Will Somebody Help Me Out With This?

[Ignorant Steve]

He knows his stuff better than i do so i am sticking with him i am afraid

<{POST_SNAPBACK}>

So essentially what you're saying is: "I don't understand what he's saying but I'll believe him anyway"

There are plenty of emminent economists, past and present members of MPC that disagree with him.

Do you agree with him simply because he tells you what you want to believe?

I've said it before. I'll say it again. Your assumptions are flawed. We disagree and I don't think we'll ever find a middle ground. Good luck with your investments!

[Economic Sensation]

So essentially what you're saying is: "I don't understand what he's saying but I'll believe him anyway"

There are plenty of emminent economists, past and present members of MPC that disagree with him.

Do you agree with him simply because he tells you what you want to believe?

I've said it before. I'll say it again. Your assumptions are flawed. We disagree and I don't think we'll ever find a middle ground. Good luck with your investments!

<{POST_SNAPBACK}>

Possibly you are right. I don't agree with yours and i think you are only looking at what you want to believe in the same way that i am. The only proof of who is right is when we come back to this topic in the middle of next year.

If i am correct you are betting that interest rates will have risen to say 5%? If not where, and that house prices will slump? Out of interest is that your stance and if so when do you think house prices will slump and how far from their current levels.

I think interest rates will drop to 3.75% by the middle of next year and that house prices will level out this year, possibly easing a little further, and that they will then pick up next year.

How about for a laugh everyone put down their expectation and then i will flag it up to look back at them next year and we can see who was right or wrong. If i am proved wrong i will be the first to admit it.

Economic Sensations view

Mid 2006 - Interest rates 3.75% (against current 4.5%)

Average house prices according to Hometrack £163,000 - £165,000 (from current £161,000)

Anyone else prepared to put their prediction in writing?? . It would be interesting anyway to see what consensus of opinion we have

Maybe we can put this forum somewhere then and use it as a summary of feeling and periodically update it. Just an idea.

Edited September 22, 2005 by Economic Sensation

[Economic Sensation]

IMPORTANT

An article that my colleague has just brought to my attention is in todays Times, page 29. Britain needs a million new homes. http://property.timesonline.co.uk/article/...1791729,00.html

It says that Britain is facing a potential shortfall of 1.4 million homes according to experts, with an increase of 3.5 million households by 2021.

Please read this article as it will back up my arguments, especially that its easy to play different newspapers and magazines such as the economist against each other.

If not enough are built and demand is rising, which way does this push prices? Certainly now lower i will warrant.

Edited September 22, 2005 by Economic Sensation

[fatfreddie]

There is a lot of uncertainty in the States and this was prior to the rise in oil prices over there. With the trillion dollars of debt and a highly inflated property market, its possible the bubble may burst there causing a worldwide recession. This will lead to job insecurity so a FTB will have a purchase of a highly inflated property the last thing on his/her mind and also with the novice BTL out of the market, the sellers will outstrip the buyers. A number of people have abused the equity on their home and thus will find themselves in difficulties. With people dying, more businesses going bankrupt, increased unemployment, the taxman etc , repossesions these will bring the market down. Its a law of economics . With relation to the share market the easiest way to make money is a crash. When prices start to fall they fall quicker then when they go up. With the property cycle with a bit of luck should be back to 2004 price in 2012 with an unknown drop in between 20% to 30% being generous.

With a stock market crash of 1929 proportions there are predictions of some high class properties falling to 10% of their worth(a 90% drop) I think Robert Kiyosaki called these junk properties.

Uncertain times lay ahead anything can happen. A tip have some gold coins stashed away and stuff you can barter with. Check also if you have any cash savings in the bank how much it is insured for if the bank collapses. Is it Government protected.

1929 revisited Looking Forward To The Bust

http://www.elliottwave.com/features/defaul...at=pmp&aid=1907

A good article all boom busts DUH

http://whgbetc.com/meta/booms-bust.html

Unlike 1989 the next crash has nothing to do with interest rates

[whiterabbit]

Thats cool, without getting right into numbers as far as im concerned as long as the btl returns more than ( your mortgage + maintainance costs + self imposed hassle factor) then your on to a winner.

I know 2 people right now who are getting less rent than their mortgages on BTL and I think this is typical in my part of Hertfordshire and most of London. These people figure its worth subsidising one for the capital apprieciation I think they are nuts.

Another point is a lot of BTL owners do not declare or pay taxes on rent or upon selling and thats the only way they stay afloat. Sooner or later Gordon Brown and co are going to start catching some people.

[ShirtyTheSlightlyAggresiveBear]

Dont forget the entry/exit costs associated with buying and selling. These can easily add up to a years equivalent of rent. Taken with the supposed average person moving every 7 years, thats an extra lot of cost that doesnt seem to enter the calculations of the rent vs buy debate.

Mind you the EA's seem to have 'diversified' into rental fee collection activities, causing rental entry/exit costs to increase. FSA will become interested soon, but as usual take forever and do very little.

Another point is a lot of BTL owners do not declare or pay taxes on rent or upon selling and thats the only way they stay afloat. Sooner or later Gordon Brown and co are going to start catching some people.

Surprised it has gone on this long. Especially amongst renting the ol' second/third place to friend and family privately, cash payments.

[apom]

Last month 200,000 people remortgaged as their fixed rate mortgages ended.

Two years ago 3.5% fixed rates were available.

Now they are 4.9% and on average each re-mortgage was for £96,000

that’s on average over £1300 extra each a year... Over £100 a month...

over £250,000,000 extra interest repayments needed to be made...

and that is on existing debt.

That’s one month worth of re-mortgages... no new debt, just extra debt cost.

Personally I don't want to borrow £180,000... Those that had two years ago... just had over £200 extra cost a month...

People in huge debt have done their bit to the economy... their spending has been helping for a while... helping the economy... now they are a burden the rest of us drag around...

It must be horrible to be in a situation where the market has turned... many are in negative equity... many are now seeing the debt they believed would be okay harder then they imagined... and no end in site..

They can't sell... (many can't.. not if they have huge debt and a property that has devalued to a point that is lower then their debt.. 100% self cert mortgages at the peak for 6 times salary.. is common) they have no lives..

Hard for them...

Personally I could have bought.. I didn't because I read books on economics.. I asked and had long conversations with economic professors.. Studied long term trends... and learnt how our economy is structured... what feeds it and what starves it... the effect of segmental economics starvation on various areas..

I was going to spend many years worth of earnings... I figured I wouldn't do that until I had learnt all aspects of the economy.

I have not listened to V.I's or desperate hopers..

Prices are going to come down. They are coming down.

I have personally been offered a new build at a 30% discount over 9 months ago.

That’s just the way it is.

Edited September 22, 2005 by apom

[eric pebble]

Last month 200,000 people remortgaged as their fixed rate mortgages ended.

Two years ago 3.5% fixed rates were available.

Now they are 4.9% and on average each re-mortgage was for £96,000

that’s on average over £1300 extra each a year... Over £100 a month...

over £250,000,000 extra interest repayments needed to be made...

and that is on existing debt.

That’s one month worth of re-mortgages... no new debt, just extra debt cost.

Personally I don't want to borrow £180,000... Those that had two years ago... just had over £200 extra cost a month...

People in huge debt have done their bit to the economy... their spending has been helping for a while... helping the economy... now they are a burden the rest of us drag around...

It must be horrible to be in a situation where the market has turned... many are in negative equity... many are now seeing the debt they believed would be okay harder then they imagined... and no end in site..

They can't sell... (many can't.. not if they have huge debt and a property that has devalued to a point that is lower then their debt.. 100% self cert mortgages at the peak for 6 times salary.. is common) they have no lives..

Hard for them...

Personally I could have bought.. I didn't because I read books on economics.. I asked and had long conversations with economic professors.. Studied long term trends... and learnt how our economy is structured... what feeds it and what starves it... the effect of segmental economics starvation on various areas..

I was going to spend many years worth of earnings... I figured I wouldn't do that until I had learnt all aspects of the economy.

I have not listened to V.I's or desperate hopers..

Prices are going to come down. They are coming down.

I have personally been offered a new build at a 30% discount over 9 months ago.

That’s just the way it is.

<{POST_SNAPBACK}>

Well said Apom. You're a star. You are telling it like it is. Keep posting - let others know the Non-VI reality out there.

Edited September 23, 2005 by eric pebble

[unklmic]

A study has shown that over a 7-year period average property prices have always risen, including the slump of the early 1990's, so yes i am a long-term bull and yes i stand by property being up significantly in 10years

<{POST_SNAPBACK}>

ES.

So you are now a "long term bull", are you? Then why not join us in the realisation that at the moment house prices are way too high and are due for a correction. This does not necessarily fly in the face of your "long term bullishness" now does it?

Why do you argue with people who intend to buy in a year or two when prices are more realistic with """""long term""""" arguments?

[oracle]

Durch i cannot honestly believe you are trying to compare 2005 with 1929? Why not compare it with 1855 as well, or 1545? Things change i'm afraid.

<{POST_SNAPBACK}>

...it's because he has a better grasp over economic theory than you do.

you might think that its different this time but it really isn't,it's just a re-hash of an old cycle everyone had forgotten about.

and these cycles,known to a few posters here have specific durations.

14 year,30 year and 75 year to name three.

14 years(from 2005=1991) puts us into 1990's housing crash.

30 year(1975) puts us into OPEC oil crisis territory

75 year(1930) puts us in the great depression.

BY THE WAY,WAS THAT SUPPOSED TO BE A JEST ABOUT COMPARING TO 1855?.....that works on a 75 year base too.

can one of our historians please find out if there were severly crap economic conditions in that time period too?

WHERE DO YOU THINK WE ARE HEADED?...coincidence we are seeing some of the above materialise....NAAH!

Edited September 23, 2005 by oracle

[oracle]

JUST CHECKED!!!!!!....1854-1856 CRIMEAN WAR!!!!!!!!!!

[oracle]

Durch i cannot honestly believe you are trying to compare 2005 with 1929?  Why not compare it with 1855 as well, or 1545? 

BY THE WAY,WAS THAT SUPPOSED TO BE A JEST ABOUT COMPARING TO 1855?.....that works on a 75 year base too.

can one of our historians please find out if there were severly crap economic conditions in that time period too?

WHERE DO YOU THINK WE ARE HEADED?...coincidence we are seeing some of the above materialise....NAAH!

<{POST_SNAPBACK}>

well guess what......1855(CRIMEAN WAR 1854-1856)

I very much doubt economic conditions would have been too rosy!

[Chrysalis]

Eric you get better and better. If prices dropped 50-60% it would put the country into deep recession. And to only pay 3.5 times your salary in low interest rates is deluded if you want to get on the ladder. Its nutty comments like that which give sites like this and the intelligent people on it a bad name. I have not said that i don't think house prices won't fall further, but what you are saying is ridiculous. Are you a home owner or are you trying to get on the market?

Sorry for being rude but really that is ridiculous. What is your background and why are you so determined to drive the country into recession if you had your way?

Steve Tesco also announced very healthy profits at the same time. Can't be all bad. My view remains that what spurs people onto the property market is affordability and direction. The huge majority of buyers already own their own home, so if they can afford more they will upgrade. The new buyers either get in or have to rent, which keeps rents healthy and landlords with tenants (even if they are struggling with yields). Lower interest rates increases affordability. People, many intelligent people, have been predicting a price crash for 5-years, why is now any different. I just believe that all you will see is a soft landing and then a gradual increase again.

Durch i cannot honestly believe you are trying to compare 2005 with 1929? Why not compare it with 1855 as well, or 1545? Things change i'm afraid.

Can I ask you that you think a recession is avoidable?

From where I stand a recession is inevitable as the economy is currently rolling on borrowed money and it has to come down to earth soon.

Inevitably a reccession would trigger bankrupties which of course wipe out debt allowing the whole thing to start again.

If I am wrong and lets say there is no huge price and no reccesion, how do we sustain the current house prices and sustain an average 8% rise without higher inflation and how do we keep interest rates permanently low?

Everytime I think logically something tells me eventually at least one of the following things will happen and preclude a possible recession.

IR increase.

Inflation Increase.

Natural recession without housing slump, this happens house slump would follow.

Government go bankrupt since itself needs to kurb spending as its borrowing.

[laurejon]

A study has shown that over a 7-year period average property prices have always risen, including the slump of the early 1990's, so yes i am a long-term bull and yes i stand by property being up significantly in 10years

Spot on..........................and the 7 years are now up.............so the only way is down.

Or did you think when the 7 years of rises had finished, we had another 7 years of rises, then another, then another, then another.

Mate, we are heading only one way, for sure there is some microscopic profits to be made as the final herd of sheep, the interns just arriving fall prey to the lure of free money and a Champagne lifestyle.

Houses will for sure rise this year, but you are leaving your escape if you have one planned very late, maybe too late.

I can assure you that many people will wake up one morning, open the paper, and ask themselves WTF they did not sell up when the going was good. They will then get three jobs, the wife will leave them, and they will be selling Big Issue at a town near you.

[geneer]

I guess you didn't see the old thread making a clear calculation that property bought now is still a saving versus renting for the next 40 years?

surely that should be renting for the next 25 years.

Anyhow, perhalps its worth noting that there are further savings to be made in holding off for a few years, waiting for the inevitable HPC and they buying.

i do think that the market needed a correction and i think the market will struggle to rise for the next few years as average earnings catch up and as interest rates fall,

cool. I will look forward to my salary tripling over the next couple of years.

[geneer]

IMPORTANT

An article that my colleague has just brought to my attention is in todays Times, page 29. Britain needs a million new homes. http://property.timesonline.co.uk/article/...1791729,00.html

It says that Britain is facing a potential shortfall of 1.4 million homes according to experts, with an increase of 3.5 million households by 2021.

Please read this article as it will back up my arguments, especially that its easy to play different newspapers and magazines such as the economist against each other.

If not enough are built and demand is rising, which way does this push prices? Certainly now lower i will warrant.

Heres a quote from said article..."BRITAIN is facing a housing crisis with a potential shortfall of 1.4 million homes, according to estate agents...mortgage lenders...RICS....ahem...experts.

Edited May 20, 2006 by geneer