This is of great interest to any investor out there whether you're looking at bricks and mortars or the stock market. Have a go and let your comments flow.

To start off, here is an interesting article below:

Is property overpriced and due for a correction, or can the current level of house price inflation be sustained? Depends on who you listen to...
Prices-To-Earnings Ratio. If you look at the ratio of house prices to earnings it certainly seems that the market has overheated and is in need of a short sharp shock.

Viewed relative to net pay, prices, says the Nationwide, are currently 7.2 times average earnings, slightly above the 7 times earnings recorded at the height of the eighties boom.

It's this grim statistic that has seen first-time buyers priced out of the market, and according to Capital Economics the price-to-income ratio is the main reason why values are bound to fall over the next three years (by 20% in all).

Sabina Kaylan of Capital Economics says: "Property is an asset like any other. If it's overvalued there will be a correction in prices and at the moment values are high relative to incomes.

"It would be nice to believe that it will all have a happy ending but in the past that hasn't been the case - the graph shows spikes and troughs - we don't think a gentle levelling off is on the cards".


cpeck

This is scary!!!

LONDON (Reuters) - High-flying house prices could nearly halve over the next few years, a City report has predicted.

David Pannell, an analyst at investment bank Durlacher, predicted house prices will fall 30 percent from their peak, with falls "sharper but shorter than in the 1980s" and added that there was a risk prices may fall as much as 45 percent.

"Our pessimism is based on international and historic experience -- for example, the UK housing market has never experienced a soft landing," Pannell wrote in a report titled "Bubble trouble".

"Our analysis suggests a correction will take place even if interest and unemployment rates remain at their current levels," Pannell said, attacking an argument often used to explain why a sharp fall in prices is not likely.

He said the crash will be supply-driven as homeowners try to sell at the top of the market.

House prices are a closely-watched economic indicator. Many have borrowed against the value of their properties, which has helped fuel a consumer spending boom.

Analysts are concerned that rapid house price inflation, which according to the latest measure published by mortgage lender Halifax is still climbing by 16 percent, has not cooled quickly enough from rates of near 30 percent in 2002.

The Bank of England, while insisting it is not targeting the housing market, has also spelled out concerns of late that house price inflation had not slowed as quickly as it would have liked, which raises the risk in months ahead of a crash.

The BoE raised its benchmark short-term rate by a quarter point for the second time in three months earlier in February, to 4.0 percent.

Durlacher is not the only City firm to predict a sharp correction in housing.

Analysts at Capital Economics, an independent research company, are predicting house prices will fall 30 percent from a peak reached this year.

A recent Reuters poll of economists found there was a one in five chance of a crash in house prices.

Mortgage lenders and estate agents, who have profited from rapid mortgage lending and refinancings and brisk business, are predicting a cooling in house price inflation.

A separate report from housing finance company Paragon said on Monday that landlords remain optimistic about the market this year.

Durlacher, on the other hand, predicted that those buying property to rent in 2003 would receive a one percent yield for, before the cost of maintenance.

"Positive returns rely on house price inflation to remain at current levels, which is unlikely," the report said.

The Durlacher report said a tightening in lending rules by mortgage lenders, falling yields for buy-to-let, new regulation of mortage by the Financial Services Authority and rising interest rates will contribute to a fall in prices.

Hi,
I am 54 and owned a very successful property business in Dublin.
My opinion :- Stay out of investing in it.
rgds aj

Hi Ajren, havent seen you for a while. Were have you been?.

cheers Goldfinger.

Hi Gf,

America for a few weeks.Moneyam is an EXCELLENT site so still like visiting.
rgds aj