A leading Scottish agency has warned that registration lodge prices could lead at a real estate crisis if loans get out of hand. DJ Alexander Ltd, part of the Lomond Group, which is Scotland’s largest real estate and rental agency, believes recent year-end reports on the housing market boom could lead to demand for loans to higher multiples and over longer periods of time, which could ultimately lead at market stagnation, even a potential fall in the years to come.

The news before Christmas that a lender was now willing at offer seven times the first salary and five times the second salary over a period of up to at 40 years old is certainly an answer at market demand, but does it ultimately meet a need that will result in boom and then rapid collapse?

We have seen in the previous period at the 2008 crash that credit multiples hit registration levels that people borrowed as much as possible in order to at finance the purchase of their dream home. Subsequent restrictions on loans in response at the housing collapse resulted in a quieter and more stable market for the next 13 years. However, in the last eighteen months there has been a mini-boom that seems likely at over the coming year and stimulates demand in the loan market.

David Alexander, CEO of DJ Alexander Scotland, commented: “Nobody wants at deny individuals the right at to be able at buy the house of their dreams. Indeed, we should encourage this to the extent possible. However, you don’t need at have a very long memory at know that we have already gone down the path of very high multiples of people’s incomes and that ultimately resulted in a massive market correction. “

“While the 2008 crash was also linked at wider economic difficulties, it was clear that the loans ato much on the assumption that the property’s value will always increase was a major factor and a mistake we don’t want at repeat.”

David continued: “We must not forget that the average lodge prices peaked in Scotland in May 2008 at £ 145,641 and did not return at this level until July 2017, when they reached £ 147,566. British average lodge the price peaked in September 2007 at £ 190,032 and did not reach that level again until August 2014, when it hit £ 191,932.

“What we need is a sustainable and growing housing market rather than a prone market at peaks and valleys. Prices will always fluctuate, but in the long run it is better for everyone if prices increase at a reasonable level each year and maintain steady growth over five, ten, twenty years and beyond. In this way, the market benefits most of the people.

David concluded: “Make someone happy in the short term by giving them large loan levels compared to at their income may be good for them in the short term but may cause more grief over the years at come if interest rates rise, the market becomes foamy and overdone, and if circumstances change. This is when the true price of high loans will become apparent. “