Society of fools

The book did note that the phenomenon of having high property prices being seen by the majority of the general public as a “ good thing” does seem to be a particular affliction of the Anglosphere: the USA, Canada, the UK, Australia and New Zealand. In places such as continental Europe, or Asia, this is not such a pervasive sentiment, either because there are strict rental controls ( see places such as Germany or Switzerland) or there is a lot of government owned or provided housing ( Singapore) or because there is simply not a government commitment to keeping real estate Ponzi schemes alive ( China) . This is a self- inflicted problem created by the electorates and politicians of the five eyes countries.

Just read a fairly good missive named “ The Great Housing Hijack” by Cameron Murray, which discussed the Australian housing Ponzi in considerable detail, though also mentions some material on the UK, the USA, Canada and Singapore. ( he likes the housing policies in Singapore) Some interesting material there, though it was depressing from the point of view of actually visualising a house price crash. Like many on this site, he believes that in Australia the political class is so invested in high house prices on a personal level, that nothing from the governmental side can be expected in a reasonable time frame to moderate house prices. ( And he goes through the latter situation in some granular detail, firstly going through the number of federal parliamentarians in Australia invested in property, then he goes through the politicians in each state parliament, then the politicians at the council level. All told, there are 6300 politicians across Australia who are heavily, heavily invested on a personal level in housing, and a sharp drop in property prices would personally devastate them. ) He asks the reader to draw their own conclusion on meaningful housing reform coming from politicians. Where he was more positive was on the purely economic equilibrium side of property pricing. For example, he was one of the very earliest economists in Australia to point out that when the Arab slashed interest rates in early 2020 for Cobid reasons, that he expected house prices in Australia to rise by 20% to 30 %. At the time, he was a voice screaming in the wilderness. All of the major banks in early 2020 were forecasting Australian house prices to drop by 10% to 15%. So, looking at the present mortgage pricing in Australia, he expects prices to drop, again, this is swimming against the tide, as Aussie house prices are at an all time high and widely expected to go higher. But in his view, “ you can’t pay more than the bank will lend you, and banks are now lending less” . Ergo, Aussie house prices will now drop due to the price of money. There’s a lot more than that in the book of course, and his summary recommendation is that what needs to happen is a Singapore style policy whereby the government builds and owns housing , so that the state is directly involved in the provision of roofs on heads, and the private sector no longer has a monopoly on this essential need. He also points out that housing is just about the only sector where there is a 100% private monopoly. In Aussie roads, for example, private roads are a minority, so is private healthcare, etc etc etc, and he believes a mixture of public and private leads to the best outcome in terms of pricing, He admits though, that getting this into place will be a monumental struggle.

Must be like Italy. There are villages in Italy where you can get a three bedroom house literally for nothing if you commit seriously to living there. I’ve seen such places, and they are spooky. Several hundred old houses, probably 20% of them occupied, and the average age of those occupants is about 73.

He likes low interest rates ( I think the Trump org is loaded with debt) so you can expect Jay Powell to be booted up the a**e on a regular basis if he refuses to lower them. Apart from that, he may also cut off funding to the Ukrainians ( unless US Arms manufacturers convince him the gravy train should be kept rolling like they did with Saudi war in Yemen) But I don't see much else changing. With Trump, I always thought what was best was to look at what he did, not at what he said. What he actually did, as contrasted to his bombastic over the top rhetoric, was pretty conventional.

I would buy. I even have the price level clearly in mind. I can see several properties in the UK presently on offer for £500 K. If I can buy one of them for £375 K I will buy. It’s a sum I have in a term deposit right now. I like buying cheap assets even if there’s a risk. I bought Rolls Royce shares 18 months or so ago when they were £0.67. They’re more than £2 now. I wouldn’t have bought them at £2 though.

If it’s risk aversion, I think it would be only with respect to investment in property, and most particularly what is perceived to be over-priced property in markets such as the UK, Canada, Australia, New Zealand, California and suchlike. Self-evidently, there are plenty of posters on HPC who do not have the slightest problem investing large amounts of savings in equities, in crypto, in gold, and even in real estate if it is in a market, such as say, Turkey, Cyprus, or the GCC, where price multiples for high quality new build real estate is minimal. The mental disconnect is there. I always have my sister in law as a perfect example. She regards investing in the Australian share market with horror ( “ you can lose everything”), but having more than $1.2 million AUD in mortgage debt for a nondescript Sydney house in a dreary unremarkable suburb, conversely, doesn’t bother her in the slightest. “ Aussie housing only ever goes up, you simply cannot lose with that kind of investment. I wish they’d let me borrow more”. She would clearly regard the denizens of HPC as outright wackos.

The reason this place feels like a comfortable space for many of us is that the uniformity of values is remarkable. The most obvious point that sticks out to me is the fact that hardly anybody here is oblivious to having huge debt. The number of times on this forum that you hear the phrase " I couldn't sleep if I had £X + amount of debt" is incalculable. Point is , the majority of people in society don't have the slightest problem with having eye watering amounts of debt on their personal balance sheet, and that is what sets this group apart. (And makes us utterly irrelevant and invisible to politicians and policymakers)

Using the ever handy Bank of England inflation calculator shows that £280,000 in 2019 is the equivalent of £339,000 + in July of 2023. Assuming inflation has continued to rip in August and September, I’d say they have made less than £10 K as an increase in market value on their property over the last 4 years, and that’s only if that “worth” estimate actually is accurate,

Ha ha ! So true. I voted 0.25%

That’s precisely it, and is why I’m no longer making offers. I think life is simply too short to go through unnecessary unpleasantness. If I see a property I like on offer at £500,000 and I believe that a fair price is £375,000, well, it’s much better to simply wait it out and avoid a potentially very unpleasant and even emotional discussion. Fortunately I am in the position of sitting on £400 K ( actually not held in GBP) in cash earning 5.5% +, so I’m not concerned. I’ll simply wait for the property market to crack. I have faith in the collective HPC hive mind that believes it will. 😎🙏

I don’t think the psychology of would-be sellers or of the real estate agents that advise would-be sellers has changed in the slightest in the last 12+ months I am still encountering active hostility when I suggest what I would actually like to pay for a property, which is some cases is more than £100 K less than the advertised selling price Until that conversation changes, I’m not going to feel like much of a winner…..

More power to your sodding elbow sir, I could not have put it better myself.

Putin's boys adored it. They went there twice in 4 days .

I find the pricing on offer to be demoralising. You do your research and see a place that last sold for say £400 K in November 2019. You think, ok, well now it’s probably going to go on offer for say, £450 K, and I’ll bargain them down to £395 K. Then you see the offer price is actually, £585 K it just makes you want to pull the blanket back over your head and wait it out until the psychology of property sellers truly changes in a meaningful way.

I think Salisbury was the place where Putin’s goons attempted to murder the Skripals. When the killers were interviewed later on RT they waxed lyrical about Salisbury and its impressive cathedral. Check it out on YouTube. Even Russian FSB thugs are impressed by the place