88Crash

Just occured to me that although a lot of people talk about 'triggers' for a HPC there is also the old saying that 'it was the straw that broke the camels back' back in 88 double miras in monetry terms was insignificant, but it was the straw It was a sympton, but not the cause The cause is very simple - house prices (or as a few old fashioned people may call them homes) are just too expensive

In the real world and to be very specific August 88 was when the crash started Nigel abolished double miras relief and that inflated the market to breaking point I'm probably stating the obvious, but housing markets have very slow dynamics When something hapens for better or for worse it takes months or even years for the event to be translated into housing prices Then you have the statistical price and the real price flats in London that peaked at 75K in 1989 that were repo'ed in 1990 were sold in 1991 for less than 25K Bit of a time lag, but one hell of a drop!

Reading the comments on this forum for the last few months I am convinced of one thing It does not have the reach or the power to influence the UK property market, but it is helping a few FTB's with informed and diverse opinions of the current state of the market Sure most people are 'bears' but there are a lot of users that are objective and are passing on their experience that is NOT influenced by media hype and vested interest In any forum you have to 'read between the lines' because a post could be total BS Hence this coud also be BS or a figment of my imagination, But I was very active in the the last property boom. I was a devloper by the way (not a BTL'r). In the early eighties I made money from developing property, then it boomed Although I suddenly made a paper fortune overnight - my opinion was - it was WRONG! Then it crashed I lost most (but not all) of my paper fortune - it was still wrong Same sh*t - different decade - its still wrong If people like me lose money, its no problem, I win some, I lose some If old people who have done very well out of the UK property market lose a bit of equity - who cares - they have already paid their mortgage If you are a FTB, especially if you have or are planning a family, consider the implications of buying NOW The property ladder has already been kicked away!

I think you'll find home improvements (new kitchens, extentions etc,) I was told by a colleague who designs kitchens that he is losing sales due to a hold in in planning approval Haven't checked the figures myself, but he told me that planning applications are at their highest level since the late eighties/early nineties From memory that was just about the time of the last HPC

Excellent work, like any document you can always change things/add things etc, but regardless it gets the point over You only have to stop a FEWyounger FTB's ruining their lives for the next 10 years and its been worthwhile

Exactly the same with me, except, I'm a Brit who was thinking of living in Cape Town for 6 months of the year I could live with the threat of crime, but my wife has the added concern of the rape threat Woman in South Africa, both white, black and coloured get a bit of a rough deal with regard to sex attacks even in the 'New South Africa' It seems that the boys weren't told that having forced sex any time you fancy it, is no longer acceptable in 2005!

Big difference between the UK and SA (as discussed earlier) In UK the chances of you being shot in the process of a robbey is highly unlikely It does happen, but in London there are lots of muggings but death as a result is very rare in SA life is a bit cheaper, after all its still Africa!

There are a lot of Brits in Hout Bay, even got a Leeds United football bar!!! But I suspect the 90% figure could be something like "90% of all Brits that have bough in Cape Town over last 3 years have bought in Hout Bay" (can't afford Clifton!)

The crime in Cape Town is a lot less than places like Durban & Joburg Hence I find a lot of the South Africans living in Uk tend to come form those areas rather than Cape Town I go to Cape Town approx 3-4 times a year and I have never had a problem The majority of the serious crime (murder/rape) hapens in the townships, so although statistically speaking its horrendous, I would tend to compare Cape Town more to cities like LA - if your're streetwise you stand a decent chance of not becoming a statistic

I think that the denial phase will last a bit longer, if nothing else because the word 'denial' implies someone that doesn't look at the facts Got a friend - house on market - has to sell - worth 330k - past 6 months 4 offers at asking price - all offers fallen through - saw him yesterday "House is still worth 330k because I had 4 offers at FAP, bit quiet now, Xmas, you know, EA told me market will pick up in the spring"

This mail drop is probably BS, but I think you need to make one allowance for estate agents I don't like EA's but guess what my sister in law does for a living? - YES she's one of them and in fairness to her, I'd say the following Most of us at some time in our lives will us lie, cheat or deceive (might even be for a justified/honorable motive) When we do this, we still know it is WRONG Because EA's do this on a daily basis, they don't realise they are doing it, hence they don't think that they are doing wrong

That sounds about right (just after Blair wins election)

Relaxed lending/self certs/MEWing Back in the eighties you could get what was called 'dodgy' mortgages, but there was a couple of proviso's. If you couldn't produce a fake pay slip/P60/company reference etc, you wouldn't get the mortgage. This deterred many people. With such relaxed lending there has been no need for dodgy mortgages, the broker tells you how much you need to say you earn - SORTED Average UK salary approx 25k Average mortgage applicants salary probably 50k+ A couple of brokers I now have told me that a lot of lenders have tightend up the lending criteria VERY recently - whoops!

As a post on 'Anger' pointed out a few days ago, before anger is a denial phase Most people I know are still in the denial phase One couple (late forties) bought a house last year - paid 325k put down 75k leaving 250k mortgage They told me they thought they paid a bit too much at 325k but property is always a good investent, always goes up etc, Proceded to spend 40k doing up the place, the last thing they want to hear is me saying the market is going to crash (won't get many dinner invatations talking HPC at the moment!)

patientFTB, if as your name suggests you are waiting, you are doing the right thing in 2005 When prices drop big time, some of the BTL'rs etc, will get burnt (but that goes with the Territory!) When prices drop big time - New FTB's will be stuck in negative equity for years if the last crash is anything to go by Seems a heavy price to pay if all you did was buy a HOME to live it To add insult to injury most FTB's in the last crash were stuck in places they didn't even like for 10 years (overpriced s**tholes)

Charts and Statistics show us the long term trends, so I don't dismiss them (just don't read them much) Only thing with property stats, they draw data from the 'Paper World' In the 'Real World' this current boom has been in effect 3 booms 1. circa 95-96 London properties worth Paper 50-60K were actually being sold real world for 25-30k. Almost overnight people realised it was starting again and these properties suddenly doubled 2. 97-2001 Everbody steams in - Lenders, BTL's FTB MEW'rs etc 3. 2001-2004 post 9/11 global liquidity etc, - With a few exceptions all the Western World enjoy a Global property boom, pushing the UK even higher Back to the 'real world' prices, the properties that were bought in the first boom now have a paper value of circa 200k and were certainly selling last year Even if they drop 50%, they have still risen 300%+ from their lows 100k for a 1 bed in an OK'ish area is hardly cheap To say with CERTAINTY HPC will be 50%+ is foolish, the UK property market has a habit of defying logic BUT to say a 50% drop is impossible (as most bulls do) is very foolish indeed!

During ANY boom - logic + fundamentals go out the window Prices lose their real value - become a nominal paper value At any given time, it is only a minority that will effect the fundamental price That is to say they are either buying or selling Getting a valuation for dinner party conversations with no intention of selling doesn't effect the fundamentals MEW'ing influences the prices big time, but this is only a paper transaction - NOTHING is bought or sold In the last HPC prices dropped by over 60% in THE REAL WORLD Flats in London that peaked at 75K were sold in THE REAL WORLD for 25k or less Flats in LONDON that peaked at 75K and NOT SOLD where still worth 50k in the PAPER WORLD

May apply to the samller builders, but the big guys buy their land years ahead, plus they often struggle for many months/years to get planning permission - creates a big time lag from land purchase to build to sale The current boom have given them record profits which means they can absord the higher prices they paid for land in the last few years, PLUS with their current profit margins they can drop their prices a lot more and a lot quicker than most Imagine the dinner party conversation between New Home Builder, an EA, and BTL'r "HOW LOW CAN YOU GO"

But they will sell them and that one of my points with regard to the effect on house prices at a local level As VacantPossession points out "At least they build something" In that respect its a simple business, they buy land, they build homes, they sell homes - end of story If a new home was worth 200k a few months back, they can sell it for 170k (or for that matter 150K) and still make a profit Although many people prefer older homes with more character, you can't change the fact that if a new build, drops 10/15/20% in a matter of months, it will have an effect on prices New Homes companies don't go through a 'denial phase', they are already a bit ahead of BTL'ers, EA's etc

Thats helped by the fact that all the major players made record profits during 2004 - strong start to the year plus a bit of a time lag from when events actually 'start' in the housing sector and when that actually impacts on sales Enquiries started dropping in April, but this didn't affect reservations in a big way until Aug/Sept - then big time in October Because of their geographic spread, they can absord problems in London and the South East, because of strong sales in the North/Scotland Add them all together and it looks good, but for example George Wimpey did well last year, but Laing Homes (owned by GW) are at least 30% down on sales BECAUSE unlike their parent company, they only trade in the South of the UK Remember the last boom/crash? Boom started in theSouth East HPC started in the South East Same Sh*t different day or should I say decade!

Depends on the Builder - not all builders are taking £99 deposits But even if you put down 5-10%, if the property haves dropped 15% by the time you are due to complete and the market looks like it may drop further - some people will take the hit on their deposit and walk, especially if they are buying as a BTL investment as oppossed to buying a home. I know people how took 50k deposit hits on London flats during the last crash (thats when 50K was a LOT of money!)

Builders taking reservations is a bit like an Estate Agents 'Sold' board (subject to contrat) With these sorts of offers it doesn't take a lot to make a development look 75%SOLD OUT in the first few weeks, they don't even need to do an EA job and blatantly put false 'SOLD' boards As Jayne pointed out earlier, you can buy a Barratt Home for £99 (subject to completion) In the new homes sector, when a reservation falls through its a cancellation and they are definately on the increase (admitted by all the volume builders that have recently reported to the City) 275 flats may have legitimately been 'SOLD' however if the cancellation trend continues, I agree - it will be interesting to see how many actually COMPLETE

I would say there are 3 types of landlord 1. proffessional landlords (the rarer breed) 2. unproffessional landlords (the more common species) 3. BTL's I was also involved in property during the 80's-90's and BTL's in their current form didn't really figure in the equation - in this CURRENT HPC they will My definition of a BTL is someone that has a couple of properties on the side, for the SOLE purpose of Capital gain Proffessional/UnProffessional landlords run it like a business - long term and make a profit from rental yields An example of how BTL can distort the market, especially younger FTB is as follows I know a retired couple who moved out to cheaper area, but rather than sell their house in Home Counties (as they would have done 20 years ago) they kept it and rented it Their kids (now young adults) hate the area they live in - would move back tomorrow but can't afford it In the meantime their parents are now BTL'rs and have 2 houses, while their kids have none! Bet the kids are hoping their parents don't change FROM BTL'rs TO SKIers (Spend Kids Inheritance)

I bet they would like to do a 'Nationwide' and seasonally adjust their figures up - BUT THEY CAN'T Most New Home buiders are big plc's, so they may 'talk up' the market a bit, but they are accountable to the City and shareholders, as far as sales go they have to be HONEST What they can do (its a free market) is use discounts, promotions etc, to move their stock This will have an effect on local prices and this is HAPPENING NOW If a new build in your area was 200K a few months back and another older house was also 200k You can probably buy the new build today for 170k = 15% DROP The owner of older house is still in denial - waiting for the spring bounce the EA promised - His house hasn't dropped its still worth 200K in his mind cos the EA told him so

schadenfreude, I don't watch daytime TV (which has the cheap advertising slots) but I did see the Barratt ad on ITV1 yesterday evening PRIME TIME That is an expensive advert Don't know the exact rate card, but its got to be tens of thousands for a single ad