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Arabian Money: 2011 The Year Prices Fall?

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Anybody seen this one?

http://www.arabianmoney.net/global-economics/2010/12/28/2011-the-year-that-uk-house-prices-finally-fall

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Comment by Jeff - 29 December 2010

Well I guess it will hinge on how much longer the housing market bailout measures remain tenable. Let’s explore these:

1) Negative real interest rates (0.5% with RPI touching 5%)

So far no real pressure for rate rises – just a handfull of toothless savers moaning. BoE basically said CPI will hit 4% and rates will remain at 0.5% next year.

2) The Government pays your mortgage when you can’t.

ConLibs have cut the rate paid (New Labour were happily paying off people’s capital with taxpayers money!) However, I can’t see it being withdrawn any time soon as repo’s are now no longer politically correct.

3) The builder’s cartel, i.e. Barratts, Taylor Wimpy etc. These people are basically land price speculators who rack up vast debts buying up ‘land banks’. A house price crash would have bankrupted them, and their lenders, HMG supported banks, would have made (even more) huge losses. Not surprisingly these gamblers, who bet wrong, are being bailed out. The supply of new homes therefore is being carefully controlled.

4) Housing Benefit (The Buy to Let investor’s best friend). Despite the proposed crack down the LHA rates are still being increased in accordance with new Labour’s requirements that scroungers must be able to rent properties well beyond the reach of working families. Under acute vested interest attack, the proposals have been postponed and the plans will no doubt be scrapped before long. Landlords need not fret, the £13bn per anum will continue to flow into their pockets.

5) Tax. UK tax laws are designed to make speculation on house price rises as profitable as possible. Houses cost next to nothing to sit on, can be let then sold at short notice…there has been a small increase to CGT, but who pays that anyway on residential sales? Not your MP that’s for sure! The bottom line is people are keeping unneeded properties off the market because they don’t see a more attractive investment.

So assuming no major changes in the above, don’t expect any significant falls in average UK house prices.

Ed Note: Major changes are coming, housing moves in a cycle like all markets. Whenever somebody says ‘this time is different’ you are reminded that things never are.

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Anybody seen this one?

http://www.arabianmoney.net/global-economics/2010/12/28/2011-the-year-that-uk-house-prices-finally-fall

Love this comment:

Comment by Jeff - 29 December 2010

Well I guess it will hinge on how much longer the housing market bailout measures remain tenable. Let’s explore these:

1) Negative real interest rates (0.5% with RPI touching 5%)

So far no real pressure for rate rises – just a handfull of toothless savers moaning. BoE basically said CPI will hit 4% and rates will remain at 0.5% next year.

2) The Government pays your mortgage when you can’t.

ConLibs have cut the rate paid (New Labour were happily paying off people’s capital with taxpayers money!) However, I can’t see it being withdrawn any time soon as repo’s are now no longer politically correct.

3) The builder’s cartel, i.e. Barratts, Taylor Wimpy etc. These people are basically land price speculators who rack up vast debts buying up ‘land banks’. A house price crash would have bankrupted them, and their lenders, HMG supported banks, would have made (even more) huge losses. Not surprisingly these gamblers, who bet wrong, are being bailed out. The supply of new homes therefore is being carefully controlled.

4) Housing Benefit (The Buy to Let investor’s best friend). Despite the proposed crack down the LHA rates are still being increased in accordance with new Labour’s requirements that scroungers must be able to rent properties well beyond the reach of working families. Under acute vested interest attack, the proposals have been postponed and the plans will no doubt be scrapped before long. Landlords need not fret, the £13bn per anum will continue to flow into their pockets.

5) Tax. UK tax laws are designed to make speculation on house price rises as profitable as possible. Houses cost next to nothing to sit on, can be let then sold at short notice…there has been a small increase to CGT, but who pays that anyway on residential sales? Not your MP that’s for sure! The bottom line is people are keeping unneeded properties off the market because they don’t see a more attractive investment.

So assuming no major changes in the above, don’t expect any significant falls in average UK house prices.

Ed Note: Major changes are coming, housing moves in a cycle like all markets. Whenever somebody says ‘this time is different’ you are reminded that things never are.

Jeff's analysis is correct in that it shows the lengths the government has gone to to protect the various VIs along with the feckless who have got themselves embroiled at the top of this bubble. So many are affected that the policies above which ought to bring into question the competence and suitability of those who govern us are actually lauded in a media which should be bringing these deficiencies of our government to wider attention.

I, along with so many others, have learned a great deal about our government in its responsibility for and response to this crisis over the past four years. As you note I too am concerned about the consequences as we move into the eventual downturn as the measures taken above prove ineffectual and collapse stares the government in the face.

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My timeline to buy or move abroad is 3 years so it'd better happen soon.........

The thought of moving somewhere with sun does appeal as the more I look at what you get for your money here compared to what I could get in the US now (and with engineers' salaries being higher over there - though employment law sucks)

EDIT - one thing I've thought about is..... I've always been an 'upstanding citizen', doing things by the book etc. But you hear about (and I see) so many on benefits, getting money cash in hand, people going into morally reprehensible activities (BTL) etc, governments looking after these @rseholes.... the place is still corrupt and I almost feel a fool for being true and honest. Seriously makes me wonder whether I should change my ways. If there is a new bubble (in anything) would we be best to just go with the flow if it would provide immediate benefit?

Edited by guitarman001

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My timeline to buy or move abroad is 3 years so it'd better happen soon.........

The thought of moving somewhere with sun does appeal as the more I look at what you get for your money here compared to what I could get in the US now (and with engineers' salaries being higher over there - though employment law sucks)

EDIT - one thing I've thought about is..... I've always been an 'upstanding citizen', doing things by the book etc. But you hear about (and I see) so many on benefits, getting money cash in hand, people going into morally reprehensible activities (BTL) etc, governments looking after these @rseholes.... the place is still corrupt and I almost feel a fool for being true and honest. Seriously makes me wonder whether I should change my ways. If there is a new bubble (in anything) would we be best to just go with the flow if it would provide immediate benefit?

I think three years ought to be sufficient to see some significant falls, but I think that the government is trying to rebalance the economy and will do what it can to slowly deflate the bubble. A black swan event could seriously de-stabilise this policy, but we don't know. Without one I think we have 5-6 years before we are likely to see the bottom of this cycle and by then the government might have taken steps to subdue the scale of the next upturn. Incidentally politicians across both parties - John Smith, Roy Hattersley, Ken Clark and Norman Lamont's rhetoric in the 1990s suggested that they would prevent a housing bubble happening last time - which explains the resonance of Brown's seeking "an end to boom and bust" with the public at that time.

For now we can only save and hope that house price falls and compound interest will work in our favour.

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Anybody seen this one?

http://www.arabianmoney.net/global-economics/2010/12/28/2011-the-year-that-uk-house-prices-finally-fall

Love this comment:

Comment by Jeff - 29 December 2010

Well I guess it will hinge on how much longer the housing market bailout measures remain tenable. Let’s explore these:

1) Negative real interest rates (0.5% with RPI touching 5%) (...)

2) The Government pays your mortgage when you can’t.

3) The builder’s cartel, (...)

4) Housing Benefit (The Buy to Let investor’s best friend). (...)

5) Tax. UK tax laws are designed to make speculation on house price rises as profitable as possible.

(...)

Good article.

The comment is brilliant listing the government policies trying to prop up the un-prop-able, but mistakenly concludes that these props are or will work. They already are not being sufficient, and can't be afforded for much longer. Prices are already falling, despite all these props.

And since these props are unsustainable, the total crash is unavoidable.

And Arabian Money knows that. Wise investors.

It was a bubble. Real UK house prices (adjusted for inflation, or even by saving rates), will never again be as high as 2007, or as high as now in London and the SE. Never again. The BoE+FSA learnt a very hard lesson. We will never again have a bubble this high.

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Good article.

It was a bubble. Real UK house prices (adjusted for inflation, or even by saving rates), will never again be as high as 2007, or as high as now in London and the SE. Never again. The BoE+FSA learnt a very hard lesson. We will never again have a bubble this high.

I agree with this point particularly. Those planning to ride the next cycle might be very disappointed when it bears little resemblance to the bubble we have had. That means looking for houses at rock bottom or with development potential in the "undershoot" phase (which normally precedes a recovery) and limit what proportion of money is used to buy a home (which is how one ought to view it) to free up more money for investment elsewhere.

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I agree with this point particularly. Those planning to ride the next cycle might be very disappointed when it bears little resemblance to the bubble we have had. That means looking for houses at rock bottom or with development potential in the "undershoot" phase (which normally precedes a recovery) and limit what proportion of money is used to buy a home (which is how one ought to view it) to free up more money for investment elsewhere.

Exactly.

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  • 312 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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