UK housing market

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Martz

Staff member
May 26, 2001
5,707
63
Thought I'd start a new post so I can rant more about the UK.

I've been wrong about the UK housing market for many many years now, I predicted that there would be a crash in 2003 but I was wrong. I said that houses wouldn't go up in value from that point - but I was wrong. Some people have gained a very good percentage of growth in their housing equity. I believe now that I'm right, and that the only reasons I my predictions were wrong are down to point [2] below - excessive immigration into the UK.

Now, however, I am making the same predictions. The property market seems to be fooling itself, almost to the point where people are in denial about it. To me, this is evidence that rough times are ahead. When, I don't know - but surely the current situation cannot be sustainable.

The factors that I see:
  1. Current house prices are overinflated due to nearly a decade of growth.
  2. Very high demand and low supply for housing for 2 reasons:
    1. Immigration - the key driving force by the Goverment to help sustain demand for houses is to let lots and lots of people who need housing into the country, instead of setting sensible quotas.
    2. By To Let (BTL) markets - it seems the average joe has become a property investor these days and has 1 house to live in, maybe another house to go on holiday too, and another house to rent/let out and try and make some profit. How many people now have multiple properties?
  3. Debt. Huge amounts of debt. An excellent site I saw the other day has the stats for UK debt. It's very very scary how much more debt (excluding mortgages etc) the people in the UK have.
    • Average household debt in the UK is approximately £8,575 (excluding mortgages) and £50,494 including mortgages.
    • Average owed by every UK adult is approximately £26,525 (including mortgages). This grew by ~ £200 last month.
    • Average interest paid by each household on their total debt is approximately £3,123 each year
  4. Goverment schemes to help trick persuade first time buyers in certain sectors to buy into the property ladder at the bottom and maintain the whole house of cards style of an economy we have. This means that teachers, policeofficers, nurses etc can get 25% of their mortgage payed for by the Goverment and a proportion by banks. This can save people £200 a month on a £150,000 house - the idea being that in the future wage increases will allow the person to be able to pay back the full amount.

    Not only is this slighly unfair to anyone who isnt a civil servant of some description, but also its my fucking tax payers money! Why the fuck are the goverment giving this money to people to get mortgages with? Get your own! - or dont buy a house. It's not some sort of right that everyone has - that everyone should be able to afford to mortgage your own house. Once upon a time, it used to be a very big deal! Now it seems to so trivial that the mortgage companies are falling over themselves to give anyone with a credit history better than swiss cheese £1,000's in loans at high interest rates.
And on those 4 things, I think we are in for an entire world of shit.

Interest rates are set to rise again, and this will hit the BTL landlord very hard. Not only will they find that because their property has only had people lodging in it for 10 out of 12 months of the year, the annual yield in renting slips from somewhere around 7% to 4% or 5%. Since we don't seem to have much room for growth anymore, most properties are not increasing by £10k per year. Houses are not a retirement fund - especially if you do not own it. Money paid into a bank or pension can be drawn out when required, diverted and is a liquid asset. Houses on the other hand, require constant maintenance and repairs, require the servicing of a large mortgage and also for that person to never be out of work. That 4 to 5% profit isnt looking very good now, and once you've factored in all the time, money and maintenance spent on a BTL house - it would be better to actually put the money into a high interest savings account at ~5% APR.

How can we justify any of this? I must admit I am very interested in the housing market, having spent many weeks of my life reading opinions, articals and datasets to try and understand what is happened.

I don't believe in the phrases "You can't go wrong with bricks and morter", I believe you can - and like all bubbles which eventually pop - people who have invested into this market by placing themselves into £100,000's of debt are blind and oblivious that the market can also go down as well as up.

If I had bought a house 4 or 5 years ago, I would be very keen to sell it ASAP, even at a reduced price, to make sure that I do not have one of the largest possible debts tied round my neck.

If I hadn't bought a house (which is the case) and I had lost out on gaining some equity - I would still be renting and looking to invest my money into other areas which would return much greater than 4% a year.


The US housing market is a good indication of how the global economy is going to go (in my opinion of course). The US housing market is on the brink of collapse, UK investors in US property have already lost around 7% of their value due to the value of the dollar going up to very high exchange rates at around $1.88 to the pount. And this is before the cooling happens. Sure, in the US you can get low interest for the length of your mortgage - but such is the size, and such are the increases in the US interest rates (quarter point raises almost constantly - from 0.5% to now 5%!!), that consumers are soon going to start feeling the squeeze, have less disposable income, and spend less, save more.

This is ready to happen, in the UK, in the US, and globally - it's just how long can our irresponsible leaders keep the bubble going? None of them want to deal with the hot potato which is economic gloom and doom, and with 2 major elections on their way in the UK and US - the parties are doing everything they can to make sure that this bubble doesn't burst while they are in charge. It'll also be a great mess to hand over to any other opposing party who might win the elections and find themselves in charge of a debt ridden, over spending and brain washed population who are constantly living beyond their means.

I do appreciate that house prices WILL go up over the next 10 years, or 20 years. Thats long term investment - and in pretty much any decent market a 10 year invesment will be profitable. How profitable, who knows. However - its the short term people have to fear in my opinion. When (not if) a recession hits us, its going to hit the people with mortgages first. The knock on consiquences will effect everyone though.

Comments/flames/suggestions/etc welcome.
 
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wow i even read it all :)

It's happening not only in UK m8. Very similar situation i got here in my country.
I won't say anything more becouse that kind of discussions always makes me angry and today is such a nice weather and day :)
 
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"over spending and brain washed population who are constantly living beyond their means."

says it all imo

The whole world works on short term (1-5 years) investments which they demand high profit from. Still best thing to own is lots and lots of land imo :)
 
In spain is more or less and more or less cos of same reasons.
Ive just come from london and i looked a bit about prices, salaries and those things as im thinking on the posibility to go to live there for some months. Well they are expensive but belive me, in spain, well in the zone that i live the situation is even worse.Cos our salaries are wicker and houses are just a bit less or similar expensive that urs.
Hmmmm just an example, my mom´s house was around 160000 euros 6/8 years ago now its over 400000 euros and salaries hasnt been increased a lot (about 1200 euros per month is a decent/good salary).