Voice of calm

You've got to love this bit: No credit crisis?! Surely he meant to say 'we have A no credit crisis'...

I don't see how anyone here isn't a vested interest. If you own property you are. If you are an STRer you are too (or perhaps you're a devested interest? same thing anyway). And if you've never owned property you most likely are too since it's hard to avoid living in it. We're pretty much all coming from somewhere if we're posting on this site since we're all affected by the property market one way or another. As for cut and paste... I don't think it's my posts that are sounding formulaic. And nothing I've said should worry an STRer that's thought things through properly, made sure it's right for them, gets their timing right enough and acts with discipline. Me? You're right if you're thinking there's no chance I'd bet my home for a limited return that might even turn into a loss DESPITE a big drop in the market. Personally I bought my home to live in not to play at being George Soros with. There's lots of CGT- and stamp-duty-free ways to hedge against a drop in the property market. They give me more control and allow me to adjust my position as events unfold. And to limit my losses if I'm wrong. But, for trading or investment purposes, I'll choose to make my money elsewhere.

That's a tricky one. There's arguably more of a case for buying the metal right now since I can see fewer downsides. There are all kinds of issues going on at the moment (power shortages in South Africa, union action, need to do more deep mining as surfaces resources are depleting). These make platinum mining company shares potentially volatile. Even with the cushion I have I'm keeping close tabs since any of these could prove to be big problems for profits, at least in the short term. They are, however, also potential reasons for the PGM price to go up further. I guess on balance I'd be erring towards the metal. But needless to say I'd need to do much very much more research if I was getting into the market now and making that decision.

Interesting. Nobody seems to be into platinum much here. I don't hold platinum directly but decided to get exposure to it by buying shares in platinum mining company. Quite literally the best thing I've done yet in investment terms. I bought in mid 2005 and the share price is now more that eight times what it was then. I've added since at opportune moments and I, though I'm tempted to sell, I think there is some way to go yet. This year at least. I can't claim to have done a ton of exhaustive research, in fact what put me on to platinum is a bit of a bloke in a pub story. I bumped into a guy I hadn't seen in ages at a party and he banged on about the increasing use of platinum and other noga metals in industrial applications such as catalytic convertors. He went on to claim that, for this reason, oil companies had been buying up platinum reserves and buying into platinum mines (I've found no evidence for this personally though). I was curious enough to do a bit of research, I found tons on this usage of platinum on industrial and motor industry sites but very little on investment sites, including those covering precious metals. Platinum didn't look exactly overvalued so I started to look around for a smaller, fast-growing platinum mining specialist. This was riskier than investing in a more established player or in the metal directly. But I felt the rewards could be higher and I was happy to risk the money. I also figured this would give me room for gains even if the metal didn't perform that well. I checked out the company's situation as best I could and their management. I was impressed and invested. Since then platinum has more than doubled in value and my shares are worth eight times what I paid for them. Obviously, not all of my investment decisions go that well! It is reckoned that platinum could rise more than 50% this year: http://news.bbc.co.uk/2/hi/business/7408253.stm Though I'm not yet clear how much of this rise is already factored in. Hope this is of interest.

I've got very mixed feelings about this. I remember when builders were decimated in the last property downturn. You could get great work done very cheaply but I did end up feeling sorry for them. But, especially given that I'm based in London, I've had quite a few years of paying through the nose and struggling to find builders that were half decent. I don't want to be unkind but there are some builders out there that were practically asking for a crash. When I've questioned some very high estimates I've even had builders, very cheekily, tell me it's OK as it's a fraction of what I'll make from the increase in value! Madness. That said, I have a feeling it's the more reliable small building firms and individuals that will loose out most. The fly-by-nights will quickly move on to other things. And the big firms can shed staff and rely, to a degree at least, on big contracts like Crossrail, the Olympics etc.

An awful lot of what I said wasn't assumption but fact. To STR is to short a market. Get the timing and your predictions wrong and you can get burned, even with large price falls. If it doesn't apply to you then good on you. Obviously this site isn't just about STR. But this thread IS about STR as is quite a lot of this site. Personally I don't care about insults. People have a lot on the line and they can get quite aggressive when people don't agree with them. But it would be better to argue on merit. Every speculation has a potential downside. Slamming people that disagree with you is a bad habit and can blind you to risks.

I am not trying to spin. But I do think there seem to be some people on here who believe that STR is/was such a no brainer that they seem to have disengaged their brains. To be clear I am not saying STR can't work. I am convinced that the market is falling, and I think the falls are likely to be in the 20 to 30% range not the 10 to 15% some want us to believe. STR will work for some people, just as BTL did, but it has to be assessed on a case by case basis and there are very real risks. Old Timer might be quids in (only the future will tell) but not everyone is in his shoes. Lots of people on here seem to be **** sure on what the future will bring. I'm not, and I like to think through a range of scenarios. Taking your points in turn: 01 Relative cost of renting vs interest only. It goes without saying that this is one of the first calculations anyone should make. And it has to be done on a case by case basis. Again your decision will be different depending on your age, where you live and the circumstances. Renting will nearly always be cheaper so if you want to buy at some point you'll have to face this difference sooner or later. There are deals to be had in my area right now where the difference is negligible (though that doesn't automatically make it worth buying – you obviously have to factor in likely capital depreciation). 02 Principal payments on a depreciating asset. Let's not forget them. If you did STR in 2003 and there's eight years to market bottom they may well be material. And, again, if you want to buy at sooner or later you'll probably be paying a mortgage over 25 years. At some point making repayments on a depreciating asset will be pretty much inevitable. That doesn't make it automatically a bad deal. It depends on the specifics. Buying now might make no sense. But having sold to buy later might not either. 03 Risk of financial hardship to borrower and family. There are risks both ways. Shorting a market is VERY risky. If you STR in a period where the market drops 30% you'll only gain that 30% if you buy and sell at absolutely the right points and the area you are buying and selling in falls at the national average. If you are 5% off the peak and 10% of the base you can nearly halve your gain. Many people that have STR in the last three years will have been way more than 5% off the peak. Buying at the bottom is really tough too. For one thing it can be the hardest time to get a mortgage and the available deals can be expensive. Not to mention the availability of decent property. Now what happens if the falls miss your target 30%? If they hit 40% you're quids in. 20% and you could be in trouble. Most people are much better placed to bear the financial burden of a mortgage when they are young and earning than when they are retired and earning less. My mother (77) couldn't care less about the property market as she owns out right. I have some other friends who are 80+ and have rented all their lives. They dread their annual rent review. If you're happy to rent forever and you're disciplined about what you do with the money you save then none of this may matter. But the younger you are the riskier that is. If you're sitting on a fat wedge of cash from a previous property sale (or from elsewhere for that matter) then you're also in a more comfortable position. But if you're spending half the interest on paying rent (and I think many people will be spending more than half) you may well be depreciating your capital sum in real terms. 04 And on the 'poor schmucks who've bought a property in the last 3 years and who are now stuck with higher mortgage repayments than those who will buy in a couple of years time.' In 2005 there was a mini slump in my area (in London) and canny purchasers could and did get great deals from keen sellers. They could also get mortgages at near all time lows fixed for ten years. This doesn't mean they'll come out on top, that depends on exactly what happens over the next few years, but the picture is not nearly as simple as you imply. Sure there are many who paid too much who will suffer. There are many STRers that will suffer too. The market is never that simple. Timing, and specifics, are everything. 05 'It's not about speculating. It's about being financially responsible.' How is STR not speculating? Avoiding buying in an over-inflated market or avoiding over-stretching yourself is certainly financially responsible. But selling to rent is speculating. Just like buying to rent. I'm not here to spin or to ignore the downsides of buying property. At the moment getting into the market is clearly very perilous. It has been for a while. I just think there is a lot of almost religious zeal here among SOME STRers. I'm sure there are lots of STRers who will be thinking some of what I am thinking. As others here have said, it might be nice to have a debate on this without incurring the wrath of the self-appointed high priests of the church of HPC.

This shows how tricky STR can be. This website was set up in 2003. No doubt some of the early posters STR. IF we see a property crash of 30%, prices (where I live at least) could be back at 2003 levels. Lets suppose a 30% crash will take 3 years to play out, by 2011 the average person that STR in 2003 will be able to buy at the level they sold at. They will have saved 8 years worth of the difference between having a mortgage and renting. But you'd have to weigh this against the fact that in 8 years, with a repayment mortgage, they'd have paid off roughly 23% of the capital. Maybe I'm missing something here but if your ultimate goal is to own your home (and I for one would rather be living rent- and mortgage-free in my retirement) then at some point you'll have to buy. Since renting is nearly always cheaper than buying on a month to month basis, if your goal is to buy you will have to swallow that difference sooner or later. The sooner in your life you swallow that pill the sooner you'll be living rent- and mortgage-free. And the more years of benefit you'll see from that. Eight years is nearly a third of a 25 year mortgage and about a tenth of an average life span. Since the average first time buyer in the UK is 29 years old, 8 years is well over 15% of the average property-owning life. In Jonnybegood's example the period would be 5 years rather than 8. The shorter the period the more you can make an argument for STR but the harder it is to call the times to buy and sell. Given that very few people that STR will call the times to sell AND buy perfectly very few will get the full advantage of the drop that occurs. This is a property speculation site and those posting opinions on it, whether bear, bull or neither, are property speculators (unless they are off topic). It's daft NOT to speculate on investment property. But when it's your own home things are a bit more complex. You need somewhere to live. And it's not just an investment.

On what evidence are you basing this VP? Where are your historical figures? If you ask me this is the 'have your cake and eat it' thread. Many STRers on this site have been pointing out for a while that rents have failed to keep pace with property increases. Which is one of the factors that made STR attractive. So how is it that rents ALWAYS reflect capital prices? Property sales are down dramatically. Few would argue with that. If you aren't buying somewhere you have very little choice but to rent. Sure, you might leave the country or move in with friends or relatives but the majority of people will do neither. They'll rent. That's why we say STR not STLC or STMIWFoR. This makes it highly probable that a fall in sales will bring about a rise in rental costs. Granted this won't happen everywhere. You'll always be able to cite exceptions. But this is what will happen on average. I my opinion any STRers or property bears that have not figured rent rises into their calculations have got their sums wrong. If we see the dramatic price falls of 30 to 40% this may, indeed, not matter. But this is a gamble since, SHOULD rents rise ahead of inflation, this would show underlying strength in the housing market and that might support the views of some of the softer bears (those predicting falls in the 5 to 20% bracket). Now figure this... To take full advantage of any fall you have to sell at the peak and buy at the bottom. Most will do neither and almost no one will pull off the magic trick of doing both. So, whatever the fall, you need to factor in the inefficiency of your selling and buying. If you mis-call your selling point by, say, 5% (5% off the peak) and your buying point by, say, 10% (10% off the bottom), on a fall of 30% this would wipe out nearly half your potential gain. I bought (purely by luck not judgement I might add) at the bottom of the market in 1995. Most of my friends told me I was mad and VERY few people were buying. This is why it's the bottom... few are buying. It's VERY hard to buy there, probably even harder than it is to sell at the top. Now figure that you can't buy the market. What I mean is that rises and falls are not evenly distributed throughout the country. You may live in an average area where a fall is in line with national average. You may be lucky and live somewhere where the fall is greater. But if you live somewhere that falls lower than average the potential gains are obviously also lower. If you're very flexible about where you live this may not matter. But, if you think you can gain from property price falls, this should also be assessed and figured in (to the degree possible at least). Any property bears that aren't factoring these things into their figures are not being very sensible. If you're an STRer (or thinking about it) you'd be really daft to ignore them. Shorting any market is risky. Shorting property is highly risky since it is traditionally a resilient market. It's certain that prices are falling but you'll only gain by taking action at the right moments and keeping all possible factors and costs in mind. Treating any news you don't like as though it's nonsense or heresy, frankly, isn't the right attitude. People need to take a long hard look at facts an opinions that run counter to theirs and to look at the worst case scenarios not just best. A great many property bulls are feeling the pain right now from not having done this in the past few years. And it's certain there will be a bonfire of property bears sometime in the future. There's hype on both sides. The truth lies somewhere in the middle, as it pretty much always does.