Reply To: Divorce in the euro zone


@Pablo Silver or Lead? wrote:


You wrote that

“UK property is also underpinned by some sound financial fundamentals.”

With fundimental such as:-

1. Current market prices x average earning multiples off the normal scale.

2. Market prices (for many properties bought over the last 3 years for BTL) making rental yield (net of all costs) negative.

3. With real general inflation running at arround 4.5 to 5.5% and wage inflation lagging this massively.

4. With many UK buyers churning of mortgage rates of 2 to 3% only to find the landscape of today very differant from the last 5 years (many are refixing at todays rates of 5 to 5.5% (rather than go onto higher SVR’s) an increase in payments in some cases of 50% +).

5. A background of rising mortgage rates and credit tighteing following increasing bad debt due to lax lending criteria of the last 5 years.

What “sound financial fundamentals” are you refering to?

Pablo Silver or Lead?

I stated in my post that affordability is currently or very soon will be an issue, all the points you make are valid and support my view. However, the afordability issues (in my opinion) will cause the UK market to pause and catch its breath and not crash.

The sound fundamentals of the UK market include:

1) Not enough building land
2) Increasing population (living longer, immigration)
3) Trend to smaller households due to divorce/separation etc.
4) A relatively well trusted legal system
5) A well established mortgage market, which protects its own backside and will only lend on the true value of a property. Whether the borrower can afford it is another matter.

All of which equates to demand outstripping supply.

The long term fundamental picture for UK property is good (as is the stock market).

The same can’t be said for the Spannish property market. The short, medium and long term prospects are poor in my opinion. As long as supply is outstripping demand due to over development backed up by a corrupt system, then it will never be a sound investment, imho.