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House Price Crash Forum


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Everything posted by Optobear

  1. May be good advice or it could prove a disaster to follow slavishly the trend certainly looking at fundamentals entertains the possibility of numerous lines of thought some of which could override conventional approaches and lead to a reinterpretation of economic fundamentals and deeply held beliefs the best approach might be to consider how the economy is likey to develop internationally and then come to a sensible view Cheers Nixy
  2. Sadly the trend in the UK is for people to borrow insane amounts and buy over priced property. Based on the idea that the government will act in the interest of the majority - then doing what the majority do is "safe". I'm already well outside the mainstream by going STR. As to the fundamentals... well along with many others here I've been thinking a crash will happen for 3 years - and still no real sign. Interest rates of zero are a pretty strong indicator that the fundamentals of economics are seriously awry- for example the old staple that money is a scarce resource that banks need to attract by paying interest to offset risk appears to have disappeared. So very much uncharted territories, and why I'm seeking views.
  3. Seems to me that gold plays two roles 1) As a commodity that is readily traded - but is a very speculative punt. 2) The ultimate insurance against a collapse in paper money - but you need it physical in your pocket to use. To be clear, my gold has a picture of Paul Kruger stamped on one face, and is meant to act as 2). I don't have enough - or would want to have enough physical to be a serious option for putting house equity into it. Plus if you buy more than (about £8k?) you have to tell the government - wouldn't want to do that as it would reduce its use as 2).
  4. Does DYOR mean "do you own research"? What a thoughtful and helpful comment Cisco. As to cash in banks not being risk free you might like to search for some of my posts during the financial crisis, particularly on the FSCS. As an ex banker I have a pretty good understanding of those issues.
  5. I recognise that I do need to buy again, particularly because the UK tax system so much favours home ownership. So, if you own a home worth, say, £250k you can live in it rent free. If you own £250k of cash in savings accounts and rent a house, then you earn interest on the £250k, but you pay tax on the interest. So the tax treatment is very unequal. So it is more tax efficient to own the house on the grounds of income tax - but also for CGT. So I will need to buy at some point - could be in 6 months - could be in 4 years - partly depends on how we enjoy renting - partly on a hope that house prices may fall a little (or a lot). Another, and probably more significant factor is the desire to be in a position to be a cash buyer. We've tried to move home several times over the last few years, always proved impossible, largely due to the difficulty of getting a chain together rapidly enough to match the seller's requirements. We're hoping that being in a position to be chain free will allow us to negotiate a better price and to get in quickly when we do want to buy.
  6. Without going into personal specifics too far... before we complete on the sale, the majority of assets we own are in the property - with most of the the rest in saving accounts - mostly ISAs, but also equities (also held in ISAs) and some other stuff - some gold, some antiques. Also a fairly substantial chunk in pension scheme. once we complete, we'll have a large additional chunk of cash, and we probably had more than sufficient cash anyway. That is why I'm asking. But the issue is more about timing. Purchased the gold in 2007 - ditto with quite a lot of the equities - so some pretty significant gains. Continuously buying into equities on a monthly basis - on the grounds that you do better that way. Less clear that buying gold or shares is such a good plan at the moment? So the difference is the single, one-off, shift from having a portfolio that was dominated by property - with smaller amounts of the others - to a portfolio which will be very dominated by cash.
  7. Joined here in Jun 2007. Finally going STR (exchanged contracts last week after months of messing around). Found somewhere okay to rent, but much more expensive than having a mortgage. Plan to buy sometime fairly soon: Questions are: 1) Where to put cash? shares, savings, bonds, gold? 2) When to think of buying again? Odd anecdotal is that although nothing seems to be selling, and chains appear to be breaking locally, the removal firms are very busy! Optobear
  8. It was a great programme (well I only saw the end) but surely the key point about Cowperthwaite was that he wasn't elected. He was imposed, came in, saw a good route forward and took it. No need to be elected. Seems to me that almost everyone sees government money as free money, and so don't want to see the spending that specifically benefits them cut. Add in democracy and you can't take Cowperthwaite's approach even if you agree. You gain votes by distributing government spending and lose votes from those who lose their beneficial spending. Big problem - don't fancy a benign dictatorship - so have to hope that the masses gradually take on board the messages. I'm not holding my breath though!
  9. Interesting thought. Maybe it suits all states to get into maximum debt (for reasons like buying off the electorate, citizenry, whatever). But to get into debt you need someone to lend the money. So do China need someone else to start producing all the goods and then ship them to Chinese consumers in exchange for Renmimbi printed paper. Who will it be? Vietnam, India, Brazil? Perhaps Germany? Maybe the final state is that Germany funds everyone else in the world to have a massive debt by selling them enticingly attractive sports cars. Eventually the whole word owes Germany every cent they own and more. That could be the final ..........
  10. I guess that to an extent this is why China are trying to grow their domestic market. If the people get a greater proportion of the consumer goods, then perhaps that helps the government? The anecdotals I've heard about the boom in housing there are stunning. I've heard talk of people buying a flat with a mortgage, knowing they won't even be able to keep up with the interest payments, but doing it anyway because they are certain they'll be able to sell at a much higher price, clear the interest backlog, and still make a good profit. That type of behaviour is what led to Tulips and the South Sea Bubble. In a global sense it would be interesting to compare the growth of Chinese property when denominated in something else (like gold). If the point of the USA's action is to effectively devalue the Renmimbi within the framework of the Renmimbi peg (by devaluing the dollar against real assets) then Chinese house prices might be going up when expressed in Rebmimbi, going up when expressed in Dollars, but going up far less (or even dropping) compared to gold, or UK shares, or other ways of measuring value.
  11. Are you saying that when China examine their holdings of dollars that there is a chance that they find that a cat has got in there and all the dollars smell of wee?
  12. Wouldn't that only be the case if the country were trying to fund a massively overspending public sector? If Norway, for example, with a surplus finds that the dollar drops in value I can't see how that helps them at all.
  13. I'm not trying to bash china, more trying to understand why some countries are massive exporters and creditors and why others are importers and debtors. I was a little suprised that you are figuring this is an attempt to bash china because I thought that you could make a decent claim that Germany is the biggest surplus economy historically, and that China is a Johnny-come-lately? The data about owners of foreign debt is complex, it is difficult for even the FED to know who owns the debt. It may be that the substantial UK holding of US debt is actually holdings of treasuries that occur through London banks but are on behalf of owners elsewhere in the world. Also, I suspect that if you looked at ownership of UK gilts you'd find a significant ownership by the US - in the form of pension funds and other institutions. The key isn't really the ownership of debt globally, rather it is down to the trade imbalances that drive the changes in those treasuries and gilts. This is all about something that has occurred over the last decade - and goes back to the fundamentals of the value of money itself and the way those impact on exchange rates. It seems to me that the Chinese have fixed their exchange rate to grow their export economy, and that the West has acquiesced - but at the price of sacrificing the majority of the manufacturing capacity. Perhaps I'm going too far by calling it the West, what I perhaps mean is the US, UK, Ireland, Greece, Spain. On the other hand I guess there is China, Japan and Germany. China is a peculiar case, there is very strong governmental control and censorship. The government appear (according to acquaintances who are chinese and live in china) are allowing the creation of a property bubble of epic proportions. That property bubble means that the people are taking on personal debt, and that may be the key point. When the the US debt is considered, how much of it is government debt, and how much of it belongs to american individuals. Similarly, when looking at debt ownership, how much is the chinese government and how much individual chinese citizens?
  14. Although my thesis is that both are largely equivalent. But that aside, why are they wanting to hold so many dollars? Are they all planning to visit Disneyland next year?
  15. Exactly so, the Chinese have the paper money, the US consumers the cheap electronics and other goods. Who looks clever? Also, as you say, the FED can just keep on printing dollars issuing treasuries via a deficit government budget. Is this all about devaluing the chinese currency? It really is all topsy-turvy. The richest nations hold paper money and the most indebted nations have the goods?
  16. So, here is what I find myself wondering. China owns close to a trillion dollars of US debt. I think that is a given? http://www.washingtontimes.com/news/2010/mar/02/chinas-debt-to-us-treasury-more-than-indicated/ So that looks, bad, the US will have to pay back their debts. China hold the cards, and the US is at their mercy - the Chinese owns Uncle Sam's ass. But, my understanding is that the debt is mostly treasuries, and as far as banks are concerned they treat treasuries as essentially the same as cash. In fact, banks even prefer to change the ownership of treasuries rather than cash when money is transferred as it is simpler and directly equivalent. So does that mean that the $800bn of debt held by China is really just the same as China having $800bn of dollar bills? In which case, it isn't that China owns the Uncle Sam's ass. More that they own $800bn of pieces of paper money? If so, then what is the problem? The last decade becomes one in which China produced masses of physical goods and transferred them to the US in exchange for pieces of paper? The question is why on earth China went along with that? Optobear
  17. Don't think it would work like that. Say that on wednesday the US creates 5% more dollars, and we produce 5% more pounds (via QE), then the exchange rate to dollars doesn't change at all, the price of oil barely moves either... only difference we notice is drop in sterling vs euro - that makes cars a little more expensive, but no great shakes. If the US prints 5% more dollars and we don't shift, then the pound goes up vs the dollar, the oil price (in sterling) drops, and inflation is reduced... not too bad in the short term. If however, the second one happens, but we wait six months, then the UK alone is printing money - just like Mr Mugabe - and we will be up a creek without a paddle in terms of credibility. I know it differs little from the first case (Where US and UK print simultaneously) but it makes a huge difference to the markets (if we print at the same time we can blame it on the US, and can argue it is to maintain competitiveness) whereas if we wait six months, then print then the BoE have no cover. Furthermore, as was pointed out earlier, there is a big political factor. This is probably going to be Cameron's toughest decision, and to be honest there is no good answer for the tories politically.
  18. That is a good point. They'll be seen as being to blame for any future inflation from future QE... makes it hard to claim to be the spiritual inheritors of Thatcher if you just print money too. To what extent will the markets take it badly if they print? It seems to me there is an element of double standard in the press and markets, by which I mean that everyone expects Labour to overspend and print money, so the markets don't react too badly, while the tories are expected to be a little more prudent and are expected to make tax cuts as the norm. So labour can overspend (and are expected to do so) while the tories can cut and get no credit!
  19. This seems to be the crunch point for HPC. The government are caught. Inflation above target - GDP growth okay but money supply looking shaky. Hard to justify more QE - but without QE house prices look very shaky, and the pound will go up, lowering inflation, but killing any chance of an export led recovery. however, QE means house prices stay higher, but inflation rockets, and the tory voters (who are more likely to be savers) lose patience with Cameron. I think the decisions over the next couple of days sets us down either a route to roaring inflation and a weaker pound via QE - that will keep house prices from falling, or no QE, falling inflation, a rising pound but falling house prices, I know which I'd prefer, but will the Coalition agree? They have to do the QE at the same time as the US, if they wait 3 months then do a QE the markets will destroy sterling and the UK's credit rating, so they have to go at the same time, but how can they justify that... ooh, they are caught. Optobear
  20. Why? Zimbabwe's rate is 3.6% http://www.thezimbabwean.co.uk/index.php?option=com_content&view=article&id=34226:zimbabwes-year-on-year-rate-of-inflation&catid=42&Itemid=38 for August 2010 compared UK's rate is 4.6% for August 2010 Now I'm sure you're going to say that Zimbabwe's figure is grossly distorted by government lies, by manipulation of the items in the spending basket, by funny accounting to do with printing money... but I might say the same about the UK!
  21. Simple explanation. You are surrounded by tin-foil hat types who don't dare allow their petrol tanks get even slightly empty because they know that paper money is about to lose all its value, so they are keeping topped up to the brim to put them in a better position for when financial armageddon comes. They probably all post on here! Optobear
  22. Oddly enough I was about to post the opposite thread, entitled "How come there are so many 60, 10, and 59 cars around? I thought we were meant to be in recession?" One answer is they are all in Hampshire and not elsewhere (which is possible). But the odder thing is that not all the people driving the new cars appear to be rich. I say that because lots appear to being driving brand new but very ordinary cars. If they were the proper rich they would be driving different types (eg not so many Fiats, Vauxhalls, etc.) So how come so many seemingly ordinary people have decided to spend on brand new ordinary cars? My theory is that lots of people are better off than ever. Why? Because they have large / moderate mortgages and their payments have dropped quite a lot from when they bought their houses (due to the falling rates), and people now find that they have a "spare" £100 per month or £200 per month. The interest on savings is lousy, so they've opted to take on a car loan instead and drive a new (ordinary) car. Any takers for that theory? Optobear
  23. Either a huge **** - up by inept politicians - and they would have to be screamingly inept, or more sinister. Other explanation is the announcement of a deliberately unfair -eeming and crass attack on the middle class tory pro-family parts of society aimed at stirring up middle class discontent to provide political cover when the cuts are announced. In a fortnight's time they will point back to the outrage (then being expressed more strongly by the poorer parts of society over the cuts to council spending) and can say "we are being even handed in our cuts - look at the higher rate taxpayer child benefit issue". Of course, the child benefit change isn't until 2013 - so there is plenty of time to drop it before then.
  24. I'm not sure about the morality. My questions are more mundane? 1) Is it calculated annually in arrears? Or is it monthly, weekly? What about freelancers with lumpy incomes? 2) Will there be a mechanism to stop the self employed paying both husband and wife £43k each to avoid the limit? 3) What happens if a couple split midway through the year and the higher payer leaves - do they requalify immediately? 4) Do interest payments on savings count to tip you into the higher bracket - presumably - but that isn't recorded until the end of the tax year? 5) Can increased pension payments be used to stay below the limit? 6) What if a couple officially divorce, but then the high payer comes back as a lodger? 7.. to infinity) other equally obvious questions that reveal the stupidity of the scheme? Optobear
  25. If the policies of the coalition n government will cause an increase in the difference between richest and poorest (and won't they? they are Tories), then won't that reflect in house prices? So the median house could stay constant, cheap houses fall and expensive houses rise even more? Ditto with areas of the country. Rising inequality equals rising house prices at the top end?
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