I’ve been visiting this website on and off since early 06 and fancy a rant – I think it’s sometimes good to write your thoughts down and try and form a coherent view/asses your mental health
Although I take an unhealthy interest but don’t really have enough spare capacity in my brain to properly think things through - I am far from being an expert so welcome the finding of flaws in some of my thought from those who have devoted their lives to the cause
I was and remain strategically bearish on the UK as a whole
I did however by myself a flat on the dip in 09 for 200k [because I liked it] - at the time my bank was willing to lend up to c. 400k or something equally ridiclous but I was hoping that [in a dream scenario] my 200k flat would fall 50% to 100k and I could pick up the 400k house at 200k
Of course this hasn't happened and I’m starting to lose faith! - I’ve never had full conviction [see purchase in 09 which was about as far towards shorting the market as I was willing to go] and really struggle to get my head around London, namely:
- Top down pressure (i.e. rich from China/Arabia/Eurozone/wherever) buying in west > forcing bankers/lawyers etc to buy in north > poor people (on less than £100k p/a) then pushed out east - I generalise but you get the idea – essentially there are always rich people in some part of the world that seem to want a bit of prime London.
- Immigration at the lower end cannot be ignored in London – I like it very much (I genuinely ‘embrace’/’celebrate’ the ‘vibrant neighbourhoods’ that have been created!)- I even like the fact that there are some areas that have no diversity and are comprised entirely of one single (non UK white British) ‘community’ – I don’t want to live there though and this is me being selfish – if I hadn’t have been lucky enough to go to uni/get a good job etc and were directly competing with these people I would no doubt take a different view ) – immigrants are of course free to go at any time and would no doubt do so if things really take a turn for the worse (see Poles vs Ireland) but for the time being they are all helping to keep the btl guys in business
- Indeed anecdotal evidence from acquaintances with btls are that the spreads are very good (temptingly so even when factoring in higher rates) > significantly higher rates is another story but I really don’t think that we can assume that there is going to be a return to ‘normality’ re rates anytime soon - it’s amazing what can happen look at Japan (but I wouldn’t recommend trying to understand it!)
- Genuine demand (i.e. backed by credit) from owner occupiers to be is still there from what I can gather (at least where I am) – certainly there is more general awareness re the potential for a drawdown although this still seems to be outweighed by the higher prices forever story that many have followed for the entirety of their adult lives – I will still go and have a look at houses (group viewings still happening) and find myself up against panicked middle class frothing at the mouths to borrow massive multiples to buy what is essentially a **** house built for peasants 100 years ago – they will pay whatever they can - I believe that this will only stop when/if the means to borrow are taken away from them as seemed to start to happen in 08/09...
Other anecdotal evidence causes further confusion:
- Friend A is in his early 30s but much wiser than me (and a very successful investor outside of property) - having been in a position to buy/stayed out of the market for the best part of a decade (on the view that a crash was coming) he has capitulated and bought a flat (in a very nice area) for 1m+
- Friend B of a similar age but very disinterested in markets/economics – she geared up massively at the same time as I bought and paid 350 for a flat in north - has had several offers for 700 (really!) but is holding out for the 750 valuation - illustrates the benefit of not thinking too hard - friend A spends all day everyday thinking about markets/trends and has traded the London market appallingly whilst friend B has the option clear a cool 350k tax free profit on 4 years 'work'!
I’ve done ok since 06 – I am in the legal business so by my own metric I should aim to stay where I am in north London - I could buy the 400k house (which contrary to my prediction/hopes is more like 500k today) without too much trouble but I don’t want to – my reasoning has changed - as above, it’s not necessary because of any concern regarding prices but out of principle – I refuse pay 500k for something that was bought for a small fraction of that a decade ago – maybe I’m cutting off my nose to spite my face but **** it – the 300k I have not spent will buy me x30 amazing holidays over coming years
I like cash and the freedom it gives you - I keep 85% in cash - rates are not fantastically high (but then neither is that which I am paying on my mortgage) – in any event, my real ‘loss’ on cash loss is offset by 15% I have in inflationary filth! (including some gold of course –my view is that gold is even more mental than houses – I’m not sure it will do what I want it to do when the time comes but that’s another [very long] story – buy now, think later – didn’t Soros say that?!
So I don’t believe house prices have reached a permanently high plateau and will be very surprised if we don’t see a proper crash at some point (if for no other reason than assets don’t generally go up in a straight line) – timing of course is everything and time is a very precious commodity...