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Everything posted by latterdaysinner

  1. Apart from him saying that central bankers are not the masters of the universe that they think they are, I can't say I like this guy. He goes on about how the biggest failure of the Fed is failing to meet the inflation target and says that there is no greater advocate of negative rates than him. Thing is, who actually cares whether inflation is 2% or 0%? Before fiat money came along, inflation averaged zero over thousands of years and that did not bother anyone. He also completely lets central bankers off the hook as far as creating bubbles in asset prices is concerned, which has an economic cost in terms of misallocation of investment and a human cost in terms of people stressing about not being able to buy a house, stretching themselves beyond their capabilities and then losing everything. His recommendation is 'hire a central banker who can does their job properly [to meet the 2% inflation target].' Frankly that's just arrogant and doesn't address the question of how you achieve the 2% inflation target without making the bubbles that central banks have created even worse. I'm not a macroeconomist, let alone a central banker, but I would suggest printing cash and giving it to the average consumer if you want to create consumer price inflation rather than asset price inflation. Thing is, I don't think that's any better than just normalising interest rates.
  2. London buyer here. Having looked at past property bubble collapses (HK, Japan, Spain, Ireland, etc.) they all take about 4-5 years to unroll properly, so not before 2020. A 50% nominal fall in London would take us back to 2004 in nominal terms, so probably quite reasonable in real terms. We'll see.
  3. I used to feel like this too. I had an older and richer colleague who bought a big house in the Clapham nappy belt and rented out his old one in another part of Clapham. He bought the second one in April 2009 and was all smug about getting a 'great' deal. I told him that I'd try to do as he did and wait for the next crisis before buying, to which he replied even more smugly that they'll never be another crisis. I kept feeling like this until my daughter started coming up to primary school age. Then I realised that moving into a catchment area of a great primary school, which is as good as some of the best private ones, is easy as pie while you're renting. Meanwhile, my smug ex-collegue was sweating about the same thing, having committed to his huge house in Clapham. His kid didn't get in to the really good local state primary and he ended up shelling out £15k a year for a middling private school. Having renovated his house, he ended up moving just down the road to finally get his kid into the state school, shelling out a $hitload in stamp duty in the process. He still had his BTL. Now he's sitting on his two mortgaged properties and bricking himself about Brexit. Last time I met him I wondered if I had turned into the smug git. Moral of the story - there are definite advantages to being renter scum if you're willing to take them.
  4. FTSE companies have a lot of revenues and assets in dollars, so their bounce-back is to be expected in sterling terms. As regards to the property market, make no mistake, the FEAR phase has definitely kicked off in London. Brexit ticks all the boxes for a needle to ***** the bubble. Expectation of rental income is down Expectation of population growth is down Expectation of income growth is down Expectation of flood of foreign buyers is gone Foreigners feeling unwelcome General uncertainty and job insecurity All of this is on top of the stamp duty and mortgage interest tax changes for BTL, which were going to crash the market even without Brexit. Finally, there is so much residential development going on at the moment, it's unreal. It's way beyond what a normal market would be expected to absorb, even at normal prices, let alone hyper-inflated ones. This isn't a normal market though. People are afraid. You couldn't make up a better HPCer's wet dream if you tried. I dare you
  5. Foreign investors are not seeking value in London, London has not been good value for at least 5 years in any currency, they are seeking a momentum play, and momentum will now be firmly down.
  6. If they sell at a loss in GBP, they'll sell at an even bigger loss in USD after Friday's result, so it might be going down even quicker, but those foreign investors will be nursing losses.
  7. Ignoring a democratic vote is the stuff that civil wars are made of. It is an essential ingredient of a successful democracy that everyone agrees to respect the process and any outcome of it, regardless of how much they hate it.
  8. It's not economic, even if you have lots of solar panels on the roof and the electricity from them would otherwise be going to waste in the middle of the day. The battery is too expensive. If you're barred from installing one as a tenant, that's your saving grace. The best thing you can do with energy is make sure that you get on a price comparison website every time your current fixed deal expires and switch to the cheapest deal going. It takes minutes and will save the average person £200-300 per year compared to letting the energy company decide what tariff you should be on. Tenants can definitely do this as easily as a homeowner and the (rare) contract clauses that bar tenants from doing this are illegal and therefore unenforceable.
  9. I would hope that the average poster on this site has more than a 10% deposit stashed away after accounting for price falls to a reasonable level. I'm more worried about how long it will take and dying of boredom in the meanwhile. All decent crashes that I know of (HK, Tokyo, London in the early 90s, etc.) have taken about 4-5 years to play out).
  10. Who's Perfect is a German furniture company. The deal is actually a 0% loan with a 1% rebate on the purchase price. This is no different from the interest-free loans that DFS was offering even before the low interest rate era, and a 1% discount looks derisory, I'm sure DFS could do you a much better deal than this :-D You can stop hyperventilating now :-)
  11. https://en.wikipedia.org/wiki/Minsky_moment When the effect of changes to BTL mortgage interest tax kicks in, combined with rising mortgage rates, and rent is no longer sufficient to make mortgage payments, that's when the fun will start. Can't expect these people to think ahead. It will have to hit them in the face
  12. In the FT comments section on this story, there is a hilarious BTL pantomime foaming at the mouth. Here is a selection of his best comments. His sphincter must be hurting really badly today. Enjoy! ------------------------------------ 1. See my reply to BlaBla, most zone 1 landlords rent out to help out the housing shortage. They'll rather leave them empty than rent them to ungrateful so and so's. 2. You ungrateful so and so. Private landlords have contributed to the wellbeings of many millions of tenants for centuries. I'm converting all my BTL in London Zone 1 to AirBnB, hence getting REAL rents for a change. 3. Many zone1 landlords will be doing this to help with housing shortages. They will have the means to pay off mortgages that are non productive. Many of you, and GO still don't get it, it's a business and businesses evolve to stay profitable. 4. About time we AIRbnB and choke off the AST tenancy supplies. Renters will have to compete with foreigners on a night by night basis. 5. Institute investors have largely taken over student accommodation in London, they ended up paying for concierge service and taking out huge loans to pay for a small studio to study in London. That's what really happens when institute investors get involved. They are the parasite. Small private landlords are kind do-gooders who coexist with tenants in a symbiotic relationship. BTW, my tenants are all grateful for what I provide and no doubt my airbnbers will be more than happy.
  13. Sweden is the biggest basket case in the EU as far as housing is concerned. When it hits the fan, they'll have the biggest crash. Ironically, their banks already got burnt in the Baltics lending to people on stupid valuations up to 2008, but clearly learnt nothing. Norway isn't much better.
  14. The banks' business model with regard to savings is to entice new customers with high(ish) rates, reduce them after a while and hope that you don't switch. Energy retailers are exactly the same. If you want the best rates available, you have to keep switching. If you do that, banks will make a loss on you over time, but cream it in on those who don't switch. Price differentiation aside, on a macro level, market rates have fallen in the last few months, largely as a result of stock market turmoil and central banks whispering soothing words such as 'lower for longer'. The current UK government 10 year bond rate (traded - so this is yield determined by the money market) is 1.43%. It was over 2% just a few months ago. My view is that a crack-up boom, probably a very short one, is bound to follow this last hit of the cheap debt crack (unless there's Brexit).
  15. @ wish_i_had_bought"The stats will show that the capital is building homes, but the reality will be far from it." Below are the stats I've been scraping from ONS on the value of private housing construction in London and GB as a whole. All the indexes, including prices, are relative, indexed to the Q1 1980 level = 100, and shown in real terms after adjusting for CPI deflation. I know that your statement suggests that you don't trust stats, but I do, at least ones where I know and trust the source. To me, this supports the picture I see when I look at central London from the 14th floor of an office building, there are cranes everywhere.
  16. @Neverwhere "Changing the tax treatment of corporate landlords' finance costs so that they are no longer treated as a deductible expense but instead afford a 20% tax relief - leaving the BTLers judicial review argument dead in the water withough actually increasing taxes for corporate landlords - would also be a killer move." The corporation tax rate is 20%, which gives the extent of tax deductability of mortgage interest for corporate landlords. Changes for private landlords actually put them on a level playing field with corporate ones, so the judicial review arguments were dead on arrival.
  17. This article is on the US gas market. It's not the same as the EU market because the shale revolution has yet to hit our shores. The US is only now taking it's first tentative steps to becoming a gas exporter, so the gas produced there is trapped in the home market, which explains the low price.
  18. +1. Past major property price crashes have taken at least 4-5 years to play out fully from start (UK and Tokyo in the late 80s, HK in the late 90s, Ireland and Spain in the noughties). What we're seeing now are just possible premonitions. Assuming these are not false, good buying opportunities before 2020 are unlikely, especially away from London, where the cycle is in a different phase.
  19. I've done some simple mental arithmetic on this with the view of working out whether it might actually be an attractive proposition even if you believe that prices will tank relatively soon. Assuming that you go for the max £600k purchase price, your 5% deposit, which you would expect to lose, is £30k. Stamp duty is £20k. Let's say (generously) that other costs are £10k. You would therefore have to save £60k in interest relative to rent for an equivalent place before the crash. I would estimate that for a £600k new build, the equivalent annual rent is about £20k, so you'd have to save 3 years' worth of rent. If mortgage interest is 50% of rent (generous assumption) then it would have to be 6 years until the crash for this to be worthwhile. I'd say that the current situation is very unlikely to hold out for that long. Then there is the issue of repaying some of the equity loan in those 6 years, which increases the cost side of the equation. There is also the risk of prices tanking more than 45% before you manage to sell. Finally, the interest saving is actually likely to be much less than 50% because banks have to pay a fee to HMT for the guarantee (they had to do this to get past the EU State Aid rules). Really don't see how it could be worth it. P.S. @Neverwhere - great find
  20. There was an article in the FT this morning (behind a paywall) saying that L&G has committed to invest £600m into new houses to rent. It may be insurance rather than pension money, but doesn't really matter from the tenants' perspective. Overall, it looks like an emerging trend that we'll be hearing a lot more about in the next few years. The BTL tax changes should turbo-boost all this.
  21. Without wishing to be set upon as a Troll by the noble Count, it's worth pointing out that a drop in the median transacted price can happen if the fall in the number of higher value transactions is greater than the fall in the number of lower value ones. Actual price falls are more recent than the year to date. The crash is only just getting going.
  22. Surely this depends on where you are. In London, that would be consistent with prices at the turn of 2013/14. I didn't think it was a good idea to buy then at those prices and I haven't changed my mind since then. However, if prices in the NE fell by another 25% and I was looking to live there, that might be a different matter.
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