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Cherubium

Bear Buys A House

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Thought I'd share my story because although I'm a bear on house prices I've also spent the last two years looking for my perfect house.

My first reason for buying was personal, I've earned a lot of money over the last few years, but still live in a 1 bed rented flat.

My second (much more recently) is an increasing feeling that with inflation taking off, I'd be happier to hedge my bets and have a chunk of money in property rather than having it all sitting in banks getting eroded by inflation.

I decided to go for new build, budget up to £2m, more or less anywhere in London. At this level you tend to have much better quality new builds than the boxes put together by big builders, or even the 'executive homes' they put out. Also, when I looked at the market I noticed that the best value seemed to be in new build, primarily because normal sellers can withdraw their properties but new builders are under pressure to sell and don't have that option.

I first saw my dream house in Jan. Still with builders inside and the developer asking £1.75. The price seemed too high and I bid 1.35m, which the developer rejected.

Over the following months I saw a few other houses, but none that really pushed my buttons. Most were 30-40% above what I'd pay.

The agent on my dream house kept ringing, telling me that the property was about to be sold, but I kept my nerve, even when smaller houses in the development sold for more than I was bidding.

Anyway, 3 weeks back, the agent rings. The houses have been on the market for just under a year, only 2 of 4 have sold and developer's finance has run out. Given current market conditions I reduced my offer to £1.3m, buying cash. After a bit of stalling and me ignoring six 'The developer just wants a little bit more' calls, we had a deal. Contracts now exchanged.

I'm happy with the price, because two smaller houses on the development have gone for 170k more. In the same area there are smaller run down houses on the market for 1.2-1.5m (to be fair, they're on bigger plots, but they dont' have parking and they need about 250k of work done to bring them anywhere near the spec of the house I'm buying).

I'm also comfortable with this financially.

Taking a 10 year view I reckon house prices will drop by about 30%, reverting to long term norms. I think I've got a good deal, so I might have a cushion, but let's ignore my cushion and assume that my house drops by 30% in real terms.

So on paper my 30% drop means I'm throwing away £390k. However, with inflation of say 3% per year (lets face it possibly much higher) I reckon I'll be able to get my 1.3m back in 2020.

If my 1.3m sits in the bank for 10 years growing at about 1% after tax (I pay at 50%) I'll end up with a compounded £1.45m.

So basically over 10 years, I'm paying £150,000 to live in a stunning house, which at £1250pm is less than I'm paying in rent for a cramped 1 bed flat.

And of course, if we do enter some hyperinflation global mayhem scenario I won't be totally wiped out.

And even if house prices drop by 50% to historic lows I'll still be paying less than if I rented a bigger flat. (Plus, provided I keep earning good money I can sell up at a loss, add another million in cash and buy what would currently be a £4.5m mansion overlooking Hampstead Heath WOOT!)

I know my circumstances are exceptional because my income is in the top 1% and I'm buying with cash. But my argument is just as valid for someone looking to buy a house for 200k as 2m.

I just wanted to show that provided you don't over leverage yourself, provided you bargain hard and are looking to stay in the house for 10 years or so you don't have to be a 'fool' or a 'muppet' to go out and buy yourself a home that you really love.

And given the realistic chance of very high inflation or even another big banking collapse, it might even turn out to be the most sensible decision I ever made!

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Sounds very much like you are seeking reassurance that you have done the right thing, but with a potential loss greater than most people can afford to spend on a house I doubt you will get much comfort here.

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Sounds very much like you are seeking reassurance that you have done the right thing, but with a potential loss greater than most people can afford to spend on a house I doubt you will get much comfort here.

I'm not looking for reassurance, I was making my mark in the snow!

I don't like the culture on this forum where unsophisticated people call everyone who wants to buy a house a 'Muppet' or a 'Sucker'. Their arguments only apply if you view a property as an investment.

Buying a house to live in is much more complex and to me the idea that you shouldn't buy a house becuase the price will go down, is part of the same culture of idiocy where people maxed out on houses because they thought that the prices could only go up.

Almost everything we buy depreciates in price. Nobody would bat an eyelid if I went out and spent 30k on a BMW and sold it for 10k 5 years later!

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Bit harsh having a go at someone for being successful. Jealousy anyone?

OP, I think in your position the downside is pretty low and the upside considerable, I would do what you've done for sure. You don't need to worry about negative equity, interest rate rises or reposession and you can clearly easily afford what you've bought. Quality of life should rise considerably. Crunching the loss/gain numbers in that situation is arguably unnecessary. Well done.

You now need to decide what to spend your considerable future earnings potential on. Any ideas?

On that point there are many people on this site and elsewhere, including myself, who have saved fair sums of money to buy a house at some point. That money isn't put into consumption and the economy in a way that it might be had they been able to buy at a sensible price, so when prices come down and people buy there's good reason to think the economy as a whole will benefit and benefit sustainably. I wonder if TPTB have considered this, or is it small beer against all the debt slaves that won't be buying anything...??

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I'm not looking for reassurance, I was making my mark in the snow!

I don't like the culture on this forum where unsophisticated people call everyone who wants to buy a house a 'Muppet' or a 'Sucker'. Their arguments only apply if you view a property as an investment.

Buying a house to live in is much more complex and to me the idea that you shouldn't buy a house becuase the price will go down, is part of the same culture of idiocy where people maxed out on houses because they thought that the prices could only go up.

Almost everything we buy depreciates in price. Nobody would bat an eyelid if I went out and spent 30k on a BMW and sold it for 10k 5 years later!

if the properties go down 50% to 2000 prices you have lost of a lot of money IMO ...

more here:

http://www.moneyweek...edge-05101.aspx

Edited by Damik

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if the properties go down 50% to 2000 prices you have lost of a lot of money IMO ...

more here:

http://www.moneyweek...edge-05101.aspx

I am at risk of repeating myself but here we go again: prices will not go down 50% to 2000 level!

2000 prices were probably a bit undervalued, certainly not overvalued. Let's say for argument sack that 2000 prices were fair value (you can check what 2000 prices yielded).

Since then there has been 2 things (as always), inflation and interests for mortgagees. Do some simple calcs, 10years @3-4% inflation (+35% to +50%) or 10yrs @5-6% interest on mortgage (+63% to +80%) gives you an unavoidable rise, that is the world we live in, so you can expect 20% further reduction, perhaps -30% but you will not get -50%.

And don't tell me that adjusted for inflation then will come down further. This is true but irrelevant to you and me, my deposit is not returning anything and will not grow, so a regardless of inflation I won't be able to afford more in 5 years time with my present deposit.

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Thought I'd share my story because although I'm a bear on house prices I've also spent the last two years looking for my perfect house.

.....

I first saw my dream house in Jan. Still with builders inside and the developer asking £1.75. The price seemed too high and I bid 1.35m....

Thanks to the OP for sharing this. I personally see this as a realistic and (given the circumstances) reasonable approach - even for a bear! An important message for me was that with a bit of patience and resolve they knocked 20-odd % off the price. Admittedly, this might not be as achievable at more pedestrian price levels, but it shows what a bit of common sense and waiting can do.

Best of luck, I say!

Edited by andybee33

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Thanks to the OP for sharing this. I personally see this as a realistic and (given the circumstances) reasonable approach - even for a bear! An important message for me was that with a bit of patience and resolve they knocked 20-odd % off the price. Admittedly, this might not be as achievable at more pedestrian price levels, but it shows what a bit of common sense and waiting can do.

Best of luck, I say!

+1

best of luck to the OP.

My strategy is similar (if it is of interest to anyone), I am looking at 4 bed houses which have a 280k asking price where I live. They have started coming down and a few have registered sales of around 250k. I am waiting for them to reach 230k before buying but I don't believe they ought to cost more than 170-180k based on current rental yields. If for some reason prices get stuck in the region of 210-230k then so be it but if by a miracle (I don't think so but who knows) they do go sub 200k then my plan is to repay up to 170-180k and then let it until the rest of the mortgage (230k +interest) is repaid. I will meanwhile go to Canada for a few years, where I have always wanted to go and will have no alternative but to rent.

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Jeez... 2 million is "leave the UK and never ever come back" money :D. Could easily retire at 30 on that in the US.

A 500k primary residence, five 200k duplexes (10 rental units) and 1.5 million USD left over. Rentals would gross about 8k a month income.

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Q: What difference to your material wellbeing and lifetime opportunities would a fall in the value of your home make when you're earning such a high salary?

A: None.

I've always thought that this website is for the disenfranchised. you don't need this website!

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Hi Cherubium

My twopenneth FWIW!!

Congrats first ... I admire your courage! *jump to long story short for the short version!*

To be honest, my wage and living requirement is far less than yours and I am looking at flats in Bournemouth/Poole and the surrounding area. I have seen several which I like (only by pics on RM, I am certainly not going to employ an EA with asking prices as they are currently) but they are asking over 100k for a decent one bedroom flat. I cannot be bothered to go through the rigmarole of putting an offer in of 30% less than the asking price, then go through the EA roll-eyes, vendor delusion of "my pile of bricks is worth xxx,xxx" blah blah on multiple occasions - I admire those on this site that can put in low, cheeky offers but I am not one of them. I will wait for asking prices and vendor expectations to become more realistic before concerning myself with them.

I have watched prices over the years from 2004 and can continue watching for the rest of my life - it would be nice to have my own place but it is not the be-all and end-all to me. I am single, 37, don't want kids, and if I hit 67 (or whatever the retirement age is in 204x) with no permanent roof over my head then I will be knocking on the door of the council to sort me out with accommodation, obviously after stashing my savings somewhere they won't find them! For information, I suffered a brain haemorrhage shortly before turning 20 which took me a couple of years to recover from, so did not graduate until I was 25 in 1999 - I then decided to clear my student debts (bad decision in hindsight, I should have lived with them and perhaps took on even more debt to fund a house purchase but I am very debt averse) and by the time I started saving to buy a place of my own they were already out of reach. I admit, I could(/should?) have saved more and faster but life is for living (within your own means, of course).

I have endured years of my friends sneering at me for renting (I am currently sharing, costing 275pcm) and them reeling out the good old tried and tested "property value will always go up!" line as I give reasons why I feel they are due a correction to blank faces lookin gat me as if I am mad. I thought from 2008 I was going to have my time in the sun and if another 10/15% was allowed to get off in April 2009 I would have thought seriously about starting to look and maybe even put in offers. Then along came the Brown stuff in an attempt to buy votes with all the homeownerist giveaways that have supported hp's since then and have added a further c15% to the ridiculous asking prices around here. However, I can see the light at the end of the tunnel again, and I believe this government are trying to deflate the bubble, albeit slowly. Whether or not they can do that, or there will be a short sharp shock, or indeed if they start going back up only the future can show us.

*Long story short* (from all my gumpf above!) One thing that no-one has mentioned in the comments to your OP is that you successfully managed to negotiate 26% off the asking price. If I could get a flat I am looking at for about 80k (asking price, 110k - therefore reduction 27%, similar to yours) I would seriously consider it. I would like to live there, and 'get settled' four walls of my own etc, all the crappy emotive phrases!! BUT I am not going to be ar5e-raped by a deluded vendor and an unqualified EA to paying an extortionate %age of my monthly income to put a roof over my head, and to have to sit inside for the rest of the term of the mortgage. I want to live my life and spend my hard earned cash on my own experiences, not to line a banksters pockets for the next 25-odd years, as well as plan for a reasonable retirement (hopefully!).

In my simple mind, a house should be a place to live, somewhere to spend your own quality time and somewhere to rest. Houses should not be used as investment vehicles, or as pensions, or to subsidise a way of life beyond the means of an individuals earned income. I accept that currently BTL is a necessity due to the lack of social housing (maybe this should change with a good, government building programme) but it should not be at the expense of first time buyers the length and breadth of the country through tax breaks for multiple property owners, as is at the moment. If someone is lucky enough to have spare cash at the end of the month then put it to work through business, creating employment, creating goods.

Anyway, Good luck Cherubium ... I hope it is everything you want it to be! Sorry for having my own rant on your post!!

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Good luck to Cherubium. I do expect 50% drop, but it will take a long time. Sounds like he got himself sorted and struck a good deal. Add in the fact he loves his job, what's not to like? (what is the job - must be related to saving bankers' asses?)

danlee74, one day you too can have a place like this in Poole - wait for the developer to run out of funds, then stick in a REALLY low offer (just saw you already replied to the thread):

http://www.housepric...howtopic=154893

Edited by okaycuckoo

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Good luck to Cherubium. I do expect 50% drop, but it will take a long time. Sounds like he got himself sorted and struck a good deal. Add in the fact he loves his job, what's not to like? (what is the job - must be related to saving bankers' asses?)

danlee74, one day you too can have a place like this in Poole - wait for the developer to run out of funds, then stick in a REALLY low offer (just saw you already replied to the thread):

http://www.housepric...howtopic=154893

I think the key here is that I targeted new builds. I can only vouch for London, but while new builds usually sell for 10-15% above average, they currently list at average prices and then seem to sell at whatever is on the table when the development loans expire.

You'll not get big reductions dealing with Mr & Mrs 'I know what my house is worth,' as long as mortgage rates remain low enough for them to be comfortable, but many developers have short term finance deals which mean they have to sell.

I think a 50% drop is possible, BUT 50% in inflation adjusted terms not in actual prices. With inflation nearing 4% and rising steeply, I wouldn't be surprised if the greatest proportion of the price drops is taken care of by inflation rather than in actual price falls.

Also, if prices drop by 50% I can pick up a nice place for my parents to live in for about 200k!

And the person who said, 'That's go abroad and retire money,' yes I could if I wanted to. But I'm single, all my friends are here and my parents are elderly and need a bit of help. And as my accountant (who does quite a few pop stars and celebs) said when I asked about going into tax exile, 'I know an awful lot of people who've moved out of the country for financial reasons and made themselves extremely unhappy.'

Cos no matter how much I hate London when the weather's horrible, the traffic's snarled and the tax bills land on the doormat, it's my home and I've no desire to live anywhere else!

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With inflation nearing 4% and rising steeply, I wouldn't be surprised if the greatest proportion of the price drops is taken care of by inflation rather than in actual price falls.

You're way off with your inflation gamble in my view. My strategy is and has long been exactly the opposite. The inflation we're seeing here and there is a temporary phenomenon before a long period of disinflation in wages and in the value of property. Too many people are tapped out already and few are seeing any sustainable wage inflation. How they are going to cope with inflation like you foresee year on year? Maybe wage inflation in a few sectors with very high skill sets. There is that thread you started a few months ago pointing to the maths graduates you know really struggling to get jobs. Despite all that you're loaded so you can take a 50% crash, disinlation and none of your happy 10 years of debt washing away inflation, and still be better off than most. Keep your eyes on the mortgage lending figures. I think you've made a mistake in your theories but you can still be happy.

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You're way off with your inflation gamble in my view. My strategy is and has long been exactly the opposite. The inflation we're seeing here and there is a temporary phenomenon before a long period of disinflation in wages and in the value of property. Too many people are tapped out already and few are seeing any sustainable wage inflation. How they are going to cope with inflation like you foresee year on year? Maybe wage inflation in a few sectors with very high skill sets. There is that thread you started a few months ago pointing to the maths graduates you know really struggling to get jobs. Despite all that you're loaded so you can take a 50% crash, disinlation and none of your happy 10 years of debt washing away inflation, and still be better off than most. Keep your eyes on the mortgage lending figures. I think you've made a mistake in your theories but you can still be happy.

Inflation is primarily driven by commodity prices and interest rates, not the UK economy. So I reckon:

1. Commodity prices (food, concrete, metal, oil etc) will have their prices driven by 2 billion people in fast growing India and China.

2. The government and the population have vast amounts of debt. If the government keeps interest rates low and inflation high, the debt gradually vanishes. If the government lets interest rates rise and keeps inflation under control, you might see some big short term falls in property prices when millions of people go broke, but then the government won't be able to pay it's debts, the £ will collapse and inflation will rocket. Also, in this scenario, the banks go broke too so instead of losing 50% on my property, I'd lose 100% on my cash.

Edited by Cherubium

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Inflation is primarily driven by commodity prices and interest rates, not the UK economy. So I reckon:

1. Commodity prices (food, concrete, metal, oil etc) will have their prices driven by 2 billion people in fast growing India and China.

2. The government and the population have vast amounts of debt. If the government keeps interest rates low and inflation high, the debt gradually vanishes. If the government lets interest rates rise and keeps inflation under control, you might see some big short term falls in property prices when millions of people go broke, but then the government won't be able to pay it's debts, the £ will collapse and inflation will rocket. Also, in this scenario, the banks go broke too so instead of losing 50% on my property, I'd lose 100% on my cash.

Yes, if you have so much cash you can't make it productive then you may as well bung it in assets. I'm still getting 4-5% on my cash (partly by using my wife's tax allowance (she's a homemaker), the rest in NS&I RPI bonds). So I'm sticking it out renting cheaply while the real terms wages falls an the cash-rich running out of money mean real house price falls over the next few years.

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Thought I'd share my story because although I'm a bear on house prices I've also spent the last two years looking for my perfect house.

My first reason for buying was personal, I've earned a lot of money over the last few years, but still live in a 1 bed rented flat.

My second (much more recently) is an increasing feeling that with inflation taking off, I'd be happier to hedge my bets and have a chunk of money in property rather than having it all sitting in banks getting eroded by inflation.

I decided to go for new build, budget up to £2m, more or less anywhere in London. At this level you tend to have much better quality new builds than the boxes put together by big builders, or even the 'executive homes' they put out. Also, when I looked at the market I noticed that the best value seemed to be in new build, primarily because normal sellers can withdraw their properties but new builders are under pressure to sell and don't have that option.

I first saw my dream house in Jan. Still with builders inside and the developer asking £1.75. The price seemed too high and I bid 1.35m, which the developer rejected.

Over the following months I saw a few other houses, but none that really pushed my buttons. Most were 30-40% above what I'd pay.

The agent on my dream house kept ringing, telling me that the property was about to be sold, but I kept my nerve, even when smaller houses in the development sold for more than I was bidding.

Anyway, 3 weeks back, the agent rings. The houses have been on the market for just under a year, only 2 of 4 have sold and developer's finance has run out. Given current market conditions I reduced my offer to £1.3m, buying cash. After a bit of stalling and me ignoring six 'The developer just wants a little bit more' calls, we had a deal. Contracts now exchanged.

I'm happy with the price, because two smaller houses on the development have gone for 170k more. In the same area there are smaller run down houses on the market for 1.2-1.5m (to be fair, they're on bigger plots, but they dont' have parking and they need about 250k of work done to bring them anywhere near the spec of the house I'm buying).

I'm also comfortable with this financially.

Taking a 10 year view I reckon house prices will drop by about 30%, reverting to long term norms. I think I've got a good deal, so I might have a cushion, but let's ignore my cushion and assume that my house drops by 30% in real terms.

So on paper my 30% drop means I'm throwing away £390k. However, with inflation of say 3% per year (lets face it possibly much higher) I reckon I'll be able to get my 1.3m back in 2020.

If my 1.3m sits in the bank for 10 years growing at about 1% after tax (I pay at 50%) I'll end up with a compounded £1.45m.

So basically over 10 years, I'm paying £150,000 to live in a stunning house, which at £1250pm is less than I'm paying in rent for a cramped 1 bed flat.

And of course, if we do enter some hyperinflation global mayhem scenario I won't be totally wiped out.

And even if house prices drop by 50% to historic lows I'll still be paying less than if I rented a bigger flat. (Plus, provided I keep earning good money I can sell up at a loss, add another million in cash and buy what would currently be a £4.5m mansion overlooking Hampstead Heath WOOT!)

I know my circumstances are exceptional because my income is in the top 1% and I'm buying with cash. But my argument is just as valid for someone looking to buy a house for 200k as 2m.

I just wanted to show that provided you don't over leverage yourself, provided you bargain hard and are looking to stay in the house for 10 years or so you don't have to be a 'fool' or a 'muppet' to go out and buy yourself a home that you really love.

And given the realistic chance of very high inflation or even another big banking collapse, it might even turn out to be the most sensible decision I ever made!

Hi Cherubium

Thanks for the anecdote, its good to hear about some one who is in the same position as myself, (I’m single, been earning well, renting a 2 bed flat, have a similar budget to purchase with cash).

Up until recently I have been reasonably content to be patient in the hope of price falls but now I feel the risk of inflation is just too great to ignore and combined with the fact that even if it were possible to get a sensible return on savings I would still lose 50% percent in tax.

Like you I do not consider buying a house an investment, although I don’t like overpaying for things. That said at some point quality of life has to be given priority over financial gain (I think this point is lost on a lot of people on here). Do you mind me asking how old you are?

Sounds like you held your nerve and got a really good deal. I’ve not really looked at new builds much as I always saw myself purchasing a period property, problem is these are owned by as you say ‘normal sellers’ and it could take years for them to accept their house is not worth 40% more than they paid a few years back. So you’ve now got me thinking about the new build route but I do have a few reservations and I would be interested in your opinoin:

Any 1m+ new builds I have seen still have other houses crammed in a few feet away, was this a problem with your property?

Do you feel the quality of the build is up to scratch, are the internal walls plasterboard? Did you employ someone to professionally snag the property?

How big is the garden and is there enough parking?

T

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Hi Cherubium

Thanks for the anecdote, its good to hear about some one who is in the same position as myself, (I’m single, been earning well, renting a 2 bed flat, have a similar budget to purchase with cash).

Up until recently I have been reasonably content to be patient in the hope of price falls but now I feel the risk of inflation is just too great to ignore and combined with the fact that even if it were possible to get a sensible return on savings I would still lose 50% percent in tax.

Like you I do not consider buying a house an investment, although I don’t like overpaying for things. That said at some point quality of life has to be given priority over financial gain (I think this point is lost on a lot of people on here). Do you mind me asking how old you are?

Sounds like you held your nerve and got a really good deal. I’ve not really looked at new builds much as I always saw myself purchasing a period property, problem is these are owned by as you say ‘normal sellers’ and it could take years for them to accept their house is not worth 40% more than they paid a few years back. So you’ve now got me thinking about the new build route but I do have a few reservations and I would be interested in your opinoin:

Any 1m+ new builds I have seen still have other houses crammed in a few feet away, was this a problem with your property?

Do you feel the quality of the build is up to scratch, are the internal walls plasterboard? Did you employ someone to professionally snag the property?

How big is the garden and is there enough parking?

T

I'm 39

Like most new builds they've maximised the plot and the house is only a semi. The garden is about 25x25ft, as a single bloke that's enough to slide open the glass doors and have a few friends out there, or read the Sunday paper outdoors. Maybe not so good if you've got three kids who want a trampoline and football matches!

The house is about 3250sqft, so the internal rooms are big and there are huge glass areas. Spec is high, with things like CAT5 networking, music streaming, programmable lighting, underfloor heating. We're a long way from a mass market box here and I wouldn't mind betting that they'd have chanced their arm at £2m if this had gone on the market in 2007.

The house has a garage, which is nearly unheard of in this area.

My 'ideal home' would have been detatched, large in Central London (Zone 2/3ish). However, this would have cost me about £4m. I probably could have got that if I'd mortgaged myself up to the eyeballs, but in this market I'd be scared of doing that!

At 1.5m my choices were to go for the big detatched house (double garage, garden etc) somewhere a bit further out like Wimbledon or Barnet or go for a similar sized house but attached and on a smaller plot nearer to the centre. Most people in family situations would have gone further out, but as a single bloke I prioritise being able to get into central London within 30 mins, or getting a taxi home after a night out with friends over having a big garage and garden and being some sad git living on his own at the far end of the Picadilly line!

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Your thoughts pretty much mirror mine. I am close to completing on a home in the country. Not quite your league (200k) but I am happy as it ticks all my boxes and it'll cost me £700 a month in mortgage payments (fixed for 10years) and not £900 in rent as it does now.

I am still very bearish and would be delighted if house prices fell 30-50% over the years (inflation factored in too). It'll do the wider economy a world of good and I ain't moving anyway.

Congratulations on your purchase and happy new year.

:D

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You're way off with your inflation gamble in my view. My strategy is and has long been exactly the opposite. The inflation we're seeing here and there is a temporary phenomenon before a long period of disinflation in wages and in the value of property. Too many people are tapped out already and few are seeing any sustainable wage inflation. How they are going to cope with inflation like you foresee year on year?

Exactly my stance also, we are seeing a deliberate reinflation attempt and their is a reason why we face deflation, it is a necessary part of the recovery from the excesses of the last century's binge on oil. The best way to recover from a depression is to have one.

Trying to reinflate in the face of resource shortages would be suicidal for governments, I am sitting out giving them the benefit of doubt but I am acutely aware of the inflationists arguments if they are indeed suicidal.

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Exactly my stance also, we are seeing a deliberate reinflation attempt and their is a reason why we face deflation, it is a necessary part of the recovery from the excesses of the last century's binge on oil. The best way to recover from a depression is to have one.

Trying to reinflate in the face of resource shortages would be suicidal for governments, I am sitting out giving them the benefit of doubt but I am acutely aware of the inflationists arguments if they are indeed suicidal.

I must admit I'm confused by your logic.

I thought the biggest threat was presently government and personal debt levels.If deflation sets in, all sterling debt begins to inflate in real terms, the government can't pay its loans and people can't pay their mortgages with shrinking incomes. So the government defaults, the banks go bust.

The only example I can think of where long term deflation has been sustainable is Japan over the last 20 years. But they started off with vast overseas assets, a huge trade surplus and despite a property bubble most people had enormous personal savings. I doubt Britain could sustain any kind of meaningful long term deflation with some of the highest debt levels in the developed world.

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I must admit I'm confused by your logic.

There are other ways to manage the debt burden than inflating it away. Debt can and is likely to be defaulted. As an optimistic I favour a managed deflation where periods of money printing counteract periods of the required deleveraging and financial stress associated with them.

The problems the central banks and government face is that the old finacial system could be inflated/grown at the same rate the oil production could be expanded. Printing in the face of peak oil and zirp will lead to extreme inflation. Read when monry dies or listen to the interview with the author here http://www.netcastdaily.com/broadcast/fsn2011-0101-3.asx

IMHO we are at the end of a massive debt bubble created off the back of the greatest financial bubble in history aided and abetted by abundant cheap energy. The monetary system was able to cope with previous recessions and even depressions by lowering interest rates and stimulating growth that could be accommodated by ever rising oil supply (the real wealth). I must admit I accept my views are not conventional but they can be best explained by another great interview by Nicole Foss http://www.netcastdaily.com/broadcast/fsn2011-0101-1.asx

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  • 284 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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