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Slumpmonkey Returns

Asking Prices At 2007 Prices

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I have taken a break from this website after becoming a bull for a couple of months and I have started tentatively to look for house again. However, I could not believe that vendors are now pricing their properties at peak 2007 plus around £20k for good measure!!! My elderly aunt in Leamington Spa has also sold her detached house for asking price in five days, she stated that she was "inundated" with offers. Where the hell is the money coming from? This is surely complete and utter lunacy. I am now out of this market until the new year. If it does not improve - I'm out of this country for good! Utter lunacy!

Edited by Slumpmonkey Returns

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Guest Daddy Bear
I have taken a break from this website after becoming a bull for a couple of months and I have started tentatively to look for house again. However, I could not believe that vendors are now pricing their properties at peak 2007 plus around �20k for good measure!!! My elderly aunt in Leamington Spa has also sold her detached house for asking price in five days, she stated that she was "inundated" with offers. Where the hell is the money coming from? This is surely complete and utter lunacy. I am now out of this market until the new year. If it does not improve - I'm out of this country for good! Utter lunacy!
Where the hell is the money coming from?

Well fancy that - base rates at 0.5% for the last 10 months or so ....and massive QE.......... and what do ya know..? .....

People are converting their cash to assets - who'd have thought it?

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Seeing the same in Cardiff. I can't believe it and am starting to wonder what will trigger the 'second leg down' when we've had such a big bull trap. I admit to having been completely wrong about it - Dr Bubb was right on the money. My argument against a bull trap developing was the low availability of low rate mortgages at above 75% LTV, increasing unemployment and general economic gloom, coupled with the fact that transactions were (are) far lower than they were at this stage in the last crash.

As it is this bull trap is on its way to cancelling out the falls of the last 18 months (which of course means that if falls resume prices will be much 'stickier' on the downside since vendors will be confident of a quick resurgence in the market in a short space of time. It's mystifying to me and it seems it needs explanation beyond the normal bull trap models since the housing market was hit so hard and everyone was saying that there was simply no money around with which to buy houses, so damaged were balance sheets (of individuals and corporates).

As a STR, I'm beginning to rue not jumping in in Dec-March 2008-09. I don't think this was THE bottom, but it seems it may be the bottom for the next year or so. And all the while, UK housing is still 15% overvalued at the very least.

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I've seen the same kind of magic mushroom induced pricing in Oxford tonight.

Just drove past a 3-bed terraced house in a reasonable part of Cowley, Oxford (maybe not so reasonable if you saw the truth about crime on bbc 1 last week), they are trying to do a quick flip.

Previously sold for:

£305,000, Terraced, Freehold, Not New Build - 05-Jan-2009.

Currently advertised for:

£495,000.

It's a 3-bed terraced house FFS! Clearly no one will buy it at this price.

It still feels like we're in the phoney war, queue the image often quoted on here of Wille-E-Coyote off the edge of the cliff with his legs still going for a few gravity defying seconds before he plummets. Interest rates going up will shortly help gravity kick in.

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Personally i think the nominal lows are pretty much in.

We may see lower lows in real, inflation adjusted terms over the the next five years but nominally prices aint going much lower with rates so low and expected to stay low for another year (GE time) atleast.

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Seeing the same in Cardiff. I can't believe it and am starting to wonder what will trigger the 'second leg down' when we've had such a big bull trap. I admit to having been completely wrong about it - Dr Bubb was right on the money. My argument against a bull trap developing was the low availability of low rate mortgages at above 75% LTV, increasing unemployment and general economic gloom, coupled with the fact that transactions were (are) far lower than they were at this stage in the last crash.

As it is this bull trap is on its way to cancelling out the falls of the last 18 months (which of course means that if falls resume prices will be much 'stickier' on the downside since vendors will be confident of a quick resurgence in the market in a short space of time. It's mystifying to me and it seems it needs explanation beyond the normal bull trap models since the housing market was hit so hard and everyone was saying that there was simply no money around with which to buy houses, so damaged were balance sheets (of individuals and corporates).

As a STR, I'm beginning to rue not jumping in in Dec-March 2008-09. I don't think this was THE bottom, but it seems it may be the bottom for the next year or so. And all the while, UK housing is still 15% overvalued at the very least.

I'm also beginning to rue not jumping in in Dec-March 2008-09! Looks like McStalin has pulled it off - for now anyway! Bast@rd! :angry:

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Guest happy?
... My elderly aunt in Leamington Spa has also sold her detached house for asking price in five days, she stated that she was "inundated" with offers....

Was that from elderly gentlemen who'd heard she was flush with cash after offloading her house?

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And Darling going in to smack the bankers hands :blink: ...supposed to be to induce more lending to business but do you think he will bring up the mortgage equation too,and force their hands ...?

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It still feels like we're in the phoney war, queue the image often quoted on here of Wille-E-Coyote off the edge of the cliff with his legs still going for a few gravity defying seconds before he plummets.

This is more like Wile-E Coyote starting to plummet then inexplicably wafting back upwards.

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Well fancy that - base rates at 0.5% for the last 10 months or so ....and massive QE.......... and what do ya know..? .....

People are converting their cash to assets - who'd have thought it?

Exactly

What else could have been expected.

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I'm just glad I'm young enough for a drawn-out crash to not be a problem.

If I was early-30's right now, I'd be bloody furious at the glacier-like pace that this thing is moving at.

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Well fancy that - base rates at 0.5% for the last 10 months or so ....and massive QE.......... and what do ya know..? .....

People are converting their cash to assets - who'd have thought it?

Are you a troll in disguise? - the gap between 8 & 9 will most probably take at least 2 years

8. Global Quantitative Easing will be carried out on a Massive Scale

9. Global (Inflationary) Default on Debt - (Bond Market Collapse)

STOP SCARING PEOPLE - WELL SAID 'People are converting their cash to assets'... BUT FOOLISHLY SO, FAR TOO EARLY

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I have taken a break from this website after becoming a bull for a couple of months and I have started tentatively to look for house again. However, I could not believe that vendors are now pricing their properties at peak 2007 plus around �20k for good measure!!! My elderly aunt in Leamington Spa has also sold her detached house for asking price in five days, she stated that she was "inundated" with offers. Where the hell is the money coming from? This is surely complete and utter lunacy. I am now out of this market until the new year. If it does not improve - I'm out of this country for good! Utter lunacy!

The same pattern is seen here in Chester too. The houses that I have viewed recently were all priced at 2007 prices+£20-50K. It is madness! I told the EA that I am pretty irritated and not making an offer. I am happy to wait.

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Guest Daddy Bear
Dr Bubb was right on the money

Well done for admitting that

As a STR, I'm beginning to rue not jumping in in Dec-March 2008-09.

you were warned that there would be a brief window of opportunity

Personally i think the nominal lows are pretty much in.

We may see lower lows in real, inflation adjusted terms over the the next five years but nominally prices aint going much lower with rates so low and expected to stay low for another year

We will definitely see lower lows in real terms !! - housing will "fall" for the next 10 years at least albeit very slowly.

Nominally ? Well in my opinion* and I have said it many times before it ain't going to go much lower.

* Caveat - this only applies to quality property - shitee 2 bed flats and crap housing will fall nominally for years.

DB

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I'm just glad I'm young enough for a drawn-out crash to not be a problem.

If I was early-30's right now, I'd be bloody furious at the glacier-like pace that this thing is moving at.

I'm 38 and I wonder if I will live to see a real crash!

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I have taken a break from this website after becoming a bull for a couple of months and I have started tentatively to look for house again. However, I could not believe that vendors are now pricing their properties at peak 2007 plus around �20k for good measure!!! My elderly aunt in Leamington Spa has also sold her detached house for asking price in five days, she stated that she was "inundated" with offers. Where the hell is the money coming from? This is surely complete and utter lunacy. I am now out of this market until the new year. If it does not improve - I'm out of this country for good! Utter lunacy!

Im with you on leaving this country for good. I've decided to do it regardless of the house prices. This place is a corrupt mess.

People really have no idea what is going on.

My only question about you aunts sale is when did it complete ?

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Guest Daddy Bear
Are you a troll in disguise?

Joined in July 2005 and STR'd in Aug 2007 at the peak - so NO I AM NOT A TROLL - just lucky to have seen it all coming :D

STOP SCARING PEOPLE

YADDAH YADDAH YADDAH.

Mate I had all this from the property bulls back 2005 - 2007 when I posted this...

Why the Property market WILL crash

1. There has been an unprecedented global price rise in property since October 1995 of bubble proportions, not only in the UK but globally (Ireland, Spain, US, Australia, France etc.). These property bubbles have already began to burst or are deflating rapidly in these countries, the UK is likely to follow this pattern.

2. Interest rates have risen 10 times since November 2003 when they were at an all time low of 3.50%. (and 5x since Aug 06). Each time the rise has been 0.25 basis points. Interest rates are now (July 5th) 5.75% basis points and in my opinion are likely to rise to 6.00 or 6.25%. Some forecasters predict even higher rates of 7.00% within 12-18 months. This would be a 100% rise from 3.5 basis points (Nov 2003) to 7.0 basis points – a doubling of mortgage payments. (equivalent of going from 7.0% to 14.0% as in 1990.

Whatever the outcome the trend is well and truly established, and sentiment has changed.

Higher interest rates raise monthly repayments, and more importantly limit the amount a buyer can borrow through a mortgage. Typically a .25 basis point rise reduces borrowing by 5-10K for the average earning couple in the UK.

3. High Interest Rates or Unemployment do not necessarily have to be a precursor to a HPC, all that is needed, is a change in sentiment. The expectation that one can buy a property and sell it on at a profit is the underlying driver to all bubbles, when this is no longer the case and sentiment changes demand will drop off the proverbial cliff and a collapse will occur – the bubble will burst. An example of this happening at present is the Irish Property market, where IR’s are still low 4.0% (but have risen), and sentiment has changed – prices are falling.

4. First Time buyers now only account for 8.9% of the market (July 2007). If there are not buyers buying the first rung of the ladder (80-150K) properties, then the owners of these properties are not able to trade up. The property market in the main is fuelled by First Time Buyers (FTB’s).

5. Many house owners have seen their equity increase from for example, £0 to £350k or more in the space of 10 years. When it becomes apparent that by Selling To Rent (STR) it will allow this 350K to earn 6.25% per annum gross, approximately 15K after tax and a similar house can be rented for £1000PCM or less in most cases, with no maintenance and repairs etc it looks prudent to do so.

Obviously they cannot all rush and get through the door to sell at once (as well as the BTL’ers!). This will cause property prices to fall.

6. There were over 100,000 bankruptcies last year (the highest since records began). Rising IR’s are having an effect. Homes are being repossessed; this will cause a fall in prices. Latest figures Q1 2007 show personal insolvencies climb to a record 30,075, a new quarterly record.

7. 8% of Mortgages in the UK are sub-prime (risky lending). This equates to £30bn, 200,000 mortgages since April 2005. A lot of these (62%) were fixed rate. These deals and thousands of other (safer lending) fixed rate deals are expiring (2 million by the end of 2007). The borrowers face hefty increase in repayments when they end. This will cause financial hardship, decrease spending power, and in some cases lead to insolvency/repossession. This will cause House prices to fall.

Latest figures (July 2007) show Q1 2007 mortgage repossessions stood at 33,715. This is up over 10% on Q4 2006, and again an all time record high.

8. Many Irish/foreign Investors have released equity from their own property market and have invested in the UK market, typically northern cities. As their property market falls they will need to liquidate their assets thereby putting their flats onto the market increasing supply, causing price falls.

9. Many UK Investors have released equity from their own property market and have invested in the foreign market. As these property market falls they may need to liquidate their assets thereby putting their properties onto the market increasing supply, causing price falls.

10. There has been an over supply of 2 bedroom flats. For example there are over 5000 units planned to be released in the Leeds city housing market by 2009. This over supply is causing prices to fall. This is also the case in Liverpool, Manchester, Birmingham etc.

Figures released (July 4th 2007) show only a 1.5% rise in the average flat price across the UK in the last 12 months, and the trend is to turn to price falls. This compares to 11.1% in the house market. This fall in prices will filter upwards through the higher rungs of the market.

11. Many BTL investors have bought purely for capital gain and not rental yield which is historically low (4-5% or lower in many towns), due to oversupply. The BTL landlords are also highly geared, and as IR’s rise they may need to liquidate assets to pay off debt. This may cause a flood of flats onto the market reducing prices.

12. If a BTL landlord can get a yield of 6.25% (July 2007) in a high interest savings account why bother BTLing when yields are lower and the hassle factor and overheads are much higher? As amateur landlords wake up to this and see their money tied up in asset form depreciating they may cut their losses and sell causing a flood of properties onto the market, causing property prices to further fall.

13. Aside from London/SE (where foreign investment and city bonuses as well as a low supply of property to a dense population has increased competition for housing) house prices have risen by only 4-5% in the past year. This is a marked slowing compared to previous years and if inflation is taken into account the value of the average house has actually leveled off and is some regions is falling.

14. Unemployment has been falling for a number of years in the UK but this trend is now slowing markedly and is predicted to rise in the future. Less jobs equals less money equals less demand for housing.

15. The % of UK earnings which is in savings is at an all time low (last 25 years), 1.9%. Consumers have no more cash to raid from their piggy bank to spend on housing and other goods. The consumer led boom has to come to an end. Higher interest rates will encourage people to spend less and save more. This will contribute to a downturn in the economy leading to job losses. (See previous point).

16. Latest figures (July 2007) show that the UK population has borrowed more then £1.38 trillion. A huge proportion of this has been secured on the rising value of their homes, in the form of Mortgage Equity Withdrawal (MEW), and has been encouraged as interest rates have been so low compared to history.

£13.2 billion was borrowed against properties in Q1 of 2007 (£13.3 billion in Q4 2006), for spending on holidays, home improvements, ‘paying off debts’, and funding other investments. (This is worth 6.2% of disposable income). This money has been used to fuel the consumer led boom and is keeping millions of people in their service industry/luxury goods jobs (restaurants, hairdressers, new cars, retail etc). As interest rates rise and people realize they have to pay this money back the new cars and £30 haircuts every month soon stop, people lose their jobs and we get a domino effect, a positive feedback loop where people slow spending, people lose jobs, spending slows even more, more jobs lost and so on….

Rising unemployment and a recession is the result. This will cause house prices to fall.

17. Apart from the consumer led boom based on credit card debt (unsecured) and MEW (secured debt) of £1.38 trillion, there has been massive borrowing by the government to pump money into the economy through public sector. For example an economy like Newcastle is mainly supported through government money. 60% of the working population is employed directly by the government and nearly all the rest depend on this money indirectly to keep their service industry jobs alive.

The government is running out of money and will have to reduce public sector spending dramatically over the next few years to balance its books. Many public sector jobs will be cut, this will contribute to a recession and unemployment and cause house prices to fall.

18. Due to the huge amount of cheap cash being pumped into the global economy there are asset bubbles in many areas e.g. the art market: With Monet's Waterloo Bridge fetching £17.9m and Warhol's Green Car Crash selling for $71m last month (June 2007) , it's no surprise that commentators are increasingly wondering if the art market is signaling a top in other markets. In 1990, the Japan's very own car crash was signaled when Japanese paper tycoon Ryoei Siato paid £50m for a Van Gogh. The wine market is another example of this phenomenon, as well as the huge growth in private equity and mergers and acquisition activity.

The ‘wealth’ has been fueled by "a tidal wave of cheap cash" which has allowed them to borrow vast sums to fund "the most spectacular takeover boom for 20 years... All the most dangerously inflated bubbles today are spin-offs of this global credit binge." The housing market is supported by a PONZI Scheme of debt. There is the potential for the biggest global asset bubble collapse in modern times. The consequences could be far worse then the recessions of the past, and may even be worse then the 1930’s depression.

19. The UK economy has had unprecedented growth since 1994. This boom has been mainly consumption/debt led. The boom has been fuelled by a huge supply of money and global low interest rates. (UK, US, and Japan). This money has to be paid back.

As the tap of liquidity has been turned off the Boom will turn into Bust. Japan is increasing Interest Rates, and as the Yen Carry Trade unwinds it will have devastating consequences on Hedge Funds and global markets will collapse. There has always been BOOM and BUST, it is the nature of capitalism. Why should it be any different now? Bigger BOOMs should become bigger BUST’s. This boom has gone on for nearly 15 years and has been mainly debt/consumption led; the consequences may be far reaching. The Bust may become deflationary and a global economic depression may occur. Imagine paying back a £300K over 25 years when inflation has not eroded it’s real value, like it did in the 60’s – 70’s and 80’s

20. The sentiment in the housing market has been very positive over the last 10 years of boom times (its called GREED), this has self perpetuated the boom. Sentiment is very important in a bubble scenario. The GREED may turn into FEAR and cause self perpetuating price falls.

21. The ratio of average earnings to average house price is now very high. A person on an average salary of £25K/annum needs 8x their salary to buy the average UK house £200K

Historically 3.5 times average salary has been the norm.

22. The % of monthly disposable household income, set aside each month to pay the mortgage is at a historically all time high figure of 41% of. This cannot continue and will be even more unsustainable if IR’s rise any further.

23. Due to high oil prices, currently $76 per barrel (July 2007) compared to $20 per barrel 5 years ago, high money supply, and low IR’s in Japan, inflation has the potential to rise rapidly over the next 12-18 months. It is seen as a threat and rising IR’s in the UK will be the main tool used to counteract it. High IR’s will cause a fall in property prices.

24. A generation of university graduates are leaving university with huge debt (£20K) and may be unwilling/unable to take on further debt in the form of a huge mortgage.

25. Credit lending has been extremely loose since 1997 when Gordon Brown changed the rules regarding the multiple of what a Bank has on deposit that it can lend.

A Bank used to be able to lend out 4x the amount of money it held on deposit, since the rule change it could then lend out 8x its deposit holding.

As the banks "had" much more money to lend they relaxed their lending criteria over the next 10 years:

1. They increased the multiple of earnings that they could lend to a mortgage borrower from an average of 3 x to in some cases 6 x joint earnings

2. They relaxed the rules regarding proof of income to certify a mortgage and self cert mortgages proliferated. ( I got one as a student at university !! net income a year -9000K !!!! (It allowed me to buy a flat as I had the 25% deposit and rent it out).

3. As property prices inflated they had to relax lending criteria more and more to keep the Ponzi scheme going.

There was a wall of cheap and easy money to fuel the property market. As we are seeing at the moment (13 Aug 2007) money will no no longer as cheap as it was - Interest rates have risen to 5.75% and borrowing is no longer 'easy'. Credit lending is tightening, and a time may come when to borrow one must have a very secure job, with excellent credit rating and even then you will only be able to borrow 3 x income.

As buyers are not able to borrow as much money prices will have to fall in line with credit supply. This will contribute to the House price Crash

13 Aug 2007 Daddy Bear

What do you say to that?

:D

Edited by Daddy Bear

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I'm just glad I'm young enough for a drawn-out crash to not be a problem.

If I was early-30's right now, I'd be bloody furious at the glacier-like pace that this thing is moving at.

I am one of those people in their early thirties you talk of and I AM bloody furious! We all laughed at the bulls in 2006/7 who said that the government would not allow a house price crash didn't we? Well I'm NOT laughing now! :angry: Corrupt bast@rds! Well as long as the boomers don't lose any money on their "investments" that's the main thing, right? The youngsters can just hang. I've just about had enough of this selfish little corrupt country! :angry:

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Guest Daddy Bear
oh here we go again. Daddy Bear put your fcking c0ck away

chicken_1_large.jpg

It's tough when you are right......

keep the HPC blinkers on fella

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chicken_1_large.jpg

It's tough when you are right......

keep the HPC blinkers on fella

i have to admit... that's quite a big c0ck

Edited by ɥsıɟpǝɥs

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I am one of those people in their early thirties you talk of and I AM bloody furious! :angry:

I'm right with you there. Have been angry all day - in fact, I'm sick of feeling angry. A negative figure from haliwide this month will quell my fury a little, but I suspect it will be positive, so I will remain absf***inglutely f***ing b**tard furious.

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I STR in May - to move to a different area not for financial gain - but don't feel that was the wrong thing to do from a house price point of view over the long term. What happens between now and the election is very different from what will happen over the next 5 years. Real house prices are being underpinned not only by ZIRP but also by the banks' reluctance to force repossessions. As they repair their balance sheets their tolerance of mortgage defaults will inevitably decrease.

Having said which I suspect we're in for another 18 months of both ZIRP and QE so don't expect HPC to be soon or sudden. It's in no-one's interest (no-one important that is) for this to happen fast.

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I'm right with you there. Have been angry all day - in fact, I'm sick of feeling angry. A negative figure from haliwide this month will quell my fury a little, but I suspect it will be positive, so I will remain absf***inglutely f***ing b**tard furious.

At least in the States prices have fallen to reasonable levels. This country, however, is a fu@king stitch up! :angry: :angry: :angry: F U C K the boomers and F U C K McStalin!

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