Posted on 09/14/2013 9:59:48 AM PDT by whitedog57
Fearing another housing bubble in the UK, the Royal Institution of Chartered Surveyors called on the Bank of England to use its powers to cap house price growth at 5% in certain areas.
Where in the UK are house prices growing at breakneck speed? London .. and some place outside of Liverpool.
london
If we compare London house prices (white line) to New York City house prices (gold line), we can see that London did has rebounded more rapidly after the global recession. The largest increase was in London where prices were up 8.1%.
Read more: http://www.dailymail.co.uk/news/article-2419824/Call-expensive-mortgages-areas-house-prices-soaring-5-slammed-experts-insist-boom.html#ixzz2eswQBWhh Follow us: @MailOnline on Twitter | DailyMail on Facebook londonnylt
But if we look at January 1, 2012 to today, we can see that London and New York are neck and neck in house price growth.
lonnycsepr7
Hopefully, no one in the US or at HUD will propose house price growth caps. But what is at the heart the suggestion? Affordability of housing.
Sound familiar? In the US, “affordable housing” advocates push low down payment loans (and lower credit scores) as a way to help households “afford” rising home prices. That is, as house prices grow, there are demands for riskier lending to help marginal households.
According to the article, “the number of first-time buyers getting a mortgage has hit the highest level since the credit crunch began in 2007 as banks are offering far more loans which need only a 5 per cent deposit. Before the credit crunch, there were 1,000 different types of 95 per cent loans. During the recession, it dropped to just three, but has rallied to 46.”
But here is the thing. UK mortgage approvals are at about half of what they were in 2007. And given that it is only London that is skyrocketing, it is likely that it is investors (domestic and foreign) that are pumping the London housing market with air, not first-time home buyers.
ukmtgapp
UK mortgage approvals are tracking US Mortgage Purchase Applications, meaning that it is cash and investors driving BOTH the US and UK housing markets.
ukPPMBAPURCHAE
Ordinarily, The Federal Reserve and Bank of England would respond to a bubble by raising interest rates and contracting credit availability. But these are not ordinary times. Price controls on house prices will not work, are difficult to enforce and will lead to activities such as side payments.
Eventually, investors and cash buyers move away once prices are driven too high for their tastes. But that leaves a hole in the support for housing that is difficult to back-fill.
In other words, the UK may be sitting on a bubble that could explode.
Post your stolen charts here.
Hmmm...London isnt the UK. House prices are pretty depressed elsewhere.
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