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House Price Crash Forum


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About charmer

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  1. I had a similar discussion with a colleague "Ah, but you see it's not about the rental income - it's all about the capital gain you see. All you have to do is wait for a few years and then you can sell it on for more." I tried to point out that buying an asset on the basis of capital gains rather than future cash flows is against pretty much every principle of asset valuation. I tried...
  2. 1) What's your circumstances? Newly qualified chartered accountant, currently renting with girlfriend. 2) What do you think will happen to the market? We stay in the current will it/won't it phase for another year or 2, city bonuses fail to materialise, London goes and the rest follow - initial quick crash at the top followed by a more general deflation over a few years. 3) What's your biggest fear? Where do I start? I have more hangups than a wardrobe. 4) What's your 'Confidence of a Crash' level at? Depends on what you mean by crash; apocalypse? 0, stagnation and drift downwards? 10 5) What will interest rates be by Christmas? 6% minimum - look at the M4 figures, MV=PQ + carry trade unwinding (watch this space...). Remember, a year ago 5.5% would have seemed an outrageous prediction.
  3. His tornado of facts and figures magics up images of untold national wealth and success. Couldn't have put it better myself Polly...
  4. She doesn't have a f*cking clue - none of these so called experts do, all they say is "unlikely to moderate in the short to medium term" - what does that mean? "Stable foundations", again, what? I can't be arsed to read these "predictions", if anyone wants me I'll be reading my horoscope, apparently pisces are going to have good year. Now THAT'S science.
  5. When I can buy a nice place to live on my salary without destroying my lifestyle. I'm want to buy a home, not just a house.
  6. Or of course, they could just f*ck off and stop interfering in everyone's lives...some bloody hope.
  7. I've just qualified as a chartered accountant with a big 4 firm in London (Deloitte). It's a good option (even if you don't want to be an accountant). Current packages post qualification are in the £50k to £65k pa bracket depending on where you go. However you look at it, that's very reasonable 3 years after graduating. Most graduate entry schemes will close shortly so get your skates on! Bust your balls for the 2:1, it will be worth it. Give me a shout if you want to know more. More than happy to help.
  8. Mervyn, you're dammed if you do, dammed if you don't. Apparently... I had heard this crazy rumour that 1)you don't get raises because mortagage rates have gone up 2) Inflation has something to do with the money supply 3) oh and that an increase in borrowing costs might possibly choke off consumer spending, thus dampening CPI? Stuart Law, Managing Director of Assetz is an idiot. The full idiocy is available on firstrung. C.
  9. OK, so a year ago me and my mate rented a flat. We each paid 422.50 pcm for it, so £850pcm overall. Yesterday, I was browsing flats (just watching the market) and came across my old flat on find-a-property. Anyway, I'll let the emails tell the story. Just for the record, he's a member of RICS. His last reply is the best, when he implies the mortgage rate could be a fair bit lower than the bank of England rate. At this point I decided all was lost! ------------------------------------------------------------------------------------------------------------------------------------------------ Subject: Now tell me that housing is not overpriced. Mate, Was just browsing around and found this property for sale... http://www.findaproperty.com/displayprop.a...p;agentid=02753 At 6% over 25 years, it would be £1496.09 pcm! (+£20 ground rent) Seriously, if this sells, we are definitely in a housing bubble! C. ------------------------------------------------------------------------------------------------------------------------------------------------ Subject: RE: Now tell me that housing is not overpriced. Yeah but if you paid 6% then you'd be a bit silly!! ----------------------------------------------------------------------------------------------------------------------------------------------- Subject: RE: Now tell me that housing is not overpriced. Allright, let's go for the bank of England repo rate of 4.75%, still be paying £1,323 pcm. Do you seriously think that's value for money? ----------------------------------------------------------------------------------------------------------------------------------------- Subject: RE: Now tell me that housing is not overpriced. Whatever the market will pay means that's the value! All supply and demand! Wouldn't be a good one to go for though, as there isn't much you could do to it to add value, you'd have to wait for capital value to increase . Depends on the deposit too, could go interest only and try and get a capped rate, though I don't think there are many going any more since rates are on the rise, but the mortgage could be a fair amount lower I think. -------------------------------------------------------------------------------------------------------------------------------------------
  10. Hmm.. Of course, hindsight was a wonderful thing in '92. Sure it will be again in '08
  11. Hardcore monetarist, you've rumbled me. However, I would argue that your cost push inflation, which I entirely agree is the major threat, would be exogenous to the system. I have limited my explantion basically to a closed system as bringing in outside factors opens a whole new can of worms. In terms of the real situation rather than just the theory, I reckon that in the long run, if P rises due to exogenous factors then Q, or other factors making up inflation (P) will fall. Basically domestic prices drop, or more likely wages. Either that, or we see a slowdown. However, I reckon this is where house prices could come in, as I believe the equation would consider asset price inflation as part of the inflation issue and therefore the sector most vulnerable to counteract the goods inflation is likely to be asset prices as growth in the money supply will increasingly be channeled towards paying for more expensive goods. Does this make sense? C
  12. Interesting, I had not considered the concept of real interest rates in the housing sector alone. I may need to go away and do some thinking...
  13. Interest rates control inflation via the monetary equation. MV=PQ. M is the quantity of money, V is the velocity circulation of money (how quickly money can flow from one person to another, probably growing slowly, but it;s difficult to tell) P is the level of prices, so the change in P is inflation. Q is the quantity of goods produced, the size of the economy or GDP. This is the model for a simple closed economy (no imports and exports). So, if we say that both V and Q are qrowing at 2.5% (this is just an assumption as it makes it clearer the actual values are debatable but that's another can of worms) then any % increase in M will increase P by the same % amount to keep the equation level. Happy? Good, so we agree that the growth in the money supply links to inflation? OK so how do we control the growth in the money supply? Well firstly why does the money supply grow. Essentially it's because the money supply is not determined by how much individuals save or lend. Under this situation growth in the money supply was constrained by the amount saved ( the growth derived from the money multiplier, see Wikipedia, on the role of fractional reserve banking and the money multiplier, I'm sure they will have something on it) However, this could occasionaly lead to problems and it was decided (this was a worldwide consensus on the role of reserve banks, no consiparcy) that the bank should undertake to provide cash to the system to mainatin stability. So the bank will lend at the quoted interest rate to retail banks who can then lend on to customers. {This is not strictly relavent but should help - Therefore the main supply of money comes not from individual savers but from the BoE and the determinant of growth in the money supply will be the relation between demand for loans at the quoted rate, and the rate quoted by the BoE (think Supply and Demand where the price is set, and supply is infinite at any given price). The bank also take deposits, these are the roles of T-bills or Gilts/bonds in the UK which effectively take money out of the system, shrinking the money supply.} Hence if interest rates at the BoE rise then this makes all loans more expensive slowing borrowing and money growth, and thus inflation. I hope I haven't made this too basic or patronising. If so I apologise, I am used to explaining this to people with a lesser grasp of economics than many on this forum. The inimtable C
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