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House Price Crash Forum

Jimmy James

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About Jimmy James

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  1. There are only 68 signatories... come on people! We can do better than this!
  2. I'm not too sure Frank's right here - Blair has almost no levers to control the economy, the great achievement of the Granita lunch for Brown. Unless of course Blair comes out with a public statement saying house prices are going to crash - which i reckon is unlikely.
  3. I don't think they're as stupid as they first appear. My guess is that they realise the loss of the Eurostar is a major blow to their business model, so they are hyping the market whilst off loading their portfolio to the gullible through their "consultancy business". The last set up is to try and avoid the shock to the Ashford market that selling up their portfolio in a normal manner would create. They have about 10 months (up to 18 if really optimistic) try and pull it off.
  4. I'm a potential FTB - although 'potential' seems very hypothetical indeed at the moment. Not surprised STRs post more frequently, as their position means they are exposed to greater risk and it is more of a conscious choice - hence a greater need for analysis and greater levels of self doubt. As an FTB I feel much more that it is in the hands of the gods - and thus post less.
  5. We're turning Japanese... I am very depressed. I don't mind others losing their shirts through foolish financial behaviour - but the scale now looks like it will mean the rest of us get shafted too. And all government housing policy is designed to pump more liquidity into the system. I think i'm just going to migrat to Allotments4all discussion boards and just talk about vegetable cultivation, otherwise i'm going to need medication fairly soon.
  6. Respected economics writer saying things are more complicated than the HPC view - comment? ---------- Pay no attention to house price forecasts By John Kay Published: November 7 2006 02:00 | Last updated: November 7 2006 02:00 Like those who tell the time from a stopped clock, the people who predict that British house prices will tumble will be right one day. But in the meantime, the rise continues and London estate agents are salivating at the prospect of City bonuses in January. Last week, the principal mortgage lenders announced that they would help new buyers by offering loans of five times income and 125 per cent of value. If house prices have risen, so have the values of most other assets. Including the only asset category that really is safer than houses - long-term real government bonds. If the recently issued 50-year indexed stock had existed when Britain's housing boom began, almost 10 years ago, it would since have doubled in value. From that perspective, what has happened to house values is less remarkable. Asset bubbles emerge when the dominant motive for purchase is the expectation of selling on soon to someone else at a higher price. Such bubbles necessarily burst, because that expectation must sooner or later be frustrated. In this sense, there has never been a housing bubble except in certain, very limited areas of the market: the overwhelming majority of those who buy houses plan to live in them. In the absence of bubbles, prices oscillate around uncertain estimates of fundamental value. These speculative prices typically display positive serial correlation in the short term - if prices have just gone up they tend to keep going up - and negative serial correlation in the long term - periods of above average increase are followed by periods of below average increase. If we knew when the short term became the long, we would all be rich, but we do not. This pattern is one of mean reversion - prices return to a historic norm. For five years now, the expert consensus that British houses are overvalued has relied on one central fact - the ratio of house prices to incomes is at a historic high. But while there are some good reasons for expecting the price-earnings ratio of stocks to revert towards its long-term average, there are no similarly persuasive reasons for expecting the same of house prices. Houses are both an asset and a commodity and the analysis required is much more complex. A house provides space and shelter and, in the American mid-west, these are the principal attributes of a house. There is more land there than anyone could build on and usually not much to choose between the prestige or convenience of different areas of the spacious cities. House prices are low, stable and tend to move in line with incomes. London, Dublin or Barcelona, like Manhattan, California and Hawaii, are very different. Most of the price reflects the location rather than the accommodation. You cannot make more houses on East 69th Street or in Belgravia. Nor can you make more houses at the most prestigious addresses, because it is in the nature of prestigious addresses that there are not many of them. Well located houses are what the economist Fred Hirsch called a positional good. House prices are consequently a product of sociology as well as economics. That combination explains why it is Britain, Ireland and Spain, not France, Italy and Germany, that have seen the fastest rises in European house prices and why Hawaii, California and New York, not Idaho, Mississippi and Nebraska, have been the hot spots in the US. The aspirant rich do not displace the very rich from the best houses but they make the very rich pay more for them. This is the self-defeating character of the search for the symbols of status and affluence. So it goes on down the scale. The level of house prices depends not just on levels of income but on social mores and the distribution of wealth. Successfully predicting house prices involves good economic models, an appreciation of the sociological dynamics of aspiration and a trader's flair for the waves of market psychology. Not many people combine these skills. My files tell me I wrote about house prices in 2001 and 2004 and concluded that the only information anyone offering confident predictions about house prices gave was that you should not pay attention to them. It is still true.
  7. Live in South London - 399 properties up for rent through rightmove within a mile. Sure plenty more doing rentals without an official agent
  8. Guardian Debate Living on borrowed time Forty-year mortgages mean people will still be paying off loans out of their pensions. But that is the harsh logic of the housing market. Rupert Jones Confirmation has come this week that the traditional mortgage as we knew it has been consigned to the history books. Go back just a few years and we were all taking out home loans lasting for, at most, 25 years, and borrowing perhaps a maximum of three times our income. Oh, and we'd take out one of those endowment policy things to pay off the loan and provide us with a nice cash lump sum, too. Endowments, of course, were exposed some time ago as a dead loss. Then, last week, it emerged that high street bank Abbey is allowing homebuyers to borrow up to five times their salaries. Others, such as Northern Rock, will go higher still. Today brings news that the maximum mortgage term of 25 years also seems to have been abandoned, with some banks and building societies now prepared to offer home loans lasting more than 50 years. Abbey (yes, them again) will apparently let home-buyers desperate to get on to the housing ladder take out a 57-year mortgage, while Tesco's banking arm will go up to 52 years. The only barrier to such borrowing is the age at which you start: as Abbey's home loans must be paid off by age 75, you would have to be no older than 18 to take out a 57-year mortgage, whereas a typical first-time buyer is now in his or her mid-thirties. Still, the basic story stands: it is a fact that growing numbers of first-time buyers struggling to afford today's property prices are being encouraged to tie themselves into mortgages that some of them will still be paying off when they are pensioners. Halifax, Britain's biggest mortgage lender, will go up to 40 years, as will HSBC, while Bradford & Bingley will do 45 years. It is rocketing house prices that are to blame for this phenomenon. With homebuyers requiring bigger and bigger mortgages, banks and building societies have come up with a clever wheeze for keeping the home-buying market booming: stretching the term of the loan in order to reduce the monthly mortgage bill. But this conjuring trick has a sting in the tail. Yes, you pay less each month, but you're paying out over a much longer period. The effect of interest repayments is that, at the end of that 40- or 50-year term, you'll have paid out far more than if you had opted for an old-fashioned 25-year loan. For example, if you took out a £200,000, 25-year mortgage, with an attractive rate for the first two years and then a higher rate thereafter (let's say 6.5%), you would pay £1,329 a month from year three onwards. If you stretch the term to 40 years, that monthly payment falls to £1,157 - a saving of £172 a month. That's a pretty handy amount. But after 40 years you'd have paid back £155,000 more in mortgage payments than if you'd gone for 25 years. That's to say nothing of the fact that, if you're still paying off the loan after you've retired, you'll have to find those mortgage payments out of your decimated occupational pension. Today's interest rate rise - up 0.25% to 5%, the highest level in five years - will intensify the debate about the hurdles which homebuyers must jump in order to get on to the property ladder, and the pressures bearing down on those who have signed up for their first mortgage. It's easy to slam the lenders for loosening their purse-strings, but with house prices galloping ahead of earnings, something's got to give. That old mortgage model simply doesn't bear any reality to today's housing market. If we want ordinary people to be able to buy a home, the rules have got to change. ------- My twopennyworth: Rubert - for an economics journalist at the Guardian you appear to know very little about economics. Housing is a good of relatively fixed stock. It's price therefore depends on amount of liquidity available to purchase it (Keynes called this 'effective demand' - look it up, it's quite an important concept). The amount of liquidity in the market (the amount that lenders lend) therefore to a very very large extent dictates the price of the house. You are therefore putting the horse very much in front of the cart. The loosening of lending criteria (and the pumping of money into the housing market) has been primarily driving the increase in prices - if you want to bring prices down you need to tighten lending criteria. If you want to pump more money in through 40 year mortgages, 5x income you'll just see prices jump up still further. Next time can we pass these comment pieces onto Ashley Seager - he seems to have a better grasp of these things.
  9. Laurejon: but immigrants causing pressure on housing services is not the same as immigrants causing high house prices. Well, much to my surprise, I partly agree with you here LJ - the quality of life is deteriorating in London, and part of that is to do with levels of immigration. However I think it's best to come at it from a more rounded way - immigration is clearly a problem, but distributional and social justice issues are also equally important, if not more so. It's a faulty intellect who tries to hang it all on the immigrant hook. And treat the 'immigrants cause house prices to increase' with the very large piece of salt it deserves.
  10. Have you bothered to read this thread? It is about clarifying what 'demand' is - and why a simple head count is not a very good way of understanding current levels of 'demand'. The primary reason why Londoners retiring to Norfolk effects prices is because they have a great deal of money - i.e. their contribution to 'effective demand' is very high. You make a good point in highlighting that in a case where one group with more money moves into an area with a group that has less money this of course makes the impact on demand much greater. Of course this isn't the case with the movement of most immigrants into the UK.
  11. The first paragraph could be said to be a fair argument - although it doesn't have much to do with house prices, more a 'immigrants are a tool to help supress wages for the working man' thesis. The second paragraph is fairly tendentious though. The links you are trying to make are weak at best. House prices are much better seen in the context of monetory policy and the surrounding framework of government policy on investment, btls, tax incentives etc.. Immigration isn't the main issue. And what is 'high density immigration' - coming here 50 to a mini metro?
  12. Yes the rental sector is a contributing to demand. But think about it in a little more detail. Effective demand in the rental sector is based on the amount people can borrow - tempered by the yield they must earn from rent. In your example the main contributor to effective demand to be able to buy the house is the business man (who borrows the money, pays the mortgage whilst earning rent), whilst the immigrant (because of their low wages and their inability to borrow) only contributes 10% of this effective demand through rent. The business man benefits from access to better (although riskier) access to credit, through interest only loans and rental income, which means they can out compete our hard working young British couple. Of course the immigrant contributes to rental demand (albeit at 10 immigrants per house this is very low) but the key driver of effective demand is the business man in alliance with the bank. Can you see a picture emerging: business man + bank = problem. Socialism made easy.
  13. Brainclamp - you have a very unitarian way of constructing an argument. Is the clamp affecting you're brain's ability to see more than one cause to a problem (and then roll everything else into in a very jumbled way)? In fact your response is such an incoherent mush it's hard to know where to begin. My numbers are not meant to be serious - but even if you asume that we have 10 new immigrants to the original 59 residents the observation I make remains valid. The 'causes of low interest rates' are multiple and varied. In the current UK context interest rates are used primarily as a mechanism to control inflation. Low inflation is caused by many different factors (costs of goods, basic materials, services etc..). Wage costs are only one part of a measure of inflation - and for the most part wage costs elsewhere (i.e. China) are a more significant driving force behind our current inflation rate here. It is true that immigration can have a downward pressure in wages within the UK - but only in certain sectors. You are also right to point out that this comes with distributional consequences. But this is only one part - and a fairly small part - of any analysis of why inflation and interest rates are low. During the early part of the twentieth century anti semitism was called 'the idiot's socialism' - in that the anti semite was identifying the jew with the problems associated with banking and capitalism. You seem to be suffering from 'the retard's socialism'. At least in the twentieth century the uninformed had the excuse that jews had a fairly strong associative link with banking and finance. You don't even have this excuse - trying to blame an immigrant for problems created by central banks, the workings of free markets and a laissez faire government really is moronic.
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