Also, a lot of mortgage lenders have returned to the "safe" lending schemes they operated in the mid-90s of requiring 20 - 25% deposits and low multiples of wages. The riskier 95 - 110% schemes which were commonplace this time last year have disappeared. This does menas that, until prices have finished falling, (and imo they have a long way to go and will take time doing it) is going to make it hard for people to enter at the bottom.
The big falls are in the buy-to-let market, a legal scam which has inflated prices ridiculously in the last 15 years. The wheels have come off and now people are selling for whatever they can get, which is pulling all the property in those areas down.
I don't wish ill on people but I'm glad buy-to-let has fallen apart as it was a disgraceful practice that should have been, if not outlawed, taxed into unprofitability. keep to the Fen Causeway
Buy-to-let is an arbitrage between the rent a property commands and the mortgage payments required to buy it. If the mortgage payments are low relative to rents, buy-to-let will lead to rising demand for building purchases and higher demand for credit. It is quite easy to nip such a bubble in the bud by slightly increasing interest rates so that the property prices don't increase too much and the demand for credit is curtailed.
If, instead, interest rates are kept low or are even lowered further, then property prices start appreciating at double-digit rates and within a couple of years, when the trend has established itself, it becomes more profitable to buy property to resell it rather than to live in it or rent it.
I have no sympathy for buy-to-letters but they were not responsible for the bubble lasting 10 years, only for seeding it. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
What helped this was that multiple buyers became preferred bidders via estate agents. When I sold my flat it never went on the open market as it was bought by a buy-to-let-er who was on their contact list.
Now they are making losses cos the rents aren't equalling the mortgage costs, and are having to sell at a loss. Good, I hope they all lose a lot of money. But I would have preferred such a distortion had been prevented in the first place. keep to the Fen Causeway
Home Truths
which I have yet to digest fully.... "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
