Jump to content
House Price Crash Forum


  • Posts

  • Joined

  • Last visited

Everything posted by Icantbelieveitsnotbutter

  1. Council house sales actually started under Callaghan. At least in the early 1980s people were paying sensible prices with properly underwritten mortgages, and all are better off as a result of the deal, unlike the past decade.
  2. The city has given builders more money. This has given them some capacity to carry on - presumably Gordon will claim credit for shareholders deciding to bail them out rather than let them go bust, though Govt has done nothing of merit here. Having written down the value of land the breakeven price of a new build has fallen to the point where some will make sense again where supply is hsort, and thus the economics might work - this is why you need to allow the pain to be felt, it results in a write-off and restores some of the economics, after shareholders or banks have accepted a loss. Elsewhere we see the Govt trying to avoid the pain, so the problems don't go away, just get deferred.
  3. I don't think either banks or the Conservatives are in any doubt of the seriousness. There was an interview with john Major at the weekend which was pretty explicit. Camerons problem is how much damage does he do to the country and his party by being very downbeat. The banks are fully aware, but as they are trying to sell off assets or hedge risk, why would they announce it. Indeed most of Labour know it, I am just not sure if Gordon is in denial, or whether he is fully aware and happy to drive us into the ground - I fear it may be the latter given his penchant for decisons that are clearly for short term political gain at long term cost, denial would be in some part to diminish his responsiblity for the sad catastrophe unfolding. Green shoots... I think we forget there was a window last year when we thought it might not be so bad, between NR going down, when Lehmans were able to raise a few $bns before going down. Hope springs eternal but the reality always wins.
  4. Some of our taxes went so Ed Balls' department could write a cook book on preparing picnics. I'd really like a public debate on how our taxes are spent, not the pathetic bleatings on how much more as a big figure, but how wisely spent.
  5. ...er, and perhaps petrol... ...and perhaps council tax... ...in fact tax... ...cars... ...train fares... ...car parking charges at train stations... Excess supply drives prices down. Capacity gets cut, demand picks up, prices rise. As for housing, the bull market rally is faltering now. There is no magic tap of funding to turn back on, the banks might now have enough capital from the point of view of capital ratios, but they are still tight for liquidity, and Govt borrowing is beginning to crowd out private sector lending. Come the Autumn the confidence will seap away and we'll see another round of price cuts.
  6. We are busy deferring the problem, not reducing or removing the problem. Those with sound finances are paying for it in future taxes. The moral hazard of bailing out the market will haunt us - it is already being seen with thousands of hapless unencumbered people being sucked into the market for the first time.
  7. By KEITH MARSDEN From today's Wall Street Journal Europe. Shocked by the parliamentary expenses scandal and suffering from the recession, British voters have shown their displeasure with Gordon Brown's government. Labour was trounced in local and European elections earlier this month. Despite this electoral drubbing, Labour lawmakers expressed their confidence in the prime minister on June 8. Given his supposedly successful management of the economy while chancellor of the exchequer, the majority felt that he was best qualified to lead Britain out of the recession, which, they claim, was caused by external forces, not by Mr. Brown's policies. The facts show otherwise. Britain's economic downturn began when its house price and household debt bubbles inevitably burst, beginning with the run on Northern Rock in September 2007. These bubbles had swollen to higher levels, relative to average price and income levels respectively, than in the U.S. and other major economies. In relation to their long-term average, British house prices soared by 88.5% between 1997 and 2007, according to the OECD. In the U.S. the rise was 64.5%. Britain's household debt rose to 176.9% of disposable income in 2007 from 104.8% in 1997. During the same period, U.S. household debt rose only to 105.8% of disposable income from 64.3% in 1997. The increases in Germany and France were considerably lower. Gordon Brown tolerated and even encouraged the formation of these bubbles for several reasons. The traditional sources of Britain's economic strength, the mining and manufacturing industries, shrank during his term as chancellor. Total mining sector output, including oil and natural gas, dropped by 31% between 2000 and 2007. Total manufacturing production was stagnant during this period. The gross value, in inflation-adjusted prices, of output from all production industries combined fell by 3% between 2000 and 2007. Their employment level dropped by nearly 1.1 million over the same period. These trends were not an inevitable result of shifts in comparative advantages that are said to occur in advanced economies. Real manufacturing output rose at an average annual rate of 2.2% in the U.S., 1.2% in Germany and 1.1% in France between 2000 and 2006, according to the World Bank. Eager to achieve the illusion of steady progress in the overall economy, Mr. Brown needed the rapid expansion of financial services, and the real estate and business services industries. Their output soared by 48% and 33% respectively from 2000 to 2007, compared with 19% for the overall economy. Their combined employment level reached nearly 6.7 million in 2007, an increase of more than one million. Rapid expansion of consumer credit in turn boosted demand for wholesale and retail products and services. The booming financial and real estate sectors, with their inflated salaries, bonuses, and profits generated by unsustainably rapid credit growth, also filled Mr. Brown's tax coffers. Thus, despite the decline in corporate and personal income and national insurance tax revenues from the production industries, he was able to fulfill Labour's 1997 election promise of expanding public services. The output of health and social services increased by 26.3% from 2000 to 2007. Employment in the category "other service activities," which includes public administration and government services, grew by 1.3 million between 2000 and 2007, reaching almost 10 million -- nearly a third of all British jobs. So the boom in the financial and real estate sectors served Mr. Brown's political interests well. And he was by no means a passive bystander to their growth. He urged them along in several policy speeches. Introducing on April 1, 2005, a policy document entitled "Homebuy: Expanding the Opportunity to Own," he insisted that "this Britain of ambition and aspiration is a Britain where more and more people must and will have the chance to own their own homes." Ignoring the inability of many house buyers to pay their mortgages, he touted this message to City bankers in successive annual speeches at the Mansion House in London, promising them "light-touch regulation." Already in 1997 he transferred the responsibility for bank regulation from the Bank of England to the inexperienced Financial Services Authority. He also curbed the central bank's ability to keep asset inflation in check by removing housing costs from the price index. Mr. Brown also repeatedly praised the City's "innovative skills," bragging in 2006 that it was responsible for 40% of the world's over-the-counter derivatives trade -- which includes the now infamous repackaged subprime mortgages. He gave financial institutions a false sense of security by telling them on June 16, 2004, that "I am determined to ensure that we can lock in greater stability not just for a year, or for an economic cycle, but in this generation." With this assurance from the chancellor, how could anyone expect bankers to forego juicy profits and bonuses by avoiding innovative but unduly risky practices? Because of the large size and global reach of Britain's financial sector, and the many newfangled financial instruments it created and marketed, Mr. Brown cannot honestly deny all responsibility for Britain's recession. Given these historic facts, Britain's Labour legislators should think again about sticking with the prime minister. Choosing a new leader with integrity and managerial competence is the party's best chance to win greater respect from voters. " Good article.
  8. For years it been threat and counter threat - we'll only fund you if you follow our line vs if you don't fund us you'll face cuts under the tories - trouble is the goose has been cooked - Labour could have kept the game up, spending and taxing at high levels, but just below the unacceptable pain threshold. However, they have gone too far, spent too much, taxed too high, and the whole system is now too top heavy and is unsustainable. There is a limit to how much the state can confiscate from the real economy without strangling the life out of it. It has crossed the line, the only answer is to cut the state back down to size, and in a recession that is further than it would have needed to be if they had remained responsible. The unions know the game is up, its everyone for themselves now....
  9. So, just to remind ourselves, we need a global statesman to get a global solution and a global regulator and global co-ordination otherwise it will all fail. Only one man is capable of bring everyone together to get a joint action plan, or else it will all fail. Then we the headlines subside and the focus moves on, we go it alone.....
  10. price divided by after tax earnings - so assume a 5% gross yield, lose 10% of income for costs, tax the balance at 25%, leaves 3.375% net yield, gives 29x. The stockmarket trades on about 12x. Rents have to rise 150%, or prices fall 60%. Those who buy houses as an inflation hedge, bear in mind equities are an inflation hedge, but less than half the price.
  11. swap rates are rising, so mortgage rates are going to rise. This is a long game, this is looking like years and years to sort out. At the moment, the BoE is still providing cheap liquidity for banks, it will need to be replaced in time. Govts are finding the cost of borrowing is rising and hte high funding calls have barely started. Risk aversion means investors still willing to sit on low short rates in expectation long rates are rising and unwillingness to commit funds. Unemployment and tax is rising, cost of borrowing will rise, its toxic mix that is not going to solve in a quarter or two.
  12. QE has reduced LIBOR towards base rates, and thereby benefited those in debt at the expense of the prudent. If that is the social credit you think we need, then that seems a strange set of priorities to me. It has subsidized the reckless borrowers at the expense of our silver haired prudent savers, many of whom are faced with a squeezed income. The £ has devalued - it was well over $2 to £1, and €1.6 to £1 not that long ago, so even with the rally it has weakened - the rally I understand in part to be growing expectation that the BoE is looking to bring QE to an end, though the Govt clearly wants it to go on as long as possible as it helps its electoral prospects, and it doesn't seem bothered by the long term consequences.
  13. Your point is right - Equitable made a promise, then completely and utterly failed to manage to the promise. The resulting loss had to be paid by all other policyholders without the promise. That is management failure, not the failure of the principal of saving for retirement. It may not be fraud, but it was negligence oor ineptitude. Equitable could have removed the promise from new business when it realised it wasn't appropriate. Equitable could have matched assets and liabilities, rather than use the profit on long dated gilts (whose capital value balloned as yields fell) to pay the wrong generation of policyholders. At essence we see the current problem - low interest rates to bail out current absurd levels of Govt and personal spending is being paid for by those who prudently set aside for retiement and now have to lend it to the profliagate for little or no reward as it value is eroded by unrecognised increases in the cost of living.
  14. There is a basic problem. Many here have a problem with capitalism. Many seem to despise profit. If you do not believe in profit you cannot believe in ownership. If you don't believe in capitalism you cannot believe in pensions. If you don't beleive in pensions then you cannot have a problem with earning money and giving large amounts of it to others in retirement. After they have worked and spent all their money and now spend your money. Pensions is the deferment of spending now to spending later, and deferring near term spending instead to invest in the means of production or an asset that in future someone will be prepared to buy from you. We have a govt that wants the outcome and benefit of investment but despises those that invest to produce. The systematic moving of the goal posts of pensions is state confication of assets and benefits from those who chose to save not invest - what is apprarent here is those whose pensions hsave proved miserable investments do not connect the poor outcome, at least in part, with Govt conficating returns and penalising the decsion to be socially responsible in saving. We need a World that respects our right to choose to spend or save, and not shaft those that save, as is happening in spades today.
  15. The consensus view remains that housing is a good long term investment. Based on one fact, house prices have gone up a lot for a long time, and one assumption, we build fewer hosues than we need, and one total disconnect from reality, house prices are unbelievably expensive versus income and economic prospects. They say bull markets climb a wall of worry. Given the consensus, we have the reverse, bear markets fall a wall of undying optimism. The consensus wants to find reason why the worst is over, the consensus wants to see signs we return to past trends. Bull market trap, can last a while yet. You have to risk being wrong and be prepared go against the consensus sometimes.
  16. The consensus view remains that housing is a good long term investment. Based on one fact, house prices have gone up a lot for a long time, and one assumption, we build fewer hosues than we need, and one total disconnect from reality, house prices are unbelievably expensive versus income and economic prospects. They say bull markets climb a wall of worry. Given the consensus, we have the reverse, bear markets fall a wall of undying optimism. The consensus wants to find reason why the worst is over, the consensus wants to see signs we return to past trends. Bull market trap, can last a while yet. You have to risk being wrong and be prepared go against the consensus sometimes.
  17. Aside from the acceptance of immigration and women, there are many parallels between Nazis and Labour. It is perhaps why the main support for BNP is from disaffected Labour voters.
  18. You are arguing about two seperate points. Firstly, some pension products are rubbish value and should be avoided. The old financial services model where the consumer lacks interest or any appetite to listen, understand, enquire and examine what they are buying leads to the purchase of a product that is horrifically expensive. You don't have to do it that way, there are sensibly priced alternative - most SIPPs have very low fees. A bit of reading and research n the internet will quickly yield a better solution. Particularly if you avoid the big life cos and an IFA who charges for telling you the bleeding obvious. Saving defers consumption, true. But long term savings provide the capital for investment - many on here bemoan the lack of industry - this is largely the function of a low savings rate and hence limited funds for investment. The constrast is plain to see. Asian populations, and Germans etc, save money, invest instead of spend, and have built industy that exports and generates wealth. We have underinvested, and this is state-sponsored, Govt has removed incentive to save and invest, encourages spending and indebtedness.
  19. Back to the 1970's then, with 90% tax, high unemployment, riots, strikes, crumbling industry. Hmmm, sounds great.
  20. There may come a point where BTL is a good inflation hedge, but not now. As inflation expectations rise, interest rates rise. As market yields rise the capital value for a given income stream falls. Net yields on residential property are probably below 10 year gilts, you need a premium yield for a lower quality asset, to reward for the risk of voids, risk to cpaital values, depreciation, a premium to reward you for holding an illiquid asset. Rents will only sustainably rise in a reasonably robust economy where disposble income is rising, shortage of rental supply excess of demand for borrowing, thus rising employment/net immigration etc - the expectation of inflation comes before the inflation. Thus the rise in cost of funding the asset comes before the income from the asset rises. Disposable incomes have yet to suffer the impact of rising taxes. Average spend as a proportion of income on the provision of housing is already histically high as a percentage of disposable income. There will come a day when your argument mght work, but not here.
  21. are we seeing the first signs that QE will come to an end.... political opinion is Europe is swinging against it, market expectations for a pick up in inflation in the medium term is mounting, cost of issuing Govt debt is rising. Once QE ends, the expectation grows that the next move is to rise rates. So how long does a housing market rally last in the faces of rising unemployment, rising rates, rising taxes... I think we get two or three months of bullish headlines, fizzles out in Sept, gaps down early next year.
  22. Supply of houses has been very low for a load of reasons - the majority accept the market is weak, but still retain an inherent belief that over the long term they are great investments, and so we have never got anywhere near capitulation. The reasons cited for the long term optimism is the growth in household formation and the shortfall in new building. Sometimes people mention Japan as a bear example, but this is remote and easily dimissed ... but what about Hong Kong, small island, household formation outpaces new build by around 2 to 1, rates are lower than here, economy is stronger, taxes are lower, populatons grows, and yet...house prices peaked in 1998 and then fell for nearly 6 years, periodic rallies in 1998, end of 1999, briefly in 2000, but the fall resumed each time. Domestic savings are very high in HK, there is loads of cash so it has struggled in the face of all the bull arguments we have here in spades. - many cannot now afford to sell, and don't yet have to, have to wait better times, a sort of pent up supply. - the cost of moving is massive, much higher than historically, didn't matter when LTVs were high or prices rising, but in terms of people's after tax income, it is a dramatic expense. Thwe value per sq ft of a house means anywhere in the south of England, adding to an exisitng house where possible is considerably better value. - jumbo mortgages are history, there is little scope for people to buy expensive houses out of income, they need wealth and we've seen wealth destruction, will take an age to repair. The middle market is now unable to step up easily. - a massive percentage can afford to move, but have self certified and will be unable to secure a larger mortgage, do not want to draw attention to existing arrangmeents which were described to lenders with an economy of detail and probity. The current appearance of stabilty is a function of the a recovery of buyers from one third of normal to one half of normal, which is 50% up on recent numbers and thus feels better, spread amongst fewer agents, so feels even stronger to those surviving agents, but is still only half the level previously seen as necessary for a stable marekt. The limited supply, which is partly but very much not solely a function of limited building creates a closer short term balance. But limited buying and limited selling can only provide temporary stability, we need to see more volume to see a more permanent stabilty has been established, and that isn't obvious now. The herd-like behaviour dominates still, the behaviour is driven most strongly by the inherent beleif in a majority that housing is good, which is backwards looking and unsupported by economic prosperity. TRue stability is restored when we have capitulation so that behaviour going forward is rational and not driven by pure speculative greed.
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.