when you finally understand what inflation is, and realise how much you have lost because of it.

  • Boris MacDonut

    #56 Noneleft . Sorry,did I miss something here? It is okay to speculate on the future based on the chaotic present, but seeking to make reasonable inferences about the present by a wide reading of history is pointless. Is that what you said? If so you are more deranged and dangerous than we all first thought.

  • Christopher

    Boris. Why not read up on balance sheet recessions, where businesses do not invest because their products face minimal demand as consumers pay down their debts? Maybe you’ll learn something. It more or less defines the chaotic present and history shows it takes decades to fix.
    A good case study is Japan. You’ll probably say it isn’t at all relevant but IMHO it is. Noneleft is absolutely, 100% more correct about this than you give credit for. There is nothing pessimistic about it. If a reality check were needed about this, then a glance at the figures shows that we still remain several percentage points down on our 2007 GDP.

  • Boris MacDonut

    #58 But Christopher, Noneleft is saying ignore the past and just guess. As long as you believe your own hype about how clever you are ,youi will be okay. That is a bit naive. As Taleb tells us ,always expect the unexpected.

  • Noneleft

    #57 & #59 Boris: I did not say the present was chaotic, but unprecedented. You can’t find a hole in my logic, so you created one by putting words into my mouth just so you can shoot it down. Chaos would be difficult to base predictions on, but the outcome of our unprecedented situation is all too predictable (well, to everyone but you it seems).
    And no I didn’t say that a wide reading of history is pointless (but the opposite in fact, just what you don’t do), or that we should ignore the past.
    Now you finally contradict yourself telling us to “expect the unexpected”, which is what you have been arguing against all along with your idea that everything will work out just like it did in the past. This is starting to feel like a discussion with my wife which cannot be won.

  • Boris MacDonut

    #60. I just say things may turn out okay as the unexpected is just as likely to negate the doom agenda as add to it. Much to the detriment of my eyesight the one thing I do do is read widely on the subject of history. It is this that lends me a clear element of doubt when confronted by the type of certainty you preach. Of course it is harder to look forward ….it is impossible. Except in your own eyes, clouded by self worth and a vacuous arrogance . Try to remember that you are human and thus prone to failure.

  • Innocent Sun

    #Boris MacDonut

    Follow the statistics or the ‘wisdom of crowds’?