Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
US Bond Market Yield Curve Patterns – What To Expect In 2020 - 25th Feb 20
Has Stock Market Waterfall Event Started Or A Buying Opportunity? - 25th Feb 20
Coronavirus IN Sheffield! Royal Hallamshire Hospital treating 2 infected Patients, UK - 25th Feb 20
Dow Short-term Trend Analysis - Coronavirus Trigger a Stocks Bear Market? - 24th Feb 20
Sustained Silver Rally Coming? - 24th Feb 20
Should Investors Worry about Repo Market and Buy Gold? - 24th Feb 20
Are FANG Technology Stocks Setting Up For A Market Crash? - 24th Feb 20
Gold Above $1,600 Amid FOMC Minutes and Coronavirus Impact - 24th Feb 20
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Global and UK House Prices

Housing-Market / UK Housing Jun 16, 2014 - 07:20 PM GMT

By: Jonathan_Davis

Housing-Market

The charts below show global house prices in relation to local incomes and historic rents.  Some of the prices are shockingly high, relative to reasonable economic comparators.

This first one, shows prices to incomes. To explain the chart, Italian house prices are seen as about the same, historically, relative to current income levels.


Whereas UK house prices, for example, are seen as c 30% over the long term norm in relation to incomes. Japan’s real estate prices are significantly lower than you would normally expect given income levels.

In the next chart prices are compared to prevailing rent levels.  Almost the same countries have over or under priced conclusions attached to them.

Notably, according to the Organisation for Economic Cooperation and Development and the International Monetary Fund, the UK’s house prices are even higher, relative to rents, than to incomes.

Either, in their analyses, this is because rents will rise to compensate or house prices will fall, eventually, to compensate.

It appears that, according to them, Australia and Canada – broadly similar economies to that of the UK – are, like the UK, in great danger of entering economic depression, in due course.  I am in good company there as, when I suggest that, the Governor of the Bank of England has said as much in recent pronouncements.  France, too.  Of course, much of the EU is already in Depression.

Let us consider.

The next chart shows the number of mortgages at approval stage by the members of the British Bankers Asscociation.

As you can see the number is significantly below that of the peak in prices in 2007 and way below peak lending 5 years prior to that.  Evidently, prices can rise with lower volumes.  And that is how it normally is.  Stella McCartney sells 1 dress at £25,000.  John Lewis sells 5000 at £200 etc.  Of course, when even Ms McC has to reduce prices you can bet your bottom dollar so is everyone below her.

Of course, prices have risen as volumes have fallen.  That will not always be the case.  Eventually, buyers will disappear and prices will fall as they quite simply can go no higher, without new buyers.  We also see that, recently, approval numbers have fallen.  The shape of things to come?  On verra.

Next we see how gross borrowing has risen quite strongly – primarily due to Help to Buy (or as I call it now Help to Borrow).  However, NET borrowings (after taking into account mortgage redemptions and reductions) are practically still on the floor at no growth or very tiny growth.  This does not bode well for the housing market or prices.

And either does borrowing by non-financial companies (AKA the real economy), as shown in grey, below.  Businesses are not borrowing and there has been a fall in lending to businesses for each of the last 3 years – not a reduction in the growth of lending, actual reductions in lending, annually.  This is the REAL economy, not the financial/banking one.  This is where house prices of ordinary mortals are.  Not the multi million pound pads of the ultra rich.

Consider this too, households’ incomes have not been keeping pace with the rises in the costs of living for 6 years.  This, again, cannot bode well for house prices.  The next chart shows incomes compared to CPI.

I’ll finish with a thought – one that I have expounded many times.  The next time we have a global economic shock, which can be expected, the Bank of England cannot slash the Base Rate, as it has done every time it got us into difficulties in the past.  The most they can cut is 0.5%.  That will not make the blindest bit of difference to the real economy.

You conclude, based on the above, what is likely to happen to house prices.  Let me know what you think.

By Jonathan Davis

http://jonathandaviswm.wordpress.com/

25+ year veteran of the world of financial services, the last 10 doing the same thing under his own name.  We work with families all over the UK and in Switzerland and, indeed, on 2 other continents. If interested in our Wealth Management work, cast a glance at the firm’s website.

From time to time media folk call me and ask me to rant live or in the press.  JD in the media.

I don’t buy hype.  I don’t believe it’s the end of the world but I do believe, within a generation, the West will have no welfare state.  The maths don’t lie.  We’re toast.  It’s obvious if you think about it.

© 2014 Copyright Jonathan Davis - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules