Is the bubble about to burst?
Discussion
fredt said:
Interest rates will not move in the foreseeable future as that will obviously bring down the castle in the sky. Yes there might well be some very minor hikes to give a hint of normality, but rates won't move in a meaningful way for years.
More QE in the US cannot be ruled out.I am not sure that there is much of a bubble for "normal" Porsches, to be frank. A really good 993 C2 manual is probably objectively worth (insofar as concepts of worth can be objective) about £30-40k, and prices aren't that far off that, are they?
I don't see anything strange about a 993 costing about the same as a 997.2.
I don't see anything strange about a 993 costing about the same as a 997.2.
Wilmslowboy said:
ORD said:
.... A really good 993 C2 manual is probably objectively worth (insofar as concepts of worth can be objective) about £30-40k, and prices aren't that far off that, are they?
....
Unfortunately really good C2s are about £60K....
Perhaps there is a bit of froth in the market for 993s and 964s, but it isn't utterly bonkers. I don't think I would be jumping ship if I had a 20k mile 993 C2 manual.
fredt said:
Where is the bubble? In credit, globally, and it's not about to burst just yet. And when it does burst the value of your car is probably the last thing you'll worry about.
Our dear leaders around the world really messed up in the last credit crisis, trying desperately to save themselves and their bankster/big business buddies by printing wads and wads of cash. Best we can hope for is to inflate slowly out of this mess, the alternative aint pretty.
Classic cars are just playing catch up with prime real estate imo. Adding 50-60 grand to a mortgage to buy a classic/GT car is fekk all to a lot of people and anyone with any cash will want to get rid of it. So for anyone in either of those situations just mildly interested in cars it's an interesting proposition. Anyway, worst case scenario on a classic, will not be much worse then buying a new car of similar purchase price so it's almost a free punt.
Interest rates will not move in the foreseeable future as that will obviously bring down the castle in the sky. Yes there might well be some very minor hikes to give a hint of normality, but rates won't move in a meaningful way for years.
This is interesting, I think interest rates are low, have been low, and probably will be low for a while, and whilst this has happened historically probably not to this scale.... So we don't know really how it will play out, so maybe people are looking for other places to put money, might as well take it out the house, I'm only paying 2% and Im getting nothing out the bank....but heres the thing, that's speculating and once people think the value might go south, they will be out. So I don't think we need to wait until the next crash to see prices go down, Our dear leaders around the world really messed up in the last credit crisis, trying desperately to save themselves and their bankster/big business buddies by printing wads and wads of cash. Best we can hope for is to inflate slowly out of this mess, the alternative aint pretty.
Classic cars are just playing catch up with prime real estate imo. Adding 50-60 grand to a mortgage to buy a classic/GT car is fekk all to a lot of people and anyone with any cash will want to get rid of it. So for anyone in either of those situations just mildly interested in cars it's an interesting proposition. Anyway, worst case scenario on a classic, will not be much worse then buying a new car of similar purchase price so it's almost a free punt.
Interest rates will not move in the foreseeable future as that will obviously bring down the castle in the sky. Yes there might well be some very minor hikes to give a hint of normality, but rates won't move in a meaningful way for years.
YoungMD said:
No - check out what inflation is now compared to 20 years ago. 20 years ago we had interest rates at 10% inflation not far behind, we are in a very different world now and will be for the foreseeable future
Quite. House prices are ultimately constrained by ability to pay, which is pegged for the most part to incomes. Incomes are not going to increase much, so house prices will grow slowly.YoungMD said:
FrankCayman said:
anonymous said:
[redacted]
YesMy 'buy to let' has increased by 30% in the past 3 years...I can assure you, wages have not increased one little bit.
But just my opinion. If I knew for sure, I'd be a rich man!
anonymous said:
[redacted]
Bit of a contradiction as they did.. :-DWages have never really impacted house prices. Lower interest rates and increased leverage are the drivers, as people only look at the monthly cost, nothing else really. Oh and speculation/placement of cash of course.
But I think we are close to max for the time being; mortgage rates wont go much lower, and most people have already leveraged to the max. From here I can only see extended leverage allowance making much of an impact.
anonymous said:
[redacted]
I think it can happen as long as the government keep propping up the market. Complete blocks of flats are being marketed at/sold to foreign investors and they get their return from renting to people in receipt of inflated housing benefits.The release of pension money has to be having an effect as well. I know there has been stories of people blowing it all on Lambos etc, but a lot of people will have put theirs into the housing market and will accept tiny yields of 2-3% because it is still better than they would have earned otherwise and the capital value is going up.
That is two drivers of demand that don't even rely on income.
Add to that the fact that people can still (cheaply) borrow massive multiples of their income and are willing to because housing has become a one way bet and you can see the case for further growth.
The government will run out of ideas to keep the plates spinning eventually, though, and eventually there has to be some link between incomes and prices. The generation now in their 60s would have bought an average house for 3 times their average income, where as people now have to pay more like 8 times. Not sure how far that can go.
If interest rates do go up that will have the dual effect of making mortgages more expensive and people less likely to invest in property if their bank is paying them more interest. The problem is that the government know they cannot put rates up a meaningful amount because of the current debt levels.
If foreign investors lose interest, the market really would be in trouble, but it is easy for the government to keep it attractive to buy and invest in the UK.
Oh yippee a property market bubble thread has emerged!
I think everyone really knows that the UK property market is a bit of a bubble but as most of us own property we try to stick our heads in the ground. From my perspective:
- There is lots of cheap money around
- Interest rates are at all-time lows and have been for some time
- The UK property market is well known and easily accessible and has had a prolonged period of growth
- Demand for housing currently outstrips supply
- Changes to the UK pension system have given the grey haired brigade lots of cash to invest quickly and as a fairly risk averse group they like buy to let properties
BUT
- The UK birth rate is well below 2 which means that the domestic rate of population growth would tend to a reducing population in the long term - in the short term this is being overcompensated for by immigrants who tend to have larger families and of course themselves also lead to an increase in demand for housing. As we know there is a lot of pressure in the UK to address the immigration "crisis" which would in itself lead to a reduction in the demand for housing in cities
- Interest rates will rise, maybe this year (probably in the US this year) and given how people have stretched themselves with recent mortgages at these interest rates there will be some trouble when this happens
- Yields on buy to let properties are really terrible. People only buy now for the expected equity upside (and partly because the yield on everything is terrible at the moment), combined with the recent changes to the tax law regarding the buy to let market (which will in itself have a dampening effect on the market), any fall or even a prolonged level of stagnation will lead to people exiting the buy to let market. With rising interest rates and the changes to the tax law this could in itself be leading to a "perfect storm"
- Given the toppiness of the housing market and the risk that this could pose to the wider economy, combined with the absurd income / loan ratios currently, mortgage lenders will increasingly find themselves being pushed to provide more stringent means testing by the BOE
- There is more "fast money" in the UK market than ever before. Some of this will be gained from illegal sources and others will come from overseas investors that were looking to get their money out of the country (China / Russia in particular). Now that the pound has appreciated and London property price growth has started to fall the smart investors out there will start to think about selling. If price growth falls away all together or we start to see falling prices then - guess what - we will see overseas investors panic selling which could lead to another "perfect storm"
So I think that property investments now do not have a very certain mid / long term future. I need a house for my family and I so I bought one, but I will be putting any spare cash into my cars as when they fall in value I can still thrash them down the track / road!
I think everyone really knows that the UK property market is a bit of a bubble but as most of us own property we try to stick our heads in the ground. From my perspective:
- There is lots of cheap money around
- Interest rates are at all-time lows and have been for some time
- The UK property market is well known and easily accessible and has had a prolonged period of growth
- Demand for housing currently outstrips supply
- Changes to the UK pension system have given the grey haired brigade lots of cash to invest quickly and as a fairly risk averse group they like buy to let properties
BUT
- The UK birth rate is well below 2 which means that the domestic rate of population growth would tend to a reducing population in the long term - in the short term this is being overcompensated for by immigrants who tend to have larger families and of course themselves also lead to an increase in demand for housing. As we know there is a lot of pressure in the UK to address the immigration "crisis" which would in itself lead to a reduction in the demand for housing in cities
- Interest rates will rise, maybe this year (probably in the US this year) and given how people have stretched themselves with recent mortgages at these interest rates there will be some trouble when this happens
- Yields on buy to let properties are really terrible. People only buy now for the expected equity upside (and partly because the yield on everything is terrible at the moment), combined with the recent changes to the tax law regarding the buy to let market (which will in itself have a dampening effect on the market), any fall or even a prolonged level of stagnation will lead to people exiting the buy to let market. With rising interest rates and the changes to the tax law this could in itself be leading to a "perfect storm"
- Given the toppiness of the housing market and the risk that this could pose to the wider economy, combined with the absurd income / loan ratios currently, mortgage lenders will increasingly find themselves being pushed to provide more stringent means testing by the BOE
- There is more "fast money" in the UK market than ever before. Some of this will be gained from illegal sources and others will come from overseas investors that were looking to get their money out of the country (China / Russia in particular). Now that the pound has appreciated and London property price growth has started to fall the smart investors out there will start to think about selling. If price growth falls away all together or we start to see falling prices then - guess what - we will see overseas investors panic selling which could lead to another "perfect storm"
So I think that property investments now do not have a very certain mid / long term future. I need a house for my family and I so I bought one, but I will be putting any spare cash into my cars as when they fall in value I can still thrash them down the track / road!
anonymous said:
[redacted]
That is what they said in 1995 
Inflation and wage growth lower now admittedly - but not by huge margin - and demand strong. Major supply issues too.
Who knows? I wish someone did - and would tell me.
PS should add average property price in UK has risen fourfold over last 20 years, not tenfold. That seems a bit more achievable going forward, though still an uphill struggle.
Edited by drmark on Wednesday 12th August 17:14
anonymous said:
[redacted]
No, I don't think it can carry on at anything like that pace. What I meant was that the government has artificially boosted the market with low interest rates, loose lending policy and high housing benefit. Because this has gone on so long, people take the view that house prices are a one way bet and speculation takes over, pushing prices even higher than the government wanted them. It will probably continue for a bit longer with the momentum already gained, but it can't carry on indefinitely otherwise there won't be enough money in the world to fund UK housing stock!My view is that the government wanted high house price growth to create an illusion of wealth during the recession (people on tiny salaries feeling rich because their houses are worth so much), but now the prices have gone too high and they are actually one of the biggest problems in creating any type of sustainable recovery.
A lot of people I know who are into buy to let don't care about the yield at all because their investment is going up 15% a year and they believe it will continue to do so.
When prices eventually do come down, no one will want to touch housing as an investment with a sh***y stick for a few years and then it will all start again. The cycle is just the same as it always has been, but it has just lasted longer and gone higher than ever before because of the government policies being more extreme.
kingston12 said:
No, I don't think it can carry on at anything like that pace. What I meant was that the government has artificially boosted the market with low interest rates, loose lending policy and high housing benefit. Because this has gone on so long, people take the view that house prices are a one way bet and speculation takes over, pushing prices even higher than the government wanted them. It will probably continue for a bit longer with the momentum already gained, but it can't carry on indefinitely otherwise there won't be enough money in the world to fund UK housing stock!
My view is that the government wanted high house price growth to create an illusion of wealth during the recession (people on tiny salaries feeling rich because their houses are worth so much), but now the prices have gone too high and they are actually one of the biggest problems in creating any type of sustainable recovery.
A lot of people I know who are into buy to let don't care about the yield at all because their investment is going up 15% a year and they believe it will continue to do so.
When prices eventually do come down, no one will want to touch housing as an investment with a sh***y stick for a few years and then it will all start again. The cycle is just the same as it always has been, but it has just lasted longer and gone higher than ever before because of the government policies being more extreme.
I think this is the traditional economists view currently, another view is that there has been a fundamental shift in the economy, this shift is from high, low interest rates, low, high inflation, to a more steady low interest rate, low inflation environment, sure we will see rate rises and property may go up slowly, but an emerging economic view is that this may well be a step change.My view is that the government wanted high house price growth to create an illusion of wealth during the recession (people on tiny salaries feeling rich because their houses are worth so much), but now the prices have gone too high and they are actually one of the biggest problems in creating any type of sustainable recovery.
A lot of people I know who are into buy to let don't care about the yield at all because their investment is going up 15% a year and they believe it will continue to do so.
When prices eventually do come down, no one will want to touch housing as an investment with a sh***y stick for a few years and then it will all start again. The cycle is just the same as it always has been, but it has just lasted longer and gone higher than ever before because of the government policies being more extreme.
House price growth for the next 20 years like the last 20 years is in no forecast, of course to some degree house prices are very loosely linked to wages, all of the elements mentioned above that have driven house prices may change, but slowly and I think now the UK housing market is more in line with Europe. I think houses are a reasonably safe place for money although if i wanted a big return I don't think they are the place I would put my money........ Maybe a £40k 964 in need of some work
Who knows, but I'm not investing right now, that's for sure! There was a time when they were clearly undervalued compared to classic Ferraris, Lambos etc (for example you could buy a mint original 2.4S for £20K in 2002, which I did and a 2.7 RS was about £50-60K which I wish I'd done!). Then people finally realised they were quite desirable and prices became more in line with what you might think they should be worth. But now prices are just plain stupid! I'm sure at some point the market will collapse, either because they simply go out of fashion again or are not considered to be a good investment. I always think of Warren Buffett's mantra - buy low sell high. Well this seems like buying high to me.
uktrailmonster said:
But now prices are just plain stupid! I'm sure at some point the market will collapse, either because they simply go out of fashion again or are not considered to be a good investment. I always think of Warren Buffett's mantra - buy low sell high. Well this seems like buying high to me.
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