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House Price Crash Forum


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Everything posted by DrBob

  1. Good grief - this is all a bit pessimistic, isn't it? Of course there will be a recession, of course there will be a house price crash, of course unemployment will rise and credit will become much tighter. But this doesn't mean we're heading for armageddon. The closest analogy I can think of is with Japan's 'lost decade' in the 1990's - a prolonged and painful fall in house and share prices leaving the banks holding substantial bad debts. Life will go on, but there will be a sea change in people's attitude to saving and credit, which is no bad thing.
  2. Well with just a handful of detached houses sold, that explains the enormous variation in prices. Gather data on a few hundred properties for something more statistically significant.
  3. My favourite bit about this article is the tone - no-one's trying to deny the parallels with the 1990s house price crash any more: The National Association of Estate Agents (NAEA) said the number of house buyers dropped from an average of 276 per agent in January to 243 in February 2008 – the lowest figure since 1989/1990. [stuart Lilly, NAEA president,] blamed the global credit crunch and 'consumer inflation', but added: 'We still have a long way to go before we see the difficulties of the late 1980s repeating themselves.' Lilly doesn't say the late 80's won't repeat themselves - just that we have a long way to go!
  4. Uk Property Prices Must Drop 10 - 15% Now To Avoid A 50% Crash Later - Rics I'd say this statement is about two and a half years late!
  5. I don't share your confidence. NuLab saved Northern Rock because: 1. It was the first bank to fail, 2. It was a British institution with thousands of UK employees, 3. It was based in a Labour heartland, 4. There were queues at the branches on the TV/radio I cannot believe that NuLab will feel obliged to help out an Icelandic internet-only bank to the same extent. Icesave/Lansbanki and Kaupthing investors will be relying on the 300,000 Icelandic population to foot the bill!
  6. Wow! Is that the first media picture of a boarded-up house illustrating the current house price crash? A picture speaks a thousand words...
  7. Really? I think they actually are tax-free, you know. From the NSANDI website: http://www.nsandi.com/products/ilsc/index.jsp http://www.nsandi.com/products/ilsc/index.jsp' rel="external nofollow">Index-linked Savings Certificates Inflation-beating savings with tax-free returns With our inflation-beating savings, the value of your investment increases in line with inflation as measured by the Retail Prices Index (RPI) and earns guaranteed interest rates on top - with all your returns tax-free (which means that all returns are free of UK Income Tax and Capital Gains Tax) . So you can be sure to keep ahead of rising prices. Because inflation fluctuates, you won’t know exactly how much you are going to receive until your Certificates mature. But you can be sure that your money will have more spending power. Sounds like a great idea, unless you think the UK treasury is insolvent
  8. Tricky one. This depends on your 'intentions'. Remember, if you marry her you'll be sharing all her assets and (more likely) debts! If you plan to stay together forever, you should probably persuade her to sell before prices fall further. I understand there are still buyers around in London. Unless, of course, you love the flat and will be happy to live in it for the next decade (possibly with young kids).
  9. I appreciate the OP's dilemma. I'm not an STR, but I do have a decent house deposit. I too am sceptical of cash, with commodity price inflation and the possible risk of bank failures. From December 2007 until about two weeks ago, I was mostly in commodities (invested via ETFs). These did really well (20-30% gains), but I sold most of these when I became nervous about the financial system. Here's why I felt I had to drop out of the commodity ETFs: 1. my ETFs were in an Iwebsharedealing account (part of HBOS) 2. my Iwebsharedealing account is a nominee account (no physical share certificates) 3. the ETF Securities ETFs are underwritten by AIG (which recently announced $11bn subprime losses) 3. I am concerned about a breakdown of the whole derivatives market if a few major counterparties fail So this leaves me with relatively few options. If I was in the UK, I'd put a big chunk in the NSANDI inflation-linked bonds. They're tax-free, linked to RPI (not CPI) and are government-backed. Yes, your invested money might not buy you as much petrol in five years' time as it does now, but you should still be able to buy a home with it! As it is I'm stuck with cash, with some share certificates in profit-making local (NZ/Australian) mining, energy and farming companies and a small amount of physical gold 'for emergencies'. The agricultural land argument is interesting. Agricultural land should always hold some value. There are some real problems in investing, though. It's an illiquid asset, and unless you know a fair bit about farming, the land market and local factors, you could easily end up paying much more than you should. If you know and trust a farmer, you could ask them for advice - they'd be able to help out. If you have enough cash, you might want to buy some land for the (very) long term, and rent it out to a tenant farmer. That way your land will be maintained and productive, and you can rest assured that you own a small piece of the earth! I doubt that land investment is feasible if you'll need the money in 3/4 years for a house deposit.
  10. Unfortunately, this is real. As is this report on the West Coast: Tent city highlights US homes crisis http://news.bbc.co.uk/2/hi/americas/7297093.stm And here's a BBC video report: Tent cities spring up in LA http://news.bbc.co.uk/player/nol/newsid_72...s=1&bbcws=1
  11. It isn't often that an important piece of international economic news comes from New Zealand, but yesterday withdrawals were frozen from two consumer investment funds from ING: ING forced to put freeze on two funds http://www.nzherald.co.nz/section/3/story....7816&pnum=0 5:00AM Thursday March 13, 2008 Investment manager ING has been forced to suspend withdrawals from two of its funds in one of the global credit crunch's first direct hits on Kiwi investors. The indefinite suspension of withdrawals from the $353 million ING Diversified Yield Fund and the $168 million ING Regular Income Fund is effective from today. One investor who had tried to get her money out of the Regular Income Fund instead received a letter from ING informing her of the suspensions. "The fund has experienced an unusually high level of withdrawal requests in recent months," ING wrote. The 85-year-old woman put $300,000 into the Regular Income Fund 18 months ago and has since lost $60,000 on the value of her investment. "I thought I'll get out of it while the going's good." The woman said it was "maddening" that she was now being forced to ride it out. The funds' portfolios are made up largely of Collateralised Debt Obligations (CDOs) and Collateralised Loan Obligations (CLOs), financial products which package bank loans and other types of debts into securities. The suspension of withdrawals from the funds has angered retired investor Eddie Graham. He and his wife had asked their ANZ financial adviser for a low risk, diversified portfolio. He ended up with money in the ING Diversified Yield Fund, which he has lost $23,000 on. Eddie wants to contact other investors in the Fund and take action. These funds were from a major international investment firm and were marketed to the public as "low to medium risk". The crisis is clearly spreading beyond hedge fund investors to Joe Public. I suspect many other 'low-risk' income and yield unit and investment trusts have large CDO exposures, not to mention pension funds. Expect similar withdrawal freezes to come to a shore near you... Protect your house deposit!
  12. "Someone looking to buy a house with a market value of £200,000 will be able to take out a mortgage for just £100,000. But a homebuyer taking out a 50% mortgage will have to pay interest on the top-up loans from day one. This "rent" would initially be set at a cheap 1.75% a year, rising to RPI inflation plus 1% (currently 5.1%)." FFS! Is this not the exact equivalent of a US subprime-style 'teaser rate' mortgage? How did those help home-'owners'? And how are public service keyworkers supposed to afford the rising 'rent' component with their 2% 'CPI inflation' wage increases and 30% annual fuel and food inflation? Another irresponsible 'back of a fag packet' policy from the government. Cr*p!
  13. This is essentially the reason that I am convinced house prices will slump for a very prolonged peroid (> 10 years). I expect to see continued commodity price inflation such that we will all have to spend a much higher proportion of our income on food and energy. Families simply won't have enough spare income to continue servicing excessive mortgages. Individual commodity prices will be volatile (I wouldn't suggest buying wheat right now), but the trend will surely continue upwards for years.
  14. Quite right! Paris is just a few miles down the train line. I moved to New Zealand a few months ago but still follow this site. The NZ market will crash just as all the others will. There's still a lot more denial in the press here than in the UK, though.
  15. The graffiti reads "143,637 - 06-08". This number is very specific, and it isn't just some Chav tagging. I strongly suspect that this is the amount someone lost on their (now repossessed) flat. Could it be that they bought in late 2006 at the same time as your 'landlord', and that it was sold as a repossession for GBP 143,637 less in 2008?
  16. And can I just remind anybody who is using commodity ETFs to hedge against inflation that AIG underwrite all of ETF Securities' ETFs (including the gold and silver ones)! " BULL is backed by matching Commodity Contracts purchased from AIG Financial Products Corp. (AIG-FP) whose payment obligations are guaranteed by American International Group, Inc (AIG)."
  17. ETF Securities Grains (41% soybeans, 32% corn, 27% wheat) is traded on the LSE (AGGP)
  18. Great find. I never cease to be amazed at the extent of financial chicanery which has gone on in recent years. All this money had to come from somewhere - it seems it will come from you and I (in consumer price inflation and taxpayer-funded bailouts). I really hope there will be some prosecutions.
  19. Re: Darling's great plan... Little more than fool's gold The Times, 7th Feb 2008 ... it would be naive to think it is likely to breathe new life into the mortgage market any time soon. Banks are in no mood to extend the credit, however temporarily. While house prices are falling, investors have little appetite for mortgage-backed securities, whatever their provenance. The recent slide in mortgage approvals may be as much to do with homebuyers sitting on their hands in the expectation of lower prices as banks rationing loans.
  20. Please don't talk about 'gold seals'. I have a horrible image of Brown and Darling p*ssing all over a heap of worthless paper 'covered bonds', laughing hysterically as they do so. Where's Spitting Image when you need it?
  21. There is quite a good summary of covered bonds here. Correct me if I'm wrong, but the differences between a mortgage-backed CDO and a mortgage-backed covered bond seem to be: 1. With CDOs, it was commonplace to build a AAA-rated security out of a range of poorly-rated mortgages/loans. The CDO industry was all about using clever but flawed mathematical models to achieve this (the CDO-squared and -cubed being the most sublime and ridiculous examples). In covered bonds, however, all the constituent mortgages have to be of a high quality. 2. The covered bond remains on the issuer's balance sheet, and the issuer retains control of the bond. This means the issuer can change the constituents of the bond (or the terms of the loans) to make sure it retains it's credit quality. Once a CDO was sold, it was sold, and the issuer no longer held any responsibility (or risk). 3. The security in the covered bond comes from the purchasers of the bond having the right to claim all interest payments on the constituent mortgages ("the cover pool") if the issuing bank defaults on the bond. However, the only security in a AAA-rated CDO comes from the fact that losses are taken out of the lower-rated CDOs before the AAA-rated ones suffer The idea is good in that it allows banks to use their 'good-risk' mortgage assets to gain some much-needed liquidity. I think there are a few problems, however: - For the covered bond's constituent mortgages to be of high enough quality, they will have to have a low LTV etc, so many mortgages won't qualify for them (perhaps not such a bad thing). This will make the plan of value only to larger, more established lenders. - Darling's comments suggest that the government itself will be effectively rating these bonds. The rating agencies may have done a poor job, but what makes him think that the govt is any better placed to rate bonds than a professional agency? Who would trust the government's rating? Unless the govt intends to actually underwrite the bonds (with taxpayers' money) too... :angry: Finally, and most importantly: - Who would want to buy these covered bonds? Covered or not, they are still mortgage-backed bonds, and with the current house price crash and impending recession, even 'good-risk' mortgages could end in repossession. Surely the canny investor who is prepared to take this sort of risk would snap up a AAA-rated mortgage-backed CDO instead (paying 70p on the pound for the latest vintage) and hedge their investment by buying some appropriate put options. And a sovereign wealth fund looking for a home for it's billions would surely rather buy bargain-basement equity in large established financial firms than pick up Darling's mortgage-backed bonds. Nope, the crash is still on, I'm afraid.
  22. It's not the world's most authoritative resource, but according to Wikipedia: The Bank of England holds to a voluntary reserve ratio system. In 1998 the average cash reserve ratio across the entire United Kingdom banking system was 3.1%. If this article is correct, there is no reserve ratio requirement in the UK or US. I don't know how this tallies with the Basel II capital adequacy rules, which as far as I can tell do not specify a single reserve ratio, but use a more complex mechanism to determine capital requirements. Nonetheless, by taking out your deposit, you will have reduced the building society's reserves so they'll need to pay better interest to keep hold of/attract more savers in the future. Well done for withdrawing your STR fund, by the way, I don't know how you could sleep at night with that much cash all held in a single (and rather small) institution...
  23. I have a moderate holding in gold (15%) invested in a self-select ISA (using the GBS ETF). Gold is becoming a speculators' market, and many of the major purchasers are ETFs (as well as services such as Bullionvault), buying tonnes of the stuff on behalf of shareholders. This is bullish for gold in the short term, but once confidence evaporates, the price could fall very quickly as ETFs are forced to unload their gold holdings when shareholders sell. I'm staying in gold for the next few months, riding the wave as China and India buy into the market. But I'm planning to set up some stop-losses...
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