oh dear™: UK house market is ‘heading for crash’

[DimPrawn]

Dense population isn't necessarily going to hold the market up. Yes in the long run it is a driving factor, but Japan also has a dense population yet managed to have a 14 year slump in house prices.

"Japan suffered one of the biggest, and best documented, property market collapses in modern times. At the market's peak in 1991 all the land in Japan was worth about £10 trillion, or almost four times the value of all property in the United States at that time. Then came the property crash, after the Japanese central bank finally moved to raise interest rates. House prices plunged into a 14-year slump, from which they have only recently started to recover.

In 2005 Japanese property was worth less than half its 1991 peak, meanwhile un-mortgaged property in the United Kingdom has more than tripled in value, to reach a total value of around £3.6 trillion and debt secured on UK property has risen to around £1 trillion, both all time highs. Private homeowners were amongst the hardest hit. In Japan's six largest cities, residential prices dropped 64% between 1991 and 2004. By most estimates, millions of homebuyers suffered substantial losses on the single largest purchase of their lives.

Their experience contains clear warnings for UK homebuyers. One is to avoid the sorts of temptations that appear in over-heated property markets, particularly the use of risky or exotic loans to borrow beyond one's means e.g. extended lending multiples, interest-only and 125% mortgages. Another is to avoid property that may be hard to sell when the market cools.
"

There's a difference here. During that time almost no immigrants entered Japan and the population is falling.

In the UK, the population is booming, driven almost entirely by massive immigration. There is no end to this immigration. The houses being built in the UK are not enough to sustain the current population, let alone the immigrants.

Therefore, completely unlike Japan. Boomed forever. If you can buy a one bed flat for under a million next year, do it. It's cheap at twice the price.

[DBA_bloke]

There's a difference here. During that time almost no immigrants entered Japan and the population is falling.

In the UK, the population is booming, driven almost entirely by massive immigration. There is no end to this immigration. The houses being built in the UK are not enough to sustain the current population, let alone the immigrants.

Therefore, completely unlike Japan. Boomed forever. If you can buy a one bed flat for under a million next year, do it. It's cheap at twice the price.

... and the population in Japan would have fallen dramatically (so no buyers), as millions topped themselves to save face at the dishonourable raising of interest rates "For the Emperorrrrrr....!"

[beaker]

There's a difference here. During that time almost no immigrants entered Japan and the population is falling.

In the UK, the population is booming, driven almost entirely by massive immigration. There is no end to this immigration. The houses being built in the UK are not enough to sustain the current population, let alone the immigrants.

Therefore, completely unlike Japan. Boomed forever. If you can buy a one bed flat for under a million next year, do it. It's cheap at twice the price.

Mmm... I think immigration can and will slow. Once the UK becomes much too expensive for the average person/immigrant to have a decent standard of living they will leave and stop coming here. Thousands of brits are already leaving for Oz, Canada, NZ, France, Spain etc. I know they're all being replaced with Poles, but that's only because they can have a better life here than in Poland and there is no limit to immigration.

[M_B]

There's a difference here. During that time almost no immigrants entered Japan and the population is falling.

http://www.stat.go.jp/English/data/handbook/c02cont.htm

This website indicates that whilst the growth in Japans population is declining, it has always shown a growth (except for 2005 which was long after the property crash).

Therefore the only real difference is immigration.

[beaker]

http://www.stat.go.jp/English/data/handbook/c02cont.htm

This website indicates that whilst the growth in Japans population is declining, it has always shown a growth (except for 2005 which was long after the property crash).

Therefore the only real difference is immigration.

Do immigrants buy houses? I'd say most of them rent and rental prices are flat so that does not indicate increasing demand for property.

I think the boom is less about immigration and more existing homeowners getting access to cheap credit to upgrade to a bigger house in a better area etc. Sure immigration is highest in London, but most immigrants aren't living in the highest priced and fastest appreciating areas...

[Francko]

Do immigrants buy houses? I'd say most of them rent and rental prices are flat so that does not indicate increasing demand for property.

I think the boom is less about immigration and more existing homeowners getting access to cheap credit to upgrade to a bigger house in a better area etc. Sure immigration is highest in London, but most immigrants aren't living in the highest priced and fastest appreciating areas...

Shhh.... you are breaking all the sand castles....

Immigration is responsible for all the problems. That's it.

[sasguru]

In any case the Poles aren't immigrants. They are exercising their rights as EC citizens to work in an EC country.

[M_B]

Do immigrants buy houses? I'd say most of them rent and rental prices are flat so that does not indicate increasing demand for property.

I think the boom is less about immigration and more existing homeowners getting access to cheap credit to upgrade to a bigger house in a better area etc. Sure immigration is highest in London, but most immigrants aren't living in the highest priced and fastest appreciating areas...

Well I'm not sure that immigration argument holds water either. The point with the Japanese crash is that population was dense and was increasing thereby increasing demand. This same argument is also held for the British market remaining high, yet the Japanese experience would suggest this is not true.

[AtW]

In any case the Poles aren't immigrants. They are exercising their rights as EC citizens to work in an EC country.

If it's not tourism then it's immigration.

[Bagpuss]

Why do people think there is inelasticity of demand wrt house prices?
The limiting factor is how much you can borrow, prices will have to respond to the credit crunch