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House Price Crash Forum


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  1. You are mistaken. The economy is highly sensitive to interest rates and becoming more so each passing year. No they are not. The economy is in recession. Then you will know this economic situation is nothing like it. Utter ******** - have you walked down the average UK High St lately? Why? Who "books" holidays these days? Ah, so the mass unemployment is not down to economic conditions, it is down to people just not trying ruddy well hard enough to accommodate Victorian shopping practices. This is ********. We are in one QED. No it doesn't. Forgetting all those house prices crashes that have occurred in deflationary periods, cast your mind back to the 90s. That crash was not caused by inflation. Apart from all these points, I agree with everything you say - very wise...
  2. Yeah, it did implode and it will again if rates rise a few percent. Why do you think the BoE is pushing on string? Or do you think they fiddle the inflation figures like the numpties on the gold thread? This is complete b****cks - and if you want to walk through the numbers, I would be happy to hold your hand (after you have carried out your initial analysis - start by obtaining numbers for cash on deposit and mortgages outstanding and go from there.) Also, are we really expected to have sympathy for the creditor class? That usurious bunch of scumbags who expect to receive money for just having money in the bank? Savers are worse than BTLers IMHO - at least BTLers provide accomodation services. Same too with people who buy shares or other assets - at least they are taking a risk. What do savers provide? Nothing. They just leech off of working people all the while having their precious money insured for free by the government. Bunch of Saga-holidaying, telegraph-reading misers!
  3. I think you're bang on the money there Bosh - about 2.5% would do it.
  4. The red line is a line of "best-fit" to the limited data set of the last forty years of Nationwide data. The average % "trend" rise therefore changes over time. Currently it is falling along with real house prices. (It is now in fact 2.8% rather than 2.9%.) The truth is that there is no trend increase (Why should there be?) - the long term (ie using data over 100+ years) "red line" is horizontal. That is, we can expect real house prices to fall back to around £80k. As an aside, the Nationwide data and reporting also embeds the idea that the house price to income ratio should mean revert to 3-3.5 times, however this is also spurious - the long term average is in fact 2.5 times.
  5. Broadly correct, although I take issue with your assertion that Japan hasn't done its fair share of QE. "The Bank of Japan (BOJ) increased the commercial bank current account balance from ¥5 trillion yen to ¥35 trillion (approximately US$300 billion) over a 4 year period starting in March 2001. As well, the BOJ tripled the quantity of long-term Japan government bonds it could purchase on a monthly basis. In early October 2010, the BOJ announced that it would examine the purchase of ¥5 trillion (US$60 billion) in assets. This was an attempt to push the value of the yen versus the US dollar down to stimulate the local economy by making their exports cheaper; it did not work.[53] On 4 August 2011 the bank announced a unilateral move to increase the amount from ¥40 trillion (US$504 billion) to a total of ¥50 trillion (US$630 billion).[54][55] In October 2011 the Bank of Japan expanded its asset purchase program by ¥5 trillion ($66bn) to a total of ¥55 trillion." The UK is is also now well under way in the process of getting its debt into domestic ownership. No foreign gilt holders, no bond vigilantes - the government is able to control which entities eat the paper. At present the BoE is mopping up the gilts. Eventually it could come full circle and the banks and pension funds may get the pleasure. The important thing is that the banks (which are bankrupt) get to trade their way into writing off some of the debt burden whilst being kept afloat by the government. With reference to your response to a previous post, the banks do not need to finance these write-offs direclty out of depositor funds - although many accounts will effectively attract a negative real return on credit balances. Banks make non-retail profits and their businesses are open to global trade. Additionally, new borrowing and SVR borrowing to exisitng (often underwater) borrowers is currently a very high margin source of income. There is a sub section of mortgagees however on rates tied to the bank rate. It is these mortgagees that may be offered a deal to settle their debts early (ie a nominal partial jubilee of sorts). Also, with reference to your previous response, the "goal" of "swapping" debt into different ownership is not one of debt reduction but of control. As you correctly point out, the debt burden is not necessarily diminished by the process. The debt burden will only be reduced by a default in the domestic system and this will come in various guises. The gilt default may well not be for the whole debt burden - just the portion to keep debt repayment sustainable - but it is the only controllable way to switch back out of the "liquidity trap" (or whatever label you wish to put on the UK's predicament.) There may be charlatans who say "no-one saw it coming" - many did. They may say there needs to be a "new economic" interpretation - there is no need. They may say the situation is "unprecedented" - it certainly is not. What we have in the UK is the aftermath of a good old fashioned credit fuelled asset mania. The debits equal the credits and they will eventaully net off - the greatest part of the net off will be between gilt holders and the government, but the borrowers will also take their share - at least to the point of threatening the electability of those who seek to control the process. There will be no hyperinflations or other such nonsense - just a long drawn out misery of falling asset prices and low real income growth. The main difference between the UK and Japan is that we are just starting the process and they are just finishing it.
  6. Currency devaluation is not under direct government control but default is. Look at recent attempts to weaken the yen. These have been almost entirely offset by similar policies of other governments trying to weaken their own currencies. It is not so much that the Japanese government even chooses to default as much as it is the inevitable outcome. That is, it is only the mechanism of default that is at question, not whether or not it will happen. Somehow the grossed up Japanese balance sheet will start to net off. Debt in Japan has been shifted away from the private sector by the state and is now under the ownership of domestic bond holders. The government collects tax to pay for public goods and services and to repay interest to bond holders. If taxation is directed at consumption and inheritance - and I would urge you to look at government intentions on both types of taxation - then the net effect is to take with one hand and give with another to the same people. That is, bondholders effectively end up meeting their own interest and capital repayment via taxation. This is the proposed mechanism of default. If the population sees the writing on the wall and starts to dump bonds, then we can expect government measures to stop/tax this and/or a more forced form of direct default. However, the current envisaged mechanism relies on a certain amount of stability in the money supply and it is unlikely the government will be in control of this. The time that it could simply run deficits and print money to offset the lack of credit demand and falling velocity are near an end. Stocks and property in Japan are now at fair value (and I would argue below fair value and have invested accordingly) and the economy is finally ready to reflate. With this in mind, the credit cycle in Japan is about to turn making interest payment sustainability for the government an issue. The government will find its tax receipts unable to fund interest payments and so propose further taxes on bond holders. There will be limits to this process and resistance. Faced with this situation, the democratic process will present a choice between provision of goods and services and outright default against bond holders. The population will eventually willingly opt for the latter.
  7. +1 but with only a limited jubilee in the offing (albeit via various mechanisms), the change in dynamic is incentivised to come mainly via a process of shifting private debt ownership into government debt ownership so that default is made against the public rather than by the public. That is, in a politically controllable way rather than in a socially disorderly way - ie the societal preference. This is done by the government running deficits to allow people to pay down private debt - effectively under-taxation. Government debt ownership meanwhile is controlled and enforced either by direct central bank buying or via legislation ie stipulation of pension fund requirements, bank capital requirements etc. Whilst lenders suffer negative real rates on much of their lending, we will see some form of jubilee as lenders will have a rational incentive to offer borrowers the chance to settle their debts by repaying less than the amount borrowed. If inflation dips below these lending rates, then this incentive will slowly dissipate although the BoE can still lower the bank rate a little further. Jubilee via inflation, the seemingly unachievable political dream, will still be possible to the extent that mortgage debt maturities are increased past the point of government default - these term extensions will be a big issue in the UK in about 10-15 years time. Nearly all the increase in money supply up to its falling off a cliff (and subsequently engineered flatlining) was in the form of borrowing secured against housing. The hope is that government policies will enable lenders to absorb some debt losses at a sustainable rate (another form of jubilee). The supply of government debt meanwhile will gradually be shifted to domestic ownership (and away from overseas bondholders). Finally the government will default against its own population. To achieve this, the final act of government is to balance its books so as not to require further borrowing in the aftermath of the default - hence the current attempts in Japan to raise sales taxes now that real estate there has reached fair value. The roadmap provided by Japan is not a cultural phenomenon. Economically, the Japanese act as rationally as the British to the incentives placed before them. The proof will come when we see Japanese pensioners working rather than walking around with wheelbarrows filled with yen.
  8. Pretty much the embodiment of manic thinking...combine this with paranoia (rigged government stats, secret cabals etc)...and voila, you too can become a bona fide bi-polar tin-foil-hat-wearing gold bug...
  9. Re means testing, benefit fraud/tax evasion often is simple to perpetrate...but be careful...make sure you have secured the complicity of your beneficiaries...and whatever you do...don't...under any circumstances...publicise your fraud on the Internet...you don't want to end up like Lauren Hill.
  10. Yes, this first flaw on its own is enough to show that house prices are substantially overpriced. The dual income argument is also obviously completely flawed. Not only that, the proportion of single person aka single income households is forecast to rise even further in the future. Your calculations and assumptions have clearly shown just how much house prices need to fall....but I would keep these to yourself when doing viewings unless you can use the information via feedback to encourage your clients to drop their prices. You get paid on volume...and the good times cannot roll again until prices fall. After all, why should you care what happens to prices? Your job is to smooth the buying and selling process, not make people money...and remember, "the first cut is the cheapest"... All the best...
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