Trying to buy a house in this area is near impossible

[MrBen]

Symptom No 2:

"We were the 48th people to visit it that day"

Herd behaviour.

[Jeremy]

It's crazy... we've basically reached the point where normal terrace houses round here cost a million squids. And the speed at which we reached this level is alarming. Surely this can't end well.

[StraferJack]

Hush RD - that was all Labour's fault

[Earl Aelfheah]

London is clearly experiencing another housing bubble and what's more, we haven't just ended up here by chance - the government has actively cajoled banks to relax their lending criteria, even going as far as to underwrite 90% mortgages on behalf of the taxpayer. It's madness. We have learnt nothing from the last crash.

[Too Good To Be True]

It's incredible. The government have introduced a UK version of Fannie Mae, which was proven not to work in the US!

However, we (as a country) only have ourselves to blame. I suspect Labour would have done the same. The electorate are just very short-sighted.

[Grotty]

Ok so I started this thread and here we are still in March, still looking, and even less likely to be able to buy round here than a mere 5 months ago. There is very little coming on to the market, so little in fact that with each new 3-4bed house that comes on the market, you can visibly see a hike in price.

[Jeremy]

rahrahrah Wrote:

-------------------------------------------------------

> the government has actively

> cajoled banks to relax their lending criteria

Yeah but you have to remember that there's more to the UK than just London. In particular, there's this place called "The North" where housing has been much slower to pick up since the recession.

[Too Good To Be True]

I'm sure the Wildlings will welcome more expensive houses.

They should just devolve the North. Give them a massive government subsidy on the basis that it is used to slash taxes. Zero business rates, zero council tax. Let the market do the rest. London can breathe again.

[Penguin68]

Oh, do stop complaining - it was only a couple of years ago that the Lib Dems were identifying houses at ?1m as 'mansions' (now, granted, they have revised up to ?2m). So why do you whinge when you can't afford a mansion (of which, even under the new definition, there are a shed-load in ED) or near mansion? Most of us had to do just with houses when we bought in ED. We never aspired after mansions.

Or have the Lib Dem (and Labour) views about mansion tax a bit of an anti-London bias?

[Earl Aelfheah]

But the point is government policy aimed at pumping up prices is (IMO) a bad idea. The fact that the policy is only just starting to take effect in the north where they have not *yet* seen a bubble doesn't make things any better.

We were told that there was going to be a different type of economy.

Jeremy Wrote:

-------------------------------------------------------

> rahrahrah Wrote:

> --------------------------------------------------

> -----

> > the government has actively

> > cajoled banks to relax their lending criteria

>

> Yeah but you have to remember that there's more to

> the UK than just London. In particular, there's

> this place called "The North" where housing has

> been much slower to pick up since the recession.

[Jeremy]

Yeah but regional housing markets being stuck in a rut, and people not being able to buy a home because banks wants a 20% deposit... that's not a good situation either. I guess I'm playing devils advocate to a certain extent because you do have a point, but just saying that the objective was to get the market functioning in the wider UK.

[Earl Aelfheah]

Banks are right to want a 20% deposit.

[DaveR]

I have no doubt that the current rate of increasing prices locally cannot be sustained for much longer, and that asking prices may well have already overshot.....but it is still the case that the current state of the UK housing market is very different from 'last time' i.e. broadly 2000 - 2007. In particular, in much of the UK (and in many parts of Greater London) prices remain flat and have not returned to 07 prices, and, despite the 0.5% bank rate, mortgage lending is still much more conservative than back in those days. It is arguable that price falls/stagnation in inner London during 2008 - 2012 represented a gloomy view of the UK economy as a whole, and since 2012 the essential financial strength of London and the SE has reasserted itself.

I don't pretend to understand every vagary of the property market (and anybody who does is a fool) but, absent some major macroeconomic shock, I still can't see prices round here falling steeply, or at all, in the foreseeable future.

BTW, has anybody actually paid ?1 million yet for a 'normal' ED house?

[Earl Aelfheah]

I keep hearing how (in some areas) prices still haven't returned to 07 prices. But surely that's a good thing? 2007 was the last time that the market was dangerously overheated.

DaveR Wrote:

-------------------------------------------------------

> In particular, in much of the UK (and in

> many parts of Greater London) prices remain flat

> and have not returned to 07 prices

[Earl Aelfheah]

... and actually in most parts of London prices are already above what they were then.

[DaveR]

I think the point is that by 2007 there had been getting on for 10 years of uninterrupted prices rises in pretty much every region of the UK - very different from now. And there are still lots of areas in Greater London where prices are flat. It's easy to get carried away by stories of price madness in particular areas - currently it seems to be ED and Hackney - and assume that it's a universal picture, when it ain't. It's actually a very small number of properties in thr overall scheme (and that's one of the problems).

Don't get me wrong tho' - if you look at the increase in asking prices, in particular, in SE22 in the last 12 months, you have to think a hard stop is coming pretty soon. But that's different from a bubble - intrinsic asset value remains high for houses in 'nice' parts of London, accessible to the City, West End and Canary Wharf, decent schools etc.

[MrBen]

Not exactly rocket science stuff but Moneyweek are already calling it:

http://moneyweek.com/three-signs-of-a-london-house-price-bubble/

The FT were calling it back in Sept.

[????]

Don't forget

?500K 2007 = ?425K 2014.

But,admittedly, average income hasn't icreased in line with inflation.

[Jeremy]

rahrahrah Wrote:

-------------------------------------------------------

> ... and actually in most parts of London prices

> are already above what they were then.

I think they were back at 2007 levels by 2009..

[haruki]

DaveR Wrote:

-------------------------------------------------------

> It's easy to get carried away by stories of price

> madness in particular areas - currently it seems

> to be ED and Hackney - and assume that it's a

> universal picture, when it ain't.

Not sure I agree with that. As someone looking to buy pretty much anywhere in zone 2-3 across SE, NE and E London I can tell you price madness is everywhere. E.g. I saw a property in South Woodford that had been purchased for 245k, been done up a bit then sold 2 months later for 325k. When I first started looking in Forest Gate for houses in December 275k was normal. Now 350k is normal. One property that was on at 260k in January clearly fell through and is now on at 320k. Ditto Hither Green, Forest Hill, Walthamstow. Anywhere vaguely desirable.

There just simply aren't enough properties anywhere.

[strae]

We should remember that in 2007 the pound peaked at 2.1 USD to 1 GBP and we are currently at 1.67.

The story vs the Euro is very similar.

So 1 pound today is worth roughly c. 80p in 2007 pounds in an international spending context.

In the mean time, UK inflation (as measured by RPI) has been c. 23% in total (not per annum), between 2007 and today. If you wanted to measure it via CPI, inflation has been c. 21% over that time.

So 1 pound today is worth roughly only 80p in 2007 pounds in a domestic spending context.

So from the context of an "international" buyer, London today is STILL 20% cheaper than 2007 (purely from currency perspective). And for "local" buyers, house prices would need to be c. 20% higher just to have kept up with inflation.

And despite all that, it's not clear that taken as a whole London house prices have actually done all that well.

According to the Halifax London House Price Index (seasonally adjusted), the peak was 810.6 in September 2007.

The latest reading for Dec 2013 is 778.8 (so just in London, according to this one index, we are still 4% below the peak in 2007).

The problem with indices (not saying this one in particular) is that they mask a multitude of specifics.

As an extreme example, House A may have gone up by 100%, house B has stayed unchanged, while house C could have halved in value. And if we equallly weight all three, then the average change is an increase of 17%, which tells you nothing useful about how the price of any of those 3 houses has performed. The boffins that calculate the indices try their best to adjust for this, but the principle of the average not being especially helpful about the specific remains true to some degree.

Yes - houses in ED are changing hands for more pounds than ever before. But those pounds are also worth less in real spending power. This isn't breaking news. But certainly you can see why our politicians are not keen to point it out, because no one wants to be associated with the great loss of value that has otherwisely stealthily taken place, and not when the prospect of housing riches makes the average punter go out and spend more.

Perhaps I am cynic. Perhaps another ?4 coffee will cheer me up.

rahrahrah Wrote:

-------------------------------------------------------

> I keep hearing how (in some areas) prices still

> haven't returned to 07 prices. But surely that's a

> good thing? 2007 was the last time that the market

> was dangerously overheated.

>

> DaveR Wrote:

> --------------------------------------------------

> -----

> > In particular, in much of the UK (and in

> > many parts of Greater London) prices remain

> flat

> > and have not returned to 07 prices

[StraferJack]

If you already own a property in dulwich, people quoting prices of 400k or whatever don't seem to be a problem. You could sell your gaff and buy somewhere else with the change

It's only if you have to actually earn that much the reality hits home

[Blackcurrant]

StraferJack Wrote:

-------------------------------------------------------

> It's only if you have to actually earn that much

> the reality hits home

It's also obvious if you look at rental yields, which are so low at these house price levels that buy-to-let looks suicidal. There's clearly more going on here than just a property shortage, which would push up rents at the same rate as prices - something that hasn't happened.

[StraferJack]

i wouldn't mind jailing anyone who uses the phrase "rental yields"

I take your point (if not necessarily agree) about buy-to-let being unnatractive at these levels - but rental yields aside you are still getting other people to pay your mortgage. Even at a loss every month you end up with an asset much more valuable than your no-paid-for mortgage

[Penguin68]

It's also obvious if you look at rental yields, which are so low at these house price levels that buy-to-let looks suicidal

You have to remember that at a time of high house-price inflation- particularly where general inflation is not high, then the capital gain of the buy-to-let investment may be the reason for being in this business. With interest payments being allowable against rental income for tax purposes, as long as the rental is 'washing its face' as regards current account, then it is the capital increase which makes this type of investment attractive. In fact, when you consider, even for buy to let, how little business capital is involved (with lender's capital making up a majority of the funding) returns can be positive.

Just as the borrower takes the hit when prices crash (leading to negative equity) so the borrower takes all the benefit from capital increases in a bull market.

Edited to say - 'cross posted with post above, which says much the same but more succinctly'