Comments on: Nationwide: UK house prices rise for fourth month

By: Edward Harrison

Edward Harrison — Sat, 29 Aug 2009 13:22:00 +0000

Wag the dog, it is amazing how much people believe low interest rates and a
flood of liquidity can change the underlying supply demand imbalance. Yes.
Housing is more afforable and at present interest rates cash rich buyers can
make out well. But rental yields and other traditional measures like price
to income suggest the market is still above trend in places like London.

We have allievated the acute financial distress but the lack of
affordability will become more apparent when interest rates normalize.

By: Wag the Dog

Wag the Dog — Fri, 28 Aug 2009 10:36:00 +0000

I believe what is driving this mini-bubble is of a very different nature than what drove the mega bubble that preceded it and wasn’t allowed to fully unwind. Perhaps it has yet to do so. The loan to value ratios are much lower, and buyers are being asked to fork up a much larger deposit. So it must be the cash rich who are largely behind the recent price rises. They are the property investors who got out of the last bubble in time and who now see current rent yields are higher than the interest they’re earning on their cash and so are diving back into the market. Their strategy seems to be to take advantage of low interest rates and the house price dip, then rent out the properties whilst they wait out the bust. Many are making the mistake in believing the house price deflation was due to the liquidity crisis, and not an insolvency crisis. Fear of insolvency by the lenders is putting a ceiling on LTV ratios and mortgage affordability for first time buyers. What happens when we run out of cash-rich buyers while at the same time the rental yields are forced lower thanks to all the investors jumping back into the market with no one to sell to?

By: aitrader

aitrader — Thu, 27 Aug 2009 12:32:00 +0000

Ok, and “Eurozone private sector loans dry up” – http://www.businessworld.ie/livenews.htm?a=2469051;s=rollingnews.htm also “UK hardware spend falls to lowest level since records began” – http://www.v3.co.uk/computing/news/2248544/uk-hardware-spend-falls-lowest .

Anecdotal, yes, but “green shoots” they definitely are not.

I’m still not tempted to eat the veggies. There is just too much rot around them yet to call for a recovery.