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House Price Crash Forum


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Everything posted by Nico

  1. No need to panic Capital Economics have already proved that they are no dab hand at the whole forecasting game in the past, and I would not expect them to be any better in the future. Anyone predicting a 20% fall in the current climate is going to look silly - what do you expect CE to do - stick their neck out for the "n"th year running ? Or revise their forecast to a "modest drop" type scenario. 5% nominal is 9% (ish) in real terms, of course.
  2. That's a good point about wages FDK. Before everyone jerks their knee in typical HPC style, has anyone looked at affordability ? Just because a flat is £500 a month to rent, it doesn't mean that they are better off unless they are paid UK wages which is the old arbitrage effect. What is the typical wage over there, what are the credit contraints like, how high is unemployment, etc. ?
  3. If the current run continues, it may well hit 5,500 sooner than we all thought...
  4. So the good news is that the L.R. has informed us with their lagging figures which pertain more to Q2 than Q3, that prices are still going up, in fact more so in London than nationally, and a couple of London agencies have declared that the capital's market won't in fact decline, but will bounce back next year. Bounce back from what exactly isn't made too clear as the 200% bubble market rise of recent years hasn't exactly fallen into any kind of decisive cyclical low yet, but bounce back it will anyway according to the "experts", who seem curiously nonplussed at the unexplained abolition of the property cycle. The bad news is that the L.R. is but another of the major indicators reporting a pronounced slowdown in HPI, which has actually fallen to 1996 levels, in addition to which they are flagging up low volumes, the national average probably not even keeping pace with the real unmolested rate of inflation. Hometrack the home of the nations self styled foremost property expert are even claiming negative HPI, although I notice that despite the presence of the great wriggling Elvis hunter himself, the Homecrap statistics don't seem to get the bulls excited these days. The implications of apparently rising prices against low volumes are dealt with elsewhere today, but anyone jumping to the conclusion today that we are about to hare off into another bull market, would be well advised to bear in mind that we haven't actually finished with the old one yet, unless of course they subscribe to the notion of an asset price market which can only ever go sideways or upwards. In fact, they probably do, as indeed do most people, the clear and obvious reason why, being that such a silly fairy story suits them and their wallets very nicely, so they not only embrace it with gusto but draw solace from the fact that everyone else is as well. As for our friends the agents and their expert opinions, it's probably as good a time as any to reproduce a periodic reminder of just how spectacularly wrong most of the agents and other supposed professional property experts were last time around. From today's F.T. : Few if any agents, mortgage companies or housebuilders predicted the length and depth of the last housing recession in the early nineties. The direction of prices is notoriously difficult to predict. In August 1991, for example, Henley Forecasting Centre predicted a 64% jump in house prices over the next five years. Doesn't stop them spouting off at any and every opportunity about GSD's and cancelled crashes though does it ? and why would it, their audience, many of whom have no direct experience of what happened last time are always ready and willing to tuck into whatever self serving twaddle they serve up to them. Which brings me to the ugly truth about where we currently reside in the great miracle workers property boom, which is IMHO, still at an extremely perilous point, possibly made even worse today with these LR figures, on the basis that they may have re-inforced a collective complacency which has led millions to borrow money they can ill afford to lose in Gordon's great property casino. A bubble is a bubble is a bubble, and it really is a simple as that. Like any asset market, especially one consumed by boom and bust as our housing market is, it will confound the best of us. Is it safe ? Is it dangerous ? If we all hold hands and jump in together, will none of us drown ? If it's going to crash, when will that be ? If it was going to crash, why hasn't it already done so ? And so on and so forth. There are no gaurantees, and there is no precise formula for what a wild speculative market like this will do or when exactly it will do it. The only sensible course of action is to simply take on board the fact that bubbles nearly always burst, that they do so invariably very much against the grain of mainstream opinion, and that the only way to make sure you don't implode with everyone else is by taking preventative action. Bialystock
  5. http://investing.reuters.co.uk/news/newsAr...ND-REGISTRY.xml
  6. The cost of renting will be down to local market conditions, but we have discussed this many a time on this forum and there is no doubt that (for most areas at least ) renting is the most economically viable option in the current market. There are of course many other considerations other then pure economics. I live in south London, and rent a one bedroom ground floor garden flat. My flat was purchased for £150,000 in April 2005, when we were still very much at the peak of the market and was refurbished to a very high standard (new kitchen, etc.). I pay £650pcm rent. The rent alone would barely cover the interest payments (!). (I won't question the landlord's logic). My girlfriend rents a house flat in west London for £1,200pcm - I estimate the market value to be around £350,00 - again, this would not cover the interest payments on the mortgage As a general rule in London, renting is around 25% cheaper than a repayment mortgage.
  7. Interesting. We have had various buildings unoocupied due to similar accounting / tax reasons. Cheers for the Slatin report there No Accountant, a good overview of the situation.
  8. I work in the City of London, and we are moving office to the south bank of the river (near London Bridge) in the coming months. We own the lease on the current building, and I was not surprised to hear that the new premises (which is broadly comparable to the current place) is considerably (25%) cheaper – we took the current building on in 2000 after all. What I WAS surprised to hear was quite how good the deal on the new place actually is. They are throwing in a couple of a years of the 5 year deal for free. That is a reduction of over 50% ! I was walking around at lunchtime just now, and the signs seem to be everywhere (how did I not notice this before?) – several large empty buildings, TO LET signs down every street. Can anyone shed any light as to the actual situation wrt commercial property in The City ?
  9. Interesting thread this one, especially considering that I am currently looking for a new job, and salary levels are constantly on my mind at the moment. Firstly, I have a golden rule: I NEVER tell anyone my salary. It is a vulgar measure at best, which society has always tried to underpin a level of importance against. I really don’t know what my friends and family earn. Hell, I don’t even know how much my own girlfriend earns. When you undertake a salary survey on an anonymous site like this, of course the high earners are going to be keen to post and this will skew the results somewhat. I have seen the average salary in the UK quoted as £17k, £22k, £26k….there are various different ways of measuring these things. What I did think was interesting was the % of people earning under the average salary…somewhere around 70% ! I guess that this probably should come as no surprise, we are a pseudo-capitalist society, and a by product of this is that you are always going to have the guys at the top of the ladder earning tens of millions distorting the figures. And for the "I am an IT contractor in London and I earn £xxx per day at a major bank” crowd….you are not truly representative of the IT market. You are working in one of the world’s main financial capitals for a cash-rich institution, in a specialist niche, in one of the highest risk environments (no pension, no paid holiday, no notice period, long hours, etc). That is about as good as it is going to gets for you guys, make no mistake !! I believe that these are very much the golden times for these sort of jobs; there are no real barriers to entry and the market could easily become flooded with labour which will see an adjustment in market rates. Whilst IT work might be relatively demanding and require a fair degree of technical skill, it is not a profession in the same way that (say) law or medicine is, and you don’t have to train for 7 years to become qualified. The following site has some figures for IT contractors http://www.itjobswatch.co.uk/default.aspx?...=0&q=&id=0&jt=1 You can see that the averages for banking are higher than other areas, but overall, one has to conclude that average pay for IT seems to hover around the early 40s,
  10. "IT services" for a "free massage", eh ? Talking about "the economy" were we, sir ? I bet you were, sir. Ooh ! Sir Does anyone else have any "alternative lifestyle experiences" thinly vailed as a comment on the UK economy ?
  11. The whole "homeowner sale" concept is something that I have been thinking about for some time now, and I am surprised that it hasn't already taken off. I would think that websites that already have nationwide exposure would surely be in the best position. What would stop Ebay form launching something along the lines of "Ebay Property" - instead of the traditional bidding process, it would serve as a fee paying advertising service. We are starting to see this sort of thing already, for example: http://cgi.ebay.co.uk/HOUSE-PROPERTY-FOR-S...1QQcmdZViewItem "The gardener" raises some good points above. You would really need to think of all of the functions that an estate agent performs, from taking high volumes of calls from prospective buyers to having a well positioned sales office on the local high street. At the end of the day, the buyer would probably prefer an estate agent as a certain amount of hard work is undertaken by the EA - it is in the seller's interest to cut the middleman's commission (i.e. the EA fees). In today's market, most buyers are also sellers as well, of course. And let's not forget one crucial function that an estate agent performs: arranging the actual viewings. What is the average number of viewings for a typical purchase ? Does the seller really have time for 15 or so viewings ? But ultimately, the EA adds no real value once the sale has been made. Car dealers can offer post sales support in the form of extended warranties and servicing, but there is no equivalence for an EA. Interesting thread though.
  12. I use the Nationwide inflation-adjusted house price index as the “reference index” for UK house prices. We probably all know the historical graph by now, and after two “flat” (i.e. zero growth) quarters, I really expected some sort of fall for Q2 2005, and was quite surprised to see a £5k rise. The only explanation I can think of is that the majority of sellers are “sitting tight” and are not willing to accept offers lower than the asking price; the Q2 figures are therefore based on a low volume of sales consisting of over-inflated prices. Even so, I would have expected some sort of fall for Q2. The 2 flat quarters now look like some sort of kink in the ever-upward trend Comments, anyone ? http://www.nationwide.co.uk/hpi/historical.htm
  13. Last year - saved nothing. This year - trying to save roughly my rent each month. Remember - my rent is still at 1997 levels and is pretty low for where I live (should be 50% more I reckon). Non FTB - good point about taxes there
  14. A few comments here. Firstly, £688 must be an interest-only mortgage or is a repayment mortgage with a hefty (£30k+) deposit (assuming a base rate of 4.75%). Secondly, let's not forget that 19.9% of wages applies to GROSS wages. It will be around 30% of net pay for a single person and about 28% (guess) of net pay for a couple earning £20.8k each (i.e. 1/2 of the average split equally). My rent in London is about 13-14% of my gross wages. And I live in a nice flat, but STILL have no money left at the end of the month. 20% is a high ratio, even if it doesn't sound it.
  15. In that case then, you will probably appreciate me correcting your English. You surely mean "anally retentive" not "retentative", details being important and all ? Well, you did ask.... Anyway, enough ! Any pictures, anyone ?
  16. Does it really matter though ? I only posted the picture to kick this light-hearted thread into life, a picture I took on the offchance on Sunday. I didn't say that particular photo was authorative evidence of a property crash... The fact of the matter is that these are symptoms of the downturn in the property market. 10 sale signs together must tell you something
  17. I think the fact they have been for sale tells you something though ? Out of (say) 30 flats, 10 either for sale or rent. I did say it wasn't the best example...just one I noticed when I happened to have my camera with me. I have seen plenty of streets with crash-style sale sign concentration.
  18. Very good point. They always say that Labour were lucky not to win in 1992 and I think that along a similar line of thinking, it would be disastrous for the Tories to be elected in 2005. We have a HPC and potentially a recession ahead. Let Labour bear the brunt of these. To be honest, listening to some of the Tory pre-election policies, I am becoming increasingly convinced that they don't actually want to be elected this time round.
  19. We all know the pictures from the late 1980s...rows of for sale signs against a backdrop of edwardian terraces. I have noticed a similarly high concentration of sale signs in certain areas of London over the last few months, but have never had my camera to hand. Well, last weekend I managed to get a quick snap when I was driving past Chiswick roundabout. This was at the bottom of a block of flats...I am guessing that 1 in 3 are for sale or let. This is by no means the biggest "collection" I have seen, but it is still a hell of a lot of signs in very close proximity. I will be on the lookout for more...
  20. Hmmm. I wonder if they count for the predicted rates of inflation ?
  21. Great work JP. But I couldn't help but make a few changes - see attached document (needs MSWord - looks better in "print preview"). I hope you don't take offence at me plagiarising your work - I thought it was a great idea in the first place. My version probably contains some mistakes as well of course ! General comments: 1) First time buyer(s) beware sounds better - use the plural. The title has to be right 2) Avoid exclamation marks. This is serious advice you are offering here 3) It is best not to say things such as "now is the worst time to buy". You need to put a spin on it, such as "many believe that we are at the peak of the market and that now is not a good time to buy"
  22. Reading a couple of newspapers this morning, as I always do, and something occurred to me. To our journalist friends, the property market is the weather. " What ?! " I hear you cry. " But the property market is nothing like the weather - the weather is governed by factors beyond our control - by low pressure systems over the Atlantic and the Jet Stream and other such wonders of nature ! " " The property market is all about economics, interest rates and whopping big mortgages ! ". Well. Let me tell you. I have a particular interest in the weather, and it is very important that I know exactly what is happening. I could pick up any newspaper for a weather report, and they can tell me what is happening on a day-to-day basis, in a report that is sanitised for public consumption. I read one newspaper they tell me one thing, I pick up another and they might have a slightly different take. But one thing that they all have in common is that they are rubbish at forecasting long term trends. If I want to know the "bigger picture", I have get a balanced view from a series of long term forecast models that tell you the wider movements of European weather systems. I am now thinking that most newspaper reports on the housing market are a bit like the daily weather report. They can tell you that it looks like it is sunny today, but have no idea whether we are going to enter a long period of cold weather. It might have been cold for a couple of weeks, and all the long term models are pointing towards a long & cold winter, but it is sunny today so I am going to make a prediction that it is looking that warm weather is now on the way. It's what the public wants to hear, at least. We should treat these articles with a pinch of salt. A bit of a joke. A regional TV weather presenter's viewpoint. Ulrika Johnston on TV-AM. But for the long term trend, you need to be talking to the experts in the Met Office. They know the score. But they often keep quite as not to offend the public. And did I tell you that 2005 is looking bleak ? Very bleak indeed I am afraid. But the odd ray of sunshine will inevitably poke through. Just don't believe that it will last
  23. http://www.propertyfacts.co.uk/old/pricetr...pricetrends.htm Bit out of date now though. Er, how about the header bar that says "graphs" or the one that says "useful links" ?!
  24. Would you define a decrease in "real" prices due to a high inflationary environment a "soft landing" ? I would call it a crash. The general public, who are always going to be more sensitive to nominal, rather than real prices, might not. But it is still a crash though. Or if "crash" is too offensive a word, how about "sustained period of negative real term growth" I believe that the old adage that "property always goes up" came from these periods of high inflation. I always think it is interesting that typical pay rises (without promotion) in the 1970s were 15%. Today, they are closer to 3-4%.
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