Cherubium
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How Bad Does It Have To Get?
Cherubium replied to brassed off brit's topic in House prices and the economy
With 50% of the population going to university, the average person doesn't start work til about 20. You then retire at 65 and live until 85 based on currenly projected rises in life expectancy. Take 3-4 years, for gap years, maternity, unemployment etc and you end up with a person who works about 41 years and needs state support in either education, maternity or retirement for 45 years! You have to wonder when the pressure is going to come at the opposite end of the spectrum. Maybe 18 and 19 year olds will start wanting to get jobs and contribute to pensions and reach 21 or 22 with some money behind them instead of 20k in student debt and a useless degree in Business Administration, Graphic Design or whatever. University is fine for training doctors, scientists and stuff like that, but do you really need to stay out of the jobs market until you're 21 or 22 in order to work as a civil servant or a shop assistant? -
The square footage measurement is always gross internal. Common disclaimers to add volume over and above standard surveyors definitions are: Includes space with a celiing lower than 1.5m (IE useless bits of loft rooms and part of loft itself) Includes garage In terms of usefulness, it's very good for comparing the value of properties within the same area, or for working out the relative prices in two areas you'd like to live in. You can also spot oddities in the market. One thing I've noticed where I'm looking (Barnet area) is that 3000sqft executive homes currently list at around £500 per sqft, compared to around £350 per sqft for more modest family homes around the 2000 sqft mark in the same areas. I don't think it's entirely coincidental that almost none of these more upmarket houses have sold since I put them in my rightmove favourites list back in January. Though infuriatingly, none of the buggers have come down much either!
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I'm not convinced by the argument that top end houses will sell. The kind of people who buy £million+ houses are going to lose a big chunk of their take home pay with the 50% tax rate. A person on £300k per year will see their take home income drop from £180k ish to £165k ish. Having 15k lopped off your take home pay isn't gonna send many people rushing to the estate agents...
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One way to look at what's happened is to transfer it to another field. If you walked into your supermarket and found that there was only half or a third the normal amount of food available, you would expect prices to rocket. So the fact that there's so much less available, but prices have only gone up by a few percentage points is actually a sign of just how weak the market is. (Imagine the prices that would have been acheived if such a drop had happened during the boom!) To me, the interesting thing at the moment is not what the moves in prices are, but why there are so few sellers and when will they come back. My best guess is that it's classic 'sticky on the downside' psychology where people are reluctant to take a loss for emotional reasons.
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Would the seller have screwed you over if someone offered more money when prices were going up? Just do it.
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London Fails To Make Top 50 'most Live-able' Cities
Cherubium replied to 50%deposit's topic in House prices and the economy
You have to wonder about the criteria though. Perth and Adelaide are in the top ten, and there's literally NOTHING to do in either of them. The whole list just seems to favour bland, mid-sized cities in wealthy and lightly popluated countries. I suspect it was picked by the Stepford Wives... -
The whole thing of dropping down above or below France and Italy is pretty meaningless. We've been switching places with those two since the Thatcher years, usually based on currency movements. And I'm 100% sure we'll drop down the pecking order, but that's true of all developed nations as new countries rise up the ladder to similar standards of living. I was just reading a book about WW2 and was shocked that in 1941 the USA represented 54% of global industrial output! Currently it's about 11%. And while people may feel uncomfortable with the loss of political power caused by rapidly growing countries like China, what it means on the ground is that people now have enough food to eat, in a country where millions used to die of famine two or three times per decade.
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Debt bubble, banking collapse, massive government debt relatively wealthy, densely populated island... So present day, post 1980s bubble Japan is probably a pretty good model. People often talk about 'dropping to Russian standards,' or 'third world economy' but I can't think of a single instance where a country has dramatically dropped down the economic pecking order because their infrastructure, cluture and people remain after the crisis. For instance, Japan and Germany recovered from near total collapse after WW2 and returned to 1st world status within 20 years. Argentina suffered total economic collapse quite recently, but it now resembles a developing nation pretty much on track with its neighbours. Iceland is probably the wealthiest country to collapse in recent years, but I'll bet it'll be comfortable and prosperous again in ten years, because even if the entire economy disintegrates, the fundamentals of good infrastructure, educated population, cultral stability will pull it through.
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I've discovered a few phantom houses on Rightmove where you ring up and discover that the house isn't available and they just want your details. They're usually pretty nice looking, going for about 15-20% less than what you expect and then the agent says, 'Oh I don't know why that's still listed...'
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The thing people miss totally with manufacturing are the margins. Go into a shop and pay £20 for a brand name shirt (or a computer mouse or whatever). £10 goes to the UK retailer £7 goes to the brand £2 goes on raw materials - probably poor 3rd word farmers, or some chinese plastic factory or whatever. £1 goes on the actual manufacturing. So basically, you might want to fret ethically or enviromentally over all the low value manufacturing in the world, but from an economic point of view rich countries make huge economic gains from the fact that most stuff is made by poor 3rd world workers. I certainly don't lose sleep over my Vietnamise jeans. Over the long haul, they probably do a million times more economic good for 3rd world prosperity than all the aid organisations combined and erecting trade barriers or subsidising British people churning out stuff in low value manufacturing jobs would almost certainly retard our economy rather than help it to grow.
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What I'm learning is that there are two kinds of properties on the market: People who are thinking about selling, and people who have to sell. Most new builds fall into the latter category because developers need cashflow and risk going broke if they can't renew financing arrangements. Secondly, the credit squeeze means there are two prices. If you've got a property to sell, or face difficulty with financing, you're not going to get anything like the deal that an all or mostly cash buyer can, because developers know that chains have a very high probablility of falling through. TBH, I'm very bearish about the property market and still suspect that I'll lose 200k or more on the property if I buy it. But that's only what I'd pay over 5 years in rent and I want to get on with my life and find a nice place to live. As John Manyard Keynes said, 'In the long run, we're all dead,' and I'd rather spend the next five years of the 40 or so I have left living in a great house, not sitting in my crappy 1 bed rented flat bragging about how much money I've saved by waiting for prices to fall.
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Based upon personal experience (looking for a flash new build detached, mainly cash buy) it goes: 1. Ring estate agent about 1.1m property, who says he can't fit you in because he has so many viewings 2. Estate agent calls me back, and says he can, 'squeeze me in'. I feign disinterest 3. Eventually view property, really like it. 4. Bid 780k and get told that's unrealistic. 5. Wait four days, agent calls back and says might be able to do it for 900, I say 780 sounds better. 6. Agent calls and suggests 850. I say 780 sounds better 7. Don't hear anything for ten days. Agent says 820 may be possible. I point out that it's now three weeks later, and that he now has 2 other properties in the same development where sales have fallen through. So I reduce my bid to 720. 8. Agent calls and suggests 780 might now be OK. I say the bid is now £720k 9. Agent calls and says, 'Developer has seen some land he wants to buy.' Might twist his arm to accept 720. 10. Agent calls and says 'Developer will take 720k. I'm currenly umming and arring over a second viewing. The property was way over the odds at 1.1m, but at 35% off it's not bad, and ultimately I want somewhere to live so I may go for it. Basically, based upon personal experience, if you find a seller/developer who needs to sell (as against someone floating their property on the market to see what they can get) the lack of demand means you can really drive down prices.
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Well If You Had A House Would You Sell In This Market?
Cherubium replied to chelston's topic in House prices and the economy
I can't help feeling that some of the answers on here only really apply to investment properties and lose sight of the fact that people need to live somewhere. So lets assume the worst. To make the sums simple, I assume you own the property outright. The property drops by 50% over the next 5 years, making a loss of £150k You stick your money in the bank and earn about 1% interest after tax. So that's about 16.5k with compound interest. To rent the equivalent property (assuming a 5% rental yield) would cost you around £300 a week. So that's £300 x 52 x 5 making £78000 in rent. Now I'll add in two moves, stamp duty when you buy, estate agents fees when you sell, costs of doing your house up to sell and doing up the house you buy, plus all the time and hassle. I'd say 20k for that lot. So: Costs: £78000 Rent £20,000 Moving and transaction costs £150,000 Purchase of equivalent property at 50% of current value Total costs £248000 Income £300,000 Proceeds of house sale: £16,500 Interest on savings. Total profit: £68,500 over five years. Now that's not bad for five years. But my assumptions are based upon the highest predicted falls in house prices and the fact that you're able to time your reentry into the market perfectly. There are a million ways you can kerjigger these figures (rents could obviously fall), but my main point is that nobody should view it as a simple 'If I sell for £300k and buy for £150k I make a £150k profit. In the scenario I've outlined above, house prices have to fall by 30% just to break even on the deal. -
London's New Westfield Centre Is Dead
Cherubium replied to dalek's topic in House prices and the economy
If Westfield the company went broke, the centre would still trade after some kind of refinancing. It's a similar situation to Canary Wharf in the early 90s, which almost went under but is now hugely successful. The place's biggest flaw is currently food. They put a load of upmarket eateries in, but if you're dragging your family around you often want to spend £15 on a Happy Meals, not £45 on a bunch of fancy stuff. Also of interest, there's an even bigger Westfield being built at Stratford in time for the Olympics. -
Cool, I've been using the overhead view on a couple of houses I've been looking at buying. Great for spotting that there's a massive council estate directly behind the row of tall trees...
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The Welcome Thread For New Members
Cherubium replied to Bubble Pricker's topic in House prices and the economy
Well, I'm a new member who just got thown by the 'can't post a new thread' rule. It's like Nazi bleeding Germany in ere... I'm actually a writer, quite well known if you're twelve: www.muchamore.com I'd rather like the market to crash quickly so that I can get on with my life and spend loads of money on a cool house...