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I always keep a close eye on the FT forum, one contributor in particular, Mike Small, who is a Wealth Manager based overseas is particularly bearish and his latest post is no different. It sounds quite scary!

The entire thread of the HP topic can be found here

How many times do investors need to be reminded that looking forwards gets positive results - looking rear-view/backwards - can only cause you/your investments to walk blindly into a "crash".

1996 saw an undervalued UK property market and an economy recovering from the legacy of the Lawson Tax "Boom", a period of high unemployment and the initial uncertain effects of Sterling’s ERM experiment/debacle!

Looking forward from 2005 - we can only see low inflation, rising unemployment and higher taxes. Personally I see deflation (general overcapacity and oil and tax effect) but admit that I am still in a minority, albeit a growing one more recently.

We can ALL see that property is overvalued (as publicly stated by Central Bank Governors of UK, US, Australia, China, Korea etc)- the only argument anywhere let alone this Forum for property investment at this time is based on taking the famous "long term view".

BUT, that "long term view" is based totally on historic rather than future metrics!

UK Property (and much Global property now, Shanghai, US Cities, Ireland, Spanish coastal, almost any waterfront) will in my view crash 30-50% peak to trough - and more importantly it will not, again in my view, recover!

I have warned consistently that the Globe is heading for a very steep "globalised" recession/depression. If people looking forwards can't see that/don't agree - so be it.

But for those who utterly refuse to look forwards and continue to look backwards - as on any journey - they will crash!

A "Correction" is a disappearing option - the World has too many serious problems and imbalances - and i am afraid that they are getting worse by the day.

It will soon be widely acknowledged that Central Banks cannot possibly correct these imbalances as they have now lost the ability to exert any effective control over the markets.

Expect many more "Conundrums" in the coming years. One of which will be a "Property Crash" - with no recovery, whatever interest rates do!

Mike Small

Edited by Ritters

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Just started to read the rest of the thread. I particualrly liked this;

If you are presently trying to sell out then best of luck to you, but please, save the mathematical acrobatics for your potential buyers. It doesn’t wash here where people can do their math and have long realised that 1 BTL equals one too many.

One for TTRTR. :D

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What are "future metrics"?

Measures or groups of measures. I think they are basically saying that the price of things, oil, housing etc are all trending in the wrong direction. Hence recession.

Edited by FTBagain

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Measures or groups of measures. I think they are basically saying that the price of things, oil, housing etc are all trending in the wrong direction. Hence recession.

*Future* metrics? As in, events yet to occur?

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*Future* metrics? As in, events yet to occur?

He is saying that investors so-called long term view is merely based on what has happened in the past. They should be looking forward at the factors that affect house prices and trying to project a likely course for these factors (the "future metrics").

This will allow them to get a better idea of where prices are going, rather than just saying "prices have always gone up in the long run in the past".

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Add my two cents worth...

Metrics--simple qualitative or quantitative measures of performance with respect to a stated goal.

Metrics have long been used by industry to gauge the progress of research and development programs and to guide strategic planning.

Studies in industry, academia, and the government suggest that metrics can be developed to document progress from past research programs and to evaluate future research performance

A metric commonly used to evaluate advances in climate models, for example, is reduction of uncertainty of a projection or forecast

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"no recovery"

Ouch! That makes most of us bears here look positively bullish!!

I think he gets his view of 'no recovery' from the fact that the nation has yet to wake up to the fact that we are facing a future pensions crisis.

People appear to have shunned private pension schemes as a result of seeing recent retirees lose a fortune from their schemes, and decided to plough their retirement funds into residential property. When property values collapse, people will have to save like crazy to fund a comfortable retirement, hence why he doesn't see a recovery. VI's don't want to lose their income or see their retirement nest egg shrink, hence why they blurt out the usual crap about demand and a shortage of supply.

Luckily, we're more savvy on here to believe it. :)

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I think he gets his view of 'no recovery' from the fact that the nation has yet to wake up to the fact that we are facing a future pensions crisis.

Not to mention an oil crisis, a jobs crisis and all kinds of other crises queuing up ahead of us.

Personally I'm not sure that British house prices will ever recover to current levels after a crash... there are far, far more important things we'll have to deal with for the next fifty years, with real wages probably going down, not up.

And beyond that, we may all be dead, reduced to working as tour guides for rich Chinese tourists, or living in space, who knows?

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I like this.

but thats because its exactly what I want to hear.

but then I only want to hear it because I have been affected by massive localised inflation caused by a short term speculative market, which has priced itself out of making any future short term speculative profits. so what happens to a speculative market where any educated specualtion now shows negative growth?

The debt we are in is an economic crisis. Even if its true effects have not manifested itself yet. The cause of any eventual effects remains as the economy folds around it. The debt is there £1,100,000,000,000 a growth of £600,000,000,000

First Time buyers are priced out ot the market, and see prices dropping toward their affordable levels. Any BTL Landlords would be frigtened of my the assett value of their investment shrinking. also Current prices don't even cover rent.

Currently the media based opinion is not reflecting true trends, when it does who will be buying..????? If the media did report the 14 months of price drops..

"Buy now, it will get cheaper.. so why not buy now" hard sale pitch, hard to sell.. one that means that prices drop as long as people percieve that they are dropping.. and they keep going until they reach a point where people can afford a property easily..

Because while it drops it keeps going until people can afford.

Either by inflation bringing wages up to meet prices or by prices dropping to wages.

a Reverse greed.. If the market percieves that prices will continue to drop, they will drop.

also, maintaining high levels of debt is impacting the high street, creating the correct environment for a recession as spending drops.

Interest rates against mortages have climbed and debt maintainence is getting more difficult as record levels go bankrupt..

Its a bumpy ride ahead and there is only one way to go

Down

Edited by apom

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I dont agree that there will be no recovery.

Didn't the BoE drop interest rates because of Retailers constant & powerful complaints.

I think the BoE will simply continue to drop interest rates, to zero if need be, and restart the boom times again with even cheaper credit.

Obviously wage rises in the private sector are low at the moment and many high paid jobs are going abroad means that house prices can't go as high in the future as they have, but you can bet big business & government (bb & g) will always find ways to get consumers to consume.

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I dont agree that there will be no recovery.

Didn't the BoE drop interest rates because of Retailers constant & powerful complaints.

I think the BoE will simply continue to drop interest rates, to zero if need be, and restart the boom times again with even cheaper credit.

Obviously wage rises in the private sector are low at the moment and many high paid jobs are going abroad means that house prices can't go as high in the future as they have, but you can bet big business & government (bb & g) will always find ways to get consumers to consume.

There will be a recovery evetually but I think it make take a long time. Interest rates are only of limited use - ask the Japanese. Interest rates there went to nearly zero and they still haven't managed to come out of a recession - caused by an excess suplly of "FREE MONEY" which in turn caused a bubble in stock and house prices.

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I dont agree that there will be no recovery.

Didn't the BoE drop interest rates because of Retailers constant & powerful complaints.

I think the BoE will simply continue to drop interest rates, to zero if need be, and restart the boom times again with even cheaper credit.

Obviously wage rises in the private sector are low at the moment and many high paid jobs are going abroad means that house prices can't go as high in the future as they have, but you can bet big business & government (bb & g) will always find ways to get consumers to consume.

It will recover in time, then it will boom then it will bust then it will recover.

Its a cycle, its what cycles do, although be a little careful with just assuming the BoE will just keep dropping rates to restart it - firstly look at japan, it hasnt worked there. Also there are other factors which stop the BoE dropping rates.

You cannot/shoudlnt stop a recession (although there is argument for curbing its severity).

Think of a recession like this.

You have a shrub that blooms and blossoms and shows good growth throughout most of the year.

But

At a certain time of the year you prune it and get rid of the almost dead bits.

That is all a recession is in the business sense, and if you dont prune and shake out the cr*p from the economy then it will have a negative effect on future growth.

Btw, if you prune/cut off all the leaves then you have a depression. So when your pruning its important to get the balance right.

Recessions will always happen, just like you need to sleep, sometimes you can stay awake for 30 hours straight but then you sleep for 12 hours, you can put it off for so long until you become unproductive but eventually you will have to sleep.

Recession is not a swear word, we need them and if you keep putting it off for to long you'll end up with a depression (tetse fly - sleeping sickness) which no one wants.

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There will be a recovery evetually but I think it make take a long time. Interest rates are only of limited use - ask the Japanese. Interest rates there went to nearly zero and they still haven't managed to come out of a recession - caused by an excess suplly of "FREE MONEY" which in turn caused a bubble in stock and house prices.

You can't always make judgements of what may happen in this country from what another country is experiencing. The japanese are a different race, they have a different outlook to life, different morals, beliefs etc etc...

The japanese are ruthlessly efficient and are in a different league to us. They get their wealth from 'making' stuff whereby we get our so called wealth by trading ever increasingly expensive housing stock amongst ourselves. A nation of shop keepers.

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There will be a recovery evetually but I think it make take a long time. Interest rates are only of limited use - ask the Japanese. Interest rates there went to nearly zero and they still haven't managed to come out of a recession - caused by an excess suplly of "FREE MONEY" which in turn caused a bubble in stock and house prices.

Anglo-saxon & Japanese thinking is completely different. Since the late 80's crash in Japan, Japanese people are much more cautious about their investments / decisions and so easy credit is not tempting to them. After the dot.com crash, all Western countries reduced interest rates because they could rely on consumers to take advantage of easy credit and borrow more.

Consumers are bombarded with adverts and media features about celebrities so that consumers identify with the celebrities and carry on buying to emulate their lifestyle.

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The japanese are ruthlessly efficient

Maybe they are now, but they certainly weren't when I was there ten years ago. Just getting a few travellers' cheques changed required three or four people to look at them, for example... and 'look at them' seemed to be basically all they did.

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Guest prudence
You can't always make judgements of what may happen in this country from what another country is experiencing. The japanese are a different race, they have a different outlook to life, different morals, beliefs etc etc...

The japanese are ruthlessly efficient and are in a different league to us. They get their wealth from 'making' stuff whereby we get our so called wealth by trading ever increasingly expensive housing stock amongst ourselves. A nation of shop keepers.

What do you think happened with the Japanese property market before it crashed. It rose to stratospheric heights for the sme reasons that our housing stock has so massively inflated in price. If we have deflation and IRs are close to zero it will make no difference BECAUSE people stop buying as they kn ow that next month whatever they want will be less expensive than it is now and cash becomes king. Don't ignore what happened in Japan so easily; it could happen here

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What do you think  happened with the Japanese property market before it crashed.  It rose to stratospheric heights for the sme reasons that our housing stock has so massively inflated in price.  If we have deflation and IRs are close to zero it will make no difference  BECAUSE people stop buying as they kn ow that next month whatever they want will be less expensive than it is now and cash becomes king. Don't ignore what happened in Japan so easily; it could happen here

Yeah I see your point, and it is a good one. It's the very same reason why I haven't upgraded my PC at home for years. The longer I can carry on using it, the cheaper it gets to buy the new parts, and they'll be even more advanced.

Ok I appreciate this example is a different league in terms of financial outlay to buying a home

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Yeah I see your point, and it is a good one. It's the very same reason why I haven't upgraded my PC at home for years. The longer I can carry on using it, the cheaper it gets to buy the new parts, and they'll be even more advanced.

Ok I appreciate this example is a different league in terms of financial outlay to buying a home

I've already become inclined to delay updgrading my car because I feel prices will cheaper next year than they are this year.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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