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The Masked Tulip

Worried About Inflation - Some Are Buying

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I have heard some stories this week or people with sizeable cash lump sums opting to buy property rather than lose it via inflation re savings accounts. Don't want to risk it on shares or commodities but see houses as a long-term investment.

Thought I would mention it.

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Most property is already over-inflated and is likely to fall in price appreciably before general inflation catches up somewhere down the line.

i.e. Rather than just facing real drops in their wealth due to inflation they will also be facing nominal ones in the near term.

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Most property is already over-inflated and is likely to fall in price appreciably before general inflation catches up somewhere down the line.

i.e. Rather than just facing real drops in their wealth due to inflation they will also be facing nominal ones in the near term.

True ... and when you add to that houses are incredibly illiquid, hard to value, and potentially subject to significant tax/regulatory changes in the future it's a ridiculous place to put money for safety. Given all asset classes are significantly overvalued relative to consumer goods we're either going to have a collapse or we're going to have inflation. In that environment, liquidity and transparent market pricing will be useful so you can "get away, " from subsequent government actions and market segments that break down.

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people always buy and sell.

I bet people are buying in Beirut, Afghan frontierland, and Cairo.

Even Iceland and Ireland.

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Heard this too. Inflation of goods is plainly happening and set to continue, but wage inflation is not and I see no reason for it to. Wage inflation is the inflation that matters if you want nominal house price rises, particularly in times of more responsible lending like this. Stagflation is what we have now, and I see nothing on the horizon to change this. You'll lose money buying property now, nominal and real. Some people are buying beyond a sensible level and hoping inflation will help, that's quite a gamble and one that I can't see paying off.

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I have heard some stories this week or people with sizeable cash lump sums opting to buy property rather than lose it via inflation re savings accounts. Don't want to risk it on shares or commodities but see houses as a long-term investment.

Thought I would mention it.

See my sig ;).

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I have heard some stories this week or people with sizeable cash lump sums opting to buy property rather than lose it via inflation re savings accounts. Don't want to risk it on shares or commodities but see houses as a long-term investment.

Thought I would mention it.

Why don't you buy a small house? Say a small terrace. Then you are hedged a little.

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I doubt this is happening but if it is there are more troubles ahead for the banks. After all, if many people withdraw their savings, the banks capital ratios will be more screwed than they are already.

Maybe this will be yet another reason why the BoE need to increase interest rates and so inflation may one day be curbed.

In the end though, unless King and his cronies come to their senses, it will probably be when the debt markets start increasing the rates the government can borrow at as they did to Greece, Ireland, Portugal, Spain.... Unless they react to such increases by cranking the printing press up again...

What crazy times we live in. I'm too young to know if this is the norm and economies have always been mismanaged to such an extent.

Edited by MC Fur Q

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I doubt this is happening but if it is there are more troubles ahead for the banks. After all, if many people withdraw their savings, the banks capital ratios will be more screwed than they are already.

Yes, sooner or later there will be a critical mass of people moving their capital out of the banking system ... though the (recently established) precedent is that money-printing will be used to make up the difference.

Maybe this will be yet another reason why the BoE need to increase interest rates and so inflation may one day be curbed.

In the end though, unless King and his cronies come to their senses, it will probably be when the debt markets start increasing the rates the government can borrow at as they did to Greece, Ireland, Portugal, Spain.... Unless they react to such increases by cranking the printing press up again...

What crazy times we live in. I'm too young to know if this is the norm and economies have always been mismanaged to such an extent.

I get the impression that the "We can print our way out of any trouble" school of economic thought gains eminence on a quite regular basis but usually with a quite a few decades between.

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I have heard some stories this week or people with sizeable cash lump sums opting to buy property rather than lose it via inflation re savings accounts. Don't want to risk it on shares or commodities but see houses as a long-term investment.

Thought I would mention it.

I've seen a big local pick up in action around me, in fact on my road.

The neighbouring house to me has just been sold for something like £960k. Foreign buyers with cash, looking to be nearer to a very expensive school.

Mine is identical, and I only paid £750k in 2009, though it had sold for £900k in 2008. I've also just had a letter from a guy who missed the neighbouring property and wanted to know if we were interested selling.

Something does seem to be afoot. In late 2007 to late 2009 things were dead, totally dead and HPC looked a dead cert, this is how I got to buy so comparatively cheaply.

I think people are starting to adopt an inflationary crash position. That said houses probably aren't the best asset for this, they are still relatively overvalued, and will underperform stocks, commodities and Gold over the next 10 years.

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I have heard some stories this week or people with sizeable cash lump sums opting to buy property rather than lose it via inflation re savings accounts. Don't want to risk it on shares or commodities but see houses as a long-term investment.

Thought I would mention it.

You are talking about Chelsea or Mayfair oi tink--lots of Banksters and Mafiosi to snap those up.

In my elbow of the forest prices are falloing like stones and EAs tell me buyers are not tempted to buy any falling knives anytime soon.

Anyone with reading ability will not be buying in just yet--the crash is well underway and has at least 2 years to hit a bottom and then a generation or more to recover. The damage has been too deep, the debr too high and the future too grim for anyone to be fooled at this point in the crash cycle.

Don't believe the EA hype but go on HPC.co.uk!

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Heard this too. Inflation of goods is plainly happening and set to continue, but wage inflation is not and I see no reason for it to. Wage inflation is the inflation that matters if you want nominal house price rises, particularly in times of more responsible lending like this. Stagflation is what we have now, and I see nothing on the horizon to change this. You'll lose money buying property now, nominal and real. Some people are buying beyond a sensible level and hoping inflation will help, that's quite a gamble and one that I can't see paying off.

I believe in the 1970s, the big pay rises lagged, but eventually workers became more activist. I see signs of this now.

Also I've noticed a lot of firms now struggling to recruit on what might have bee seen as decent salaries. I had a cold call from an Industry Research Firm looking for a Sales guy with experience in some of the sectors I've worked in (clearly found me on linkedin) . I played nicely and asked a few question, and when it came to salary they told me the base was £55k, I just laughed and told them I wasn't remotely interested at that sort of level , but might talk a 2x that.

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I have heard some stories this week or people with sizeable cash lump sums opting to buy property rather than lose it via inflation re savings accounts. Don't want to risk it on shares or commodities but see houses as a long-term investment.

Thought I would mention it.

I did in December after many months where the savings interest wasn't paying the rent any more and I realised our leaders were going to p1ss the value of my savings up the wall with inflation. I could have put down 90%+ in cash but found it better to have a mortgage at base+1.69% and leave some of STR fund in NS&I at RPI+1% tax-free.

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I have heard some stories this week or people with sizeable cash lump sums opting to buy property rather than lose it via inflation re savings accounts. Don't want to risk it on shares or commodities but see houses as a long-term investment.

Thought I would mention it.

But houses are DEFLATING! They are going from small real loss on cash to an asset that is losing it's value even faster than the cash! Madness.

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I have heard some stories this week or people with sizeable cash lump sums opting to buy property rather than lose it via inflation re savings accounts. Don't want to risk it on shares or commodities but see houses as a long-term investment.

Thought I would mention it.

Housing is only a long term investment if bought at the right price......anyone looking at preserving the value of their saving will only buy the right property at the right price....none of this 'pick a figure out of the air my property is worth this because I love it so much and you should pay the price I say you should because it is worth it'. ;)

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I believe in the 1970s, the big pay rises lagged, but eventually workers became more activist. I see signs of this now.

Also I've noticed a lot of firms now struggling to recruit on what might have bee seen as decent salaries. I had a cold call from an Industry Research Firm looking for a Sales guy with experience in some of the sectors I've worked in (clearly found me on linkedin) . I played nicely and asked a few question, and when it came to salary they told me the base was £55k, I just laughed and told them I wasn't remotely interested at that sort of level , but might talk a 2x that.

But will they raise the offer? Or will someone more in need take it? Where you have high unemployment I can't see how you can have wage inflation. Wages stagnated during the credit fuelled boom, why will they rise in the bust? I can only see the effect of rising fuel etc prices resulting in a lower standard of living, not wage rises. Also we have globalisation this time, it's not like the 70s

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But houses are DEFLATING! They are going from small real loss on cash to an asset that is losing it's value even faster than the cash! Madness.

If you are super risk averse and mindful of the kind of currency collapses that have taken place in recent years in countries such as Argentina or Russia it is not necessarilly that mad

If you are concerned about high inflation *and* the possibility of banks defaulting on their obligations to depositors, turning cash into something tangible is a rational choice. Gold wouldn't fit the bill for a lot of people because it offers no income, includes hefty dealers' premiums in its purchase price, might itself be in a bubble, and can be faked/ stolen. Agricultural land wouldn't be much use either if you are a city dweller with no experience or contacts in agribusiness

edit: that's assuming you had a large sum of cash that needs to be made 'safe' lying about. If someone was borrowing to buy into the current falling housing market, yes, that would be a pretty bonkers thing to be doing

Edited by Charlton Peston

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If you are super risk averse and mindful of the kind of currency collapses that have taken place in recent years in countries such as Argentina or Russia it is not necessarilly that mad

If you are concerned about high inflation *and* the possibility of banks defaulting on their obligations to depositors, turning cash into something tangible is a rational choice. Gold wouldn't fit the bill for a lot of people because it offers no income, includes hefty dealers' premiums in its purchase price, might itself be in a bubble, and can be faked/ stolen. Agricultural land wouldn't be much use either if you are a city dweller with no experience or contacts in agribusiness

And stock markets looked very over-priced at the moment with some experts saying a 10% correction is due in 2011. Some, in the past 48 hours, have stated that the S&P 500 is 25% to 30% over-priced.

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But will they raise the offer? Or will someone more in need take it? Where you have high unemployment I can't see how you can have wage inflation. Wages stagnated during the credit fuelled boom, why will they rise in the bust? I can only see the effect of rising fuel etc prices resulting in a lower standard of living, not wage rises. Also we have globalisation this time, it's not like the 70s

In my experience when this happens, you usually find it is due to the management in the firm trying to hold down the wages of the productive talent, so they can continue to pay themselves well as a managers - however without the talent the management is nothing and is worthless. Right now I think we are in a phoney war where management is trying to play hardball to keep down costs, but eventually they will come to realise they either have to hire people at greater cost or become irrelevant.

What tends to happen at the tipping point is that the talent says "sod this for a game of soldiers" and goes and sets up itself or works for a competitor - therefore it competes again the original employer.

In my case, if I could only get jobs paying £55k, then I would definitely set up on myself as I know I can easy earn more than that doing ad hoc stuff. However, if someone is willing to pay me £140k then I'd consider taking their offer.

For what its worth, since I left my old firm (a major IT vendor) I have personally cost then about £60m of business - £20m when I left as they lost a deal I had in the bag and another £40m just recently as I beat them in a bid - rather easy as I know their technology inside out. On this basis, I reckon I do have a minimum price, and whoever will pay it gets the benefit.

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If you are super risk averse and mindful of the kind of currency collapses that have taken place in recent years in countries such as Argentina or Russia it is not necessarilly that mad

If you are concerned about high inflation *and* the possibility of banks defaulting on their obligations to depositors, turning cash into something tangible is a rational choice. Gold wouldn't fit the bill for a lot of people because it offers no income, includes hefty dealers' premiums in its purchase price, might itself be in a bubble, and can be faked/ stolen. Agricultural land wouldn't be much use either if you are a city dweller with no experience or contacts in agribusiness

But at least gold is still in a bull run. And the transaction costs are much much lower than property and the money is easily accessible. Also property is effectively useless as an inflation hedge, as inflation increases so will interest rates causing property values to fall. If you want an income you can benefit from increases in the gold price bt buying a range of gold miners stocks that pay dividends. Or if you think golds run is coming to an end. There are plenty of other metals or commodities to choose from.

Edited by Pent Up

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In my experience when this happens, you usually find it is due to the management in the firm trying to hold down the wages of the productive talent, so they can continue to pay themselves well as a managers - however without the talent the management is nothing and is worthless. Right now I think we are in a phoney war where management is trying to play hardball to keep down costs, but eventually they will come to realise they either have to hire people at greater cost or become irrelevant.

What tends to happen at the tipping point is that the talent says "sod this for a game of soldiers" and goes and sets up itself or works for a competitor - therefore it competes again the original employer.

In my case, if I could only get jobs paying £55k, then I would definitely set up on myself as I know I can easy earn more than that doing ad hoc stuff. However, if someone is willing to pay me £140k then I'd consider taking their offer.

For what its worth, since I left my old firm (a major IT vendor) I have personally cost then about £60m of business - £20m when I left as they lost a deal I had in the bag and another £40m just recently as I beat them in a bid - rather easy as I know their technology inside out. On this basis, I reckon I do have a minimum price, and whoever will pay it gets the benefit.

sounds to me that you conspired to make yourself indispensible to the firm and then fracked off leaving them without the skills to complete and compete for work.

That is poor management...and they only have themselves to blame for walking down a cul de sac.

I deal with a firm that employs a useless peice of skin for a huge salary....but he sucks up to the boss and fiddles reports on sales to show himself in a good light.

The competition is fast overtaking them and they dont even know it. Management gets very lazy in boom times, and before they realize they are lagging, its too late in many cases....In particular, you get this situation in firms where the all dominant boss has virtually retired, yet still runs things, and the next tier of management are having to fight fires and try and negotiate a buyout.

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But at least gold is still in a bull run. And the transaction costs are much much lower than property and the money is easily accessible. Also property is effectively useless as an inflation hedge, as inflation increases so will interest rates causing property values to fall. If you want an income you can benefit from increases in the gold price bt buying a range of gold miners stocks that pay dividends. Or if you think golds run is coming to an end. There are plenty of other metals or commodities to choose from.

If you're worried about catastrophic default of your banks and your currency, interest rates and valuations denominated in that currency are moot points. If you manage to still be holding onto a decent property after the dust settles you'll have a tangible income producing asset with intrinsic worth. Scenarios like this were played out across mainland Europe in the post war years and further afield in more recent years

Paper holdings in gold mining stocks are hardly going to appeal to the risk averse

edit: I'm not attempting to turn this into a gold bashing thread. I'm just arguing that, if you've got cash, you're risk averse and you're worried about the stability of the £ and the banking system, buying into a decent property right now is not necessarily irrational.

Edited by Charlton Peston

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If you're worried about catastrophic default of your banks and your currency, interest rates and valuations denominated in that currency are moot points. If you manage to still be holding onto a decent property after the dust settles you'll have a tangible income producing asset with intrinsic worth. Scenarios like this were played out across mainland Europe in the post war years and further afield in more recent years

Paper holdings in gold mining stocks are hardly going to appeal to the risk averse

edit: I'm not attempting to turn this into a gold bashing thread. I'm just arguing that, if you've got cash, you're risk averse and you're worried about the stability of the £ and the banking system, buying into a decent property right now is not necessarily irrational.

I have cash.

I'm concerned about GBP so I keep half in EUR (GBP & EUR being the currencies I spend).

I don't think that buying a property at the moment would be necessarily irrational, I think it would be madness.

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I have cash.

I'm concerned about GBP so I keep half in EUR (GBP & EUR being the currencies I spend).

I don't think that buying a property at the moment would be necessarily irrational, I think it would be madness.

I have adopted a similar position to yourself

But there are plenty of people out there who do not feel comfortable playing around with currencies, bullion or stocks. They're not looking to make any speculative gains but simply to be able to preserve as much as possible of whatever capital they've accumulated. They appreciate that cash is intrinsically worthless and that, whatever happens, a decent property does hold some intrinsic, tangible worth. I know a few and, for them, property is still a draw as they believe that they won't lose out in the long term, whatever the short-medium term might bring.

Edited by Charlton Peston

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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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