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Realistbear

Move Up Market Collapses:: "housing Market Has Ground To A Halt."

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40% equity is not highly leveraged let me tell you.

Do you think in forty years time when we look back on this time in history that we will even mention or know of a credit blip let alone how cheap house prices were ?

Cheap? in comparison to what? they will teach classes in forty years time about f*uckwits trying to get on the "ladder", it will be called "Grandparents as historical comedy class" :lol::lol::lol:

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I cannot think of any asset that is not derived from land.

Land is in reality human liberty which has been packaged up and is exchanged as property. Of course you can't create wealth without the liberty to create it

Edited by Stars

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In comparison to the market value of houses forty years from now.

Everything will seem cheap in 40 years time. The only question is whether the asset has outpaced inflation or not. I wonder in investors in Japan real estate thought they would have to wait 30+ years for a return on their money and if they think that money would have been better used elsewhere.

Edited by Vagabond

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Everything will seem cheap in 40 years time. The only question is whether the asset has outpaced inflation or not. I wonder in investors in Japan real estate thought they would have to wait 30+ years for a return on their money and if they think that money would have been better used elsewhere.

ABSOLUTELY SPOT ON!! :D

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The chances are that it will. One way you could gauarnatee that it does is to borrow all of the money for your house and never pay it back. That way the value of your loan and repayments will massively reduce in monetary terms while the value doesnt.

The only thing we do know is that rent will increase at a higher rate than inflation.

I'll respectfully disagree. I don't personally see rents or house prices increasing substantially for the next decade or two, certainly not above inflation.

I see living standards falling in the west until we're more in line with BRIC countries and the east. Rents won't rise substantially simply because people won't be able to pay it.

As for borrowing vast amounts of money to tie up in one asset class, you pays your money and takes your chances. I know you believe that capital gains on property will continue to increase. If thats the case then you'll end up making money. I believe you've also put your money where your mouth is so kudos for that. As I said, I believe property is a dead asset class (certainly in the UK) for the next decade or two and like you, I've got my cash positioned accordingly.

Ah the Japan card, one country in the world with a declining population used as an example of what could happen. Personally speaking I will take my chance that it doesn't turn Japanese.

It was more to illustrate the huge boom and bust they had, just pointing out that despite what you say, property isn't always a sure bet. But since you mention in, the UK only has a population growth of 0.48% in the last 5 years and thats with a fairly large amount of immigration as well. ((Link) I'd say that if living standards fall, less people will be coming in and with an ageing population that would give us our own demographic problems.

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The chances are that it will. One way you could gauarnatee that it does is to borrow all of the money for your house and never pay it back. That way the value of your loan and repayments will massively reduce in monetary terms while the value doesnt.

The only thing we do know is that rent will increase at a higher rate than inflation.

Ah the Japan card, one country in the world with a declining population used as an example of what could happen. Personally speaking I will take my chance that it doesn't turn Japanese.

How do we know this?

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The example above is one targeted at investors and it looks like 100% investment. Normal houses are about 40% investment at the most and less so in desirable areas or for property with larger land ratio to building size. There is an abundance of posts on here describing where sellers have decided to not sell and wait it out. Of course sellers can get distressed but they are in the minority and thanks to the good old owner not selling and providing a floor price the seller gets the benefit of that support and exits at that level. Only to buy back in or lease similar product from the same market. Other than this a seller is 100% in control of their decision to sell.

Most posters are only considering a buyers position and are not considering a sellers position. The worlds pubs are full of aggressive would be buyers that are forever procrastinating and targeting that bargain basement bonanza deal. A downloaded copy of "Negotiation Skills for Dummies" would do them no harm.

i more or less agree with this

In short, the land market doesn't work like other markets because there is significant component of monopoly* power held by the seller

The bottom can and does fall out of land though, but this is when the bottom falls out of the entire economy

There is a lot of wishfull thinking on this site

* People don't leave the land market because they can't escape it

Edited by Stars

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The bottom end of the market must have been toast for sometime now, but yet the FTB places don't seem to be dropping at all, at least not where I'm looking.

What do you consider FTB? Because I'm seeing studio and one beds drop in London.

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I can believe the second rung on the ladder has collapsed. If you splashed out on a flat £165k, sat on it for 5-6 years. Then discover fkme the next step is to borrow 130k more just to get a garden and the neighbor off the roof. It really makes you stop and think. Pension or a 10 square meters of earth + a larger council tax bill hmmmmm.

Choices choices.

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I can believe the second rung on the ladder has collapsed. If you splashed out on a flat £165k, sat on it for 5-6 years. Then discover fkme the next step is to borrow 130k more just to get a garden and the neighbor off the roof. It really makes you stop and think. Pension or a 10 square meters of earth + a larger council tax bill hmmmmm.

Choices choices.

Up the ladder, down the ladder the whole lot is knacked.

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Owners who want to move are stuck in their homes, crippled by the frozen mortgage market, the huge deposits demanded by lenders and high stamp duty.

these factors will continue to bring a halt to the housing market.

Stamp duty at 4% for properties above £500K mean that even those who may consider downsizing lose over £20K just because they decide to move. This has been one of the main factor in high prices in London & SE as supply has been throttled, so when a good family home comes up for sale there is always demand for it.

The higher deposits required are preventing a lot of people even considering buying.

The housing market has now narrowed to those who have to move. Few are buying as investments as well.

Lower prices will not necessarily resolve these fundamental issues unless they go so low that the stamp duty & deposits become significantly smaller and even then so many people will be in negative equity that they won't be able to sell.

The housing market will remain stagnant until people start getting evicted in large numbers. Only then will supply rise and create a true market. Of course reducing stamp duty could have an impact along with returning to 95% LTV, but I can't see either of these occuring.

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That what I have been trying to tell people as well.

The cost of living will un-gum it, very soon at this rate.

We're playing catchup with over 10 years of money printing and profligacy - nearly all of based on entirely fake GDP growth. People are going to be dazed and confused for a while and may well never make the connection, mainly because they don't want to, regardless ignorance will not protect them.

Edited by OnlyMe

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IMO taking stock of the relationships you have is a much better indication of the likely quality of your life, which is especially true given that those who have many close family and friendships generally live longer and are happier. The happiest times in my life have generally been times when I've had far less finances than I do now!

True about relationships, but often when people say "I was happiest when I was poor" they actually mean "I was happiest when I was young".

I think it's because the gains are expected, but the losses are a blow to the ego. That's why taking losses on a bad bet is so hard for most investors to do, even when the evidence for doing so is staring you in the face.

It's not to do with ego at all - almost all human beings gain less happiness from a £100 lottery win than they suffer anger from having £100 stolen.

Economists describe it as an "asymmetric utility function", but you know it yourself from everyday life: what you've never had, you never miss. But boy do you miss the things you had and lost.

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The cost of living will un-gum it, very soon at this rate.

We're playing catchup with over 10 years of money printing and profligacy - nearly all of based on entirely fake GDP growth. People are going to be dazed and confused for a while and may well never make the connection, mainly because they don't want to, regardless ignorance will not protect them.

I suspect volumes of house sales will never recover until there is a return to less punitive stamp duty rates. It is bad enough looking at moving in a falling market without losing 4-5% as an upfront cost. I paid 1% stamp duty when I bought my house less than 10 years ago, but due to fiscal lag, it is now in the 4% band. Even if the cost of living starts to impact, downsizing is an option that would lead to immediate losses for a number of home owners. I suspect sales will stagnate or fall, but there will be more lettings.

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http://globaleconomicanalysis.blogspot.com/2011/02/perpetual-liabilities-endless-note-on.html

Why Own a House?

As noted above, you can never really own one. Property taxes are a perpetual liability.

Twenty years ago you could get nice appreciation, but that is no longer true. Moreover, I suspect that once home prices bottom, prices will stagnate for a decade.

...

Twenty years ago you could get nice appreciation, but that is no longer true. Moreover, I suspect that once home prices bottom, prices will stagnate for a decade

Thus, there is no compelling financial treason to own a house. Indeed, from a financial perspective, there are good reasons to not own a house.

However, there are more important things than money. If having a house makes you or a loved one happy, then as long as you can afford a house, and as long as it does not make you a debt slave, it is reasonable to buy one.

The biggest key right now is making sure your job is stable. If it's not, then buying a house might bankrupt you if you lose your job. Unfortunately, many people vastly overestimate the stability of their job.

It's a fair point on property taxes but that's probably the very reason they have that tax.

Edited by billybong

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I suspect volumes of house sales will never recover until there is a return to less punitive stamp duty rates. It is bad enough looking at moving in a falling market without losing 4-5% as an upfront cost. I paid 1% stamp duty when I bought my house less than 10 years ago, but due to fiscal lag, it is now in the 4% band. Even if the cost of living starts to impact, downsizing is an option that would lead to immediate losses for a number of home owners. I suspect sales will stagnate or fall, but there will be more lettings.

Had exactly that confirmed today from a friend - wants to move, doesn't about value of house - it is a move swings and roundabouts, but the £10K's in stamp duty fees and costs is a complete blocker.

Also mini rush to meet the stamp duty hike for £million plus houses before April this year - that should skew the figures like buggery until then.

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Because it has always been so.

I have posted my Edinburgh central rent anecdotal so many times, I am not going to bore you all with it again. Basic story; rent has gone nowhere in last thirteen years. So what your are saying seems to be B.S in certain territories?

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When you buy at the 3% stamp duty level you need to make 5% or lose 5% just to move to exactly the same house and in many cases this needs to be cash if they are maxed out on the mortgage . This situation was fine with 10% per year rises but in a stagnant or falling market this is punitive and stop people moving, so no wonder there are so few transactions.

+1

Taxes are one of the great determiners of behaviour. When the window tax was introduced, people bricked up their windows. When brick tax was introduced they made bricks bigger. as tax was per brick.

Nowadays people build loft extensions rather than moving. I was looking at a £30K stamp duty bill when I was looking at moving last year which is more than I am spending on a conversion.

When houses rise at 10% per annum it's not a big hit, but in a flat/falling maket it's a good reason to not sell if you are looking to upgrade.

Edited by arrgee1991

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  • 316 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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