You are right. This IS Britain we're talking about.The Britain where a house is treated as a trading asset by pretty much everybody. The Britain where the ads in the media shifted from "You need mortgage? We'll grant you one no questions asked" to ""You can't affort your mortgage? We guarantee to buy your house (at discount)"The Britain where "Experts" who were valuing your house were paid by the value they gave.The Britain where appartments still have single layer windows. but are paid for as if they were modern mansions in continental EuropeThe Britain where... I could go on and on and on.Seriously. This market feels increasingly as if everybody islooking for the bigger fool. But at some point the last russian millionaire has his appartment in South Ken

QuoteOriginally posted by: DCFCIt is always fun to point at imminent disaster.But it's absurdly unlikely for the UK market any time soon.The vast majority of home owners can simply wait for any dip in prices to go away.Unemployment is very low, this is Britain we are talking about not Europe...Not only does Britain not have the laughably stupid job destroying policies Europeans love so much, it is importing skilled workers at a tremendous rate from Europe and elsewhere, and it's probable that the next set of statistics will show Britain to have the fastest growing population in the developed world, indeed growing faster than most undeveloped countries as well.There is a profound housing shortage, and recent unpopular government measures are likely only to slow real price growth down a little.Interest rates are about the average they have been over the last 30 years.Some buy to let investors will lose money, and of course it is entirely possible that prices will drift down, but you are falling into the trap of believing British journalists.Journalists in London have about the lowest % of average local incomes in the world due to the fact that so many girls want to do "creative" jobs, depressing wages catastrophically.Most people who write for publication would get better hourly rates working in a supermarket.They can't afford mortgages and this affects what they write about the market.Almost no "business" writers have any experience or qualifications in economics.Short version is articles about the housing market is like heterosexual porn written by gay virgins.I would be surprised if we don't go the way of the U.S. (median prices down 18% in last six months). Some good wikipedia articles - this being onehttp://en.wikipedia.org/wiki/British_property_bubbleAffordability isn't far of from the late 80's peak, and real interest rates appear historically low

UK house prices fall for 2nd mth in Oct Bank holds interest rates as house prices fall

"The vast majority of home owners can simply wait for any dip in prices to go away."Not necessarily. They can, but they might not want to or have the nerves to sit while prices go down. It is enough that a certain number start thinking that other will get out of the market of the market to crash."There is a profound housing shortage, and recent unpopular government measures are likely only to slow real price growth down a little."First, we don't know if there is really a housing shortage. I am looking to move flats (renting) at the moment, and I can tell that I visited plenty this week. Second, even a housing shortage does not guarantee price stability or increase. "Some buy to let investors will lose money, and of course it is entirely possible that prices will drift down, but you are falling into the trap of believing British journalists."If many house owners are buy to let investors that could lead to a serious price crash when they start trying to cut their losses.Speculating on this topic need serious consideration to the data first, as nothing looks clear-cut at first sight.

House prices on Amsterdam Herengracht reach 300-year high in 2008

Cuchulainn, what about the price on tulips? Is it all the "coffe shops" in Amsterdam that make people over optimistic? but I am sure the day after can be tough

QuoteOriginally posted by: CollectorCuchulainn, what about the price on tulips? Is it all the "coffe shops" in Amsterdam that make people over optimistic? but I am sure the day after can be toughHi Collector,People have lost confidence in tulips since they can be confused with onions. Talk about eating your resources Tulip Mania QuoteIn less than one month, the price of tulip bulbs went up twenty-fold! To put that into perspective, if you had invested $1,000 and came back on month later, your investment would have ballooned to $20,000! Now you can understand the mad rush to buy tulip bulbs at any cost. Tulip bulb mania affected the public psyche to an extreme. One drunk man in a bar started peeling and eating what he thought was an onion, while it was in fact it was the bar owner's tulip bulb on display. This man was jailed for many months! QuoteHolland was expected to be the tulip market of the world, and the riches of Europe were to be concentrated on the shores of the Zuyder-Zee. Nobles, citizens, farmers, mechanics, footmen, and even chimney-sweeps dabbled in tulips. Houses and lands were offered at ruinously low rates that their proceeds might be invested in bulbs that were expected to return a golden crop. To a certain extent the mania did spread beyond the borders of Holland, and money began to flow in from all directions. The prices of the necessaries of life rose, and houses and lands, horses and carriages, and luxuries of every sort rose with the rise of tulips: all commerce rested on a flower bed. So extensive were the operations in roots that it became necessary to draw up a code of laws for the guidance of dealers. Notaries and clerks were appointed, who devoted themselves exclusively to the interests of the tulip trade. In the smaller towns, where there was no exchange, the principal tavern was usually selected as the show place, where high and low traded in tulips, and confirmed their bargains over a good dinner

What's this idee-fixe you have with Europe? I always find your utterences on this a scream European culture views business and economics very differently to the UK. When I was a kid, the European view was working vastly better than the British one which was a self harming mess.If then you had said to me that years later I'd find myself in Germany with Germans complaining about rising unemployment and a raft of economic ills, I'd have laughed at you.This can be summed up by something I wrote in the Guide, that "you are worth what you can get, not a penny more or less".To almost any Brit, this is a given, something that only an self important idiot would argue with.To a majority of Europeans, even some with actual training in economics this is "anglo saxon" ironic of course since I'm no more anglo saxon than you.

QuoteOriginally posted by: DCFCWhat's this idee-fixe you have with Europe? I always find your utterences on this a scream European culture views business and economics very differently to the UK. When I was a kid, the European view was working vastly better than the British one which was a self harming mess.If then you had said to me that years later I'd find myself in Germany with Germans complaining about rising unemployment and a raft of economic ills, I'd have laughed at you.This can be summed up by something I wrote in the Guide, that "you are worth what you can get, not a penny more or less".To almost any Brit, this is a given, something that only an self important idiot would argue with.To a majority of Europeans, even some with actual training in economics this is "anglo saxon" ironic of course since I'm no more anglo saxon than you.The issues in mainland Europe - as elsewhere of course - are ideological; whether to adopt a system as in US/UK where the market drives wages, fire-hire policy or to limit the salaries of CEOs.This is a major topic of conversation in the Netherlands at this very moment... being an employer myself I follow the developments with interest.Still, a more balanced discussion is preferable IMO. I suppose it's a choice between Adam Smith and John Nash.

Limiting salaries of CEOs is a policy of the economically illiterate.Google on "Agency theory", to see how artificial constraints actually cause CEOs to cost more money.Ultimately markets are emergent, one will always evolve, the question is how efficient it will be.Thus if managers cannot extract money by some form of wages they will extract value by employing prettier staff, buying corporate jets, and other things that make them feel good about themselves but in a way that is less efficient than just giving them cash.Of course this happens to some extent anyway, but you get more of this crap.A problem is that shareholders are now so divorced from the running of large business that we have little effective corporate governance, so managers have been able to create things like share option schemes that pay well even if they do a shit job.A side effect of things like tracker funds is that funds end up buying shares in a firm that is being badly managed.Also it is worth looking at the effect of share options on the incentives they give to top management...A "public debate" led by arts graduates in the media, is going to miss obvious important aspects to share options.First as I rather hope we all know, option holders gain value if they can increase volatility. Anyone think that is a good idea for the economy or the firm ?Next, options may be substantially out of the money, even if the managers got to choose the rules themselves.Thus their appetite for risk can be highly pathological. The turnover in such jobs is such that getting a good payout for options in 6 months time, utterly dwarfs the probability weighted payback over 5 years.

Going back to (central) London house prices I've seen some minor reductions (2-3%) on the inflated asking prices but nothing major. Supply of new build properties is a big problem. Waiting to see how the job market will be in the next 6 months and if there is any effect in the 400-800k range of properties that are owned by City employees.

QuoteOriginally posted by: DCFCMost people who write for publication would get better hourly rates working in a supermarket.Is this in reference to Wilmott Magazine?

1) to begin with, i'd like to point out the fact that the biggest employers in the City of London have trouble with their balance sheet and this is likely to get a lot worse before it get better. Yes I'm talking suprime here.2) Second, UBS did alread mentionned that they intend to cap bonus to 750K USD.3) One in 4 buyers in the high end London Property Market (Belgravia, Mayfair) whith prices above 5 Mio GBP is a russian.Now considering 1 and 2, the City Bonuses are likely to be well under expectation in 2007 and this would probably get worse in the year to come as investment banks struggle with trying to valuate the level 2 and level 3 assets they have and realize that the MTC (Marked to Cosmos as opposed to MTM "Marked to Market") unrealized PNL figures are at best deceptive and at worse completely and blatantly wrong. Lot of People will have to go.Some will be Quants, Traders, Sales others will be IT guys. Lot of jobs will be made redundant while the vast majority of the others operators will see their bonus shrink and be thankfull to keep their job in order to pay their inflated mortgage.So, yes, I think the London Property market will not reach a "Plateau" but will rather nosedive as soon as the Bank start to slash on the headcount. I think those who cannot accept this are in denial, especially after what has happened in the US.So Good luck to you fellow investment Bankers, try not to spend your bonus on those futile things as Sport Cars and expensive holiday because you will probably need the cash to repay your mortgage otherwise I might see you on the web site of propertysnake.co.uk.

The metric to look at is the P/E ratio for housing -- the ratio of asset price to annual rental rates -- and the ratio of monthly rental costs to mortgage payments. To the extent that the monthly mortgage on a place exceeds the average rental on similar places, the asset price is overvalued. I know that housing P/E ratios will tend to be higher than equity P/E ratios to the extent that people prefer owning to renting, but some of this preference may be influenced by bubble psychology (i.e., that people prefer owning if that think housing prices can only appreciate without bound). In any case, the ratio of rental-to-mortgage payments should be relatively constant because cultural preferences for rent vs. own wouldn't vary too rapidly.

Does anyone have any data comparing the average long term growth rate and volatility of house prices to those of equities in the UK, Europe and the USA?