In the US, the market has done its work. In the UK, it is just getting started

I’ve written here before about the possibility that the US housing market has more or less bottomed. Further anecdotal evidence on this comes from Halkin’s Robert Brooke, just back from a vacation in Florida.

There he was offered a nice little opportunity. In a “desirable tourist and retirement seaside town” on the Gulf Coast (which by the way is where I have fine plans of part retiring to one day), there is a modest two bedroom house for sale.

It hasn’t actually changed hands for a decade but it has been valued many times. In 2001, the price was $170,000. In 2007, it was $410,000. In 2011, it was back to $170,000. Today it could be yours (or Brooke’s) for $120,000. That’s 70% below its peak and lower than it has been for more than ten years.

It also comes with a gross yield of around 10% and a net of something like 5%. That’s not bad when you compare it with a long bond yield of 2% (particularly when that long bond yield comes with an almost guaranteed capital loss). 

As Brooke points out, buying the house wouldn’t be risk free: there is still an overhang of foreclosed property for sale across the US and the dodgy state of the personal finances of many of the potential tenants poses a relatively high risk to the rental income.

In the US, distressed home sales accounted for around 34% of all existing home sales on February this year. That’s down from 39% in February – which is good but it does still tell us that there is on-going pain in the market.  

However, what this enormous decline in the price of our would-be holiday home tells us at least is that “the market has done its work.” It has turned an unattractive proposition into a pretty attractive one. So the healing can begin.

One sign: US housing-starts have picked up nicely in the last five months or so. Now turn your eyes from that dream house in Florida to the UK.


Here, the market has not been allowed to do its work. The most recent numbers from Nationwide show that house prices fell 1% in March, a small rise of 0.4% in February. They now stand 1% below their levels of this time last year on the Nationwide numbers. Over the first quarter of the year, prices were flat or rising in only three regions of the UK. They fell everywhere else. 

Now, if you’ve been trying to sell a house that isn’t in central London or that isn’t almost perfect, you’ll know that to get it away, you have to bring the price down a good deal more than 1%.

But nonetheless, while prices have fallen very substantially from their peak in real terms (take inflation into account and prices across the nation are down 25% plus), if you are a buyer, you will know that they still haven’t come down as much as you think they should have. Thanks to very low interest rates (which mean owners can keep up mortgage payments despite falls in their real incomes) and extensive lender forbearance, the market isn’t really being allowed to do its work. 

According to the FSA, anything up to 8% of outstanding mortgages in the UK are subject to some kind of forbearance (ie, lenders desperate not to foreclose are allowing reduced payments, payment holidays, and even shifts from capital repayment mortgages to interest only mortgages). 

That works in the short term in that it keeps distressed sales off the market – effectively stopping the market from finding a real clearing price in the way the US market has. Still, while we know that politicians and bankers can hold off inevitable market adjustments for much longer than most people think possible (I give you Europe), they can’t do so forever.

It might keep happening slowly as it is now (lenders are reporting both a tightening of credit criteria and a rise in the percentage of mortgage applications being turned down while surveyors are reporting a rise in the number of houses coming to the market). It might suddenly happen quickly. But one way or another, real house prices will eventually revert to their valuation mean – some 15-20% below where they are now.

  • Kevin

    I don’t agree with this article at all, the markets in the US and the UK are totally different. Supply outstrips demand in the US, whereas in the UK demand outstrips supply. Therefore the large falls in house prices in the UK (as predicted above) will NOT happen as the demand will always be there. First time buyers might not be able to buy a property at the moment, but they still want their own houses, so they rent! The rental market at the moment is booming, which in turn is keeping up the demand, which in turn will keep the prices up (to more or less what they are now)! It’s very sad how articles of a “doom and gloom” nature grab the headlines, whilst sensible articles, the ones which state correctly that it will take a long time to get back to the “good times” but that the circular nature of the economy means we WILL get back there (one day), never get any column inchs!

  • Manny

    Wow I will be the first comment 29/1515bst

    I will be interested to see how many property bulls come out and tell us how uk property prices will never go down. Their numbers are thinning out. Although I am a bit early to make a judgement!!

    Perceived inflation is not necessary for property bears. In my view property prices will be -70% in absolute numbers from 2007 peak.

    Perceived Inflation; If people had not committed so much of their capital to massive mortgages or grossly high rental payments to those with massive mortgages…………. they could still afford food on their table and petrol in their cars.

    I dont see any yet inflation but it is coming.

  • Boris MacDonut

    #2 What shame Manny,Kevin beat you to it. Kevin is of course correct.The UK is demand driven. The US market is like basket case Spain where oversupply is the name of the game.
    Even if prices fall 20% in the next two or three years they will still be up 90% in 15 years,while the stock market hasn’t budged.

  • FC

    To some of the comments here: I’d like to see how the “demand driven” argument would stack up had taxpayers not bailed out the banks and the “independent” BoE hadn’t undertaken quantitative thieving. The demand that exists only exists because everyone’s forgotten about (or never properly understood) risk.
    When the market does eventually do its work in the UK and families start losing their homes, there will be oversupply.

  • Kevin

    Money does not on its own create demand, population increase does! If people lose their homes (which I hope they don’t), the government will be forced to step in and rent more private properties. The demand will always be there in a small but over-populated country (relatively speaking) such as the UK. This whole thing about the “market” is utter rubbish! If the market was to suffer the doom and gloom crash forcast here, then it would have happened by now. It won’t and never will happen to the extent that it happened in the US here in the UK. Never ever!

  • Boris MacDonut

    #FC .You make the mistake of citing “what ifs”. That is pointless. we have a reality, deal with it. One could equally say if hyper inflation kicks in everyone will pay off their mortgage in a few weeks. That hasn’t happened either. But do keep your fingers crossed for your doomsday scenario. Five years and counting.

  • Dr Bob


    You are way too bullish on UK house prices. I’m not sure what sort of mean you see housing reverting to, but even in the mid-nineties, real UK house prices were massively overpriced relative to their long term average real return of zero.

    Supposed real trend growth rates of 2-3 % pa since the 1970s are completely spurious as are the accompanying 3-3.5 x earnings multiples (the long run average is more like 2.5).

    Real house prices in the UK need to halve from where they are now. With inflation subdued, much of this adjustment will come from large nominal falls especially in London and the SE.

  • Boris MacDonut

    #7Dr Bob. What is it with doctors and negativity? Do you seriously think that house prices have been massively over stated for 40 years? You may think the growth is spurious, but it is real. When do you expect prices to revert to tthe norm of the 930 to 1970 era? Has it not occurred to you that the worlsd might just have changed a bit since the “norm” you cite pertained?
    I bet you don’t believe the war is over either and that men really did walk on the moon.

  • Jolean

    Everybody needs somewhere to live, but the bidding up of house prices from 1996 to 2007 depended on affordability, not on conventional supply and demand dynamics. Real UK house prices will continue to fall for some time yet.

  • Chris

    #7 is correct. House prices in the UK are way, way too high and need to correct about 50% or more. If they do not we will have a generation of adults forced to live with their parents and struggle to find decent jobs because the high cost of living in the UK (house prices!) is making the UK totally uncompetitive. Not to mention the further shafting of pensioners and savers. Is this really worth it BoE and MPC just to prevent a lot of property spivs from getting their fingers burnt?

  • dr ray

    Any idea what the insurance is on a property like you describe.
    Most of these are not substantial and with tornados getting bigger due to warming of the Atlantic it may be these properties are becoming uninsurable.
    Where is all the demand you talk about. I haven’t seen anyone living on the street for many years and there are apparently one million empty properties in the UK.
    Property prices in the UK outside of prime London (which is bought for purpose of money laundering by international crooks, by and large) is determined by cost and availability of credit. Currently credit is restricted but cheap so there is a sort of eerie equilibrium. If interest rates rise and credit remains tight you and many others will be wiped out.

  • NeutronWarp9

    Rule Number 1: The Market is NEVER wrong. All that is needed is sufficient time and pressure. For four years the government has pulled out all the stops to stabilise the housing market whilst – crucially – giving a relaxed, assured front.
    Imagine what the – frankly – hysterical British public would do if they were told the truth. They can’t even use ‘common sense’ in the potential tanker fuel strike, so what would happen to the housing market? Stagnation and stalemate in transactions between unrealistic sellers and greedy buyers, plummeting bank book values, loss of the AAA, higher interest rates, and Repos. Crash! Boom! Bang!

  • JREwing

    The market has not done its work in the US. If it had, prices would have dropped another 25 percent from the peak. Why? You would have debt deflation in an economy with over-leveraged consumers. What has happened instead is that the government has now become the only lender in the housing market. Ask yourself this question: would you lend money even to a credit worthy borrower in America for 30 years at 4 percent fixed today? If the answer to that question is no, then you know why private lending has disappeared. The Government is the housing market. It will be the same in the UK – the banks are now arms of the government (and both are broke).

  • JREwing

    MSW, one warning on buying American property: PROPERTY TAXES. You will need to do your homework on that and on the crime risk. America works very differently to Europe. Whole cities can disappear due to increased crime: think Detroit in the 1950s (per capita income was the highest in America (probably even the world) – higher than even New York City). Look at where it is today. The two driving factors behind property in America are: (1) Demographics; and (2) Demographics.

  • Nick

    Demand for houses is falling, therefore the prices will fall.

    Since the rents are so overpriced and the salaries are decreasing and the GBP is going down the drain (thanks to BoE MPC) why should someone immigrate to UK?
    Net immigration will fall since our unemployment is high, the sterling has lost most of its value and there are other economies doing much better (see L. America, Asia, Poland).

    As a future FTB, I am just waiting for the big crash (thank god I have investments I have very few of my savings in GBP).

  • Natalie

    No-one has mentioned the Banks’ balance sheets in all this. Whilst the Banks are still trying to get their balance sheets up they won’t admit to the amount of bad debts they have in mortgages that have been extended or turned over to interest-only ones. Once the banks start to admit what poor quality loans they have on their books the house prices will start to fall all over the country.


    Anyone’s view of the housing market on here seems to be very localized. Unless you are trying to sell a house at the moment I think many do not understand how the market is falling in some parts of the country. Your house is only worth what you can get for it and as someone in this predicament at the moment I can tell you that house prices are starting to fall away very dramatically – not only where we are selling, but also where we want to buy.

  • Runningoutofink

    #6 Boris. You’re right, 5 years and counting with nominally steady prices is a remarkable achievement, hats off to all concerned for the collective sleight of hand which has kept it that way.
    We’re beginning to learn from the US that the behaviour of consumers, thus markets, can indeed be massaged, it all depends on how the data is presented. Just look at Bloomberg, WSJ, CNN headlines from yesterday – apparently the US GDP leapt up 3% in Q4 2012 – forget the fact that’s an annualised number and below plan, 1% a month is the news they’re all waking up to before cheering and heading straight to the nearest mall. We might not be able to polish the turd of the UK housing market, but we can sure roll it in glitter for a good while…

  • Christopher

    Kevin and Boris. I hear all your arguments but IMO this has a long way to play out yet.
    It seems clear to me that the squeeze is slowly starting to be applied with plenty of scope for further pressure. Widespread falling real incomes is not news, but the recent rises in SVRs and the new deposit requirements of lenders is. I know plenty of amateur landlords who will be hopelessly out of their depth should rates rise even slightly further. A couple of void months spells trouble and as bank balance sheets improve, appetite for further forbearance will be tested. I am worried that they won’t just lose badly but rather be trampled by elephants by the time this has played out.
    The politics of the growing rental market (tenants also vote) will drive pressure for rent controls onto the agenda. The government also has no money so state handouts will be reduced again.

  • Christopher

    The CML already refers to the ‘deposit gap’ for FTBs and movers which I think is a great euphemism for people simply being completely skint.
    Look too at the demographics. I know plenty of successful people under 40 and the affordability they can achieve in the south-east is shocking, let alone the for the younger generations coming through. The Bank of Mum and Dad is also inevitably losing legs.
    The volume of sales and the volume of money hitting the market have tanked completely – including BTL.
    A few years of stalemate has happened and of course there are widespread regional differences, but for me nothing will prop this market in the long run. There simply is’nt the money to meet sellers’ expectations and despite policy, there are just too many people out there who are too highly geared for this to end well.
    Just my 2ps worth.

  • dr ray

    Very well put Christopher.
    Boris’ only hope of survival is for lots of rich Tory toffs to get richer and buy up lots of houses as second homes or to rent out.
    And yet he posts regularly on here pretending otherwise

  • Expat

    I have seen property boom and busts in many different countries around the world. From uk in the early 1990’s. Prices in London halved due initially to interest rate rises. Then I saw the boom in hong kong upto 1997, everyone used the supply and demand argument to explain irrational price levels, government embarkd on a massive housing program, then the bust came when reality crept back and despite no change on the demand side prices tanked until 2004. nothing to do with supply and demand it’s was all speculation which drove the markets to crazy levels. The supply and demand only kicks in once the market is at the bottom and people can actually afford houses to live in.

    What amazes me as an expat looking back at the uk has been why it has not gone bust in the uk as it did back in the 1990’s or it did in hong kong in 1997.

  • Expat

    I have seen property boom and busts in many different countries around the world. From uk in the early 1990’s. Prices in London halved due initially to interest rate rises. Then I saw the boom in hong kong upto 1997, everyone used the supply and demand argument to explain irrational price levels, government embarkd on a massive housing program, then the bust came when reality crept back and despite no change on the demand side prices tanked until 2004. nothing to do with supply and demand it’s was all speculation which drove the markets to crazy levels. The supply and demand only kicks in once the market is at the bottom and people can actually afford houses to live in.

    What amazes me as an expat looking back at the uk has been why it has not gone bust in the uk as it did back in the 1990’s or it did in hong kong in 1997.

  • Francois

    Instead of the absolute disaster we should have had, governments have printed a large chunk of the GDP, so after the credit boom we have had the money printing boom. The past 3 or 4 years were not the painful times, they were the end of the boom, when governments took over the money printing machine to cushion the pain. But there is not much to do after that, just allow for the readjustment on wages, house prices etc. that are coming no matter how much wishful thinking we do. Compared to Paris or even New York, London is totally underconstructed! As transport networks expand (crossrail etc.), commutable areas grow much faster than the population. Wages are kept very low here as there are so many young immigrants working for the same salary people were paid 15 years ago. All this while city bonuses decrease year after year. Low wages, increase in commuteable and liveable space don’t make for rents or house prices increase at all.

  • Segedunum

    I’m afraid nothing has yet bottomed in the US and neither has it in the UK……….

  • Bob

    I dont’ have a clue – house prices certainly are not dropping in my area. Some are but generally, in the past couple of months, asking prices have been rising even those estate agents seem to be desperate. It is bizarre.

    I think BIG interest rate rises will be needed to crash UK house prices, but they will not come for many years. Perhaps the thing to do is to consider emigrating to the US and buying that Florida house?

  • Segedunum

    The strange thing is that people are not accepting lower prices, and they can………….if they can afford their mortgage.

  • Bilbo

    Completly agree with this article it shows how corrupt the UK hosuing market is where Govt, BoE, MPC, Treasury and veted interests are at work propping up a failed over valued Asset.

    Nothing to do with over supply but we in UK have a managed commoidty in stripping out Supply with B2L supported by Govt, low interest rates forcing investment into B2L and no rent controls.

    Pure corrupt house price inflation preventing market forces culling an over valued commoidty. To the detrement and hopes of millions under 40urs old..

  • Roberto Birquet

    Yet again, the ignorant cries of supply and demand.
    This time two of the first three posts: Manny and Boris.

    Everywhere is demand driven you dopes. But what is demand? You certainly have no idea. Demand is the amount of money potential buyers have to pay for what they want. Demand is NOT how many people need or want a house.

    Money supply is down, so demand is down except for billionaires in central London. The major story in Britain is volume sales have crashed. Why? Despite lower demand, sellers remember old prices and won’t sell. This is called irrational behaviour in classical economics. They are always punished because distressed/repossession sales pull down prices even further.
    But bank forebearance is the only reason we have a near non-existant market. Volumes have crashed, and so the figures are not showing real market activity; and we get this naive “demand and supply” rubish all the time.

  • Simon

    Until the end of this parliament nothing drastic will happen, prices will fall in real terms on yearly basis and maybe a % point or two in actual price as interest rates are kept low and the economy staggers towrads a rebalancing and recovery.
    U.K banks to be recapitalised enough and growth will begin to gather pace increasing wages and pushing inflation, this will give the nod to the BOE to raise interest rates by a small amount to around 0.5% which will give knock out the lowest rung of those struggling and start the real correction that is needed. I expect the end of 2016 to see a 5-10% drop and further 3-5% drop for the nest two years until it bottoms reaching a level of affordability on normal interest rates and wages. If this isn’t the case it will be at least another decade of stagnation/ slow decline, allowing inflation to gradually realign prices with wages. I think this the governments preferred outcome.

  • Boris MacDonut

    #28.Roberto. I think I have made it clear in sufficient previous posts that UK house prices pertain to how much money is available to pay for them. The fact that prices have not collapsed shows there is still plenty about….not just mortgages.
    I do find it funny to be called a dope by someone called Birq’.

  • iamdamosuzuki

    House prices are a function of the availability of credit. Which as we all know is why they got so out of control (liar loans etc).

    It has nothing to do with supply / demand and everything to do with the government holding up the market with just about every mechanism possible.

    The article is 100% correct and not in any way negative.

  • embee

    I agree with many of you above, the prices will surely come down, and have actually come down in most parts in UK (London being one of the exceptions till now…and already on the edge).
    The rationale behind supply demand etc is fine in isolation, but there is another factor…”affordability”….the prices can only go as high as the purchaser can afford (easy credit days are over…). With job losses looming and salary freeze in most places and with budget cuts and rising inflation, “affordability” is not set to rise for next couple of years..

    Low interest rates have let the London market hang on to the cliff, the first signs of rate rise will let it free fall until it hits and bounces along the long term average (about 30-35% below current level)…

  • Pigsy

    Come on Boris (@30.) engage the grey matter:

    “The fact that prices have not collapsed shows there is still plenty [of money available] about.”

    Do you really believe this ? Are you really not aware that volumes have crashed ? Why do you think that volumes have crashed ? Is your argument that ‘there is plenty of money about its just that the banks aren’t lending’ ?! If this is your argument can’t you see the gross contradiction ?

    So long as people can sit tight and don’t sell at what people can or are prepared to offer then house prices can ‘stay’ at their current meaningless levels. Once people are either forced or even just happy to take a 5 or 10% hit to move on with their lives then it can easily snowball out of control.

  • Steve J

    Good too see some people here got the supply demand nonsense sorted out “I want a Ferrari but I don’t have the money for that either!”. On the whole we are a country full of poor people (if we were rich we would pay cash). Whoever came up with the 70% number probably going to be right. Don’t forget the truely amazing bit was we had a super overvalued housing market in overvalued pounds. I believe the combined effect of both to be 70%. I don’t have any money in UK, I think I had £20 but bank wanted to close account. It will get nasty, Some one has to pay the price for all this stupidity.

  • J P Mogan

    Good Article, Perhaps asking the now legendary Mrs Watanabe from Tokyo about values would put pricing into perspective ( property in Japan where supply is much tighter than the Uk is yet to return to its levels of the late 1980’s and probably will not reach late 90’s levels within the next 15 years !), stacking against Uk values are the lowest interest rates in 380 years, now turning, Bank , Building society forbearance, now turning, and the Uk’s very fragile economy, printing money being a sad substitute for earning it….. Nobody wants others to suffer as they have in America,however, markets have a nasty habit of ignoring sentiment and gravity always wins …..

  • PV70

    Kevin, I’m surprised some people still believe in the nonse of ‘shortage of property and demand’. I for one do not. Just look at some modern developments in various citi centres.

    Even if there was a shortage of property, that alone couldn’t keep the market going. The house is worth whatever someone is willing – or more precisely – able to pay for it, be it for sale or to let. Money must come from somewhere!

    I have been following my former neighbours efforts to sell their flat. They started at £290k. Then reduced the asking price by £5k, then by further £20k. Now their property is on the market at £249,950.

    Another example is a one bed flat in Carshalton, sold for £140k+ in 2007. Now repossessed by the lenders, the latest offer is just £90k.

    The only reason why house prices haven’t fallen any further is the all time low interest rates. As long as the rates and unemployment don’t rise, there won’t be a significant crash. However, I wouldn’t count on that!

  • Boris MacDonut

    #33 Pigsy. Good grief, isn’t it obvious? The money available is chasing fewer houses and keeping all values up. It is this very fact that means prices are NOT meaningless. People can now borrow against assets that have trebled in value since 1996, so it matters not that they have declined slightly snce 2007 (unless you bought then).
    I saw an hilarious Times article on saturday that said 10 million mortgages have been taken out since 2007. There are only 11.4 million mortgages in existence,so Murdoch’s silly rag was trying to say that 89% of mortgaes were taken out in the last 4 or 5 years.

  • embee

    38. Boris. The money available chasing fewer houses rationale does have some merit, but the issue is with individual affordability not the sum total available vs sum total value of houses. There have been several shared housing schemes etc started towards pooling these smaller pots of money but they hardly scratch the surface because people buying together with friends/strangers etc will eventually lead to problems in most cases…

    As to people being able to borrow against assets which have trebled , the problem is someone still has to foot the money and the banks are becoming more reluctant to freely lend out forever. The free borrowing against inflated assets is the one which has caused the problems in first place……are they going to print more money and keep lending more forever..perhaps not…

  • embee

    “I saw an hilarious Times article on saturday that said 10 million mortgages have been taken out since 2007. There are only 11.4 million mortgages in existence,so Murdoch’s silly rag was trying to say that 89% of mortgaes were taken out in the last 4 or 5 years.”

    >>>I haven’t read the article, but is there a chance they were talking about re-mortgages as well. A lot of people would have switched mortgage and/or re-financed..

  • Rob

    1) @Kevin How come house prices have already dropped significantly in the UK if what you say is true?

  • Truthseeker


    If you’re so convinced prices will never fall in the UK, presumably you think the government has been wasting all our money by propping up the housing market unnecessarily (bailing out the banks, Stamp Duty holiday, SMI, you name it…)

    I agree with you – the government should have done nothing, let the banks fail, let repossessions happen, keep inflation to the 2% target etc, etc. Then we’d find out the truth – if you’re right property prices would stay firm and the government’s finances would be in much better shape…..

    So, do you agree with the government using taxpayers’ money to support the housing market or don’t you? You can’t have it both ways…

  • Tom

    Great article. Quite a lot of comments on here saying demand will keep the property bubble going. I would say just have a quick look at right move, there are plenty of properties for sale, 280 within 1 mile of my location. There is a big difference between what people can afford to pay and what people want to sell at, in the end people will eventually have to sell and prices will eventually tumble and once one person in a area drops their price is will have a avalanche effect.

  • Tom

    Sorry put 280 properties for sale within 1 mile of my location. Just realised I was filtering on houses only, if I include flats etc its more like 600.. Demand striping out supply, I don’t think so..

  • No Bull

    @37: ”The money available is chasing fewer houses and keeping all values up.”

    What rubbish. There are more or less the same number of houses now as there were a year ago (give or take 110,000 new builds and maybe 20,000 demolitions). And the money supply has contracted. So there is less money chasing more houses.

    There may or may not be a shortage of houses on the market at any one time. Markets are dynamic, and will, left to their own devices (free of government interference), correct. If a temporary shortage of supply in the market place artificially boosts prices, more sellers will emerge to bring prices down, which is what is just starting to happen.

    If there is a shortage of houses in the UK (whatever that means – you can’t define the demand for anything without a freely functioning market, which we don’t have), that shortage is now fully priced in. That’s why even London prices are starting to fall, and Central London rents have been falling for the last 6 months.

  • The Market’s bucked

    The number of properties being sold is unusually low and that can only be because they are priced too high. The definition of house prices should be revised to take into account an average number of transactions, adjusted downwards when actual transactions falls below that average. And talking of low transactions, I’d like to know how Estate Agents are managing to survive this recession. At some stage they will have to generate cash and they can only do that one way – lowering prices.

  • Christopher

    37. Boris. Please. This is getting painful. There is less and less money around and banks will not be lending at their previous levels for decades. Cash buyers are a dying breed because of the affordability problem that exists but falls continuously on your deaf ears. Buyers cannot find a way to buy houses and this is shown in transaction levels. The “inheritances, family loans, savings, a mortgage whatever” that you glibly posted previously just does not match reality I’m afraid.

  • Boris MacDonut

    #44 No Bull. I do agree with you. There are 25.8 million homes in the UK (about 800,000 are empty). If they all came to the amrket at once i’m sure priicers would tumble ,but it’s a free market . People will only sell if they think they can get what they want ,so few come the market and are chased by the money avaialble .That is less than 5 years ago,but still rising Another £8billion net was taken out in mortgages last year and average legacies have doubled in 7 years.

  • Critic Al Rick

    @ 47. Boris

    How much of the £8bn net taken out in mortgages last year was taken by BTL Landlords?

    In my view such investments could prove to be toxic. Bubbles always burst. And we are probably experiencing the child bubbles of the mother of all bubbles; and when she bursts …

  • HongKongFuey

    #33 Pigsy.

    Your post is a good one, a few people on here (such as Boris & Kevin) clearly rchoose to focus on the demand side only.

    What they fail to realise (or decide not divulge), is that the supply dynamics are just as important as demand (cash devoted to the purpose of buying a house).

    As inflation increases (it will as QE is undertaken over and over again) there is greater pressure on household budgets. As the UK growth slows, the debt will (IMO is) spiral out of control and the bond markets will turn.

    Both of these scenarios lead to higher mortgage rates, for obvious reasons perhaps. When this happens the supply/demand dynamics will swing dramatically….

    Additionally, it is ALREADY happening, just because London and a few areas in the South are skewing data does not mean that a correction (significant in some towns) is not taking place.