End in Sight

But inflation is only relevant for the intended application of the cash. If your cash is held for a house purchase then the "inflation" is actually negative, as house prices are falling . So you can spend the interest and still the purchasing power of the capital is increasing.

Quality posts, Father Fred. Do stick around. Were you in the business during the last crash? Any parallels or differences between then and now?

Here is a question which has been puzzling me. You know how the predictions are for property prices to drop by X % (say 20% for example) over the next few years. X% from what? Is the % drop from the asking prices or the real prices which are being currently negotiated and completed. The reason its puzzling me is that I hear how sellers are currently having to accept offers of 10-20% lower than asking at present to make a sale. ie silly inflated asking prices in the first place. So if someone buys a house now and negotiated a 20% discount you still need a further 20% off to give you a buffer against the forecast downturn? Presumably the economists who forecast the % drops know. Any views?

Van I agree with your post. What no-one ever mentions when banging on about "nice areas" holding up is that all prices are relative - if prices fall nearby sooner or later people will notice that a gap has opened up - which does not reflect the difference in quality of houses - and this starts to drag on the price of the "nice houses". zzg113 - not sure what your point is, of course I don't believe a word EAs say though I am capable of forming my own view regardless of what they say (I don't just automatically believe the opposite). I think the fact that I STR'd in March this year supports this. South London is a matter of taste, I have lived here for 15 yrs and wouldn't move north of the river even though I could afford to.

Got back from 2 weeks holiday today. 10 letters from estate agents notifying us that "their clients have asked them to reduce the asking price of the above property".

Phil and Kirstie are signing copies of their new book in Canary Wharf, 1-2pm on Wednesday 8 September - from memory its at Promenade Level, Cabot Place East. I might ask them to sign a copy of a book of mine by JK Galbraith..

Thanks all for your advice - I'm going to mull on this one. Sledgehead - very perceptive comments. Your point about traders remorse is interesting... I sold my internet stocks on the same basis before the crash (remember the day the Stock Exchange broke down? Instinct told me to make for the door..) - thank goodness. But this is a much harder decision now than it was at the beginning of the year. As for confronting my mates.. I have long learned not to start discussions about what I have done (STR) - if I want any mates! This site provides a much needed outlet or I think I would go mad. TTRTR - I do have a one year old. I think its ok to mess around like this for another couple of years, or until another one comes along, and then my hand will be forced. My experience of moving / renting has been quite pleasant so far. So I'm happy to carry on betting against the market if I think it stacks up on financial risk/reward.

Sold to rent in March 2004. To be honest it was a no-brainer - dead cat bounce in the market, interest rates rising, the market couldn't go any higher. Renting a great house, but might have to move in November/December as the landlord is planning to sell. Happy to rent another house - I quite enjoy trying out different parts of London. The asking price of the houses we are targetting to buy have already fallen 10+%. this year We could probably knock a good 10% more off through hard bargaining. Sellers are severely rattled and the sort of houses we are looking at buying - large family houses - tend to be sold by older couples who want out by Christmas. There is a good supply of the sort of houses I am after. So - we're quids ins from the STR decision. Do we stay at the table or fold and bank our winnings? I still think a crash will come... but to be honest I think the official crash might simply prove to everyone what in truth has already happened. Perhaps we might see another 5-10% knocked off prices. But the risk profile has changed. Buyers could come back in the Autumn, reassured that interest rates won't rise.. prices recover slightly.. City bonuses support a strong Spring market... and pretty soon my upside from the STR trade is looking very thin. Alternatively the crash happens.. but nothing comes on to the market. Do I hold my nerve and wait? Or take the money and run?

Seems to me that as the crash develops momentum we will through a series of stages of denial... 1 Summer lull 2 Healthy slowdown (we are now at this stage in London) 3 Normal correction 4 Recent price falls have temporarily put buyers off 5 Irresponsible media reports are delaying natural market recovery 6 Meltdown... 7 CRASH 8 Finally the "London Property News" reports that "prices have cooled slightly but are now recovering strongly"! I'm sure I've missed a few. As to these conflicting news reports, at the moment the prevailing wisdom and vested interests are all against a crash so the press machine will continue to pump out optimistic stories for a while yet. If prices really are rising in these areas its the last few BTL maniacs blowing their hard earned.