click here I've said this for months, but others just say it's nothing, but the cycle of boom is moving around to bust again.
Inflation higher than the government likes us to believe, the price of everything going through the roof, house prices stagnating, wage rises set to the inflation rate the government wants us to believe... Hard times are looming.
No it's not, we're simply experiencing a slowing of growth. Even the most sceptical of financial analysts aren't predicting a recession, and currently the FTSE 100 is where it was last July.
Inflation is the problem facing consumers, coupled with the fall in the house market. The house market will recover, because currently the labour market is good - we now have more people in employment than at any time since records began. Of course there's a problem - economic growth has slowed, but saying that we're moving from boom to bust is a wild exaggeration.
I'm not convinced a recovery in the housing market is a certainty. The 'boom' was fuelled basically by lenders giving ever more ridiculous sums to purchasers. In earlier times the standard building society rule was 2.75 times first borrowers annual income (plus 1 times spouse annual income). At present, assuming an 'average' salary around £25k this would mean a max mortgage of about £93k. The reasoning, by the lenders was that this was an affordable amount and still with spare for other living expenses (so less likely to default). Compare this £93k with recent loans being given, and I see some way yet for prices to level out. Even with good employment levels it's the salaries that are important in house affordability.
I see that Barclays Wealth are advocating buying equities. I have a feeling they are right, as in all markets including commodities and equities, rises and falls are always over egged. The time to buy is when others are not, not when you are trying to follow a market.
always use the state of the labour market as a guide to what happens in the housing sector.
Houses are like food - people will never stop wanting them, and they'll do whatever it takes to get on the ladder. In due course the house market will recover, of that you can be sure. Building land is finite, and the demand for houses is growing; that means one thing, and one thing only, as soon as the lenders rebuild their cash reserves they'll start lending more freely, and people will borrow - it will happen as sure as night follows day.
The next 2 years are going to be very difficult with the cost of living going up & houses coming down, there is one consolation, the extra £120 tax allowance might just be enough to buy a house by the end of the year