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peakoil

Uk Vs Us Why So Different?

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Hi All,

The US has low interest rates - as do we. The US has used QE, as have we. The US, however, have a lot of minerals, farming, technology etc. etc They are a major super power where we kid ourselves into still thinking we are. They also have the worlds reserve currency (although perhaps this is an important point?)

WHY have the yanks been unable to prop up their house prices when we have?

Great swathes of the US have underwater mortgages and house prices in many regions of the US have gone south very quickly. (just how many regions or how widespread that is, I don't really know - so anything on that would be interesting too...)

A lot of people on here say "ah, but when interest rates go up, we'll have the mother of all crashes" - but the yanks interest rates are low AND they have a crash (as have the Irish)

So what major differences are there in play that are keeping our property prices at 2007 levels and above (peak prices) where so many economies in what superficially appear to be similar circumstances are having their HPC moments?

Any feedback greatly appreciated,

All the best to everyone,

Mr Oil

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There are three reasons that I can see

1. The US is a big country and built lots of new housing in areas where there werent the jobs to back up the mortgages

2. The US were a lot more carefree in handing out mortgages to people who couldnt afford them

3. The US unemployment rate is higher than in the UK. Although the official figures are 10%, it is more like 18% once you include those that have given up going to the employment office. That's getting towards the same level of Spain!

I know some areas of the US have crashed dramatically e.g. Florida, Phoenix, Detroit, parts of California, but anyone know how house prices are holding up in Premium areas where the job market is better e.g. New York?

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People in the UK are a bit thick when it comes to money.

I think it was the Car Insudtry used to call the UK..."Treasure Island".

We were paying over the odds for cars for decades. It would appear the same is now true for housing.

This suits the people at the top, they are rich, they keep us enslaved...they keep their own property portfolio prices high, they lend more and people are tied to their mortgages longer.

Yip,people in the UK are just thick.

Also, Hitler stated that "Government is nothing without Propoganda"....the UK housing market propoganda machine has been otu in forces for years now. In my opinion it shoyuld be illegal ( punishable by death ) for people to do this and to speculate on the fandamental basic needs of survival ( i.e. water, heating, housing, food ).

I can only conclude that the whole situation suits the powers that be ( i.e. government/banks/wealthy land owners ) at everyone else expense...and yet, they buy into it !!!!

THICK THICK THICK.

p.S. Reference to car industry/treasure Island here:

http://www.autotrader.co.uk/EDITORIAL/CARS/FEATURES/AUTOTALK/35781.html

"Rip-off Britain

Known as the people's champion, exposing shoddy service and bad deals at every turn, Quentin is particularly proud of one achievement on the show.

"It was a time when you went to Belgium to buy certain cars because they were so expensive in the UK," says Quentin. "I remember having drinks with a senior board member of a car company. This guy was off his face and he said to me 'Oh we love the British market – we call it Treasure Island – ""

Edited by TheCountOfNowhere

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The Americans do everthing bigger and better than us, including irrational exuberance. They lent more to people with fewer prospects. They had NINJA loans - no income, no job, but have a mortgage anyway. They had mortgage sellers getting $10K commission per loan sold; loans where the repayments tripled after the first year - the mortgage sellers kept their thumbs over that clause, where they needed to, a lot of borrowers couldn't read English anyway.

And their interest rates were lower than ours for longer. A friend of mine in NYC was told by his credit card company, have $50,000, no reason, just have it, pay it back in a year, no interest. Money was flung around post the dotcom crash. (My friend lost his $50K day trading, but he works for a hedge fund so it was small change to him.)

Of course, the Americans also over-built more than us. Sure, we built blocks of "luxury" flats. In America they built McMansions - ever bigger houses, selling for more and more with debt trivial to get. American houses have gottens so big the developers have run out of ideas for what the rooms should be for. You get houses with three kitchens: a regular kitchen, a "summer kitchen", and a little kitchen off the master bedroom in case you get peckish in bed but can't be bothered to go downstairs!

Three kitchens says to me they aren't building because of demand. They're building because the government is handing out free money and it would be stoopid not to fill your boots.

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You get houses with three kitchens: a regular kitchen, a "summer kitchen", and a little kitchen off the master bedroom in case you get peckish in bed but can't be bothered to go downstairs!

Three kitchens says to me they aren't building because of demand. They're building because the government is handing out free money and it would be stoopid not to fill your boots.

lovin' that. That trip down the stairs would nearly burn off the calories from the doughnut sandwich with mayo.

... nearly.

I like the fact that they haven't got three gyms - cardio, free weights and er... some other form of exercise...

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Mortgage rates in the US are not as closely linked to central bank IR as in the UK... the BofE can quickly manipulate mortgage rates by amending their base rate but this doesn't happen in the states.

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People in the UK are a bit thick when it comes to money.

I think it was the Car Insudtry used to call the UK..."Treasure Island".

We were paying over the odds for cars for decades. It would appear the same is now true for housing.

This suits the people at the top, they are rich, they keep us enslaved...they keep their own property portfolio prices high, they lend more and people are tied to their mortgages longer.

Yip,people in the UK are just thick.

Also, Hitler stated that "Government is nothing without Propoganda"....the UK housing market propoganda machine has been otu in forces for years now. In my opinion it shoyuld be illegal ( punishable by death ) for people to do this and to speculate on the fandamental basic needs of survival ( i.e. water, heating, housing, food ).

I can only conclude that the whole situation suits the powers that be ( i.e. government/banks/wealthy land owners ) at everyone else expense...and yet, they buy into it !!!!

THICK THICK THICK.

p.S. Reference to car industry/treasure Island here:

http://www.autotrade...TALK/35781.html

"Rip-off Britain

Known as the people's champion, exposing shoddy service and bad deals at every turn, Quentin is particularly proud of one achievement on the show.

"It was a time when you went to Belgium to buy certain cars because they were so expensive in the UK," says Quentin. "I remember having drinks with a senior board member of a car company. This guy was off his face and he said to me 'Oh we love the British market – we call it Treasure Island – ""

Talking about 'Treasure Island' - if you check between Amazon/Ebay UK and look on their sister USA websites at CD prices:

Amazon UK £7.50

Amazon USA £0.70p!

Buy them on Ebay USA as Amazon whack a £6.50 rip-off charge for post from the USA.

(This just ooooozes with UK high price maintenance/fixing!)

Same goes for books - although some postal charges are OTT

£18 personal import allowance - any higher you get whacked with customs/vat crap!

Edited by erranta

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Mortgage rates in the US are not as closely linked to central bank IR as in the UK... the BofE can quickly manipulate mortgage rates by amending their base rate but this doesn't happen in the states.

The real interest rate that people pay on their mortgages in the US has gone down nowhere near what has happened in the UK. Variable rate mortgages in the US adjust much more slowly than they do in the UK. A lot of them are set up where they only go up or down 1% a year, so the feedback between rates set by the US Federal Reserve and what people pay is much slower.

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Talking about 'Treasure Island' - if you check between Amazon/Ebay UK and look on their sister USA websites at CD prices:

Amazon UK £7.50

Amazon USA £0.70p!

Buy them on Ebay USA as Amazon whack a £6.50 rip-off charge for post from the USA.

Same goes for books - although some postal charges are OTT

One of my favourite price comparisons is the Financial Times.

It costs $150 dollars for a year's subscription in the US, with home delivery and web access. It's £400 in the UK (i.e. more than 400% more).

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Mortgage rates in the US are not as closely linked to central bank IR as in the UK... the BofE can quickly manipulate mortgage rates by amending their base rate but this doesn't happen in the states.

Correct. They have a penchant for fixed rate mortgages and I mean a fixed rate for 25 to 30 years (these are the norm in the US there is no concept of an SVR that will change with interest rates. They did some alt-A ARM reset stuff but these do not reset lower they are all reseting higher 5.5% to 6% levels. So the majority of US mortgage holders are paying rates of 5% to 6% (irrespective of what Bernanke does with the base rate) and when unemployment came it was but a matter of months before they fell behind with their large mortgage payments.

Contrast this with the UK where people with fixed rates of 5 to 6% reset to an SVR that was around 2.5% to 3.5%, then all existing SVR mortgages reset down quickly as soon as Merv cut and then there are the tracker bods who are all rolling in spare disposable cash. So mortgagees that got made redundant here could tough it out, it did not require much savings to last for 6 to 12 months of mortgage payments whilst looking for work, or the they could take a lower paid job, or survive on the partners salary in the case of dual income households.

THERE IS NO PAIN IN THE UK HOMEOWNERS MARKETPLACE AT THE MOMENT - IN FACT MOST THINK IT IS A BRILLIANT TIME TO HAVE A MORTGAGE.

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The main nissue is the simple fact the country is being run by the banks, for the bankers at the tax-payers expense.

Who owns the banks...the wealthy...who owns the land...the wealthy...who owns the property...the wealthy.

The whole thing is just a continuation of slavery and opression of the masses for the benefits of them at the top.

It's a s**te state of affairs.

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Mortgage rates in the US are not as closely linked to central bank IR as in the UK... the BofE can quickly manipulate mortgage rates by amending their base rate but this doesn't happen in the states.

This is the main reason but in the UK, there is more welfare for home owners and banks with soft repossession policies so very few forced sellers.

Out of many houses I've looked at buying, only two were really forced sellers, one death and one bankrupt (took 3 yrs to get them out). The rest were downsizers looking to fund their retirement so prepared to hold on for the best price.

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Fourfold:

If you walk away from a house debt your free, the bank holds the debt as it is tied to the house not you

Interest rates in the US went higher quicker, and property prices halved as new mortgage deals got very very expensive overnight

Jobs dried up very quickly

Massive over supply, i.e. like Ireland/Spain massive unrestricted building in many states

The four things combined caused people in negative equity to stop paying the mortgage to Build up savings until they were repossessed, so they could buy a trailer, van, or get a deposit to rent. The result lots of empty homes all owned by the banks, areas with empty houses fell further in price because crime increased. Hell even if you could pay your mortgage and you lived in a ghost estate and you were in negative equity due to 50% off it makes sense not to pay the mortgage save up for another deposit and buy a cheaper bigger house in a better area.

Edited by AteMoose

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The rest were downsizers looking to fund their retirement so prepared to hold on for the best price.

Waiting for the greater fool :lol::lol::lol::lol:

I viewed 3 places in 2007, after the NR went belly up. House on for top whack. All of them admitted they were selling up and moving to spain.

"not of my back you're not" was my 2nd thought ( my first being 350K for this you must be mental ).

Their houses sat on the market for 2 years, then were taken off. One of them re-appeared recently, same sort of price.

Them at the top of the market are a real problem, they are the ones who want to realise their capital so they NEED to get a decent price....themin the middle dont care as they are trrading up and them at the bottom bneed everyone to drop their prices.

Them at the top wanting to retire will ( and can ) sit there till they die...then their ( mankey old) house will sell at auction for a reasonable price.

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Another issue is that a whole slew of tax hikes in the US are about to hit early next year. While the following email (forwarded to me by an American friend) is obviously Republican campaigning material aimed at November's mid-terms, if even some of it is factually correct then the US consumer economy, including the housing market, stands to take a huge hit next year I would guess.

Consider this when you VOTE in November! In just six months, the largest tax hikes in the history of America will take effect.

They will hit families and small businesses in three great waves on

January 1, 2011:

First Wave:

Expiration of 2001 and 2003 Tax Relief

In 2001 and 2003, the GOP Congress enacted several tax cuts for

investors, small business owners, and families.

These will all expire on January 1, 2011:

Personal income tax rates will rise. The top

income tax rate will rise from 35 to 39.6 percent (this is also the rate

at which two-thirds of small business profits are taxed). The

lowest rate will rise from 10 to 15 percent. All the rates in

between will also rise. Itemized deductions and personal exemptions

will again phase out, which has the same mathematical effect as higher

marginal tax rates. The full list of marginal rate hikes is below:

- The 10% bracket rises to an expanded 15%

- The 25% bracket rises to 28%

- The 28% bracket rises to 31%

- The 33% bracket rises to 36%

- The 35% bracket rises to 39.6%

Higher taxes on marriage and family. The

“marriage penalty” (narrower tax brackets for married

couples) will return from the first dollar of income. The child tax

credit will be cut in half from $1000 to $500 per child. The

standard deduction will no longer be doubled for married couples relative

to the single level. The dependent care and adoption tax credits

will be cut.

The return of the Death Tax.

This year, there is no death tax. For those dying on or after January 1 2011, there is a 55 percent

top death tax rate on estates over $1 million. A person leaving behind two homes and a retirement

account could easily pass along a death tax bill to their loved ones.

Higher tax rates on savers and investors.

The capital gains tax will rise from 15 percent this year to 20 percent in

2011. The dividends tax will rise from 15 percent this year to 39.6

percent in 2011. These rates will rise another 3.8 percent in 2013.

Second Wave:

Obamacare

There are over twenty new or higher taxes in Obamacare. Several will first go into effect on

January 1, 2011. They include:

The “Medicine Cabinet Tax”

Thanks to Obamacare, Americans will no longer be able to use health

savings account (HSA), flexible spending account (FSA), or health

reimbursement (HRA) pre-tax dollars to purchase non-prescription,

over-the-counter medicines (except insulin).

The “Special Needs Kids Tax”

This provision of Obamacare imposes a cap on flexible spending accounts (FSAs)

of $2500 (Currently, there is no federal government limit). There

is one group of FSA owners for whom this new cap will be particularly

cruel and onerous: parents of special needs children. There are

thousands of families with special needs children in the United States

, and many of them use FSAs to pay for special needs education.

Tuition rates at one leading school that teaches special needs children

in Washington , D.C. (National Child Research Center) can easily exceed $14,000 per year.

Under tax rules, FSA dollars can not be used to pay for this type of special

needs education.

The HSA Withdrawal Tax Hike.

This provision of Obamacare increases the additional tax on non-medical early withdrawals

from an HSA from 10 to 20 percent, disadvantaging them relative to IRAs

and other tax-advantaged accounts, which remain at 10 percent.

Third Wave:

The Alternative Minimum Tax and Employer Tax Hikes

When Americans prepare to file their tax returns in January of 2011,

they’ll be in for a nasty surprise—the AMT won’t be

held harmless, and many tax relief provisions will have expired.

The major items include:

The AMT will ensnare over 28 million families, up from 4 million last year.

According to the left-leaning Tax Policy Center, Congress’ failure to index the AMT will lead to

an explosion of AMT taxpaying families—rising from 4 million last

year to 28.5 million. These families will have to calculate their

tax burdens twice, and pay taxes at the higher level. The AMT was

created in 1969 to ensnare a handful of taxpayers.

Small business expensing will be slashed and 50% expensing will disappear.

Small businesses can normally expense (rather than slowly-deduct, or

“depreciate”) equipment purchases up to $250,000. This

will be cut all the way down to $25,000. Larger businesses can

expense half of their purchases of equipment. In January of 2011,

all of it will have to be “depreciated.”

Taxes will be raised on all types of businesses.

There are literally scores of tax hikes on business that will take

place. The biggest is the loss of the “research and

experimentation tax credit,” but there

are many, many others. Combining high marginal tax rates with

the loss of this tax relief will cost jobs.

Tax Benefits for Education and Teaching Reduced.

The deduction for tuition and fees will not be available. Tax credits

for education will be limited. Teachers will no longer be able to

deduct classroom expenses. Coverdell Education Savings Accounts

will be cut. Employer-provided educational assistance is

curtailed. The student loan interest deduction will be disallowed

for hundreds of thousands of families.

Charitable Contributions from IRAs no longer allowed.

Under current law, a retired person with an IRA can contribute up to

$100,000 per year directly to a charity from their IRA. This

contribution also counts toward an annual “required minimum

distribution.” This ability will no longer be there.

PDF Version Read more: http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171##ixzz0sY8waPq1

Now your

insurance is INCOME on your W2's......

One of the surprises

we'll find come next year, is what follows - - a little

"surprise" that 99% of us had no idea was included in the

"new and improved" healthcare legislation . . . the

dupes, er, dopes, who backed this administration will be

astonished!

Starting in 2011, (next year folks), your W-2 tax form sent by

your employer will be increased to show the value of whatever

health insurance you are given by the company. It does not

matter if that's a private concern or governmental body of

some sort. If you're retired? So what; your gross

will go up by the amount of insurance you get.

You will be required to pay taxes on a large sum of money that you

have never seen. Take your tax form you just finished

and see what $15,000 or $20,000 additional gross does to your

tax debt. That's what you'll pay next year. For

many, it also puts you into a new higher bracket so it's even

worse.

This is how the government is going to buy insurance for the15% that don't

have insurance and it's only part of the tax increases.

Not believing this??? Here is a research of the

summaries.....

On page 25 of 29: TITLE IX REVENUE

PROVISIONS- SUBTITLE A: REVENUE OFFSET PROVISIONS-(sec. 9001,

as modified by sec. 10901) Sec.9002 "requires employers

to include in the W-2 form of each employee the aggregate cost of

applicable employer sponsored group health coverage that is

excludable from the employees gross income."

Joan Pryde is the senior tax editor for the Kiplinger letters.

Go to Kiplingers and read about 13 tax changes that

could affect you. Number 3 is what is above.

Why am I sending you this? The same reason I hope you forward

this to every single person in your address book.

People have the right to know the truth because an election is

coming in November.

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The real interest rate that people pay on their mortgages in the US has gone down nowhere near what has happened in the UK. Variable rate mortgages in the US adjust much more slowly than they do in the UK. A lot of them are set up where they only go up or down 1% a year, so the feedback between rates set by the US Federal Reserve and what people pay is much slower.

Yes, thank you for expanding :)

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Because the UK a more constrained supply of building land not because we are an island but because we are controlled by far too stringent planning laws.

Without such limits in time house prices would simply go to

House price = building materials + labour + fee to convert normal land to building land.

Building materials are getting cheaper in real terms because of increased productivity in producing them. Labour is also getting cheaper because of better techniques of utilising it, eg automatic nail gun rather than a nail and a hammer.

So in real terms the cost of housing would drop every decade.

However in the UK the part of the equation that is + fee to convert land into building plot is huge. You have all the costs and double taxation (section 106) of this process, you have the time factor which is probably one of the longest in the world but mostly the government/councils/nimbys just say no.

In many countries you can just build a house on any land you own. I know only a dozen or so families in turkey and ALL own outright because they didn’t have to pay some corrupt system £100k+ for a building plot. They bought acres of land for cheap and just paid for the material and labour. Simple and as it should be in the UK.

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THERE IS NO PAIN IN THE UK HOMEOWNERS MARKETPLACE AT THE MOMENT - IN FACT MOST THINK IT IS A BRILLIANT TIME TO HAVE A MORTGAGE.

Too right... never been better, fill ya boots time. This is literally what people STILL think.

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this has everything to do with Gordon Brown desperately trying absolutely anything to prop them up prior to the UK 2010 election

In Us election (2008?) George Bush wasn't desperate to the sheer immoral selfish nasty degree of Gordon Brown for his party to win - possibly because it was less personal as he knew he was out anyway, maybe bcause Gordn Brwn was uniquely nasty.

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Too right... never been better, fill ya boots time. This is literally what people STILL think.

And why shouldn’t they when they can take out mortgages for 2-3% practically zero if not negative real interest on the loan.

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Too right... never been better, fill ya boots time. This is literally what people STILL think.

I posted it slightly tongue in cheek, but it is not fill-y-boots time at all for people that want to buy a house now. It was fill ya boots time from 1996 to 2007 I was talking about people that bought during that time and were exisiting mortgage holders before the credit crunch.

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Because the UK a more constrained supply of building land not because we are an island but because we are controlled by far too stringent planning laws.

Not quite as simple as that. Have you ever wondered why many medium-sized US cities consist of about half a square mile of skyscrapers with miles and miles of farmland or desert all around them? Although the US has vastly more land than us, a lot of it is for all practical purposes unusable, either because it's desert, has no utilities, poor transport links, suffers from temperature extremes or has some other problem that makes developing it either prohibitively expensive or physically impossible. Try taking a drive, as I did a few months ago, from San Bernadino to Salt Lake City (around 700 miles). It's desert all the way, and you will only pass one settlement of any significant size (Las Vegas) en route. Other than that there are only two or three small towns (e.g. Barstow, Baker) that owe their existence to the railway and subsequently the road, and exist almost purely to service travellers. The environment simply can't support any industry, agriculture or primary economic activity whatsoever.

In many countries you can just build a house on any land you own.

And many of them suffer from very low standards of living as a result. If you did away with all planning restrictions in the UK, the result would be that an area stretching from around Andover to Sheerness in one direction and Milton Keynes to Brighton in the other would rapidly become one large, densely populated conurbation. Outside that area, the pretty bits would become holiday towns for second home owners and the rest would become a Clockwork Orange-style wasteland. Agriculture would become vastly more expensive or even impossible, because the infrastructure around it needed to support it would fall away and be relocated to the south-east.

I suspect you're right in that our planning system is overly restrictive and expensive, but the opposite extreme has its dangers, too.

Edited by The Ayatollah Buggeri

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  • 145 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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