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lets get it right

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Posts posted by lets get it right

  1. when sh*t for brains b oomer bulls finally realise that impoverishing later generations leads to lower rents on their BTLs, then they'll get a cold creeping feeling

    The people I see day after day on Homes Under the Hammer, who have 'portfolios' are not baby boomers.

    I'm not far off 60 years old - I don't know anyone of my age who is a BTL landlord. I know lots of people who have property portfolios. Most of them are in their 30s and 40s.

    I used to blame baby boomers but of the many things we are guilty of, that isn't the main one.

    Look at Homes Under the Hammer, Property Ladder and Location, Location, Location and all the rest of the property porn - not that many oldies on it.

    As far as I can see, your logic is precisely back to front. Later generations are not impoverished - you're just priced out of the housing market - you still have enough money to club together to pay high rents.

    Unless you stop paying the rents, nothing will change.

  2. sorry to say this old boy but your points are terrible

    the economy is growing on the back of a solvent corporate sector

    the other 2 legs of the stool - individuals and government are heavily in debt, this will subdue house price buoyancy for a very long time

    to put it anothe way, the economy grew rudely from about 1992 onwards, the bottom of the last housing crash was 1996

    property is overpriced wrt all important indicators, just because HBOS do a few good mortgage deals for those that will take them (not many), and businesses are growing does not correlate with rising house prices

    overpriced means more likely to fall in value - it was a lesson espoused by Ben Graham - despite all the fools (like you) bleating on and on with nary a wisp of logic

    The housing market last time was as low as it was going to go by about 1991 - it bumped along the bottom then for 5 or 6 years.

    I didn't say house prices were rising. I acknowledge they are falling - a little. My point is that they won't fall much further because they are sustained by high rents and people continuing to grow property portfolios.

  3. It wasn't inflated slowly an it is only remaining inflated due to huge government intervention.

    It's all about interest rates now. Once they go up, the houses will plummet. It's just going to be very tedious waiting for the rise.

    It inflated slowly in my area although, admittedly, it did inflate sharply in places where property used to be very cheap - like Liverpool and Newcastle.

    Given the massive indebtedness of governments around the world - and their need to continue to raise money by borrowing - interest rates and, in particular, the days when you could get 5% risk free interest on your money just for sticking it in a bank seem to be unlikely to be repeated any time soon.

    Government intervention saved the banking system.

    Property transactions are what, a third of what they used to be, yet the market hasn't fallen to any significant degree.

    I think you should start looking for the reasons instead of sitting there with your heads in the sand waiting, waiting, waiting for it to collapse.

    My take on it is that the structural change continues as investors build their portfolios and FTBs are priced out. The market won't crash while rents stay high.

  4. I think we are here FWIW...


    We just need to be patient because it will be a bumpy road - the VIs won't go down without a fight. But gravity is on our side, it's just a matter of time.

    I think the fear phase will start next summer after the Spring bounce has failed to materialise and after a winter of hard falls.

    I've never seen the property market go into freefall like that chart indicates. Other markets - stock markets, gold, wheat, coffee - yes, but not the property market. It is too illiquid and, without forced sellers, prices never go into that sort of decline.

  5. yes, but volumes have collapsed, all the houses that didn`t sell then are still sitting around wanting to sell? As soon as securitization disappeared the crash was baked into the pie for the majority? Doesn`t matter how many sit tight, they will never get peak prices for their house in their lifetime, those multiples to salary won`t be back? And there are many who MUST sell for a myriad of reasons?

    And yet houses where I live are selling at about 2007 prices. Not many it is true. But the ones that sell are still on at insane prices.

    What people seem to forget on here is the fact that 'prices are set at the margin'. It doesn't matter if the majority of people can't afford houses in a certain street, there may only be one house in the street for sale and, if someone who wants it can afford it, and they buy it - the fact that most people couldn't afford it doesn't matter a jot.

  6. I would agree that it's only the start of the fear stage. This is a huge bubble that has built up over many years and it's going to take a long time for the cycle to complete. As I mentioned before I don't think the phases are set in stone but are an indication of what the leading sentiment is so it can be a bit 'blurry' and open to interpretation.

    Question: When is a bubble not a bubble?

    Answer: When it has been inflated slowly and stayed inflated for a long time after the inflation stopped.

  7. What stage would you say we are in then?

    Return to normal/denial? - Not seeing many deniers these days. Most have taken on board the economic reality and at the very best expect the market to flatline (when have you ever seen an economic cycle show flat for an extended period)?

    Fear - Many news stories reporting house price decline and this as a very bad thing. Lots of anecdotals on fearful people and friends/family sentiment turned to a bearish outlook. Still a stand off between buyers/sellers as though people may be fearful they still hold on to hope that a miracle will pull the market back from the brink.

    Capitulation - For this to happen many more sellers will need to price realistically and sales will pick up. Sentiment on housing as an investment will be destroyed. The market will continue to fall.

    Despair - This is when most people will be telling you to stay away from housing but as we're approaching the bottom it is actually a good time to buy if circumstances allow.

    Return to the mean - We haven't got low enough to be able to return to it!

    Not only the sentiment, but for me the shape of the bubble also points to fear.

    Now you can rubbish the model all you like but it's still a good fit for what we're seeing at the moment.

    As far as 'Return to the mean' goes - the longer we stay above the mean, the more the mean goes up.

    As far as fear goes - who cares what the press say? Their daft headlines are meant to sell papers. People are intrinsically optimistic - particularly about housing. That much has been absolutely proved over the last few years.

    Despair? When most people will tell you to stay away from housing? Never seen it in my lifetime yet. On the contrary - the level of constant advice to get on the ladder, do it sooner rather than later, houses always go up in the long term etc, etc. - means that despair never happens.

    This endless armageddon stuff is becoming very tiresome. How about a reasoned look at what is happening in the economy and the housing market. Despite EVERYTHING the economy is still growing and the housing market is chugging along with minor falls.

    Given the current economic situation - aren't you beginning to ask yourself 'what the feck will it take to take the housing market down?'

    First they said the market couldn't do without FTBs. It can.

    Then they said BTL would die. It hasn't.

    Then they said the banks wouldn't be able to lend. They are.

    Time to face facts I think.

  8. I beleive that a couple fo months ago, where we were seeing much conflict in the figures and opinions, that we were at the change from the bull trap to the fear phase....For me, the fear phase is just starting.

    In the US, securitization is on the road to total abandonment, the frauds the bankers have commited are slowly being exposed, yet the debts they accumulated are still there. they will have to be outed some way or another for a full recovery to take place.

    That sbodes badly for the future of prices of any asset supported by borrowing...failed banks cant lend except what people save, and investors cant touch securitization with a barge pole.. It started there, it came here and its going to be nasty.

    To compare the US with 300 million people in a country that is 40 times the size of the UK with 60 million people and draconian planning laws - is to compare chalk and cheese.

    And, as we have seen, printing money seems to have no negative consequences.

  9. I would just like to add that there is a fair possibility that the economy of the UK is in a much worse state than GDP figures for Q3 indicate, and we may yet have a game changing economic recession / depression.

    If we were going to have a game changing recession/depression surely we would be in it now.

    But we aren't. People are spending less, people are borrowing less, people are paying down their borrowing.

    Yet the economy is still growing. And thank heavens for that.

    I've argued against it in the past - but, then again, I've been wrong about a lot of things (particularly the house price crash I've been waiting 7 years for) but it seems to me that the debt is going to be paid down gradually and some of it is going to be inflated away. It's going to take 20 years and in that period we are going to see a (continuing) structural shift in property ownership - with a lot more renting and a lot more people with big property portfolios.

    I work from home and I can hear the dulcet tones of Martin and Lucy on Homes Under the Hammer drifiting into my office most mornings. It seems to me that the people on there at the moment are all serial property investors. 2 young lads a couple of days ago (dad was a builder/developer) had 9 (or was it 15?) properties and loads of them are saying things like 'this is property 36' and 'this is property 27' etc.

    Despite the alleged death of BTL and the alleged death of the BTL mortgage market, these feckers are still expanding their portfolios - because the rents they get are so high.

    I really do hate to say it, but I think your generation is fecked.

  10. Capitulation is not about the media's view. The real capitulation stage can only come about when homeowners are so desperate that they think it's better to sell at a ridiculously low price compared to their expectations. I don't think we're there yet, but we're not far away - there are many stories of people accepting 10% or more less than asking. Probably needs 30% or more less than asking before it can be considered capitulation given that 10% less than asking is actually still a very good price for most vendors.

    Certainly though, the media seem to have warmed to the new reality.

    The housing market doesn't work by people suddenly accepting 30% less than asking. It is a long, slow grind on the way down with asking prices begrudgingly dropped by 5k or 10k at a time. And, possibly, people accepting another smallish margin below their asking price.

    Capitulation is not really a feature of the housing market and, in a market as illiquid as housing, is never likely to be.

    I had a look yesterday at the auction results for the latest auction at a local agents - not a huge number of properties to be fair - but, nonetheless the vast majority of them sold at up to 10% above guide.

    There is very little sign of capitulation where I live. And, in the last week, two I have been watching have gone under offer. Doesn't mean much, but it does mean offers are still being made and accepted.

  11. I'm not sure what is going on. I know two people who want to re-mortage - one is a nurse aged 42 (ring-fenced job) looking for 3.2 times salary - the other is a 35 year old project manager for an IT company (who has worked for them since leaving university). Both of them have at least 50% equity and both have been told 'no' by lenders over the last couple of weeks.

    There is something strange going on in the mortgage world at the moment.

  12. In many respects, the two (price crash and rent crash) are mutually exclusive.

    You've got that completely wrong. In a housing market where the vast majority of First Time Buyers are priced out, the market relies on 'investors'. The ONLY thing holding the whole housing market up is high rents. Just watching Homes Under the Hammer ... a house somewhere divided into two flats. Agent said £1000 a month for the upstairs flat (one of them said £1200!). For feck's sake - over a grand for a poxy flat!

    The ludicrous rent sustains the ludicrous valuation of £220k. Take the rent down to £500 a month and the valuation falls to £100k.

    Rent crash and price crash are mutually dependent - not mutually exclusive.

    I can't wait for the housing benefit to be slashed! House prices will fall and people might then get a chance to buy, or rent at a sensible price.

  13. Why can't we just keep paying 20 thousand, million pounds a year in housing benefit?

    Why aren't the Labour party asked why it went from 14 billion to 20 billion in the last 7 years of their government. They kept telling us inflation was low, yet housing benefit went up by about 50%.

    I do wish someone would pin them to the wall and make then acknowledge the problem is of their making.

    Why doesn't Cameron ask Milliband, when challenged by him at PMQs - "we're having to deal with the problem you caused. Why did you allow housing benefit to increase by 50% over the last 7 years? How much does the leader of the opposition think we should spend on housing benefit. Is 20 billion enough? Should it be £25 billion? Why stop there? Why not make it £30 billion? When Labour were in government it seemed there were no limits. Everything could just go up and up and up. Well, we're having to deal with the mess they made of the economy and, if were them, I'd keep a low profile for a few years and pray the British people forget what a mess they made of the economy."

  14. I vaguely recall driving past them when they were being built - aren't they North of the River? i.e. in Chiswick, not Kew?

    Anyway, go over the river (South) and on your left are roads full of Edwardian terraces. There is a fair bit of variety in the house styles - but many of them are quite bog standard and not particularly big. They are not (for example) over 4 floors like many in London (which are, therefore, a reasonable size). They are just ordinary, suburban houses built (in their day) to house ordinary people.

    Most of them are best part of a million now - the bigger ones well over a million.

    Seems in London you need to be a billionaire to live in a big house in central London and a millionaire to live in ordinary houses way out in the suburbs.

    I really have no idea where all the money comes from to keep this insanity going.

  15. Add in the potential nasty that councillors can end up being bankrupted to pay for a budget if it is found to be illegal, which was brought in to stop them spending the money they dont have. If central government legislation means that some councils have no opportunity to set a legal budget, the I dont see how anyone could be a councillor unless they were penniless.

    I can see a lot of councillors resigning over the next few months if the situation is as bad for them as it appears.

    Spot on. I can't say I've ever fancied being a councillor myself, but I know a good few of our local ones. Most of them are wallies and the older ones are mildly eccentric - but I can see mass resignations coming up soon. Who would be a councillor and take the risk of being personally surcharged for all sorts of things when budgets are being cut?

    The fact is that local government is largely run by wallies and most of the employees have a sense of entitlement (easy life, plenty of sick pay, long holidays, low stress, early retirement, good pension, good working conditions etc.) (By the way I am not talking about 'the public sector', I am talking about local government.)

  16. I don't agree that it's definitely to do with expectations of falling prices - half the people on here seem to think that banks are deliberately engineering a situation to take people's homes at rock bottom prices etc, and so this is counter to this hypothesis.

    Lots of reasons why banks won't lend.

    • Expectations of falling prices.
    • Expectations of increased unemployment.
    • Expectations of increasing inflation and having their returns being diminished in real terms.
    • Maybe the banks just haven't got the money to lend.
    • Maybe people just don't have the deposit.
    • Maybe the banks are funding other opportunities with a greater return? In BRICs?

    I'm beginning to think that it's "Maybe teh banks just haven't got the money to lend".

    In virtually any and every situation, over the years, banks have lent money for mortgages. But now, it seems, they are seriously cutting back. They have dealt with problem housing markets since the day dot so I think it must be something else. Lots of people have taken cash out of the banks over the last couple of years and bought property. Maybe they really don't have the money to lend.

  17. He borrowed it. Basically he just issues govt IOUs. These are lumped into the national debt. The deficit is an entirely separate entity. It's like you taking on a mortgage whilst using a credit card.

    So, you're saying he sold Gilts to buy the shares in RBS?

    If that is so, let's say for the sake of an example, he borrowed 100 billion by selling gilts and bought RBS shares with them.

    Then, balance sheet wise (as it were), he borrowed £100 billion and spent it on an asset worth £100 billion. Assuming the shares don't go up or down - and don't pay a dividend, the cost to the taxpayer is just the interest on the gilts.

    In which case, as long as the shares don't go down, any money borrowed is not part of the deficit for the year in which it was borrowed and, as long as the shares are at the same value, or higher, than the money borrowed - presumably the national debt didn't go up either.


  18. How did you work that one out then? The banks have saddled us with debts that will take generations to pay off.

    Sounds like the same magical ponzi accounting that led us into this mess in the first place.

    I'm more puzzled now than I was when I first posed the question.

    It seems bank bailouts amount to getting on for a trillion pounds. Yet they haven't borrowed a trillion pounds.

    If 'a trillion pounds' is involved - then I guess it is reasonable to argue that one minute everything was okay, the next the governement had to lay its hands on a trillion pounds and that is why we're in the mess we're in.

  19. It seems the New Labour spin machine has decided to contest the accusation that the Coalition inherited a mess caused by Labour by saying that ...

    'most of the deficit is because we bailed out the naughty banks and we had to do that otherwise people's savings were at risk - we did what we had to do etc.'

    ... and ...

    'the deficit before the banking crisis was lower than they inherited in 1997'

    I have heard this argument advanced, in almost identical words, a few times over the last week. It seems old habits die hard and, presumably, anyone senior in New Labour has been told what the message is. And to repeat it over and over again.

    My question is ... is it true?

    How much of our current borrowing is due to Brown borrowing money to bail out the banks?

    And, what was the deficit in 1997 and 2007?

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