Property Network says consumers fear another housing bubble

If property values rise quickly then owner occupiers will complain. If values don't increase back to the levels in 2008 the people who purchased at that time may well be trapped into expensive mortgage deals and negative equity. It is impossible to please all the people of the time.

True enough, but I worry the government is manufacturing a bubble by not building enough new homes while watching demand increase (certainly in London) - pleasing property owners is a great election tactic, and there are rumours of Mr Cameron calling an early election. Those waiting for house prices to get back to their 2008 values may well see it happen, only for it them to drop again once a new government takes over.

I'm not sure I'd be worrying about interest rates just yet though.

Prices increase because demand significantly outstrip supply, then this is not a bubble, this is the market adjusting.
Certainly in London this has been a long term trend. Fact is, there has been no price crash in London.

For a bubble the question to ask is whether prices are increasing beyond any reasonable explanation from the fundamentals: It hardly seems to be the case.

Reply to the comment left by "David Carlisle" at "01/10/2013 - 09:45":

The worry on interest rates isn't so the base rate, not for the next few years anyway, it's whether other lenders will follow the lead of Bank of Ireland and West Brom and hike up tracker margins. See the linked article below.
.

Reply to the comment left by "Romain " at "01/10/2013 - 09:54":

This supply and demand argument is over simplistic and misses the elephant in the room. To ignore the other significant factors is very wrong.

Pre credit crunch the reasons for the rapid house price rise was too low interest rates, irresponsible lending and mass fraud. In simple it is the conditions on the ground for funding and not simplistic supply and demand that determine a price ceiling.

Today we have even lower interest rates, schemes to loosen lending criteria and the beginning of fraud to creep back in (just look at all the property spam emails suddenly returning).

The debate shouldn't be about creating another housing bubble as we still have the existing one with a huge range of measures to keep it inflated and stop prices falling to normal levels.

There was also a price crash in London in 2008-09 before all the foreign investors started piling in to place their cash in property as a safe haven.

I think hard to argue that prices in London are not mostly driven by the desirability of the location making demand outstripping supply...
Foreign investor did not wait 2009.

@Gavin

*Pre credit crunch the reasons for the rapid house price rise was too low interest rates, irresponsible lending and mass fraud*.

Well said! Only yesterday I received an email inviting me to a meeting to learn how a lady had built a substantial property portfolio with ... wait for it ... NO MONEY, NO TIME, and NO KNOWLEDGE!

I must be a really bad investor. We've been involved in property for ten years and its taken ALOT of money, ALOT of time, and ALOT of effort.

Maybe I should pop along to the meeting to find out what a numpty I've been all these years?!

Anyway, I've just posted on Property Tribes that a new report claims house prices are going to rise 25% in the next five years ....

DEEP JOY ... NOT!

http://www.propertytribes.com/house-prices-rise-25-five-years-claims-new-t-9165.html

The social housing sector is undergoing a period of significant change. According to The housing cliff, a new report from Moat housing association, a combination of welfare reforms and changes to subsidy could seriously affect its ability to build new affordable homes from 2015.

Moat says the switch from capital to revenue subsidy under the Affordable Homes Programme, which creates a greater reliance on housing benefit to fund new developments, would be manageable as a standalone policy. However, when combined with welfare reforms such as the household benefits cap, overall welfare spending cap, social sector size criteria and the switch to direct payment under universal credit – all of which could reduce that rental income – it says the sector is entering a climate of increased risk that could unnerve investors and spell disaster for future affordable housing supply.

Read more on The Guardian website http://www.theguardian.com/housing-network/2013/oct/01/affordable-housing-cliff-2015

Ben Hood, one of the people surveyed by Property Network, said, “I have just about enough money to buy right now but I want to wait a couple of years. If interest rates go up a couple of per cent then I’d struggle to pay my mortgage. I don’t trust this government to think about long term effects of their policies.”
--------------------------------------------------
All governments only have a 5 yr view and I dont trust this or any of them to think of the long term effects of their policies. Their No1 aim is to remain in power and they will adjust their policies accordingly to ensure they get re elected. The Help to Buy scheme is a classic example of this.

Sometime their policies will thank goodness tie in with the countries needs ( as they see it) but will only get through if it is also fits in with their own political timescales. It is important when investing ( especially when you have a BTS strategy) to keep one eye on the housing cycle and one eye on the political cycle.

It is my view that if you invest in a more long term high yield cash flow BTL sustainable strategy you can iron out the interruptions of these man made political cycles and the housing bubbles and subsequent bursting of them do not impact on your investment model. In short you just ride the waves and ride out the storm.

The current shutdown in America is a stark reminder of the forces of political self interest at work

Reply to the comment left by "Romain " at "01/10/2013 - 09:54":

This is not a bubble but certainly the making of a bubble. These are strange times.....firstly interest rates held artificially and damagingly low for far too long, turmoil in Europe seeing foreigners plough money out of euro based investments to London property...and now the government inventing schemes to allow people to participate in a property market which without assistance would have been out of their reach. That is hardly the dynamics of a true functioning market. After three tyears in Switzerland...and now only just returned to the UK...I am looking to buy a residential property and a buy to let....but I do so having accepted that the cost of finance will probably increase faster and higher than most people expect. The BoE could not have had a better track record in calling the market wrong at all turns....to suddenly believe what they say about rates staying low for another three years would be naïve indeed.