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KingBingo

Its Not Just Houses

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Just thought I would share an anecdote from the city. I was having lunch with a venture capitalist who was telling me he was struggling with business owners. Basically, they all know what their business was 'worth' in 2008 and decided that hence forth their business shalt never be worth less than that, in fact why not ask for a few hundred grand more than 2008 just for good measure as prices only ever go up. Its a message I have heard often lately.

So its not just home owners that hold this delusion, but people who have built up and own multi-million pound business are suffering from precisely the same thinking. Just goes to show how across the board people just don't understand monetary phenomena like booms and inflation.

The thing is in business when they have to refinance they have to, so ultimately they are forced to accept a lower valuation, but only at the very last minute and only when they have literally no choice.

Given that no body gets monetary phenomena like inflation, and the government is not in the business of loosing elections, I really can see interest rates remaining on the floor until after the next election and everyone will just blame the high petrol prices on oil companies and high food prices on China or something. And since people will not be forced to sell because interest rates are not going up then houses will never crash in nominal terms. Volumes will remain none existent. The only people who will be buying and selling houses will be public sector workers, the rest will be bought by BTL'ers for a 2.1% yield.

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Just thought I would share an anecdote from the city. I was having lunch with a venture capitalist who was telling me he was struggling with business owners. Basically, they all know what their business was 'worth' in 2008 and decided that hence forth their business shalt never be worth less than that, in fact why not ask for a few hundred grand more than 2008 just for good measure as prices only ever go up. Its a message I have heard often lately.

So its not just home owners that hold this delusion, but people who have built up and own multi-million pound business are suffering from precisely the same thinking. Just goes to show how across the board people just don't understand monetary phenomena like booms and inflation.

The thing is in business when they have to refinance they have to, so ultimately they are forced to accept a lower valuation, but only at the very last minute and only when they have literally no choice.

Given that no body gets monetary phenomena like inflation, and the government is not in the business of loosing elections, I really can see interest rates remaining on the floor until after the next election and everyone will just blame the high petrol prices on oil companies and high food prices on China or something. And since people will not be forced to sell because interest rates are not going up then houses will never crash in nominal terms. Volumes will remain none existent. The only people who will be buying and selling houses will be public sector workers, the rest will be bought by BTL'ers for a 2.1% yield.

Sad but true.

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Just thought I would share an anecdote from the city. I was having lunch with a venture capitalist who was telling me he was struggling with business owners. Basically, they all know what their business was 'worth' in 2008 and decided that hence forth their business shalt never be worth less than that, in fact why not ask for a few hundred grand more than 2008 just for good measure as prices only ever go up. Its a message I have heard often lately.

So its not just home owners that hold this delusion, but people who have built up and own multi-million pound business are suffering from precisely the same thinking. Just goes to show how across the board people just don't understand monetary phenomena like booms and inflation.

The thing is in business when they have to refinance they have to, so ultimately they are forced to accept a lower valuation, but only at the very last minute and only when they have literally no choice.

Given that no body gets monetary phenomena like inflation, and the government is not in the business of loosing elections, I really can see interest rates remaining on the floor until after the next election and everyone will just blame the high petrol prices on oil companies and high food prices on China or something. And since people will not be forced to sell because interest rates are not going up then houses will never crash in nominal terms. Volumes will remain none existent. The only people who will be buying and selling houses will be public sector workers, the rest will be bought by BTL'ers for a 2.1% yield.

If you think valuing houses is tricky try valuing an embryonic business. Especially if you know sweet FA about what the business does.

Suprisingly I've had a lot of stuff from various organistions recently looking to gain equity stakes in small businesses. I thought it was because investors were looking for something a bit more "tangible" to plonk their money in. So why shouldn't small businesses want more ?

And anyway, if you see the cash people expect to get for their crap ideas on dragons den, why the hell wouldn't you value your business that actually has some customers, IP and assets a bit higher ?

Finally I might go to a VC to expand the business, or to move into new opportunities, but not to refinance. VC's may be ignorant, but they're not stupid. They can smell blood and desparation a mile away.

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The only people who will be buying and selling houses will be public sector workers, the rest will be bought by BTL'ers for a 2.1% yield.

you have just listed the people most deserving of the honour of taking over the debts from the banking system, rather them than me

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So does anyone want to challenge my assertion that there just won't be much if any nominal price falls?

I was hoping someone would give me a really good reason why I was wrong, its quite depressing.

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Just thought I would share an anecdote from the city. I was having lunch with a venture capitalist who was telling me he was struggling with business owners. Basically, they all know what their business was 'worth' in 2008 and decided that hence forth their business shalt never be worth less than that, in fact why not ask for a few hundred grand more than 2008 just for good measure as prices only ever go up. Its a message I have heard often lately.

So its not just home owners that hold this delusion, but people who have built up and own multi-million pound business are suffering from precisely the same thinking. Just goes to show how across the board people just don't understand monetary phenomena like booms and inflation.

The thing is in business when they have to refinance they have to, so ultimately they are forced to accept a lower valuation, but only at the very last minute and only when they have literally no choice.

Given that no body gets monetary phenomena like inflation, and the government is not in the business of loosing elections, I really can see interest rates remaining on the floor until after the next election and everyone will just blame the high petrol prices on oil companies and high food prices on China or something. And since people will not be forced to sell because interest rates are not going up then houses will never crash in nominal terms. Volumes will remain none existent. The only people who will be buying and selling houses will be public sector workers, the rest will be bought by BTL'ers for a 2.1% yield.

Just for a laugh here - did you not remind him that Linkedin Facebook Groupon Skype are worth hell lot more than 2007 - perhaps he was just being too conservative ?

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So does anyone want to challenge my assertion that there just won't be much if any nominal price falls?

I was hoping someone would give me a really good reason why I was wrong, its quite depressing.

from here on in I believe it is possible there will be no nominal falls - or minimal - or even nominal rises - all in the interests of the tories winning the 2015 election

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No falls until we get a black swan in the bond markets. QE is cushioning the falls. But QE can't hide from gold, which is about to break out and assault the £1000 milestone.

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from here on in I believe it is possible there will be no nominal falls - or minimal - or even nominal rises - all in the interests of the tories winning the 2015 election

In fairness its worth it just to stop Labour. The Tories are weak to take the easy path, but they WILL loose and it WILL be worse under labour IF they do the right thing.

Its a shame we don't have two good choices, only a bad one and a far worse one.

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Venture capitalist in talking down value of business shocker :)

Seriously though, perhaps if he offered to buy the business with something other than the paper money (which has probably lost more value since 2008 than the business he wants to buy) he might have more luck

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VCs often haven't got a clue what to do with a small business.

I sold a company to a VC/PLC some twenty years ago, they thought they could walk on water but they didn't have a clue. They screwed it up and went bust in the process, got bought out by another PLC who sold me back my original company for the value of the stock :lol:. I ran it in a slimmed down form for another fifteen years and sold it again in 2008 and retired :D.

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In fairness its worth it just to stop Labour. The Tories are weak to take the easy path, but they WILL loose and it WILL be worse under labour IF they do the right thing.

Its a shame we don't have two good choices, only a bad one and a far worse one.

yes, except over 10 years (2 electoral terms) nominal stability at 5% inflation translates to realterms 50% falls; this is fine providing you recognise it and take precautions

Edited by Si1

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yes, except over 10 years (2 electoral terms) nominal stability at 5% inflation translates to realterms 50% falls; this is fine providing you recognise it and take precautions

Which would be buy a house on a 10 year fixed (just encase). Providing your income responds to inflation, I'm in finance I'm confident it will, then your debt will get reduced 50%. Have I just become a Bull?

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VCs often haven't got a clue what to do with a small business.

I sold a company to a VC/PLC some twenty years ago, they thought they could walk on water but they didn't have a clue. They screwed it up and went bust in the process, got bought out by another PLC who sold me back my original company for the value of the stock :lol:. I ran it in a slimmed down form for another fifteen years and sold it again in 2008 and retired :D.

In fairness VC's are like anything, good ones and bad ones. My job is to figure out which are which and then bung them loads of cash.

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So does anyone want to challenge my assertion that there just won't be much if any nominal price falls?

I was hoping someone would give me a really good reason why I was wrong, its quite depressing.

We need a Ratner moment. Simon Cowell, or someone else the masses trust must tell people housing is overpriced crap. I'd give it 48 hrs to grind to a halt after that. And no, I'm not joking.

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yes, except over 10 years (2 electoral terms) nominal stability at 5% inflation translates to realterms 50% falls; this is fine providing you recognise it and take precautions

Which is fair enough, unless your wages don't keep up. Can you see spiralling wages these days? I certainly can't.

Houses have to fall nominally, it's the only way they'll become affordable again, and they have to become affordable again as there are only so many 'savvy' BTL investors. It could be falling rents this time that cause the crash, BTLs getting out while they can or being repossessed.

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Just thought I would share an anecdote from the city. I was having lunch with a venture capitalist who was telling me he was struggling with business owners. Basically, they all know what their business was 'worth' in 2008 and decided that hence forth their business shalt never be worth less than that, in fact why not ask for a few hundred grand more than 2008 just for good measure as prices only ever go up. Its a message I have heard often lately.

So its not just home owners that hold this delusion, but people who have built up and own multi-million pound business are suffering from precisely the same thinking. Just goes to show how across the board people just don't understand monetary phenomena like booms and inflation.

The thing is in business when they have to refinance they have to, so ultimately they are forced to accept a lower valuation, but only at the very last minute and only when they have literally no choice.

Given that no body gets monetary phenomena like inflation, and the government is not in the business of loosing elections, I really can see interest rates remaining on the floor until after the next election and everyone will just blame the high petrol prices on oil companies and high food prices on China or something. And since people will not be forced to sell because interest rates are not going up then houses will never crash in nominal terms. Volumes will remain none existent. The only people who will be buying and selling houses will be public sector workers, the rest will be bought by BTL'ers for a 2.1% yield.

Yea happy memories sitting in front of the vulture capatalists in NYC. I almost miss the scumbags. Happily we bootstrapped our business. VC's can kiss my feckin ass. Oooohhh that feels better.

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Which would be buy a house on a 10 year fixed (just encase). Providing your income responds to inflation, I'm in finance I'm confident it will, then your debt will get reduced 50%. Have I just become a Bull?

if you can get cheap debt then this is fine, get as high a real leverage as possible on these terms, a compliant valuer to overvalue it etc

yep - but don't cash buy!!!

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Which is fair enough, unless your wages don't keep up. Can you see spiralling wages these days? I certainly can't

in 10 years yes, in 5 years no

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if you can get cheap debt then this is fine, get as high a real leverage as possible on these terms, a compliant valuer to overvalue it etc

yep - but don't cash buy!!!

Exactly.

Regarding the 'cheap debt' that's the easy bit for me to value. Just look at what the interest portion of the payments would get me if I was renting, actually I am perfectly happy with 10yr fixed rates on this basis.

Valuing the capital value of a house over 10 years depends on inflation which is the highly subjective part.

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So does anyone want to challenge my assertion that there just won't be much if any nominal price falls?

I was hoping someone would give me a really good reason why I was wrong, its quite depressing.

History suggests you are wrong. Businesses lose value, houses prices fall.

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  • 311 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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