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House Price Crash Forum


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Everything posted by Van

  1. I used to support Labour (if not actually vote for them), but they have betrayed everything that they traditionally stood for. This property crash will be devastating for them and could see them kicked out of office or at least mortally wounded enough for Blair/Brown to be ousted even if they manage to hang on after the next election. I remember the words of Neil Kinnock on election night in 1997: "I say this with no please at all - [the electorate] had to learn that the predictions we made at the last election were actually right, and it's a pity that people had to suffer features like negative equity in the meantime."
  2. Doing it right now (keeping maybe 30% cash in ING, too). As the contrarians will attest, the best time to buy is during a bear market when everyone else is selling, there's no enthusiasm for stocks and prices are undervalued. The good times will return and those who bought their shares when sentiment and prices were lowest willl be laughing. I feel like the vampire bat who feeds off the herd, but I don't care!
  3. Over the long run, equities will thrash properties and every other type of investment, because they are wealth-generating. Every other investments - property, metals, cash etc - are not wealth generating and therefore *cannot* outperform the overall economic growth rate over the long run. Wealth is invested into these other assets classes from[/] the wealth creamed off economic growth - they do not create their own wealth, whereas companies do, and you can't invest more than the amount your economy grows by. On average, property might earn you 5% a year over the long run (with the concept of dividends reinvested applied), while equities might get you 7%. Doesn't sounds like a spectacular difference year on year, but over a working lifetime, say 35-40 years, that extra few % compounded will make a spectacular difference. BBB, you are right that shares are far more volatile than property. Looking at high/low data for even supposedly-stable FTSE 100 companies will show large % difference over the last 12 months. That is why it is crucial to hold a diversified portfolio. Anybody who invests seriously and has all their money in a handful of shares is just plain stupid. The people who stuck all their money on one high-performing tech fund or "invested" (ie gambled) it all in dotcoms are the same get rich quick gang who then piled into BTL. To show how seriously getting it wrong in the short term can impact your future wealth, here is an illustration. If you invest £1000 in an asset expectingh 5% growth a year but it's price collapses by 50%, it will take 16 years at 10% growth just to get back to break even on your original expectation. How likely is it that your asset will outperform the market by double over 16 years? Buy a house now at your peril!
  4. Paperwork is still going through! Maybe today, or early next week. Supposed to be one of these "exchange & complete all on the same day" jobs. Buyer is still keen (bless her!).
  5. Traditionally, turnover falls when prices are falling because buyers stay away. It's too late to do anything about it. If the EA's somehow think that falling prices will get the market moving again they are as dellusional as the BTLs who still think property is a good investment. Falling prices will kill the market stone dead as everyone will adopt a "wait and see" approach! A world of pain awaits if you're an estate agent!
  6. Or the new Alan Hansen: "You don't win anything with kids!"
  7. Saw the early BBC Breakfast report. They had a HBOS guru-type in the studio. Could not supress a huge grin when Declan asked him if interest rates were nearing the peak, and "isn't it time for the BoE to give homeowners a breather"; he unflinchingly said something very close along the lines of "Interest rates will continue to rise." No emotion whatsoever - told it plain and simple. Must have felt like a smack right between the eyes of about 5 million early risers. This would have been much bigger news but for today's A-Level results.
  8. I can't get over the SIZE of some of these London falls: Hammersmith - 9.9% Ken&Chelsea - 8.8% City of Wesminster - (don't pay too much attention to this) 8.3% Merton - 6.5% You'd associate those sort of figures more with a crash in full swing rather than just the initial stages. Okay, so these are only asking prices, but what I think it represents is (especially in less expensive boroughs) that sellers have recognised that the market is now falling. A lot of kite-flyers have woken up to the fact the market will never reach their ludicrous asking prices and are now quickly having to cut the 10% or so "froth factor" off. So, Anne Spackmann, do you still think those London boroughs have already had their "soft landing" as you wrote only a few weeks ago??
  9. Happy days!! I'm meant to be exchanging contracts tomorrow. Hope this doesn't put my buyer off, or I'm buggered!
  10. The problem is that other economies are even more depressed than ours. Even at 4.75% our interest rates are high, and with the pound so strong, we are importing lots of cheap good and running a record trade deficit. In such an open economy as we now have, the link between money supply and inflation is not as obvious as it once was. Certainly nontradeable goods will see inflation, but inflation in imported goods is dependent on the conditions of foreign economies rather than our own. Result: some goods/services may be experiencing inflation (houses, haircuts etc), while others may nave no inflation or even deflation (eg DVD players). It could be argued that oil prices will raise global inflation, and this is probably true to an extent, but there are also lots of stages in manufacturing where cost cuts can and will be found. That is my take on it. Others far more economically knowledgeable than I will hopefully have more to offer.
  11. The bank sells the property for whatever it can (this WILL be lower than £119k), and then chase you for the outstanding amount on the mortgage. You will not just "be able to walk away." This is of course a worse-case scenario, but it happened a lot in the last crash and will happen again to an unlucky few this time around also.
  12. Don't forget that MIRAS effectively meant payments were almost 20% less than a SVR rate. So if the headline SVR in 1989 was, say, 13%, in reality this was effective more like 10.5% mortgage rate after MIRAS. If base rates go up to 5.5-6% in this cycle, SVRs could easily touch 7%. Factor in necessarily larger mortgage capital payments, and suddenly the new paradigm is looking distinctly shaky.
  13. I've been keeping a close eye on new instructions in my area, and I can now confidently say that the pendulum has swung. Instead of buyers outbidding each other, it is the sellers who are having to drop prices and compete with each other to secure a sale. In my block of flats, there are now 5 more or less identical 1 bed flats that have all come onto the market since May. Prices are as follows: 137k 133k 131k 130k 130k They are all chasing each other down. One of the flats was originally on at £140k, then slipped to £133k, and now is one of the £130k pair. I'm quite confident that the other flats will have to follow suit. This is a prime FTB/BTL area property-type. Back in March/April, I've no doubt these properties would have been snapped up fast. It's amazing to see how the market has swung with people desperately trying to cash in at the top. I think it easiest to see see prices slipping in these sort of homogenous rabbit hutches that are more or less identical, rather than period houses that have far more vagaries and features to justify different asking prices.
  14. Here is a very good post from TMF that shows historical data comparing the last peak and this one: http://boards.fool.co.uk/Message.asp?mid=8709132
  15. Hi TTRTR. Good to see you on board. I agree that stock market speculation can make property speculation seem tamer than a puppy dog, even by current standards. We only have to go back a few years to dotcom to find ludicrous examples of tech companies stocks and technology funds increasing by hundreds of % a year, way out of line with what they could ever expect to earn. It is also generally accepted that In The Long Term (currently the overleveraged BTL's favourite four words), stock market investment will always beat property investment because companies are wealth generating while real estate is not. It is not difficult - just pick a well-respected fund and away you go. I have been doing a bit of reading on investment too. People often say that a share is nothing but a worthless piece of paper while a house is an actual tangible asset. This is of course not quite true. A share gives you ownership of the company's assets, and it is quite possible to find shares that are trading at near or below net asset value, effectively meaning you are purchasing the company's net asset value at cost value and inheriting any dividend and goodwill.
  16. Good point, Sledgehead. As Benjamin Graham, the guru of value investing teaches us, sentiment in the market swings like a pendulum from peaks formed from unsustainable overoptimism, to unjustified pessimism which then leads to overcorrection. The smart money is made by selling when the herd is buying and vice versa. What causes the stall/crash, eventually, is a simply a great enough deviation away from fundamental value for it to be unsustainable, and dilution of the market by more and more people buying into it. Anyone who ever bought into a bubble believing it was sustainable has been proven wrong time and time again.
  17. AJD, I'm by no means an expert or even knowledgeable, but I think the risk is very small. ING are owned by a Dutch ING Direct NV. I would be less worried about losing money with them than perhaps sticking my money in a high st bank who could find themselves in a bit of trouble if reposessions increase sharply. By all means, spread your cash over more than one account if it helps you sleep that bit easier at night. I think they'll allow you up to 10 accounts with them.
  18. AJD, Taken from http://www.ingdirect.co.uk/html/footer/legal.html : The Financial Services Compensation Scheme and Dutch deposit protection scheme If we are not able to pay any amount we owe you, you may be able to get compensation. Most deposits held with our UK branch are protected by the Dutch Central Bank's deposit protection scheme (known as the Investors' Compensation Scheme) and have further protection from the UK Financial Services Compensation Scheme (FSCS). (It is normal for deposits with banks regulated in the UK and the Netherlands to be protected by either or both of those compensation schemes.) Payments under the Dutch scheme are limited to the first £20,000 (or the sterling equivalent) of your total deposits held with us. Payments under the FSCS are limited to 100% of the first £2000 of all your deposits with us, plus 90% of the next £33,000 of your total deposits with us, less any payments to you under the Dutch scheme. In practice, this means that each of our customers with deposits at our UK branch may be protected up to £31,700. In this way you are no less protected than the customer of a UK bank to which only the FSCS applies. I think this is standard practice for banks. ING's savings rate goes up to 5% from next month. Yay!
  19. 3.13% yield.. I love it! I bet it feels cushy to be subsidised by your landlord!
  20. Why is anyone still paying attention to BBB's fantasy yield figures? He has already refused to specify which area these properties are, on the basis that if he tells us, it won't be a secret any more and he'll lose out to increased competition when anybody with an inkling of intelligence would logically conclude the opposite. As I have said, the guy is an amateur landlord but a professional Bullsh*tter who evidently thinks typing ALL IN CAPS will somehow make him more right.
  21. RichM, what a great post. It sums up "herd instinct" about as well as I have ever read. I agree with almost everything you have said. Unlike yourself, though, I think the crash is already underway. Yes, we have had a few false dawns already, but everything now points to falling prices in market-leading areas, and the macroeconomic conditions are all putting downward pressure onto prices. It may or may not be a seasonally adjusted blip - we just have to wait and see. Unfortunately, we live in an age of spin, and NewLab will peddle the illusion of a healthy housing market until the next election is in the bag. They have pulled the wool over our eyes with their stats on unemployment and inflation, and house prices will be the same.
  22. http://www.rics.org/downloads/market_survey/HMS_July04.pdf So, latest RICS figures for London show that 8% of surveryors reporting a rise, 58% no change, and 34% a price fall, giving a net balance of -26 reporting a fall. Decent reflection of what is actually happening, I would say. In April the net balance was +51! The market has turned.
  23. I believe Cahoot are currently offering 5.5%. Here are some other options. http://www.fool.co.uk/savings/savings.htm Might be wise to spread it around a couple of accounts to keep each below the insurable limit (I know ING's is 30k). Cash ISA's are useful too, keeping Gordon's grubby mits away from your hard earned. Personally, I'm going to keep about 30-40% in cash and stick the rest on the stock market. My Easyjet shares are already up 2% in a few days, which puts me way ahead of the BTLs! (seriously though, I don't recommend it if you're just looking to make a quick buck.. day traders are not investors).
  24. IMVHO, The ernstwhile Ms Allsop deserves every single critisicm that is thrown her way. This property bubble has been the greatest con trick of the last century. Lenders, Governement & Ms Allsop have all played their role in making us feel richer because property prices have risen. The reality is that it has made us all poorer; we spend more of our current income on housing; we are borrowing more than ever and therefore spend more of our future income on housing. We believe one thing, when the economic truth is the complete opposite. It is brainwashing and indoctrination on a mass scale to a level of which Bin Laden would be proud. The greatest trick the devil ever played was to convince everyone that he doesn't exist...
  25. Fair scenario that would probably be most desireable to bring prices back to sustainable levels without causing economic damage, but all you're demonstrating is that negative equity can be avoided under a GSD where HPI is somewhere between zero and the rate of general inflation - which is true for any rate of inflation, high or low. IMO the salient point is that the real value of the house has fallen and therefore represents a bad investment, regardless if equity has risen, stayed the same, or gone negative.
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