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Nico

Great Post From The Motley Fool

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So the good news is that the L.R. has informed us with their lagging figures which pertain more to Q2 than Q3, that prices are still going up, in fact more so in London than nationally, and a couple of London agencies have declared that the capital's market won't in fact decline, but will bounce back next year. Bounce back from what exactly isn't made too clear as the 200% bubble market rise of recent years hasn't exactly fallen into any kind of decisive cyclical low yet, but bounce back it will anyway according to the "experts", who seem curiously nonplussed at the unexplained abolition of the property cycle.

The bad news is that the L.R. is but another of the major indicators reporting a pronounced slowdown in HPI, which has actually fallen to 1996 levels, in addition to which they are flagging up low volumes, the national average probably not even keeping pace with the real unmolested rate of inflation. Hometrack the home of the nations self styled foremost property expert are even claiming negative HPI, although I notice that despite the presence of the great wriggling Elvis hunter himself, the Homecrap statistics don't seem to get the bulls excited these days.

The implications of apparently rising prices against low volumes are dealt with elsewhere today, but anyone jumping to the conclusion today that we are about to hare off into another bull market, would be well advised to bear in mind that we haven't actually finished with the old one yet, unless of course they subscribe to the notion of an asset price market which can only ever go sideways or upwards. In fact, they probably do, as indeed do most people, the clear and obvious reason why, being that such a silly fairy story suits them and their wallets very nicely, so they not only embrace it with gusto but draw solace from the fact that everyone else is as well. As for our friends the agents and their expert opinions, it's probably as good a time as any to reproduce a periodic reminder of just how spectacularly wrong most of the agents and other supposed professional property experts were last time around. From today's F.T. :

Few if any agents, mortgage companies or housebuilders predicted the length and depth of the last housing recession in the early nineties.

The direction of prices is notoriously difficult to predict.

In August 1991, for example, Henley Forecasting Centre predicted a 64% jump in house prices over the next five years.

Doesn't stop them spouting off at any and every opportunity about GSD's and cancelled crashes though does it ? and why would it, their audience, many of whom have no direct experience of what happened last time are always ready and willing to tuck into whatever self serving twaddle they serve up to them.

Which brings me to the ugly truth about where we currently reside in the great miracle workers property boom, which is IMHO, still at an extremely perilous point, possibly made even worse today with these LR figures, on the basis that they may have re-inforced a collective complacency which has led millions to borrow money they can ill afford to lose in Gordon's great property casino. A bubble is a bubble is a bubble, and it really is a simple as that. Like any asset market, especially one consumed by boom and bust as our housing market is, it will confound the best of us. Is it safe ? Is it dangerous ? If we all hold hands and jump in together, will none of us drown ? If it's going to crash, when will that be ? If it was going to crash, why hasn't it already done so ? And so on and so forth. There are no gaurantees, and there is no precise formula for what a wild speculative market like this will do or when exactly it will do it. The only sensible course of action is to simply take on board the fact that bubbles nearly always burst, that they do so invariably very much against the grain of mainstream opinion, and that the only way to make sure you don't implode with everyone else is by taking preventative action.

Bialystock

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I added this as I really think both sides have to step back and smell the roses.....

**********************************************

MOTLEY FOOL..

Long time lurker. First time poster (finally bothered to register).

I cant help thinking the devil is in the detail but the taking a step back once in awhile puts things in perspective.

Since I last looked the basic facts remain and it does not matter who you are - KoN, Bears Knightmare, Bialy or APDavidson....

1). Where are we on average house prices? 6x earnings still? (7x in London?)

2). Theoretically affordability is there due to historically low IR's (although first you have to get a mortgage 6x salary).

3). Inflation nudging up whether it be TRUE inflation or the governments hand-picked basket of inflation products.

4). Debt at record levels (Its been mentioned we have spent 3 years earnings in two years).

5). Bell-weather info leaking out - Repossessions on an upward curve, bankruptcy on upward curve, retail slowdown, unemployment on an upward curve.

6). Seemingly irrelevant factors to the uninitiated are also a concern...US IR's creeping up = UK ones? The Pound is coming under pressure partly and wither way we will soon be importing inflation because of it..and then we go back into how this will affect point 1-6.

The game will move on, metamorphose, and feed on itself with each and every drip of info and how it affects the above factors. The warning signs are flashing at the moment, the road ahead does not look brilliant if considered as objectively as possible.

Spin and counter spin only muddy's the water and bog's argument down. The housing market will be a victim if (?) the economy goes into tail spin but it will not be the main concern, it will be another financial victim of the economic fallout.

If you disagree with the big picture viewpoint I am trying to describe (probably poorly as usual) what is the alternative. 100 quarters of economic growth? No more boom and bust? A recessionless century?

Are we only arguing about the timing of the downturn (and thus the property correction/crash). What is clear is that we do need trigger, but the trigger is only known after the fact....so I think both sides should stop being so argumentative/prone to gloating....unless you really do believe that economic cycles/asset cycles are a thing of the past.

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I think events, people and markets just run out of steam. At the moment nobody can predict growth in any investment (with the exception of commodities). The markets are in limbo but propety is illiquid so the delay seems for ever. I am in the construction industry and today a contractor mentioned the R word. However even if we are going into recession it will take 6-9 months for all the construction projects to finish and work to become more scarce. Today is a good time to be sitting on your hands and wait a little.

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1). Where are we on average house prices? 6x earnings still? (7x in London?)

On ITV news tonight: London average property prices £300k, 10 x average London earnings!

Peak for previous crash was 6 x nat. ave. earnings I think.

What's more scary, in 1989/90 Millwall finished 9th in the premiership, one place above Man United!

Look where Wigan are today!

strange-sin-back.gif

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  • 301 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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