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House Price Crash Forum


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Posts posted by CrashConnoisseur

  1. He managed to get in the line "Whenever oil prices have run high, it's caused a recession in the UK..." [AvidFan]

    Also reported in 'Brown blames Opec for fuel crisis':


    Acknowledging that the current crisis was as big as the oil shock of the 1970s, ...

    This is untrue. The current oil situation is a long way short of being "as big as the oil shock of the 1970s" for the following reasons...

    1. Adjusted for Retail Price Inflation oil would need to approach $100 per barrel to match the price seen in the 1970s. Adjusted for average wage inflation or the rise in corporate profits it would need to go much higher to reach comparable levels of affordability.
    2. One of the main drivers for the rising price of oil has been the fall in the dollar. Oil is sold in dollars. If each dollar is worth less, then more dollars are required to obtain the same value. Consequently the price in UK pounds has gone up far less than it has for consumers who pay in dollars. For a discussion see 'Overlooked factor in oil hike: falling dollar':
      Between the end of February 2002 and the end of February 2004, the price of oil in dollars rose by 51 percent (from $20 a barrel in 2002 to more than $35 a barrel today), but it rose by only 4 percent in euros. Over the same two-year period, the US currency plunged from 1.16 euros per dollar to 0.80 euros per dollar. In this situation, it is perfectly rational for foreign suppliers of oil to charge more dollars.
      While remedies such as encouraging more efficient use of energy are good, they won't negate the fact that a declining US dollar is an important cause of the run-up in oil prices.
    3. The oil shock of the 1970s was a genuine shock -- OPEC turned off the taps for political reasons and created an acute shortage. At worse, we now have a small supply-demand imbalance (likely to be corrected, at least in the medium term, by demand elasticity and incremental supply increases).
    4. The UK is still largely self-sufficient (although North Sea output is in decline). In the 1970s almost all UK oil was imported. Consequently rising oil prices now make little difference to the balance of trade.
    5. As a result of North Sea oil British based companies, such as BP, are now major players in the world market. The oil sector contributes substantial foreign earnings and taxation revenue to the UK economy.
    6. Since the 1970s the UK economy has moved away from energy intensive manufacturing to services. Each unit of GDP now requires around 40% of the oil that it did back in the 1970s.

    Petrol at the station is only 25p a litre without the tax, ... [DEATH]

    For an average pump price of 91.82p, the pre-tax price is 31.1p per litre (91.82 / 1.175 - 47.1).

    He could, of course, just be priming the world for a relaxation of his financial rules and conveniently putting the blame on the oil price spike. [iLBB]

    I suspect that's exactly what he's doing. It's possible he was forewarned about the need to raise interest rates by Mervyn King earlier in the weekend, as reported in 'U.K. Chancellor of the Exchequer Gordon Brown said Sunday the fiscal impact of high oil prices for the U.K. would be "effectively neutral".':


    Brown said he had spoken with Bank of England Governor Mervyn King during the course of the weekend about the inflationary impact of high oil prices in the U.K. Brown said he believed the independent, interest rate-setting central bank would be able to keep inflation under control.

    There's no doubt in my mind that he'll have to take some action to stop the UK economy falling into recession, bearing in mind that the rise in oil will see around £300 to £500 added to the average households fuel, electricity and heating bills and that's just the primary effect! [iLBB]

    The modest oil price rise seen so far (in pound terms) is unlikely to be the cause of a UK recession. However, the relatively small rise in interest rates that may be needed to counter its inflationary effects is likely to exacerbate a recession caused by the ongoing house price adjustment.

    The timing is absolutely perfect for an oil shock to supposedly be the singleton cause of wrecking his economic miracle. [farmerdring]

    Indeed. However, the real cause remains the speculative bubble in the housing market which started to deflate last summer -- before UK oil prices even became an issue.

  2. By the way, I've heard that the French have just threatened their oil companies with higher windfall taxes if they didn't cut prices (and profiteering) - guess what - prices fell immediately. [gruffydd]

    'Oil firms act to avert French tax':


    Oil giants BP and Total have agreed to cut French fuel prices after government threats to levy a new tax on oil firms in the face of soaring crude prices.

    From 'Brown Told: Cut Fuel Duty':


    Fuel duty has now been frozen since October 2003, but it remains among the highest in Europe at 47.1p per litre. In France only 24p of the 85.2p drivers pay at the pumps per litre is duty.


    Britain 91.82.

    Assuming these figures were correct and contemporaneous the pre-tax price in France appears to be over 50% more than in the UK:

    Britsh pre-tax price = 91.82 / 1.175 - 47.1 = 31.1p per litre.

    French pre-tax price = 85.2 / 1.196 - 24 = 47.2p per litre.

    (French VAT is 19.6%).

    This suggests that French petrol distributors and/or retailers make much higher profits than their UK counterparts (unless dramatically less efficient).

    Oil futures for January '06 are $5 _below_ where they were after Katrina hit. [MarkG]

    A case of 'buy rumour, sell fact'?

  3. Edit: Yep, rather use JPG or another compressed format. Paint didn't previously support these formats, suppose this is an XP upgrade? [bandWagon]

    Graphic formats can easily be converted with IrfanView (Windows, freeware):


    JPG is best for images containing graduated colours such as photos. GIF or PNG are best for flat images such as graphs (smaller file size, less processing).

  4. Take a copy of the graph, paste it into "Paint", save it as a bitmap and upload. [bandWagon]

    Save it as a GIF or PNG either of which are web standards. Bitmap (BMP) is a Windows specific format which is not appropriate for use on the Web (it's also uncompressed which wastes people's time and bandwidth).

  5. Does anyone have any idea what inflation is going to look like in six months? [Pluto]

    I don't know, but I suspect we'll see a 'surprise' rise above market expectations.

    Interest rates will be at 5% very soon... [Pluto]

    Or Brown will reset the inflation target to 3% in order to accommodate the 'temporary blip in oil prices' (due to Hurricane Katrina / nasty speculators / Iraqi insurgents, etc.).

  6. Why is it you can get planning permission almost anywhere to house horses but you can't get permission to build somewhere to house people? [OnlyMe]

    See 'Information on Building Stables':


    Unfortunately there are no easy answers when it comes to planning permission for stables or any other structure. Each application is taken on it's own merit.

    Firstly, Central Government provides each local authority with Planning Policy Guidance notes. The local authority also have their Unitary Development Plan which is a 250 page document within which are policies on drainage, noise, traffic etc. Each application must adhere to these guidelines. The local authority then looks at the designation of the land e.g. is it in a green belt area or an area of outstanding natural beauty. There are different levels of tests for these types of area. The local authority then looks at the area itself and if the application passes all this then it goes to public consultation.

    There may be instances where an application would not ordinarily pass one of the local authority policies, however, the local authority may ask Central Government for permission to go ahead.

    Has the planning system a lot more to do with lining pockets than planning? [OnlyMe]


    Why do they do the same with an open border imimgration system? [OnlyMe]

    They don't. There is no such "open border immigration system".

    How many members of parliament have second homes/BTL and other housing interests or get paid consultancy fees from the lending/building industry? [OnlyMe]

    Why not do some research and report back? Here are five MPs' declarations to get you started...

    'Tony Blair MP':


    Register of Members' Interests


    8. Land and Property

    Two flats in Bristol for which rental income may be received.

    A house in London for which rental income may be received.

    'Gordon Brown MP':


    Register of Members' Interests


    [No property interests listed.]

    'Margaret Beckett MP':


    Register of Members' Interests


    8. Land and Property

    Residential rented property; flat in Westminster, London SW1.

    'Michael Howard MP':


    Register of Members' Interests


    8. Land and Property

    Flat, currently let, in London SW1.

    'Charles Kennedy MP':


    Register of Members' Interests


    8. Land and Property

    Single bedroomed flat in London, from which a rental income is derived.

    Why did govt have a policy of attracting more people to further eduction with no provision for a suitable level of additional accomodation? [OnlyMe]

    Most students attending colleges of Further Education live in the family home. Higher Education Institutions such as universities are responsible for providing student accomodation. This has been greatly expanded over the last decade often by using 'Public Private Partnerships and the Private Finance Initiative':


    Institutions have successfully employed PPP and PFI as a procurement route for a number of project types, most notably to provide student accommodation.

    Some university towns and cities may now have a surplus of student accommodation as reported in 'Student landlords feel the pinch':


    Landlords in Lincoln have said they may be forced to sell their properties because of new university flats.

    The warning comes as more than 600 student flats remain unoccupied -- three days in to the of the academic year.

    wouldnt it be a good idea to have MPs declare their housing interests.? [right_freds_dead]

    Lord Nolan thought so.

    why not write to your local MP and ask if he has any connections to housing groups or home builders/developers. or are they landlords ? [right_freds_dead]

    Much easier to consult the 'Register of Members' Interests':


    1.  Remunerated directorships

    In this section Members are required to register any remunerated directorships which they hold in public or private companies. Members are also required to register directorships which are unremunerated if the companies are associated with or subsidiaries of a company in which the Member holds a remunerated directorship.

    2.  Remunerated employment, office, profession etc.

    This is the section for registering outside employment, professions and sources of remuneration not clearly covered elsewhere in the registration form. This includes membership of Lloyd's of London; Lloyd's members are required to disclose the categories of insurance underwritten.


    8.  Land and property

    The requirement in this section is to register land or property worth more than £55,000 (100% of an MP's salary) other than any home used for the personal residential purposes of the Member or the Member's spouse or partner -- or from which in aggregate an income in excess of 10% of an MP's salary (£5,500) is derived, for example holiday homes which are let for rent or other commercial property or land.

    9.  Registrable shareholdings

    In this section Members are required to register the name of any public or private company or other body in which, to their knowledge, they have a beneficial interest in a shareholding (a) of more than 15% of the issued share capital or (B) a value of £55, 000 (the current parliamentary salary) at the preceding 5th April. The requirement extends to holdings in which the interest is held with or on behalf of the Member's spouse or partner or dependent children.

  7. Surely rental property is generally used more efficiently? Professional landlords usually maximise their income by letting larger houses out by the room or converting them into separate flats or bedsits. Relatively few tenants rent properties that are larger than their needs. By contrast, there are many single owner occupiers who live in two or three bedroom houses. Some owner occupiers own a second holiday home which is empty for most of the year. How many tenants rent two houses at the same time?

  8. First post.

    Plotting the frequency of house sales against price might be expected to produce an approximate normal distribution centred on the average selling price with a long tail of higher priced properties. However, such a graph will be disrupted by discontinuities around the stamp duty thresholds. This tax is paid by the buyer at the applicable rate on the entire purchase price once each threshold is reached. Current rates are 1% on properties over £120,000, 3% if over £250,000 and 4% if over £500,000. For example, on a house bought at £249,900, the stamp duty is £2,499, but at £254,900 it rises to £7,647. Consequently, there will be a substantial peak in the frequency of sales just below the threshold, a precipitous drop to near zero at the threshold, followed by an initially slow but accelerating rise to rejoin the approximate normal distribution curve. These threshold chasms are likely to be wider at the higher rates of duty.

    The chasm above the £250,000 threshold apparently extends upto £270,000 -- buyers are reported to be unwilling to pay anything in between *. Now consider a house advertised at £299,500 for which the seller is willing to accept offers down to £270,000. If no such offer is forthcoming then to secure a sale they will almost certainly have to accept less than the £250,000 threshold -- a further fall of 7.4%. The stamp duty threshold chasm may therefore cause a more abrupt fall than might otherwise be the case.

    How wide might the chasm be at the lower threshold? For a house bought at £270,000 the additional £5,600 in stamp duty represents a marginal tax rate of 28% on the £20,000 paid above the threshold. If a marginal tax rate of 25% is generally acceptable this would imply a chasm above the £120,000 threshold extending to £125,000 (stamp duty = £1,250). Although this represents a smaller drop of 4% it may have a larger impact on the market due to the volume of houses advertised in the £130,000 to £150,000 range.

    Will such chasms and their proximity to average house prices be a significant factor in accelerating price falls? Could they perhaps make the crash "different this time"?

    By raising the lower threshold to £120,000 in the March 2005 budget could Gordon Brown have unwittingly helped future First Time Buyers rather more than he intended?

    Stamp Duty Threshold Chasm Effect?

    Further research.

    1. A frequency graph for a particular region or area would be useful. How wide and deep are the chasms? What volume of transactions occurs at prices that may fall within range of a chasm?

    2. A longitudinal study might be interesting. Do the chasms widen and deepen as buyers take control of the market? As prices fall, how do the relative volumes above and below the chasms change?

    3. A comparison with the early 90's crash may be illuminating. Did any significant chasm exist? If so, how did it relate to average house prices? What happened in 1992/93 when stamp duty was suspended?

    * 'Stamp duty thresholds continue to threaten UK housing market':


    "We hear from many clients who are unwilling to pay ten or twenty thousand pounds over the stamp duty threshold," adds Hearnden. "That's the cost of a great new kitchen or bathroom -- they are looking for property under the threshold and keeping the cash for things they really need or want."

    Many sellers are reacting to this barrier by pricing their properties on or just under the threshold in order to secure a sale."

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