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Everything posted by Van

  1. Christ, BBB. You just don't seem to understand that a 12% nominal fall is JUST AS BAD in a high inflation economy as a much larger fall in a low inflation economy. It equates to exactly the same thing. Nominal prices are not what is important. In the real world, there is such a thing as inflation. It really isn't rocket science. Low inflation will leave people FURTHER in negative equity this time around, and for longer, than last. I accept that the economy was screwed last time, but things aren't nearly as rosey now as the government would have you believe. The housing market is an huge and very important part of our economy. When it goes belly up, the economy is going to be hit hard. If you believe that the economy will still stand firm fine through a housing market crash then you're hopelessly optimistic.
  2. BBB, 10-12% falls nominally DID equate to 30-40% real falls. You don't me to tell you that inflation was much higher last time around - it equates to the same thing. Sure, last time we had a recession, high IRs because of ERM and high unemployment. This time around there will be different factors contributing to the misery - greater personal debt and LOW inflation bordering on deflation (more negative equity and for longer), both of which will bring hit the economy hard and lead to unemployment. History has taught us that while cycles repeat themselves, they always take a different form. I believe the low inflation will be a key factor this time around. Real price falls will not be masked by nominal prices, so a 40% fall in real prices could still translate to a 30% fall nominally - more negative equity, no more "money illusion". And with wage inflation at 4% (and likely to fall as unemployment rises), it will take likely take 10-15 years to climb out of negative equity as opposed to the 5-7 years it took last time around.
  3. BBB, I think you and I will always be diametrically opposed in our views. Here is why I disagree with you. The public behave like a herd. At the moment, the clamber is still (just about) on to "get on the ladder". It take a long time for a tanker to turn; when the herd accept that prices are falling, the rush to buy a house will have disappeared - prices will have already been dropping for some time. Everyone will be told "Don't buy a house. You'll lose money that way." The same as what has been happening in shares recently. And for a few years, they'll be right. It's amazing how quickly people will lose interest in something the second it stops making them money and starts losing them money. People will actively stay away from homebuying/housebuying; no buyers; collapsing prices; leading to fewer buyers; further collapsing prices... classic bust scenario. People love their houses right now because their paper profits have tripled in the last decade; they weren't quite so enthusiastic about then from 1989-1994 when they were stuck in negative equity, but we are still talking about the same houses; the same pile of bricks and mortar - loathed in the last crash, loved in the bubble. It's all about sentiment, and sentiment is driven by how much value an assets is gaining or losing.
  4. 450/pw on 460k... 5% gross yield. With interest rates and mortgage rates already higher than this, you gotta ask: is it really worth it? And that's assuming they can find a tennant!
  5. 30% is probably a bit cheeky at this stage. Hang around the auction houses, though, and you never know. When you consider that the percentage of asking price achieved in London right now is 93%, to balance those few still getting full asking price, there must be some offers being accepted at around 85%, which I guess would make an intial offer of 80% just within the limits of decency.
  6. Okay, my Chingford price index is now 4 weeks old. I'm unable to post the whole spreadsheet, but will summarize here. The average asking price 4 weeks ago was £245k, which has increased steadily week by week to £249k currently. Turnover has been pretty steady, with about 40-50 new houses coming on to the market each week; this number balanced by the number of houses coming off (except in the last week, where number coming off dropped by about half). It looks as though there are proportionally more houses coming on in the mid-upper range of the market which seem to be dragging average up. Early days yet, of course.
  7. rentboy, I do have genuine sympathy for FTBs who have been priced out (and not just profligate) - you were simply born a few years too late/early. Like Gavin said, I consider myself extremely fortunate to have seen my early career earnings rise quickly enough for me to get on the housing ladder back in 2001. I missed out on dotcom - although I'm not sure I would have made or lost money from it. However, I do also believe that luck only gets you so far, and that choices you make now have have an impact on your future wealth and prosperity for the rest of your life. I know couples who've split, sold their house, then each spent their share of the profits - him on cars; her on handbags, etc (and they STILL have credit card debt!). They've pi***d away a once-in-a-lifetime chance to make an investment that will significantly improve their future wealth. For me, I'm using my STR fund to kick start my amateur investing career. It's an investment in my future. I'll buy a house when prices have returned to fair value. I may or may not withdraw out of equities when this time comes.
  8. If there's one thing that History teaches us, it is that the stock market has always managed to bounce back, growing and outperforming our expectations. Nobody would have predicted the great bull run of 1949-1970. Likewise, after the bear market in the early eighties, nobody thought the markets would do so well throughout the rest of the decade (the great crash of '87 notwithstanding), and at the beginning of the 1990's nobody though the next ten years would be as good for shares as the last 10 years, when in fact the 1990's were the best decade for the stock market ever. Could we be at the start of another great bull run? I would say it's more than possible.
  9. Hmm. Reckon South-East prices will bottom out around 2007-2008 myself. Reckon we'll see the first negative equity stories hit the headlines before end of the year, and then the panic will really set in. Imagine it: you're on your way home one cold and rainy November evening after a hard day at the office. You dig in your pocket for the 40p that will buy you a copy of the Evening Standard. Headline: "Negative Equity Is Back." Stupid Sue bought her house in February this year. She is already one of the estimated 10,000 new homeowners across the capital who are in negative equity, after a weakening property market in the last 6 months has wiped 40,000 pounds from the price of her home, leaving her with a mortgage 20,000 pounds more than the value of her house. 6 interest rate increases in the last year from the Bank of England has stopped Britain's property boom dead in its track, and now it seems likely that prices will continue to fall, despite predictions earlier this year from mortgage lenders Nationwide and Halifax. 'I feel betrayed' says Sue. 'People like Kirsty Allsop have kept banging the drum about house prices levelling off. I can tell you that prices in my area have fallen around 10% and are continuing to fall further. I feel prices have a lot further to fall before we see any signs of a recovery...'"
  10. Hey Teddy, Congrats! I bet right now you feel like you've just got away with murder. What you planning to do with the cash?
  11. >>Heggessey now plans to develop shows on money and family relationships. The times are a-changing. Next bubble will be in personal finance and designer families. Keeping up with the Joneses has moved on!
  12. Well, for me, the advantages of STR are: Travel - I'll be able to move closer to work. Lots of good places to rent within my current budget that are 30-40 mins in to work. Old journey used to take me a hour door to door. I get to live in trendy NW London. Saves me 30 quid a month on travel, too. Flexibility - I'm going to rent a room/houseshare. Can't buy an equivilent of this. Fixed housing cost - Don't have to worry about rising IRs (at least until contract renewal). Upkeep & maintenance is now someone else's problem. So far so good. Yes, there's a loss of some intangible sense of well being of not owning what I live in (although did I really ever own it? Nope, the bank did). Um.. apart from that, I'm struggling. I've had to uproot and now need to resettle, but I think change every now and again is a good thing. I've mentally prepared myself for this and instead am concentrating on going forward!
  13. In the earlier thread, I pointed out that STRing needn't be a hassle that some make out (don't want to uproot, have to consider the children etc). In the current market, it could be as easy and painless as moving to the bigger house next door for less rent than your current mortgage payments. However, TTRTR has also pointed out that you are then at the mercy of the landlord and might be forced to move again if they decide to sell up. I think there's merit in both sides of the argument. Some come on people.. Pro's/Cons for Owning vs Renting.
  14. Rent prices are not, I repeat NOT, set by costs. This is basic GCSE economics. If costs rise, supply falls and prices adjust upwards. As I said, landlords may try to pass some or all of the rising costs on to tennents, but they are doing so against the market forces and relying on illiquidity to force these rent rises through. In the long run they can't buck the market price.
  15. Not sure why I used 0.3% increments, though. We'll know after the long (and wet) weekend!
  16. Martin, it's a good question. As ever with property, the problem is illiquidity. Some landlords may try to raise their rents; some of these will suceed, others will not. What happens then when their current tennent moves out (these things happen, y'know), and they can't find another tennent at their above-market price? They may then have to drop to a level below the market price to find a new tennent, etc. The market will sort itself out in the end. Rents are simply determined by supply and demand of rental accomodation. Rent prices can't be fixed, they are simply determind by supply/demand. There may be some friction as landlords try to fix rents to cover their costs, but in the long run if their costs are not covered by market price, they leave the market, and prices adjust accordingly.
  17. I think it's only a matter of time before the amateur BTLs who bought in the last two years sell up and try to flee the sinking ship. Consider their BTL experience will be something like this: rising mortgage costs in the last year will have eaten away their profit margins. Some will be experiencing long voids and other will find their rent not covering mortgage & maintenance costs. Falling prices will mean capital gains are being wiped out by the month. Many will not have the stomach to hang tough and wait for the market to correct. Rates are still rising and losses will be magnified. The market, of course, will correct; less rental property, higher rents. Most BTL landlords, however, have no concept of economics or demand & supply - their predictions of the future are based on their experiences of the past - and for many their experience will be nothing but a rental market that has been continually weakening since they entered it. It's the same mentality that says house prices will continue to rise simply because that's what they've done in the past. The herd continue to base their assumptions of the future on their experience of the (immediate) past; not the underlying economic fundamentals. They always have, and they likely always will; irrationality and an imperfect market. It's going to be a case of Last In, First Out.
  18. Chingford's my old stomping grounds, so I know the local market very well (esp the sub 200k market in South Chingford). The mid and top of the market has been stagnant for some time, but the market had been kept afloat by a steady turnover of flats and BTL (I think it's a good BTL area - cheap for London and still decentish yields). Now even this has dried up, and there is real stagnation setting in. Churchill Estates have the lion's share of the market - probably 70%+ of all sales - there is really no reason to register with multiple agents. None of the other agents are seriously going to find buyers that Churchill's can't. It's a sure sign of desperation. Keep an eye out for my Chingford hosue price index. It's 4 weeks old and I'll post my findings when I've updated the spreadsheet later today!
  19. Van


    Teddy, BP, Thanks, BP, I am well aware of the effects of day trading, so don't worry there! I'm reading stuff from the likes of Benjamin Graham, Lynch, Buffett, Templeton etc - I feel in very safe hands. I see the equities as a much longer term thing, and not as simply something to do with my STR fund while the property market takes a dive. Even if the equities bear market continues, I'm prepared to stay fully invested (in fact, as these investing greats teach us, I'll be prepared to buy even more shares!).
  20. Van


    TTRTR, It's up to them. Moving needn't be a hassle. I bet 95% of OO'ers with children could find a similar house to rent in the same street if they really wanted. This "don't want to uproot because of the children" argument is a load of crap and an excuse for not wanting to upset the miss's nesting instincts. Try telling a child the difference between a mortgage and rent.
  21. Van


    BBB, Thanks. As I said, I am a little sad to be leaving my home, however - I think this is mostly down to not yet having another home to move to! I fancied a change of area anyway, so would have sold sooner or later, regardless. I don't know how other STR's came to their decision, but for myself, I just simply sat down one evening with Excel, and figured out what the impact on my overall future wealth would be by sitting tight through a houseprice fall, instead of STR. Even with conservative price falls of 20% or so, I was quids in. There was no comparison - it hit me like a train, and the next day I formulated a plan and timetable to get it all into operation. It was like a switch that flips inside your head - like the obese person who (I'm reliably informed) wakes up one day and decides to change his lifestyle, not for anyone else, but for him/herself. Nobody else can convince you; it's only something that you can learn for yourself. That's how I know it was the right thing to do, for me.
  22. Van


    Sledgey, When I decided to STR, I did of course bring this up to friends, colleagues & family. The majority thought I was mad. Now, they've always generally seen me as a pretty canny operator with my head screwed on very tightly indeed; who's been able to read between the lines, as it were. I told them all: "sell your house. There's a crash coming." - but with the subtext of your house is also your home (so don't just do it for the money) etc. Whenever friends ask me why I sold, I flippantly say to them "I wish there was some more noble reason, but I did it for the money!". Being part of the herd of course, they can't see how I have made money by falling off the property ladder, so see me as some sort of crazed and demented person who has chosen to pay off someone else's mortgage for a few years. How do I feel about it? To be very honest, I feel a slight sense of intellectual superiority. Let me say that I am personally more motivated by money than almost everyone else I personally know. Maybe not the thought of being rich as such (winning the lottery doesn't appeal to me; in fact, I've never even played it), but the thought that I have managed to earn something by being one step ahead of the herd is very appealing. If I manage to stay one step ahead of the herd, I think I'll do well no matter what life throws at me. Be a wage slave for the next 30 years? - Not for me, thanks. WRT to investing philosophy, I'm very much an optimist who always sees the glass as half full; if I pick a stock and it rises by 100%, but I jump off at 50%, I ain't complaining. Hmm. That's a toughie. In all honesty, I would say that the company I keep are like sheep - they still have positive sentiment and are very much entrenched in their bullish views. The few I know who have the vision to see that high property prices are NOT a good thing have been of this opinion for some time, suffering from not being able to trade up, etc. So far though, none have been bearish enough to actually STR, and instead subscribe to the GSD theory.
  23. Van


    Cheers guys, BP, How much, I'm putting most of my dosh into equities- maybe up to 70%. Have been doing a lot of reading up on it lately - it's got me totally hooked. Plan to build a decent sized portfolio of shares in the next few years. I tell you what.. if you thought the property market was fascinating and addictive subject, equities is 10 times more so IMHO - the temptation to day trade is almost overwhelming! I might come out with a loss. I don't really care - I'll put it down to the vicissitudes of the market and stay fully invested waiting for the next bull run. As long as I don't drastically underperform the market average I'll be happy enough. It's going to be fun.
  24. Van


    Have finally exchanged and completed. I'm home and dry at last! I feel like the jammiest git in town. When I originally made the decision to STR, I was prepared to wait until 2nd half of 2005 before the turnaround. I can't believe sentiment has turned so quickly! I feel like the pilot who took the last parachute, leaving the rest of the crew & passengers on a flight that has just suffered terminal engine failure... Although I'm a little sad to say goodbye to my home, I know it's the right thing to do. Regards,
  25. It's just very, VERY lazy "journalism". They are just rewording the claptrap that vested interests issue, and dress it up as a "headline". Filling a 60 page newspaper every day with good quaility material is hard - most publications don't come close. It's the same sort of journalism that Martin Bell criticize during the Iraq war - journalists reporting from the comfort of their hotel rooms, as opposed to actually doing any investigating for themselves to add flesh to their stories. All newspapers are prone to this from time to time. The London Evening Standard in particular seems to cite every single set of figures from every institution without doing any actual reporting, resulting in a mish mash of inconhesive headlines, one week bearish, the next bullish.
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