This is the first of a series of short notes on the current state of the debate on the key question for most private investors in the UK - is this a 1990, or a 1995, or a 2003-4 scenario?
The plus side:
- Rates remain low relative to 1990-2 15% peak
- Arrears and repossession rates remain low
- Longevity & immigration are secular trends that drive demand - 400,000 new entrants in 07
- Divorce, young people at university, second homes, buy to let are all other drivers of demand
- 160,000 new homes built in 2006 - in the 70s and 80s numbers were 350-400,000
The negatives:
- House price income multiples stand at 6 times
- Typical mortgage payments as a % of income are now 18.7%, a 15 year high
- US sub-prime market decline may be the tip of the iceberg
- Medium term path of inflation and hence rates are the key swing factors, and ultra hard to predict with any genuine conviction…
