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House Price Crash Forum


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About LuckyOne

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    HPC Fundi

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    British Columbia / Florida

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  1. I have a theory. The average house price is the present value of GBP 1,000 per month over 25 years discounted at the Base Rate + 100 bps. People care about payments and not prices at their peril. Base Rate Present Value 0% GBP 265k 1% GBP 236k 2% GBP 211k 5% GBP 155k 7% GBP 130k 10% GBP 102k
  2. https://www.theguardian.com/money/blog/2017/nov/18/house-prices-land-prices-cheaper-homes The essential point is that residential land is worth about 100 times the value of agricultural land. As the planning process is the mechanism by which land use is reclassified, why should the increase in value go to owners upon reclassification rather than to society which gives planning permission and causes the increase in value?
  3. I think that they key indicator to watch is the velocity of money. https://fred.stlouisfed.org/series/M2V Monetary authorities have tried to counteract the collapsing velocity (flow) by pumping up the supply (stock) to maintain overall activity. https://tradingeconomics.com/united-states/money-supply-m2 At some point, the velocity of money will pick up and all hell will break loose. It feels like we are reaching an inflection point but I have been wrong about the timing for a while now. I think that history will look back at the last decade very unkindly. Monetary authoriti
  4. It is a bit of a tricky question to answer. I describe BC and FL as having a high quantity of life while the UK has a high quality of life. There are things that I really miss about the UK, especially socially. We have lived all over the place and I know that there is no such thing as perfection and that the best that we can do is look for the "least worst". The housing markets are not homogeneous across either BC or FL. We are not in (or within commuting distance of) Vancouver or Miami with their attendant issues. In the parts where we live, our son could afford a modest, single
  5. I still pop in every now and again. We left the UK in 2015 after renting and waiting for a decade for house prices to get to a reasonable level. Our daughter still lives in London and we visit a couple of times a year. My current thinking is that the PV of GBP 1,000 a month for 30 years at 0% is GBP 360,000. The PV of GBP 1,000 a month for 30 years at 7.5% is GBP 143,018. A monthly payment of GBP 2,517 a month at 7.5% has a PV of GBP 360,000. Prices don't matter, cashflow does. Rental yields have collapsed because people can't afford more rent. People can pay current prices
  6. I am surprised that the BIS know so little about the mechanics of FX swaps and forwards and cross currency swaps. If one party to the transaction defaults at any time before maturity, the bankruptcy claim is for the net mark to market value of the contracts and not the gross amounts. If one party defaults on the maturity date of the contract, there is a settlement risk that the surviving party makes the payment in one currency and doesn't receive the payment due in the other currency. In this instance, the authors are correct if the surviving party is not vigilant about settlement risk.
  7. The irony is that the last court of appeal is the European Court of Justice.
  8. I have been giving IP a bit of thought lately. This is what got me to thinking about it : IP is taking up an increasing share of total capital. It is very difficult to participate in the "production" of IP. It is even more difficult to acquire it. I think that the growth in the relative value of IP is a contributing factor to increasing inequality. In the long run, we are going to have to face up to the fact that there are more people than good jobs and that some form of Citizen's Income is going to have to come into play. This will be very expensive and is a "down the road" discussio
  9. The other problem that we have is that net additional government borrowing each year is definitionally part that year's GDP. When borrowing is reduced or halted in a subsequent year, either because of policy or because of markets, GDP falls by definition absent increased tax collections. The Krugmanite argument (Austrian in good times and Keynesian in bad times) is that states should increase borrowing during recessions to keep GDP constant. In my view, this is a tautology and not a policy at all. If we were to believe that debt is just a claim on future output, our national accounts would
  10. Throughout history, reliance on vendor financing has eventually harmed the vendor and not the purchaser. I agree with your identification of the problem. I also think that a full fiscal union won't politically palatable. Germany could be clever in a EUR exit strategy. They could have German owners of German government debt (roughly EUR 2.24 trillion in total) have their debt converted in DEM upon exit while non Germans keep their debt denominated in EUR. As long as foreign ownership of German government debt is more than roughly 22% of total debt, this will be a good offset of the Target
  11. There are only two options for Germany in the medium term : Leave the Euro Agree to a full fiscal union A cost of entering into a monetary union and not a fiscal union has already been incurred by Germany. The nature of the cost is all that remains to be determined. If they leave, the cost will be a 20% to 40% reduction in their net Target 2 balance in DEM terms as well as a more difficult export environment due to a strong DEM. If they stay, they will have to allocate an additional 5% to 10% of GDP to fiscal transfers within Europe. If Germany and the UK were smart, in my opinion, they w
  12. http://www.theguardian.com/politics/2015/jul/21/george-osborne-launch-spending-review-asset-sales I assume that all of the land being sold will count as brownfield sites, so relatively easy to develop.
  13. The BIM45700 "regime" is something that I didn't know about. It just makes the problem even worse for those with larger debts and income who have been aggressive in the past which is where I believe that the pain was meant to be felt.
  14. It is the only way for the Euro to survive. Another option is to have a strong EuroA and a weak EuroB, perhaps with some sort of promotion / relegation framework.
  15. The first column represents after tax net cash flow before the budget and after the budget. The second column represents the after tax net cash flow before the budget and after the budget with a 2% increase in rates. I think that I have already shown what you are asking for. The reality is that higher marginal rate BTL landlords can be in a negative cash flow position after tax post the budget even if they are in a positive cash flow position pretax due to the differential between the tax rate paid on (rents - non interest expenses) for a 40% or 45% taxpayer and the tax "earned back" on int
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