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Bear-ly believe it

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  1. Very high inflation to house prices, sure. And oil, thus petrol, but not generally surely? Our household expenditure, despite a growing family, hasn't changed exceptionally in the last few years. I remember one period when food rose sharply, a couple when energy prices surged, but countering that is that a lot of other stuff got cheaper or stayed the same or rose only a little. I do think the official figures understate inflation a bit but I don't think we have been through a period of generally high inflation, is that what you meant or were you referring to housing costs in particular?
  2. I know that this subject tends to polarise views on here so I might be overly optimistic in hoping to get some clear cut advice but I'm going to ask anyway. I have read a lot on here about the threat of inflation or even hyperinflation. I am a student of history so well know the classic account of Weimar Germany, and we have all seen those empty supermarket shelves in news reports from Zimbabwe in more recent times with the huge denomination notes chasing what little there is. The predictions of hyperinflation (as those of hyper deflation) have so far proved wrong with what little extra inflation (over and above target) probably accounted for by the weakening of the pound during the crunch and the knock on effects from that. I am, however, acutely aware that there is a small matter of £200 bn of QE 'in the system' with helicopter Ben probably preparing to create trillions more stateside as well. I read today that it is now expected that we will engage in more QE fairly soon. This has made me think about the inflation danger again. I find it hard to see how a hyperinflationary spiral could take hold when wage growth is so weak and the economy in a parlous state, but I could be missing something. What do members think? Will we go one way, or the other, or will inflation carry on, maybe a little above target, for a few years with no major calamity? It is of more than academic interest to me because at present I hold a little bit of cash (about £40k) and own my home with no other debts. The cash is being saved so that we can move to a bigger place mortgage free when some normality returns to house prices. This leaves me exposed to inflation as I can't pay down debt to get rid of the cash if inflation looks likely to erode its value in a serious fashion. I am left uncertain about how best to proceed but hope that someone will be able to offer some calm, reasoned advice on the subject.
  3. The boom, as such, is over. Prices are being held around a high plateau by artificial support measures to the property market specifically, the banking industry and the economy in general. When the crash comes, assuming it does, it will be massive by historical standards, making the early 90s look like a little foothill to a whacking great mountain! Buying now probably would make little financial sense but people buy for all sorts of reasons and finance is not always the uppermost concern. Thats something not everyone on here appreciates, labelling those that have real world pressures to consider as nutters, gullible or stupid. I have always followed a policy of being sensible, not borrowing more than you can afford and bear in mind where you would be if prices took a tumble. If you bear all these in mind (and your job security) then you have a head start over most people. Sure, you won't mortgage to the hilt and buy your dream home but you might sleep better at night. Those that have stretched themselves will have many more sleepless nights to come before this crisis is over. I am uncertain whether we will get inflation or deflation but given that we haven't had really significant inflation yet and yet the money supply has been expanded massively it suggests the deflationary forces are very strong out there. If we do get inflation, house prices will get some nominal support and whilst you are right that in real terms they will be cheaper a lot of people will be no better off because there won't be (probably) the wage inflation to make them more affordable to most. Given the dangers of a debt spiral I would expect more printing if necessary to ward off any significant deflation. Sadly, I don't see any easy way out of the current predicament and I think all policy is trying to stear a stabilising course of slow, drawn out correction. The problem has become that house prices are now so central to the economy that there is probably nothing they won't try to prop them up, or at least support them as they edge downwards. Maybe policy will change, maybe the BoE will say enough is enough, but as things are the current course is probably the least painful for the economy and will be followed as long as it seems to work. During the boom I became increasingly certain that the age of working class people owning their own homes was passing and we would return to a much more limited level of ownership. This could change though if other forms of investment looked more attractive. Whilst people believe in property as an investment the better off will continue to eat into the housing stock and reduce house availability for the rest of us. i think this has paused over the last couple of years but the attitudes persist, just waiting for hpi to kick off again, hopefully they will be disappointed.
  4. It must have been a slow news day at the Observer. This mighty group currently boasts 80 members of their facebook campaign and their website has 1508 members. How many of them signed up after the article I don't know. Of course, they are right to be bothered by high house prices but given their size I'm surprised they managed to get to see Yvette Cooper. As an aside, ironically, she organised a rent strike once, when she was a student. It failed! The reason this won't work is there is no agreement amongst buyers about what is a fair price. Clearly many people can't afford to buy at present who would like to. They are all annoyed about this, perhaps resentful and would probably like something done. The problem is that some would buy if only a small fall occurred because they would now be able to afford to buy a house, others would want quite unrealistic mammoth falls before they would buy (maybe these people could afford to buy at higher prices but are genuinely striking). The point is that as prices fall, at each point on the continuum more people will peel away from this movement. That is essentially the market in operation which is why we are where we are at now. The only way to really affect the overall situation is to change the fundamentals underlying the market such as another reduction in the availability of credit or a change in the way people in this country view house ownership so that people cannot or do not want to buy, maybe one will lead to the other. In my view removal of the artificial government supports propping up the housing market is the most desirable policy change as that would increase repossessions and help put downward pressure on prices. If that doesn't happen then our best hopes are finance markets forcing interest rates higher or banks being forced to reduce further the amount of money they lend. I fear that at present on the demand side there are sufficient people who would borrow to the limit of what they can around to make this crash very protracted. In fact, not a crash at all, a managed decline, which is what I believe the policy makers are trying to effect to buy time for the banks to repair themselves and the economy to recover. Demand could fall dramatically in the future but this will have to be triggered by an economic crisis from the wider economy that put the fear of God in enough people to make them want to stear clear of housing. If there had been no intervention to prop up the market in 2008 I believe we would be there now, but we aren't. Removal of government mortage support schemes might be enough to get that going again, although it is not that likely to happen I expect, and it might not. We may need another shock to move demand to a lower curve before we will truly be free from this madness that has gripped our nation.
  5. Sorry, but this is not a strike if people are not buying because they can't get sufficient credit. If people are deliberately not buying when they could then it would be a strike but it is unrealistic to believe that this is happening on any significant scale. It is simply 'pent up demand' due to insufficient credit. When mortgage lending eased slightly last year prices rapidly stabilised and improved as houses started to sell again in even moderate numbers. People will easily understand the concept of a buyers strike and easily conclude that it is a myth as they do not see people around them behaving like that. When sentiment turns it will be quickly but telling people that something is happening that obviously isn't will only further discredit the views of all of us who want lower house prices and know that the fundamentals support our view. At the moment, the great bulk of people believe that the current prices are about right, sure some of them will complain, but they still would pay. I don't know if Alfie was having a swideswipe at my post as well, but I don't believe there is nothing you can do, I have taken my own position and I talk to people I know (it is working with my sister if it weren't for her gobsh*** husband) and I am not a victim but it is important to get real about this.. There is no sgnificant buyers strike. There will not be one until people are fearful about buying property in this country. We have had over a decade of brainwashing about property and it has worked very well. After the early 1990s crash lots of people were fearful of buying property and most said 'never again' but in less than ten years a new housing bubble was forming. People forget the bad stuff, want to believe that they are wealthy because of their house and telling them that there is a buyers strike will be greeted by most people with incredulity as most will know family/friends/colleagues who are wanting to buy.. Most people have a very limited understanding of economics but do understand what they see around them and that is their truth (and any decent economic theory understands this).
  6. I'm afraid this puzzles me. I could understand it if you titled this thread "Lets start a buyers strike", but not as it is. I agree that house sales are a lot lower than they were three years ago but I think that to attribute this to any kind of strike on the part of buyers is a mistake. I also don't think the wider public, as opposed to members on here, will believe it. As other posts have said, transaction levels have fallen simply because the availability of credit has been reduced. If the money was still available there would be plenty of lemmings queueing to throw themselves over the edge. That is unpalatable to me as someone who believes that high house prices are a social evil, but I acknowledge that it is a fact. In my own family, I have a sister and brother both of whom are actively looking to buy, first time and trading up respectively. The only thing that is frustrating their efforts is not being able to borrow enough to secure a suitable property. They cannot buy at present, but they are not on strike, both have mortgage offers and are looking, the prices in their areas are just too high at present. I have little doubt that if the bank had offered them £20,000 or £50,000 more they would have borrowed it, because then they would have been able to get what they want at current prices. They are not stupid people, they just want somewhere to live that more suits their needs and perhaps don't appreciate the medium term macroeconomic situation the way I do. I am kind of engaged in my own buyers strike in that I could trade up, if I wanted to take on the debt. I would certainly like the extra space a larger house would bring for a growing family but want to get better value when I move. Most people do not see this and, at the moment, will not see this, in my opinion. Only when the mass of the populace believes that house price inflation is over for the time being and prices are certain to fall back will enough people let go of the belief that prices only go one way and that you must 'get on the ladder' if you possibly can. For this to happen confidence in the market will have to be rocked badly by another crash, at least as big as the one in 2008-9, and probably more. Until then buyers will just wait to jump back in the moment they can. I don't honestly believe sufficient public support can be garnered for a pre-meditated buyers strike to affect the market significantly, when sentiment turns it will be because people have decided that they do not want to own property, either at all or at the current prices. I am pretty sure the early to mid 1990s saw a buyers strike because of the revulsion at the losses some people suffered in the crash then, but it followed the crash, it did not precipitate it. I think this will be the course again. Our best hope for inducing a crash is uncertainty over or simply more unemployment taking away peoples' means of obtaining what credit there is, or a further reduction in the availability of credit. I would also hope that the government support measures would be reduced in the post election cuts but I have given up hoping for sense from our political classes. Best of luck to you, but I fear that you are trying to put the cart before the horse.
  7. In my small corner of the East Midlands the stock of properties coming on to the market has increased since Christmas. Property Bee is also showing up quite a lot of reductions although very few of them are highly significant. I would say agents are pushing for reductions but buyers are digging their heels in and only reducing £5k-£10k for the most part, if at all. Selling hasn't completely dried up though so sentiment doesn't appear to have turned, but there are quite a few hard to shift properties out there and price is a big factor in most of them, I'm sure.
  8. If unemployment reaches 4.2 million then what is going to stop house prices falling more than 23%? Except inflation, of course. Is there are limitless supply of foreigners and uk based cash buyers itching to pile in to UK property to make up for the absence of a lot of potential buyers and repossessed owners who don't have jobs!
  9. Any fall of that magnitude won't happen in a vacuum. For a fall like that to take place either the demand for credit will have to go away or the supply of it will have to dry up. Both are currently possible. On the supply side the amount of money available to lend has already fallen significantly. It would be wrong to say that the money is being loaned any more sensibly than in the past though. 4x and 5x multiples are still available from 'reputable' lenders. People are still borrowing deposits, not saving them. Although the number of transactions has fallen, those that are going through are still taking place at bubble prices. Not the peak, sure, but bubble prices nonetheless. With banks apparently happy to keep lending large amounts to a small number of buyers that then requires the supply of available property to swamp the number of buyers so that competition amongst sellers brings prices down. Whilst the number of properties on the market is growing the imbalance is not yet critical, mainly due to the various support mechanisms in place at the moment. Critically though, if prices did fall this far there would be plenty of buyers who would come back in as the only thing restricting prices would be the lack of credit. Once the amount available was sufficient sales would return to normal levels. Of course, demand is likely to be affected to and I think this is where it gets interesting. A double dip, or a very weak recovery will lead to growing unemployment. After the election some of the supports for homeowners will have to go as money has to be saved and these schemes are not central to running the nation so will be phased out. The effect of these things will be to increase the supply of housing and also weaken people's ability to buy. If enough people get into trouble and lose their homes then market psychology changes and the herd will then cease to see property as a medium term, one way bet. At the moment everyone I speak to can only conceive that very limited falls are possible before the inexorable rise of prices resumes - that view has to be so shaken that people view property as a risky acquisition. In that case a fall of 50% may not see the end of the falls (unlikely though a fall of such magnitude is, in truth), or the market may stabilise but with weak price inflation reflecting weak demand.
  10. That is true, unless due to some new revision to the Q4 figures (ie the truth slips out) we find that we have never left recession in the first place. I really don't know how controlled the ONS are, bu tjudging from the spin that accompanied the last revision and various other data put out recently I would suggest that political operators are in position to keep everyone 'on message' at this sensitive, pre-election time.
  11. I just thought I would see how things were going on this at lunchtime. I'm gratified to see quite a few replies and interesting insight into what is going on. No, Whenever we have tried to get involved with local government in our area we have found there is always more than a whiff of corruption in the air! Whatever the case, the local councils certainly have their favoured suppliers and don't want to let competition in. I In this the road to ruin lies! There are quite a few of these outfits in this country. They price at marginal cost because they have to run their machines 24/7 to make the payments, profit is near zero, even the kettle in the office is leased. Most people I know who have used them get hit by hidden charges to make the headline figure into something actually worth invoicing. It is the kind of overcapacity issue that I was referring to and the real losers in this so far are the medium sized commercial printers. They are too big to rely on a small number of loyal customers but too small to compete with the fantasy prices of these super plants. Being in commercial leaflet or brochure printing has been a mugs game for years and these firms have just made it more so. Smaller firms can still prosper though if they have loyal customers who want service, especially on the design side, or if they have a niche market. We work hard to have both. Also, when you publish things yourself you know that is some work that won't walk out of the door! I share the feelings of some of the other posters who feel that this is something of a false state at present. Parts of the economy are being supported and the rest is hanging on, hoping for something to come along. I do wonder though how long it will be before the dam bursts and all that short time working and under employment translates into failures and more unemployment. I'm sure most people I talk to don't understand just how bad it could be.
  12. Only my third post, so please be gentle! There has been a lot of talk recently about the recovery accelerating. Only yesterday a couple of surveys were released that suggested output was improving (they were nearly lost in the news a,s understandably, the pound took centre stage but most of you will no doubt know about them), we have had the famous 'end of recession' and various commentators have said that they think the economy is strengthening. Back in the real world, well at least my little corner of it, things still look really quite hard. I was wondering if we could build a snapshot of how things appear to us now, as we stand on the cusp of spring and with an increasingly uncertain election ahead of us? It wouldbe useful to know what sectors of the economy posters are talking about as, inevitably, some will be doing better than others. S'pose I had better go first, then. I work in printing and publishing for a small business. We are still doing ok but things are still tough out there. The printing industry is still suffering. This is partly due to technological change, and thus structural (modern productivity gains far outstrip increases in demand so there is overcapacity), but also print suffers badly in recessions. All our suppliers tell us that things are bad with subdued demand andlots of firms tetering on the brink. A survey just before Christmas by Tenon (I think) reported that 90% of print businesses could fail. This was met by consternation in the industry as, quite clearly if a few percent of firms went there would be enough work for the rest to be quite happy, but it does show that the pain is widespread. My business is part of the lucky 10%, fortunately, but I have always been able to look at the madness going on all around and take a step back, so I guess I'm lucky. On the publishing front we publish several magazines that are advertising based. Comptition in this area is cut throat with everyone slashing their prices to the bone to try and get any kind of revenue. We know our competitors aren't making any money as they are laying off staff. We are only sustaining the magazines at the moment because our printing business is still profitable, allowing us to take the long view. The crucial problem is firms either won't spend on advertising (at a time when they need to most- it was ever thus) or they are struggling to pay. It has never been harder to get payment either on time or at all. We deal with a broad spectrum of, mostly consumer focussed businesses and the tale they tell is the same - business is struggling. Our area has not been as badly affected by the recession as most so if things are this gloomy round here I really have my doubts as to whether things are really looking up, as some would want us to believe. Anyone else care to add their experiences?
  13. Don't forget also the bidding up of asking prices by agents desperate to land what stock there is coming on to the market. In my area (Lincoln) prices are rising at present and are definitely back to peak madness levels for the most part in the area I watch. My sister works for an agent and she tells me that is definitely what is going on - the valuations are unrealistic (unless cash rich buyer with no brains turns up, which isn't unknown) given local earnings and the mortgage market, but are driven by agents fighting over what there is. Of course, the problem comes for the agent when they have to persuade the vendor that the offer for 20% below askingthey have is worth taking, given that the vendor has just got used to their house being 'worth' the inflated valuation. Short term it may work for the agents but will it in the end, I'm not sure as hard nosed vendors may refuse all 'realistic' offers in defence of their 'valuation' and eventually change agents in frustration that they can't get them the price they deserve. Leaving the agent with the expense but no sale!
  14. Lincoln update, for those interested but maybe not on the ground. My sister works for one of the agents in Lincoln and tells me that business is continuing, albeit at very reduced levels compared to most of the last decade. Most vendors are not realistic on price and all the talk of prices rising has made them less so but that is not the crucial element in the mad asking prices that I am seeing at present in the three large villages that I keep a close eye on. The crucial element, my sister tells me, is that due to the shortage of supply of houses (thanks to all the various schemes to protect vulnerable mortgage holders) some of the less ethical agents are increasing their valuations to try and win business. There is nothing new in that, it always goes on when the market is behaving normally - Lincoln's biggest agent is known to overvalue to get properties on their books and then pressure vendors to accept any offer they get - but in a half strangled market it means that affordability continues to decline when the pool of people who could buy locally is already shrunken. Prices, in the area I watch, fell on those properties that needed to sell during 2008 but the bulk of the vendors stuck it out. In 2009 transactions did increase at about the same time prices began to increase nationally. There has been little sign of this stopping. Whatever the picture nationally, in Lincoln any new dip has barely started as yet (mores the pity). When I look on Rightmove there are still plenty of houses that were there in 2008 and early 2009, and they have been joined by others, some of which seem even more unrealistically priced. The recession (I'm not going to pretend it has really ended, grown ups amongst us know that whatever the technical situation we are almost certainly in a depression) has not bitten as hard here as in many parts of the country - a large RAF, health and local government element to the workforce have seen to that. If significant cuts are made in these areas, and the crutch of non-repossession that the market is leaning on at present is kicked away, I suspect the collapse could be quite swift as I know for a fact that local businesses are struggling for the most part and that means people aren't spending. In Britain that can only be because they don't have the money and can't borrow it any more as I simply don't believe that the great bulk of the population take macroeconomic factors into account when deciding on what to splurge on next.
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