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Economic Sensation

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  1. 10 months ago interest rates were at their peak of 4.75%. If rates have since dropped since then does that mean house prices are set to rise further?
  2. Not if you do the maths. My property cost £225,000, which, including costs and deposit led to me putting down £30k. 4% on £225,000 is £9,000, and because i make £300 a month on the rental thats £300 extra. So for my investment thats £12,600 per year at the maximum. If i wanted to live in it thats still only £900 per month as opposed to the £1200 i would have to pay to rent it, so i am saving £300 a month, as well as making my 4% or less. No matter which way you do the sums, its always better buying than renting that flat. I am not saying that works everywhere, especially the country such as my folks house, but its significantly better than i would do with my £30k otherwise.
  3. I am not quite sure when i said that there would never be another house price crash ever. If you mistakenly took that from my words, then i either wrote them badly or you didn't understand them. I have never said there will not be a house price crash at any time, my argument has always been that our economic fundamentals are too strong to allow one, and because the UK is slowly pulling itself out of the downturn of the last year or two, my argument remains that it won't happen in 2006. Even if unemployment is rising, it remains near historical lows, and the fact remains that interest rates are low and due to fall again, the city has had record bonuses, which filters out wards and growth is picking up again. Whether it will happen in 2007 or after i don't know. However i feel safe in the knowledge that no matter how much you may harp on, if an independent observer read my posts and yours over the last few months (since i registered really), i am fairly confident they would take a lot more stock in what i am saying than the doom mongering that you may be spouting. Surely deep down somewhere you are feeling that you may actually be wrong? I am prepared to admit that there is a risk in these predictions if you are prepared to admit that we may actually have house price growth in 2006 and 2007 Come on, show me you haven't always been a pessimist and you haven't completely gone over to the dark side!!
  4. ???? Do you actually read any of these posts? I also don't think i can sell a house over the odds, and i am not trying to. As i said before, my parents are, and as i said before, this is typical in the countryside where people are much more likely to be homeowners than renters. They only want to sell to realise some dosh (they don't have a mortgage). I hardly think i am likely to be lumbered with negative equity, the house has actually gone up in value and i cant' see mine on the market for £125 where a well paid student could almost afford to buy it. I am happy to wait and see. Myself, and seemingly virtually all of the financial institutions out there as well as the public, think that prices are going to go up, and as they say in the markets, don't bet against the trend. You are all happy to dispute all of the bullish talk out there of prices but you all seem to have forgotton that you were probably all bearish at the start of 2005 and expected prices to fall 20%, as did many others including Roger Bootle. However none of you are right and are now starting to look silly. Even Roger, the arch house price crash forecaster, has changed his mind "The clearest sign of the change has come from Roger Bootle, whose consultancy Capital Economics has been one of the City’s most vocal prophets of a house price slump. At the start of this year Mr Bootle wrote in a report for Deloitte: “We continue to expect house prices to drop by a total of 20 per cent or so over the next two years, but a bigger fall cannot be ruled out.” But last week, Capital Economics announced a “forecast change”: noting the lack of a sustained fall in house prices in 2005, they now predict house prices to drop by just 2 per cent in both 2006 and 2007. " http://www.timesonline.co.uk/article/0,,2-1960912,00.html If even he has changed his tune, i think it might be time for some of you to check your music.
  5. My my, so much anger on this site. Whatever you guys think, i am going to have to go with the big guys with the big numbers. On a personal level i bought at the supposed top of the market in 2003 and have seen it go up anyway, and there are certainly not loads of properties on the market. They put it up because its a rental flat they have owned for years and wanted to retain control and the income. But last year the market was dead so they got a good offer to rent it out again. Now they want to sell it, and i am glad they waited because they will get more this year. The market has picked up in the area and 3 estate agents have all valued it £25k above last years valuation. If they fail to sell it at that price i will happily eat my hat. You are very right about renting a house, but you seem to have conveniently missed my other comment about my flat. The point is that there is not much of a rental market in the middle of the country, so rents are often less than the mortgage you would need to buy the place. My comment, if you actually read my post properly, was on on the fact that in the London market you can typically rent it out for more than you pay on the mortgage, not on the state of the market. the_duke_of_hazard, if you can get a 2 bedroom large garden flat in Kensinton for under £1,000 a month, i applaud you. But from what i can see you are the exception rather than the rule. The mortgage on my place costs £900, and i get £1200 a month, and its going up in value. You can't tell me that renting is better where i am, maybe in Somerset, but definetly not here. Good luck guys, you carry on pouring your money into the landlords pockets, the rest of us will still be there as prices continue to rise, as we will all need nice tenants to fill new properties up. I wonder what the stats on this site are, there seem to be less people nowadays, i wonder why that is?? ES
  6. Aaahh. Did you miss me? No i just got bored of getting abuse from people who couldn't see the wood for the trees, despite the amount of evidence weighing against them, and would normally stay away but thought that these predictions were a good thing for the forum. My views have never changed since joining the forum, and its nice to see the major data sources all now agreeing with my view that prices bottomed out a few months ago and prices are heading up. The amount of distrust in this forum and concern about conspiracy theorists amazes me. Would it every be worth for once actually believing what you read might be true? No matter how cheap rents may be, i am happy to pick up 2-4% on my properties and make some good money on the banks loan, as well as picking up the rent excess. An interesting thing though about the rents, i am surprised to see how different it is compared to where you live. My parents are selling a house they own in the country in somerset for £375 but only get rent of £850 a month for it (which is considered good, despite the fact that its in great nick), however i rent out a £260k flat in London for £1200 a month. So i agree, if i lived in the country i would probably rent as you get a far better house. However in London without a doubt i would buy, as if i paid the money i pay in mortgage payments and repayment (just under £1,000pcm) in rent i would end up in a dire place somewhere. ES
  7. Well done Gilf. A masterly demonstration of trying to make bullish facts seem bearish. Whatever Halifax and Nationwide say, surely the fact that RICS, the Treasury, BoE, Rightmove, the council of mortgage lenders and gordon brown all agree is surely too much weight of evidence. Unfortunately for you the public will believe what they see and flock back to the market in 2006 for fear of being left behind, spurring the market higher. Just came back from Somerset for Christmas and talked to Estate Agents looking to sell a property of ours and they both said that the market has picked up hugely in the last few months. ES
  8. Thought you guys would appreciate this run down of predictions for 2006. I am sure you will try and shoot the messenger but they all point one way, up, and with rates expected to drop in February 2006 by 25 basis points, especially after the minutes of the last BoE meeting showed that one guy looked try and cut rates and after data showed that inflation has eased right back to almost 2% again, i would say give up and get on the wagon. Prices are rising again, the slump (or slight dip) is over. Sourced from http://go.reuters.co.uk/newsArticle.jhtml?...alog/GetContent LONDON (Reuters) - Following is a list of the main survey publishers' predictions for annual house price inflation next year. HALIFAX: forecasts 3 percent rise for 2006; latest year-on-year rise 4.5 percent NATIONWIDE: forecasts 0-3 percent rise for 2006; latest year-on-year rise 2.4 percent RICS: forecasts 4 percent rise for 2006 RIGHTMOVE: forecasts 4 percent rise for 2006; latest year-on-year rise 3.4 percent HOMETRACK: forecasts 1 percent rise for 2006; latest year-on-year fall 2.5 percent BANK OF ENGLAND Inflation Report, Nov 16: "A range of indicators points to a moderate recovery in the housing market." "The number of loan approvals for house purchases has increased. A measure of market tightness -- the ratio of sales to stocks on estate agents' books -- has also edged above its level during the first half of the year. And an average of the lenders' monthly data for house prices suggests that the pace of house price inflation may have ticked up recently." BoE Governor Mervyn King, Nov 17: "We are in a position where the housing market is broadly stable." TREASURY Pre-Budget Report, Dec 5: "After the strong house price growth over recent years, prices have moderated sustainably as expected, stabilising between the middle of 2004 and spring 2005, before edging up more recently. The economy has continued to grow throughout this period. There are important differences between the current environment and past historical experience, which mean the risks of a protracted decline in house prices in the current cycle are far lower." Chancellor Gordon Brown's Pre-Budget Report speech, Dec 5: "House prices, which were rising at 15 percent each year for three years, and at their peak rose by 25 percent, have moderated to 3 percent." COUNCIL OF MORTGAGE LENDERS Revised forecasts, Dec 6: "Over the next two years, prices are predicted to rise by 2 percent annually. Even though the number of property sales is expected to decline from 1.23 million in 2004 to 970,000 this year and 920,000 in 2006 and 2007, the high level of remortgaging will ensure that gross lending remains buoyant." * The Royal Institution of Chartered Surveyors publishes a balance for house prices based on the proportion of chartered surveyors reporting rises in house prices over those reporting a decline. The balance was -9 for the 3 months to October. I am sure some of you will try and pick holes in this, but the fact that it is not all from mortgage lenders and includes comments from the Treasury and Bank of England will hopefully hit the facts home a little more. Then again from my past experience of this forum i am sure there are some of you who think you know better!! Happy Xmas and i hope you all you bears have a happier 2006 ES
  9. Well IPOD your charming. I bet it takes a lot of brains to come out with a comment like that. "The lender’s survey - which together with other housing market data is taken as a guide to future consumer sentiment - showed the gains of 1.9 per cent in August and 1.1 per cent in September could not be maintained. “The overall pattern of price movements over the past few months shows that the market has strengthened compared with earlier in the year, but the static level of prices in October suggests that we are not poised for another sustained period of sharply rising property values.” said Martin Ellis, Halifax chief economist. On an annual basis, house prices climbed 3.9 per cent, significantly slower than the 18.5 per cent increase registered in October 2004. The average price of a home is £168,210, according to the survey." They stood still in October but rose on the year. At least i can read properly!!
  10. (1) If you read my earlier post it is based on data and comments from Halifax, Nationwide, Hometrack, Rightmove, RICS and mortgage approvals. They are all starting to point the same way, that the fall in house prices has slowed and prices are set to start rising again in 2006, with the Halifax saying they already are. (2) Not that affordability has been restored yet, but that average earnings are catching up, and with interest rates low affordability is improving. Compared to historically house prices are still high, but obviously not too high or people would not be buying, which they seem to be. Unfortunately millions are still priced out but someone is obviously buying them. One survey can be wrong, but 2, 3, 4 or 5 surveys all saying something similar?
  11. They are only rough figures but using Hometrack they said the peak was £274,200 in July 2004, and the average house price is now £260,700. This is a drop of 4.9%. Taking inflation into account, which has been about 2.2% over the last couple of years on average, that puts the real drop at something like 8-9%, so actually less than i initially thought without doing the calculations. In that time average earnings have risen about 6% (4% per year) so the gap is narrowing.
  12. I can only speculate on why the housing market has bottomed out. In my opinion it may be because people are keen to get on the ladder while interest rates are still low because perhaps some feel that inflation may rise further and so rates may rise further, even though i don't agree with this. A lot of people are also coming to the end of the 2-year fixes on their interest rates so may be using the chance to move and fix in another mortgage. All i do know is that the weight of evidence from HomeTrack, Nationwide, RICS, Rightmove, Halifax and rises in mortgage approvals all point to the housing market bottoming out and set to rise next year, if only at a slow rate, as average earings pick up. The weight of this data is becoming so heavy that it cannot be ignored. Personally i feel it is because people don't think that house prices are going to fall any further. They have fallen around 10% over the last year and a half, in real terms this is almost 15%, and in this time wage inflation has risen around 6% so houses are becoming more affordable again to many. I personally think that we won't see another boom for a while, but more of a sideways trading action. Now obviously this unfortunately still leaves a lot of people off the ladder but if there are more buyers than sellers they must be coming from somewhere. SIPPS are also set to have animpact. On the rate front i don't believe that the Bank of England will raise rates in the short term because of several reasons. They don't admit it but they are as almost as concerned about growth as they are in inflation, hence why they cut rates in August even though they knew that te high price of oil would raise inflation, and because they are more interested in core inflation, which i think actually fell last month. They would ideally like to see lower rates to stimulate growth and reduce unemployment. Our economy is in a downtrend, unlike the US, and central banks rarely raise rates in a downtrend unless they absolutely have to. Hence why the US is raising rates as their economy is growing strongly, and hence why our bank is more interested in cutting them. The inflation caused by high oil prices is actually easing a little as oil prices have dropped off. As stated by Alan Greenspan yesterday "the US economy appears able to absorb an incredible amount of price shocks from high prices as the economy is much more flexible than in the mid 1970s." The UK economy is much less energy dependent on oil than the US economy, i think i read somewhere that we actually use less oil per unit of GDP than any of the other G7 countries (partly due to our huge taxes on fuel), and with oil prices easing the inflation effect is also easing. This is backed up by the ECB President Jean-Claude Trichet who yesterday ruled out expectations of an interest rate rise in the eurozone, despite the fact that inflation there is as bad or worse than it is here as he views that their current interest rate is appropriate as the eurozone economy is also struggling. The main threat i think to this is if we have a very cold winter, as predicted by several forecasters, in the US and Europe which will pressure supplies of heating oil and could lead to oil prices surging again, which will set off more inflationary pressures. Inflation could indeed keep on creeping higher, but i think as long as its overall inflation and not core inflation that is rising the Bank of England will keep rates on hold (of course unless inflation hits 3%). (I had better put in a disclaimer here as some people have taken glee in dragging up my previous predictions. As Keynes said himself "If the facts change, i change. What do you do sir?". Things may change, my esimates are based on current facts that we know.) We shall see.
  13. ooooffff, a below the belt blow. Time of the month? When all the evidence starts to point one way you don't trade against the trend. No need to be rude just because i have a different view point to you.
  14. I hate to say it guys but it may be getting to the stage to take the bear hat off and be prepared for the realisation that we have seen the bottom. It may be a bounce but looks to broad based at the moment with all surveys and indicators pointing to a bottom in the recent slip in the housing market.
  15. We are digressing here a little but unlike your conjecture on house prices you are not looking forwards. If we have the very cold winter in the US that has happened after every major hurricane season as big as the one we just have, and which Accuweather and others are predicting, it won't be enough. If your viewpoint is that we have plenty of oil and heating oil why is the market stubbornly sticking to $60 and not heading down to the mid-50's or below? We know there is ample crude oil, and while there are low gasoline stocks these are rising again. You seem to know so much but seem very removed from the actual market and what it feels, a bit like your view on house prices i would guess. Annoyingly i actually agree with you on oil, there is plenty out there and Europe and Asia has been exporting a lot to the US, but as you would surely know if oil prices come back down as you seem to be predicting, it would ease inflationary pressures on the markets and allow interest rate cuts? You seem to be arguing both sides of the same story a little?
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