tag:blogger.com,1999:blog-2948538160252327076.post8369818342240003160..comments2023-11-02T15:48:50.381+00:00Comments on UK Bubble UK Economy: UK price to earnings ratio at an all time highAlice Cookhttp://www.blogger.com/profile/05753570123987780947noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-2948538160252327076.post-22291048377938146102008-04-30T14:53:00.000+01:002008-04-30T14:53:00.000+01:00Looking at that graph I'd expect this crash to bot...Looking at that graph I'd expect this crash to bottom out at a ration just below 3. <BR/><BR/>Whether that is achieved by a 50% reduction in house prices or substantial wage inflation (it's kind of a nice daydream but I won't hold my breath) is another matter. <BR/><BR/>Please, before anybody says 'it could never happen in a modern, relatively prosperous industralised democracy' remember that in Japan in the 90s, Tokyo residential real estate lost <B>90%</B> of its value from peak to trough, and <B>80%</B> off the value of the Nikkei.<BR/><BR/>http://en.wikipedia.org/wiki/Japanese_asset_price_bubble<BR/><BR/>And the Japanese households had a higher level of savings to tide them through.powermanhttps://www.blogger.com/profile/13670631915567128744noreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-24969428581918858362008-02-08T11:14:00.000+00:002008-02-08T11:14:00.000+00:00Traderboy -With a repayment mortgage, you are actu...Traderboy -<BR/><BR/>With a repayment mortgage, you are actually looking at £350-400k max for your couple. Interest-only mortgages are something of an abberation, not a realistic way to buy. I predict that come 10-15 years time, there are going to be a lot of 40-somethings suddenly realising that they haven't actually paid their mortgage off at all, after going IO.<BR/><BR/>And let's face it - you have a young, hard working, successful couple.. and the best they can afford is a pokey 2-bed flat.<BR/><BR/>Of course, what I really wonder is who is going to buy £400k flats in Swansea, where your young working couple is earning £30-35k combined. (Search for new flats in SA1 on rightmove if you don't believe me). Makes London look relatively cheap.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-75255046092068214412008-02-06T08:18:00.000+00:002008-02-06T08:18:00.000+00:00with the banks willing to lend below Libor,...That...<I>with the banks willing to lend below Libor,...</I><BR/><BR/>That and high LTV. Add in an ARM with a very low starter rate, meaning many marginal borrowers qualify only due to the artificially low initial payment. How common are ARMs in the UK?<BR/><BR/>Of course everyone is kept whole as long as prices rise, e.g. if a borrower cannot afford the higher payment later then he just sells. Conversely, everything comes apart if prices begin to fall. People who have put little into a house but borrowed money have next to no incentive to hang on.<BR/><BR/>House prices usually don't crash; stock markets do, partly in anticipation of the fact that significant and unrelenting house price falls will be a wipe out for the economy in general.<BR/><BR/>This is what you will see play out in the UK now, just as is happening in the US.<BR/><BR/>Welcome to the party.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-92195181165661068782008-02-05T18:40:00.000+00:002008-02-05T18:40:00.000+00:00economic despair...with the banks willing to lend ...economic despair...<BR/><BR/>with the banks willing to lend below Libor, it's not that expensive to buy. this will end eventually, but in the meantime...<BR/><BR/>say you have a couple working in the financial sector in london, you'll be looking at combined earnings of £100k at least. after-tax, 60k. spend half that on a mortgage payment. if you can get a 5% mortgage, there's a £600k place you can buy. this is a pretty normal price for a nice 2-bed flat in a half-decent location in london.<BR/><BR/>the turn will come when layoffs happen and mortgage rates rise. this seems to be happening now.<BR/><BR/>as for the rest of the country, i think even more so it has been based on rising prices and overloading with debt.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-67758028744563250172008-02-05T18:14:00.000+00:002008-02-05T18:14:00.000+00:00Oh boy, that is one nasty-assed chart. How does a...Oh boy, that is one nasty-assed chart. How does anyone buy a house in England?Economic Despairhttps://www.blogger.com/profile/15834343361456412739noreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-32696555956923210532008-02-05T18:01:00.000+00:002008-02-05T18:01:00.000+00:00uk homeowner...i disagree. a crash will help me. r...uk homeowner...<BR/><BR/>i disagree. a crash will help me. <BR/><BR/>renting and have a slug of cash to buy when the time is right. however, i think it'll be at least 3 years before it'll be time to pull the trigger.<BR/><BR/>the crash is coming, whether we talk about it or not (although I agree it's not a crash yet).Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2948538160252327076.post-395389883739114632008-02-05T15:50:00.000+00:002008-02-05T15:50:00.000+00:00There are certainly signs of a correction but I th...There are certainly signs of a correction but I think its a biot early to be calling it a house price crash yet. That could still happen of course. The market certainly needs a correction butit wont help anyone if we talk ourselves into a crash.Anonymousnoreply@blogger.com