Singing Pig

Here is a thread to try and keep abreast of the factual & accurate UK Economic scene, I have read a lot of vague opinions being posted - how about some honest opinions based on the real facts (which should be quoted)?

Trying to guess the future of the economy & the markets is very difficult due to the large number of national & international factors which are constantly changing - perhaps a sensible discussion with accurate references might give us all some new perspectives with which to work.

NB: Not for forum bullies, “I told you so” or ‘know-it-all’ posters - a sensible discussion about people’s interpretation of the economic factors which might help us all. Very happy with differing views though!

I have started to list a number of sources of Economic & Property related FACTS so that people can quickly refer to them in order to form a view of where we are and where we are going - I'll add more as I find them.

Do you know of a good source of factual info or have you seen quotes from top bankers or economists? Post them here please! we need all the help & information we can get.

INFORMATION SOURCES

Bank of England http://www.bankofengland.co.uk

HM Treasury http://www.hm-treasury.gov.uk/

Office of National Statistics (UK Snapshot) http://www.statistics.gov.uk/glance/

Royal Institute of Chartered Surveyors (RICS ) http://www.rics.org/

Nationwide Building Society (House Prices) http://www.nationwide.co.uk/hpi/

Rightmove (House price index)  http://www.rightmove.co.uk/soldprices.rsp (Bottom Right)

Halifax:HBOS (House Price Index) http://www.hbosplc.com/economy/HousingResearch.asp

 

Council of Mortgage Lenders (Statistics) http://www.cml.org.uk/cml/statistics

 

Swap Rates (See Zulu's post below) http://www.swap-rates.com/UKSwap_extended.html 

Carl Henry:

Very happy with differing views though!

 

I don’t think you are at all – they seem to make you very angry…

 

 

OK, since you are asking, here are some facts:

 

1. UK average house prices from 1945 to 2002, oscillated between 3 and 5 times average earnings*

 

2. From 2002 onwards, when the FTB was priced out, price change was driven by a frenzy of BTL leveraged speculation, driven in turn by ever-improving mortgage availability as well as low mortgage rates and higher economic growth

 

3. In 2007 average house prices reached 7 times average earnings*

 

4. All the drivers of house prices (mentioned in 2 above) have now gone into reverse.

 

5. This means a fall to at least 4 times average earnings, and probably 3 times average earnings.

 

6. This in turn means a bear market of 2 – 3 times as bad as the 1989-1994 market, so falls of some 30-50% on average.

 

7. Because this is the bursting of a leveraged and speculative bubble, those areas where BTL has been the most concentrated will be hit the worst.

 

 

* For some reason I can’t post the chart here, but you can find by paging down a little here:

 

http://www.landlordzone.co.uk/forums/showthread.php?t=12050

Hi Eduardo,

Here is the graph you mentioned (Posted to clarify the conversation - readers please draw your own conclusions!), it is certainly interesting, I'd be interested to know where the figures came from.

My main question is how you can be so definite & so certain of precisely what will happen, after all we are talking about averages here.

I think it would be more helpful to identify the areas of the UK where the problems will be centered, I say this because you can not compare average prices for say, a 2 bed flat in  London W1 and a 2 bed flat in Batley (Sorry Batley!) take the average and 'call' the market for the next few years. Perhaps we could start a hot spot database because the "abuses" or major risk of melt down must have major concentrations around the country.

There must also be concentrations of major equity gained over the recent years, particularly people who have kept properties for 7 or 8 years - I would expect that some of this wealth will come onto play in various ways to skew the future predictions.

I'd also like to know the percentages of BTL next to general housing stock (I know it's out there - I'll find it). There must only be a certain percentage of general house holders who have over leveraged? I would guess that the vast majority have not "been irresponsible" so their equity is more than enough to soak up any dip in values and their lifestyle will continue on a fairly stable basis.

I am interested in discussing these things to gain a deeper and more educated understanding, I am not interested in scaring people, embarrassing people or belittling them, particularly on generalised information.  This is such a vast subject surely a wide ranging discussion will educate us all.

Regards,

Carl

 

 

I've had a quick look at the Council of Mortgage Lenders statistics page http://www.cml.org.uk/cml/statistics and if I read it right across a few spreadsheets these are the headline figures;

(Please check for yourself)

Total Mortgage lending in 2007 £155 Billion (1,016,400 Loans)

Total BTL lending in 2007 £44 Billion (346,000 Loans)

So I make that BTL Loans are 28% of total Gross Lending (Loans 34% by number).

What can we learn from that? It is a fair percentage of the total but how many people are in trouble?

If we could work it out perhaps we could see the potential effect on the market in real terms and then guess the sentiment, watch out for the bears!

 Carl Henry

Hi carl,a useful site to keep an eye on swap rates

 

 

http://www.swap-rates.com/UKSwap_extended.html

Thanks Zulu!

I've added it to the list, do you think you could explain how we should read the info' and what it's showing us?

All the best!

Carl

My understanding is that swap rates are the borrowing rates between the financial institutions. This forms the basis of Libor and importantly for us determines the cost of mortgages.

Here is another way that landlords can cut costs. Don't bother with carpets. Tenants often damage them and they cost £300-£400 to replace and that is for the cheap stuff. I bought a floor sander for £400 and an edger for £250. The rooms look great when there finished. I am sure it puts the value of the property up considerably. The tenants will still scratch the floors, but you can sand it out in a few minutes and then re-oil it. I will never buy carpets for ground floor flats ever again. You can buy sanders on Ebay.