Where are house prices heading in 2007?

It’s crystal ball time again: when the experts put their necks on the line by predicting what’s going to happen to house prices next year.

If the consensus is right property prices will receive another boost this year rising an average of 5%.

Savills, the estate agent, is one of the most optimistic commentators forecasting 7% growth in 2007. At the other end of the scale is the Royal Institution of Chartered Surveyors, with a 3% rise.

We've all heard the reasons that economists wheel out to justify why prices will continue to go up. There are too few new homes being built so there is more demand than supply they say; borrowing costs are still low by historical standards; and the desire to own property is ingrained in the British psyche.

These are sound arguments, but we all know it doesn't really make sense. Wages have been rising much more slowly that house prices so surely something has to give. I bought in London

just over a year ago and since then house prices have risen about 10%. Over the same period my wages, in line with the national average, have risen in line with inflation – 2% to 3%.

The result: if I wanted to buy the same house today I couldn’t afford it and there’s definitely no chance of me moving to anywhere bigger.

But at least I've got my foot on the ladder. Think about those poor first time buyers who have strenuously saved up a deposit only to find that it won’t even get them a loan for a shoebox.

How much longer can this go on?

Comments

[Bemused]

An interesting article. You say that "economists say there are good reasons why prices will continue to push up, no matter how absurd it seems." I am doubtful about this advice and I offer my own analysis:

House prices rise because people believe they will.

It's that simple. Of course, the cheap loans available for the last five years have helped as well. I used to think that the market would behave rationally and slow down but there isn't any sign of this yet.

As long as people sincerely believe that prices will keep rising, they will keep borrowing more and more. I used to think that the market behaved rationally but now I supect that there is another five or ten years of respectable growth before conditions change.

It will be fun listening to the "it's not fair" complaints when the market does turn.

[John]

There are several additional factors which need to be taken into account in the wage increase vs house price inflation question, which add fuel to the rise: (1) the move over the last 10-20 years to 2 earners in a family, (2) fewer children/ household, (3) inheritance of property a recent phenomenon, (4) the recent start of multiple folks purchasing a single property (siblings &/or friends), (5) > 3 x earnings loans being more affordable with no dip in standard of living partly due to cheap imports (China et al.), (6) future fuel includes longer term mortgages i.e. > 25 years (as in some other countries)

John

[J Hughes]

I think a lot of the market is'hyped up'.
It may be growing in London which pushes up the average elsewhere in the country.
my experience of the market in Wales is that it has gone flat.(pardon the pun) Many houses have been on the market for a long time without selling. The houses that are selling are often going well below the asking price.
I think that the market is turning and that prices are lower or static in my region.
I see no hope of higher prices next year.
London is probably faring better. However, the higher they rise the lower they fall if the market turns there.
Caveat emptor.

[Property Search Now - The International Real Estate Guide.]

There are signs from many surveys and reports that the property market in London is starting to level out. Except in areas of high demand like Kensington, Chelsea and Knightsbridge.

Much of the demand for property in London is also from international buyers so UK wages are often not an issue for them.

For 2007 Scotland would be our top tip property in the UK.

Property prices there have been rising dramatically over the past few years. Plus Scotland is still catching up, in terms of house prices, with many places in England so there's great potential for continued growth.

However, at present, there are still very good deals to be found in Scotland if you look around.

[Craig Watkins]

House prices are now unaffordable. The house I purchased for just short of £40,000 7-8 years ago is now worth around £100,000.

In the meantime our family income has not increased that much that we could afford to purchase the same house.

The market will fall at some point and millions of people will be left with negative equity.

Unfortunately in some cases this will be combined with some people also having spiralling debts due to living in a society being driven by finance.

[Julian H]

Interest rates being "low by historical standards" do not result in price increases from hereon. The movement in interest rates should affect the movement in house prices, and interest rates are moving upwards (thus meaning prices should move downwards). Of course there are other variables that affect prices - such as unemployment and inflation. Again, both moving upwards means house prices moving downwards. There is also an element of truth in people's perceptions altering how much they're prepared to spend, and thus altering demand. When people wake up and realise that their substantial debts are not sustainable then the chances of this asset bubble declining (if not bursting) are even greater. I'm one of the pitied 20-somethings that cannot afford to buy any kind of reasonable flat; I am happy to rent for now though as I feel prices will decline by at least 5% in some areas before long.

[Tony]

I have read the other reader comments and they all bear logic.
The thing is, this market does not, and many of the so-called experts have a vested interest in a rising market (namely, their income).
We are going down the same road as America, they are just a bit further ahead of us in high equity release from property & personal debt credit cards, etc, used for personal consumption & stock market speculation.
Where is there property market now? Going down is the answer.

[Melvin]

House prices in the USA are faltering even before the economy does. As the USA is in hock to the rest of the world, it is only a matter of time before the US economy has a correction. Then house prices in the UK will definitely fall as employment becomes less secure.

[Steve Clements]

One item that I have heard little about in relation to house prices is the sellers packs coming in next year. How many houses are sold after a potential seller gets an estate agent in just to give an idea of how much the property is worth and then goes on to put the house on the market? This will not happen any more. The result being that there will be a lot fewer houses for sale and this can only lead to higher prices.

[Colin Mackenzie]

The problem is that there is no such thing as 'the' housing market. The market for, say, a £3 million house within a thirty minute train ride from Canary Wharf can be expected to be a lot more rosy than that for a £650,000 house on a main road.
The fact is that some 20% fewer houses came to the market last year. Why? Maybe owners have held back from trading up because the differential has become less affordable? This results in a shortage of supply, meeting with continuing demand from capital wealthy buyers, creating an even greater differential.
We witnessed a spread of up to 40% in the value of a single house in 2006.
E.g. A selling agent suggests £1.25m for a £1m house (he isn't going to get the instruction by being honest!). The owner suggests that he might sell if tempted by an 'exceptional' price of, say, £1.35m. Given the shortage, he might just get it (there have been several examples in 2006). If it doesn't fly, the house is marketed at £1.25m. If unsold for six months plus, it drops to below £1m.

2007 will see a surge of available houses post-May - even more before July, when HSPs come in. Asking prices are unlikely to falter - but sale prices actually achieved will reflect the tendency for house owners to be trading down, not up (except for those with City bonuses to spend, that is).

[M.Goodman]

House prices and buyer confidence will continue to rise in the early part of 2007. However, inflation is marching ever upwards which in turn will lead to higher wage demands as the £1 in our pocket today is worth less than it was a year ago.
Inflation will have to be brought under control with the Bank of England raising interest rates. This in turn will dampen the property market as mortgage repayments are missed and repossessions increase, with more property coming onto the market for the wrong reasons.
First time buyers will be even less likely to enter the property market as confidence wanes: the life blood of any robust housing market.
Therefore, property prices will start to soften and ease back towards the end of next year.
Buyers beware!

[Dave London]

None of the explanations cited by 'experts' as to why house prices will continue to rise into 2007 can possibly explain a trebling of house prices over 10 years. The truth is, speculation of further rises has fuelled this boom and once financial constraints prevent rises living up to expecations, we'll see an equal hurry to get out of the housing market. The question is, when might this occur? Judging by the number of new exotic mortgage products being wheeled out to keep the momentum going, that point cannot be too far away.

[mover and shaker]

I have recently marketed my property in Dorset. After 6 weeks & 2 viewings, my agent has suggested that the property is overpriced by 10% (despite them valuing the property in the first place and my settling for a slightly lower marketing price to get the place sold). When questioned over this suggestion, their advice was that there is a flood of 2 bed, 2 bath apartments at the moment and they are suggesting to all their vendors that they reduce their asking prices. Looking at prices in Dorset, they seem stagnant and even the millionaire's paradise of Sandbanks is still marketing the same properties after several months. Form your own opinion

[Derrick J]

As at the end of June 2006, there were 767,600 mortgages relating to buy-to-let, more than double that in June 2003. These properties, owned largely by individual investors - never come back on to the market, thereby reducing the amount of properties available for sale. As more and more people are buying homes for investments and renting them out (nest eggs many people call them), less properties are available for the ordinary person wanting to get on the property ladder.
Will the bubble burst? Probably not as many property investors have been in the market for many years now and have probably on average 50% equity to value. For many, the rental income more than covers the mortgage repayments and in 15 years time, there will be no mortgage left to pay and the rents keep coming.

[Brian Roberts]

I live in Hampshire. The picture is clear, there is a chronic shortage of supply. In Winchester there are currently 29 3-bedroom properties below £325,000 on the market. This time last year the figure was over 80. This picture appears to be replicated all over the South East. The demand for housing is very price inelastic. In the short term prices are set to rise.

However, the factor that could cause a sharp downward correction in house prices is the increasing investment element in the residential market. Increasing interest rates are resulting in lower yields on investment properties, and will lead to sales in this market segment. A dumping of properites and distress sales by investment owners could lead to a market collapse.

[Patrice]

Of course the estate agents are going to predict growth in house prices next year. Why? More commision for them, and the more they brainwash the public (which they have successfully done over the last 9 years), people are still going to fall for this false hype.
Good luck to you all, but all I can see is a long-awaited correction of house prices in the UK for 2007. Come buy a real bargain in Florida! Now's the time, don't wait.

[John Kidd]

As a regular visitor (I live in Australia) to England, in particular to London and Devonshire, I am gobsmacked by the high asking prices for houses and apartments there.
Apparently a typical three bedroom suburban semi of about 100 square metres now sells for an average 300,000 pounds or thereabouts.
Incidentally my knowledge of economic history indicates that many such houses were built pre-World War 2 when they sold as new for 500 pounds or so. Although general inflation since the 30s has been high indeed (about 50x?), and salary levels have increased at about 100x, that is far below the 600 times increase in house price inflation in that period.
I suspect that in most countries other than England such statistics would suggest an economic bubble waiting to be deflated or even (and I hope not for the sake of those already heavily mortgaged) burst.

[mark loveday]

Property prices have risen almost as fast as my disrespect for selling agents! They have hyped prices for years and sadly it's worked. Sickeningly, they have been rubbing their hands together with a greed that has resulted in precluding many from buying a house at all, which will inevitably result in thousands of desperate people facing negative equity and agents themselves losing their jobs.
I have some sympathy for the former but absolutely zilch for the latter. It's going to get very ugly...

[Peter]

The UK will follow the US with a housing recession. Remember the 1990-93 housing crash - it was not so long ago, and this cycle is well overdue for a serious correction. Will it be any different this time? 30-50 per cent off peak prices in 2007-8.

[Canh Humphries]

House prices are likely to go up next year as much as it has gone up in 2006. This is because people still have plenty of money to spend which is proven in the last three days' sales since Christmas. Affordability may be an issue but people will invent new ways of buy properties such as buying together with friends or even strangers. Also some lenders have been willing to lend first time buyers five times their salaries. Meanwhile globalization will continue to keep food, shoes, and clothes prices down so that people can spend the money saved toward the mortgage.

In conclusion unless the GDP growth falters and interest rate goes up by another half a per cent house prices will continue to rise significantly in 2007.

[shamrock]

The test of `buying better than renting' depends on comparing the rent-per-month against the interest-only payments on a mortgage.

Where I live in Edinburgh I can rent a flat for 500 pounds that would cost 170000 to buy. With the best possible mortgage (5%) for this price, I'd be paying out 700 pounds a month *just in interest* - before a single penny of the capital was paid off. So by not buying, I can save 2400 *extra* per year towards capital repayments (on my future flat) over what I'd pay off by taking out a mortgage (i/o or repayment).

Of course my calculations only work if there is no capital appreciation...
And despite the huge oversupply of rental property in Edinburgh, house prices keep on climbing up and up. But this has all the hallmarks of a pyramid scheme. Pity they don't teach this stuff in school!

[David]

If we were talking about any other product, these kinds of increases would be viewed as near hyperinflation. These ludicrous prices will inevitably be corrected by the market, and if the correction is big enough, it will be termed a crash. In my opinion, it's not a question of "if" the bubble will burst, but rather of "when".

[Chris Bradley]

House price inflation is simply insane. For the vast majority of the home owning public, there is no tangible benefit. Afterall, your house may have doubled in value in the last five years, but so has every other property. Whilst for those who have been unable to get onto the property ladder, they are simply left with little hope of owing a property. Long term, surely this cannot be good for society. I suspect if house prices do come down, it will be with an almighty crash.

[Chris]

When you have people that want to turn dodgy money into a nice rental stream of clean money (and I don't mean the average buyer), then we will continue to see silly prices paid for what are obviously uneconomic rental yields. Anyone with an ounce of sense would surely rather put their money into a high yielding bank account or into shares that can be easily liquidated, rather than bricks and mortar that are only worth "what someone else is willing and able to pay".

[Sukh]

House prices still will rise, particulary in London.
1) More Single People i.e more demand (Thanks Labour for removing benifits for being married couples)
2) More immigrants coming from eastern europe increasing demand for accommodation(Thanks Tony Blair)
3) More households with both couples working (more income)
5) People living longer in their own homes
6) Not enough housing being built because of planning restrictions
7) The weekly reports reporting the rise of property prices encouraging people to take the plunge to invest before it's too late
8) Interest (Which are low and unlikely to rise much further) only costs of a mortgage are still favourable against rental costs

[andy anderson]

I sold two flats in Notting Hill in 2003 thinking prices had reached the peak. I re-invested the money in Bulgarian property projects over the past 3 years - but have achieved the same growth as if I had just kept the flats in W11 and collected the rent. Surely there is something wrong with our economic system whereby one is rewarded for no effort ?

But my question is, did anyone predict the house price collapse of the late 80's - and if so can we hear from them now?

My view is the prices rise as there is a supply of money - i.e. as long people can borrow. As long as banks lend ridiculous amounts then prices will rise. However, should interest rates rise significantly for whatever reason the bubble will burst.

[firstline]

With 13 years experience in the private rental market , i am of the opinion that price trends are down , not up.
There are hot spots , but i know some agents who have 50 to 100 rental properties on thier books they cant rent.
This happened in 1993 and i remember prices dropping 10-15% soon after.As soon as landlords bail out watch this space!

[MacK]

One of the underlying problems with property prices is that almost every commentator is in a sector that has a vested interest in property prices rising:

Estate Agents -- what happens to the vast flock of rude, windsor knotted youths when prices slump -- they are out of a job. I have spoken to estate agents from other countries, the US, Ireland, etc. who find themselves working in the UK, and they are consistently astonished at the lack of skill or ability of most UK estate agents. The perceived reason is that in the current market, any idiot can sell property. Come a downturn though and there will be a shakeout.

Mortgage banks -- most of the profit in the mortgage business comes when or shortly after the mortgage is written. The banks need the market to stay strong, because if the market slumps the profit stream dries up, while the costs side (repossession soars.)

Journalists and newpapers -- some of the most expensive advertising is in the property supplements -- the Times sells multi-page adds to all the major estate agencies in its poprty supplement weekly, ditto the Evening Standard and the other papers. Journalists and editors of property sections know this -- is it surprising that none will antagonise the broad property sector.

Homeowners -- well only property inflation can support the home-equity loan (equity withdrawal or second mortgages) that have allowed many UK (and US) homeowners to spend the gains in their property values.

Economists -- do not make me laugh. I have employed professioanl economists, they can be obtained to say pretty well anything. Almost no economist publically comentating about the property market does not work for one of the groups with avested interest in the market going up -- the mortgage banks, the major property developers, the big estate agency groups . . . what would you expect them to say

[Matt]

"House Prices are matter of opinion whereas debt is real"
-Mervyn King

Three points:

1. The "pundits" predicting rises are those with vested interests in a rising market.

2. The banks create new money every time a mortgage (credit) agreement is signed (i.e. banks are not borrowing money to lend you money; they are licensed to CREATE money with your signature on a credit agreement).

This means that it is in their interests to have house prices as high as possible because:
a) The value of the mortgage adds that value to their asset ledger;
b) The interest payments over the period turn a comfortable profit;
c) If you don't "pay back" the "money" they keep the deeds to the property.

2. Rising house prices is a zero-sum game in most cases. If 'your' house rises 10% in value, an equivalent house has done the same. Where's the "gain"?

3. Consider this before you go and get an Equiry Withdrawl Loan (with which you give the bank an opportunity to create more money and lend it back to you at interest).

Happy New Year!

[Ben]

I think banks and building societies are trying hard to sell the idea of 'OWNING a house' to first time buyers. Most people do not think that they don not actually 'own' a house when they are still repaying mortgage. I think the property price will continue to rise as long as the banks are hard selling different mortgage products. There will be a time though when reposessions rises and the banks eventually become very cautious about these products and prices will be adjusted.

Afterall, this economy is about big fish making money. The banks will still make heaps of money from mortgage payers, but when they cannot keep up with payment, we will all see the consequence.

Any economy is in cycle. This property boom has been a long and steep rising curve so far. For property investors, it is wise to start selling, cash in and invest in other places or other investment products.

[Moyra]

I believe that prices will continue to rise. The reason? Most of the decent, family-sized housing stock is owned by older people (whose children have left home) who see this as their pension. They don't need to sell, and in any case would rather live on a pittance of a pension and retain their family home, which they see as the key to passing wealth onto the next generation.

Few family sized homes are being built - even in low density areas most new-build dwellings are flats. We are building a lower rung of the housing "ladder" for the next generation to live in. While families live in flats, baby boomers are luxuriating in space they don't need.

It will take more than a quarter percent increase in interest rates to reverse this trend

[Simon Bond]

House prices will continue to rise as demand will exceed supply

[Tony Fellows]

There is a dire shortage of suitable housing in the UK which is not helped by unfettered migration. Add to this the ease of credit made posible by the banks and this all equals rising house costs. The banks particularly would not want a housing crash - and they basically control the money through the central authorities, so the doomsayers are wrong about a housing crash.

[Steve Milner]

I have recently sold a buy-to-let flat as I can make more money off the profit than I could off rental income.
I had to drop the price by over 10% to get a quick sale (still took 6 months).
I would like to sell more but am unhappy about paying too much CGT.
This is the only way to make money from the housing market. For everyone else an expensive housing market only devalues the money we earn. When the crash happens it will happen suddenly like it did before. And nobody will be able to get out quick.

[Phil]

It is not just affordability that is pushing up house prices. Prices are being pushed by the costs involved in new developments.

Since PPG3 was introduced in 1999, there has been a concept of "planning gain" in return for an element of "social housing". For example, a local authority will grant planning permission for 100 houses if the land for 50 of those is "donated" to the local housing association. As an incentive for the developer, the government has increased the density of housing. However, this has meant that the average dwelling is SUBSTANTIALLY smaller than the comparable ten years ago. Thus the ten year old equivalents are being sold for more than they should be, because the modern alternative is half the size. This of course, is creating a polarization between those who do not have property and those who do, which in turn increases the need for social housing.

Ironically, this "push" is probably stabilising high house prices by affirming the high asking prices, as developers are forced into asking high prices for their new developments.

Of course, the only one who really gains out of these price leaps is the government, who by default gets a disproportionate increase in tax revenue through stamp duty, inheritance tax and capital gains tax and also gets house buyers to pay for its social housing. It is a win-win situation for the government!

[Adam]

I have just taken the plunge buying my first home, being sensible and borrowing less than 3x our combined wages. I have done what research I could for the past 6 months.
I feel I got a good deal on my property being a first time buyer and able to complete before christmas (Reduced the property price by 10%) So there are deals to be had for first timers willing to push.
This also shows me that the market is starting to slow and moving back to a buyers market, although the same happened 2 years ago and then it took off again.
I believe and now hope that the market will level off and prices will maybe drop back 10-15% over the next couple of years and then recover their losses, it just goes on on.
Property for most is long term and not just an investment but a roof over your head.
Reasons:
Unemployment is low by comparision - Interest rates are low - Housing demand outstrips supply - Britons have always loved owning their own homes - Biggest bonuses in London this year (Ripple effect) - Homeowners over the past few years have seen the equity in their property increase rapidly and so spent thousands on improvements, people in briton love their homes, simple!!!
The bottom line is a house will only sell for an amount someone is willing to pay for it and on the flip side, Lack of housing higher prices can be demanded because end of the day everyone needs a home.
House prices 5-7 years ago seem under valued to me, Average car would of cost you £10k average house £70k now it seems more in relation average car £15k average house £170k. An average extension itself will cost £20k - £50k today.
The biggest people at risk if things went bust are not only the first time buyer but more so the middle aged re morgaged amongst us who have released so much equity in their property and over stretched themselves. If it does happen there will be a seriously large number of casualties.

[E.Wentworth]

Most people seem to be posting their opinions as to why the market is as it is! Who cares? It is what it is. I am 100% sure the crash is coming this year not just in UK but all over Europe. Get out while you can! Bank shares too are going down the pan!If this paper is still solvent in 2008 I will post again with a I told you so!

[Neil]

Firstly, I'm amazed at the robust opinions coming from those who think the market will continue ever onwards and upwards. Personally, I also think it will for a little while yet but the tide is turning. Here's why.
1)Take a look at the Nationwide house price index which goes back to about the mid 1970's. There is a common theme to the shape of the graph although it is difficult to see from the earliest house price dip. They are all characterised by a flattening out of the market or a small dip, followed by a last surge and steep rise before prices fell off, usually between 30-40%.
2)If you look at the recent graph we have just have just had the flattening out for a couple of years and I feel we are now into the final surge for maybe the next year or so before there will be a very quick drop off.
3)People point to affordability but there have been so many products put out there by the banks to enable people to really stretch themselves such as interest only mortgages that even relatively small rises will result in relatively large increases in mortgage payments and hurt those who have stretched themselves, especially those who maxed themselves out and whose fixed periods are coming to an end. A 5.5% mortgage now for someone who was on fixed 4% starter rate is a whopping 37.5% increase. Oh I forgot, the market believes there is a good chance that interest rates have at least a couple more rises to come in 2007.
4)Many buy to letters are in it to make money over a relatively short term, they aren't all in it for 20-30 years. If they aren't going to make a capital return for 10 years many will pull their money out and put it somewhere else where they feel they will make better returns. There were never so many people taking a punt like this in the past so I feel it will hit quicker harder.
5)Much of the buy-to-let market is at the bottom end of the market and this has been underpinned by massive immigration over the last couple of years. This first wave is now over and the government is being a lot tighter on the newer members to the EU, so the immigration will not continue to underpin the buy-to-let market as it has done.
6)Last point, as I think you getting bored by now, house prices aren't just based on financial economics, they are based on the sum of peoples sentiment, just as the stock market is. Once enough people believe it will fall it will become a self fulfilling prophecy. This latest surge in house prices is driven by the press, estate agents and banks whose interests it is to see house prices continue to rise. This is feeding peoples fear, their fear of missing out. Just look at the stock market in the late 90's. That curve had the same characteristics as the Nationwide house price curves I mentioned above and it is all based on herd mentality and a fear of missing out. Once there was a small dip and it looked like a cheap time to buy, everyone piled in and drove it to the last final peak before the mother of all crashes. People talked about a new paradigm in pricing companies and said things were different this time and whenever that happens trouble isn't usually too far away. Be careful those of you diving in at any prices just so you don't miss out. It might just happen again.

[Venkat]

The current RE bubble is a global phenomenon.

I was born in India and currently settled in US.
In 1962, my father bought a house in Bangalore, India for then US$3K. The same house is now worth about US$500K!. Property values in India are increasing at the rate of 15+% every year. Salaries in India have grown but they are no where aligned with current RE prices. I know of family friends who have taken on huge loans to invest in RE in the hope of earning 20+% gain.

In the US, the greed is almost at the same level. "RE always goes up" was the standard mantra prior to 2006. In 2006 it was "we have hit the bottom and we will go up again next year". In 2007, the bulls have cornered themselves into the frenzy that RE market will be all honky dory after Spring. Prices in the US are being driven by loose lending practices. In late 2006, the feds put together guidelines to curb this trend. It is expected that these guidelines will be executed during Spring of this year.

My friends tell me that the bubble effect is being experienced in China, Australia, Russia and many other countries. The result of a worldwide RE bubble popping will be quite disastrous.

[Derek Bevan]

As long as rents are guaranteed by housing benefits,irrespective of cost,and multiple occupancies,(until houses are full),prices will continue to rise.

[james]

Property can still be a good investment and profit can be made by buying in areas due for regeneration. In these areas a property price increase is certain as investment into the areas with government money turns around a struggling area.
A housing crash? Nah not in my opinion, the economy is strong,the bonus paid to the London traders may have boosted the London property prices, but I live in Leeds and the amount of development both residential and business is astounding. Things in general are better now than they were when the last crash took place and lessons can be learned.
Any body who had a property investment at the last crash and kept hold of it will be laughing now , sure like any investment there will be peaks and troughs but nothing will outperform a rental property because somebody else is paying for it! Get down to your local bank use there money to invest and get somebody else to pay it back... simple

[Neil]

As long as rents are guaranteed by housing benefits,irrespective of cost,and multiple occupancies,(until houses are full),prices will continue to rise.

The thing is though, most people with a buy to let property do not want someone on benefits in their house.

[mark]

I am not sure of the % of your housing bubble ,but here in the US prices have dropped by 25% already in some overheated markets such as S. California, and S. Florida. Most were bought with ARM's ,were a large % will reset in 2007,and with lower prices they will be stuck being unable to refi,and thus exacerbate and sharpening downturn. Fraud articles are appearing daily ,and foreclosures up to 300/month in places like San Francisco no less.

www.thehousingbubbleblog.com

[Tony]

in Northern Irelnad over the past year house prices have risen by up to 53% in many areas. i bought my first home 8 months ago in Belfast for 145k, and had it valued yesterday at 195k. in theory this is great for me as i have 50k.... but i can only buy the same house again. it is totally crazy with investors from the republic of ireland fuelling the market to a point where no first time buyer on a normal salary can possibly buy. peiople keep saying 'it has to stop' but there are signs that it will rise by a further 12% in 2007. i dont see how this is sustainable.

[Kathleen]

Just remember, at one stage your cleaner will need a wage increase to cover your mortgage...