Comments on: UK Housing Market Continuing Down the US Path http://www.nakedcapitalism.com/2008/01/uk-housing-market-continuing-down-us.html Sun, 22 Nov 2009 01:48:48 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Anonymous http://www.nakedcapitalism.com/2008/01/uk-housing-market-continuing-down-us.html#comment-3078 Anonymous Wed, 16 Jan 2008 12:13:00 +0000 http://www.nakedcapitalism.com/2008/01/uk-housing-market-continuing-down-the-us-path/#comment-3078 Time for Dean Baker to ask whether UK difficulties are due to shoddy lending or bubble prices Time for Dean Baker to ask whether UK difficulties are due to shoddy lending or bubble prices

]]> By: vlade http://www.nakedcapitalism.com/2008/01/uk-housing-market-continuing-down-us.html#comment-3076 vlade Wed, 16 Jan 2008 10:42:00 +0000 http://www.nakedcapitalism.com/2008/01/uk-housing-market-continuing-down-the-us-path/#comment-3076 Well, there's not that much sub-prime in UK in the classical US sense. That is, you won't find nearly sa much NINJAs, 2/28s etc. <br/><br/>That doesn't mean the lending here was responsible though - it's just that the adjustment's not going to be as bad on most people's lives as in the US (famous last words). <br/><br/>What I mean by that is people most hit here will be the buy-to-let "investors" who had problems recouping cost of a mortgate from rent in the first place. Those will get nailed (and rightly so).<br/>Real estate will drop - maybe by as much as 20-30% - but then, look at it this way - you have to live somewhere. If you can afford to pay your mortgage payments now (at between 5-6.5%), you can probably (barring a job loss, in which case makin any mortgage payments is hard) it will hurt you psychologically, but not so much (directly) financially. You have to have a place to live, Britain just doesn't have enough bridges :).<br/><br/>Of course, the economy will slow down (you won't have that much free cash to spend), but again - you have to live somewhere and renting isn't extremely cheap either (as in half of what you'd be paying in mortgage. it's probably around 85-90%, but can be more, depending on area).<br/><br/>So lot's of people who own just their own house will batter down, and not do the three overseas holidays they were used to. <br/><br/>I think that we will see "foreclosure suburbs" here in the UK, but it will be buy-to-let suburbs.<br/><br/>Of course, if UK gets 70s-like recession to boost, then anything's possible. <br/><br/><br/>If you want to look at real strange housing bubble, look at New Zealand. Mortgage rates of 10% (normal, <b>not</b> subprime), housing appreciating (was, not anymore) at tremendous speed for last 10 years, yet the place has (mostly, with the exception of Wellington) enough land for ten times the population easily. Well, there’s not that much sub-prime in UK in the classical US sense. That is, you won’t find nearly sa much NINJAs, 2/28s etc.

That doesn’t mean the lending here was responsible though – it’s just that the adjustment’s not going to be as bad on most people’s lives as in the US (famous last words).

What I mean by that is people most hit here will be the buy-to-let “investors” who had problems recouping cost of a mortgate from rent in the first place. Those will get nailed (and rightly so).
Real estate will drop – maybe by as much as 20-30% – but then, look at it this way – you have to live somewhere. If you can afford to pay your mortgage payments now (at between 5-6.5%), you can probably (barring a job loss, in which case makin any mortgage payments is hard) it will hurt you psychologically, but not so much (directly) financially. You have to have a place to live, Britain just doesn’t have enough bridges :) .

Of course, the economy will slow down (you won’t have that much free cash to spend), but again – you have to live somewhere and renting isn’t extremely cheap either (as in half of what you’d be paying in mortgage. it’s probably around 85-90%, but can be more, depending on area).

So lot’s of people who own just their own house will batter down, and not do the three overseas holidays they were used to.

I think that we will see “foreclosure suburbs” here in the UK, but it will be buy-to-let suburbs.

Of course, if UK gets 70s-like recession to boost, then anything’s possible.

If you want to look at real strange housing bubble, look at New Zealand. Mortgage rates of 10% (normal, not subprime), housing appreciating (was, not anymore) at tremendous speed for last 10 years, yet the place has (mostly, with the exception of Wellington) enough land for ten times the population easily.

]]> By: Brock http://www.nakedcapitalism.com/2008/01/uk-housing-market-continuing-down-us.html#comment-3074 Brock Wed, 16 Jan 2008 09:46:00 +0000 http://www.nakedcapitalism.com/2008/01/uk-housing-market-continuing-down-the-us-path/#comment-3074 Not 5 months ago I was sitting in a pub in Singapore being lectured by some drunken Brit about how the housing crises was due to "stupid Americans" and how it could never happen in the UK. He went on and on and on about real estate never going down in price and this and that. He gave me his card. It is time for an email, I reckon. Not 5 months ago I was sitting in a pub in Singapore being lectured by some drunken Brit about how the housing crises was due to “stupid Americans” and how it could never happen in the UK. He went on and on and on about real estate never going down in price and this and that. He gave me his card. It is time for an email, I reckon.

]]> By: a http://www.nakedcapitalism.com/2008/01/uk-housing-market-continuing-down-us.html#comment-3072 a Wed, 16 Jan 2008 09:16:00 +0000 http://www.nakedcapitalism.com/2008/01/uk-housing-market-continuing-down-the-us-path/#comment-3072 Not much subprime? The banks were giving away money, without any analysis whether the borrower could pay back. A relative of mine (in Cambridge UK) had 3 or 4 properties and wanted to buy another. The combined mortgage payments were already over 50% of income. The banks didn't bat an eye and lent him the money.<br/><br/>No England won't follow the same trajectory. It will be worse. Not much subprime? The banks were giving away money, without any analysis whether the borrower could pay back. A relative of mine (in Cambridge UK) had 3 or 4 properties and wanted to buy another. The combined mortgage payments were already over 50% of income. The banks didn’t bat an eye and lent him the money.

No England won’t follow the same trajectory. It will be worse.

]]> By: AndyG http://www.nakedcapitalism.com/2008/01/uk-housing-market-continuing-down-us.html#comment-3070 AndyG Wed, 16 Jan 2008 08:49:00 +0000 http://www.nakedcapitalism.com/2008/01/uk-housing-market-continuing-down-the-us-path/#comment-3070 Whilst the UK housing market might not have as much of a subprime problem, my feeling is there has been a higer level of speculative investment than the US (via by-to-let), and therefore the downside is as great, if not greater. Whilst the UK housing market might not have as much of a subprime problem, my feeling is there has been a higer level of speculative investment than the US (via by-to-let), and therefore the downside is as great, if not greater.

]]> By: Yves Smith http://www.nakedcapitalism.com/2008/01/uk-housing-market-continuing-down-us.html#comment-3069 Yves Smith Wed, 16 Jan 2008 08:35:00 +0000 http://www.nakedcapitalism.com/2008/01/uk-housing-market-continuing-down-the-us-path/#comment-3069 vlade,<br/><br/>Correct, and due to the hour, didn't elaborate sufficiently. My impression is that the UK is in some ways similar to Oz, where anyone with a job and a pulse could get a mortgage, and much higher home payment/total income ratios are used in determining maximum mortgages than is the norm in the US (here, 40% was the absolute max in a prime loan, and 33% considered more prudent, while in Oz, 50% was the limit. I know people who had to argue with the bank to take a smaller mortgage, in part because they couldn't live on what would be left after servicing a bigger mortgage).<br/><br/>I am also under the impression that the home price/incomes ratio is at least as out of line with historical norms in the UK as in the US. vlade,

Correct, and due to the hour, didn’t elaborate sufficiently. My impression is that the UK is in some ways similar to Oz, where anyone with a job and a pulse could get a mortgage, and much higher home payment/total income ratios are used in determining maximum mortgages than is the norm in the US (here, 40% was the absolute max in a prime loan, and 33% considered more prudent, while in Oz, 50% was the limit. I know people who had to argue with the bank to take a smaller mortgage, in part because they couldn’t live on what would be left after servicing a bigger mortgage).

I am also under the impression that the home price/incomes ratio is at least as out of line with historical norms in the UK as in the US.

]]> By: vlade http://www.nakedcapitalism.com/2008/01/uk-housing-market-continuing-down-us.html#comment-3068 vlade Wed, 16 Jan 2008 08:26:00 +0000 http://www.nakedcapitalism.com/2008/01/uk-housing-market-continuing-down-the-us-path/#comment-3068 There's a difference between UK and US housing - not that much subprime. <br/>That said, the love of British with their houses and willingness to borrow to the hilt to pay for overpriced shoddy housing is I think much higher than in US, and that might compensate (read, crash in speculative buy-to-let "investments") There’s a difference between UK and US housing – not that much subprime.
That said, the love of British with their houses and willingness to borrow to the hilt to pay for overpriced shoddy housing is I think much higher than in US, and that might compensate (read, crash in speculative buy-to-let “investments”)

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