I was out walking today in Notting Hill, looking at the storefront estate agent windows (what an inefficient joke by the way) at 1-bedroom flats for $800,000 (that would rent out for about 30% of the total cost of ownership). Always good fun, and a good laugh that a sucker would pay that.
Then I pass by the tube station and see the headline above shouted out in full caps.
However, even though the MSM picked it up and ran with it unchecked, just like the biased homebuilder-funded Harvard study recently in the US, similar scenario here, as the study was funded by the affordable housing association so as to freak out the market and get regulations written favorable to their interests... Yes, this should be illegal, but as always, shame on the lazy MSM
The average home could cost almost £300,000 in five years which would make it impossible for young people to get a foot on the property ladder, economists said yesterday.
Oxford Economic Forecasting said that house price growth would far outpace wage growth, "thwarting people's personal aspirations and limiting job and home choices".
Buying a home in England cost around £195,000 during the first three months of this year. But the forecasters said that prices were likely to rise by almost 50 per cent between now and 2011. That would mean the average home costing £286,500.
The National Housing Federation, the trade body for housing associations that commissioned the research, said that by 2011 the average price of a home would be 9.2 times the average salary, up from its current level of eight times average earnings.
July 18, 2006
Dow 30,000 moment: UK's Telegraph headline boards today shout "Homes to appreciate 50% in 5 years!"
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6 comments:
European home prices have always been higher and cost more of a person's income than the USA. Even in Germany where home prices remained stagnant for 10 years the aver cost per sq ft is much higher than the USA. Our bubble markets almost look like bargains compared to the average cost per sq ft in Europe.
Add to that the high cost of everything else in Europe (your $7 toast in Scandinavia) or $2 for a can of coke in London and the USA looks like a bargain. Again the largest issues in all markets isn't the cost of a home (for many the cost of land, developement, labor, materials makes homes ever more expensive not counting inflation which is under reported by all governments) but the inability for the average labourer to see his income rise due to globalization and the expansion of the labour markets that prevents the workers from having leverage over their employers.
Always amazing that CEOs can give themselves millions in compensation and that isn't inflationary but to give the workers a $1 an hour raise is!! The populist policies of Venezula, Argentina, Bolivia, and other leftist countries will spill over into the US if there is a melt down in our economy.
cash flow is still cash flow foxwood. if you can buy a place for $800,000 and rent it out to cover 100% or more of your carrying costs, then it's ok (from a PE perspective)
it's not here, and it's not in the US either.
but it will be soon - rents will stay flat or drop slightly, but prices will come down drastically to get back into equilibrium.
everywhere.
I think its more a queston of the Telegraph neglecting to say "The Sky is Falling!" It wasn't all that long ago over here people still thought a 20% increase was going to be perpetual.
I've had some dealings in London RE lately, and while the price of property over there is still sky-high, it doesn't appear to be rising much faster than over here in the US. I don't think its quite at the tanking stage, but I wouldn't put money on it not decreasing next year.
Of course, I can only speak for myself.
I had 6 bids in three weeks, and have gone with the highest and hope to complete in in the next month.
When oil hits $100 in Sept. cost of housing look even more out of line for those losers that purchase pre-fab home depot homes 2 hours drive out in the new suburbs all around America.
Anyone notice how not one red cent of the housing boom profits given away by local governments has been spend on transportation infrastructure?
Here is the "technique" used for the forcast: take the price trend for the last 5 years and extrapolate a straight line for the future. We call that linear thinking while seing price changes in terms of cycles is beyond the understanding of most "forecasters".
I agree with you Keith on the issue of cash flow. I don't dismiss the reality of a housing bubble world wide. I have always used the cash flow formula to buy a house and have always considered value rather than hype when buying, or selling. I have always tried to take inflation into account but these days that is getting harder because our wages haven't always kept up with inflation thus even if the average home cost per sq foot hasn't risen dramtically in most of the non-bubble areas wages have not so those homes today and the job opportunities in those communities do reflect that home prices even in some of those areas are unsustainable if wages don't rise to adjust for the higher cost.
But who can understand markets? I've always been amazed at the cost of homes in third or second world countries or in Europe compared to incomes and always open-jawed at prices in California or such places even when homes were only $45,000 in some of those areas because cost related to incomes always seemd so out of line.
Rents are rising no remaining flat in a lot of communities and if there is a global melt down it will be induced maybe by war but then we may experience hyper inflation so then prices will continue to rise. I guess I'd rather have a fixed mortgage and take my chances since I didn't over pay for my house since I've never allowed myself to spend more than 25% of my income for a home and I usually have kept it down to 11%.
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