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werewolves

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Hello everybody...

Just noticed an interesting discussion at www.economicsuk.com, the site managed by David Smith (Times economics editor)... David doesn't believe in a significant market correction.

Mosey over to:

'Don't get suckered by the house price rally'

Click on the 'comments' box and comment away...

Sensible comments only I guess. There is a good discussion in progress so it would be a shame to drag it into the gutter...

B)

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A whole industry has built up around the crash story, with websites, weblogs (blogs) and newsletters. I can only think this is driven by schadenfreude - pleasure in the (potential) misfortune of others.

What about the misery/misfortune of people unable to afford a home. Jeez!! :angry:

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Great comment from Warks Lad. :)

It is WAY too early too call off the house price crash.

As everyone should know, actual housing transactions have dropped off a cliff over this past year.

The housing indices are also, in my view, reflecting that only the more desirable properties (and thereby the more expensive) are actually being transacted, so skewing the figures.

Everything else is way overpriced (a lot more than the 10-15% you say) and simply isn't selling. There's a glut of property on the market and relatively few buyers.

Still, that doesn't matter to the vested interests of the market who are always looking to spin their way out of trouble, and the Government who are trying to keep the whole show going with SIPPs.

Alistair Campbell would be proud of the whole effort.

Personally I am coming around to the view that the only thing which will produce a dramatic crash circa 1989 is a rise in Interest Rates - but I don't think they have to be raised much (only a few %) to cause mass panic and selling by BTLs whose profit-margins are already non-existent or laughably small.

The debt burden is huge and wage inflation just isn't there to help like it was in the 1970s. So with rising fuel costs, rising taxes (to plug Gordon Brown's black hole) for everyone, this situation is going to take a long time to rectifty itself.

By which time demographics will turn against the housing market as the baby boomers begin to try and sell-up their second homes.

And with the US continuing to raise their Interest Rates and other central banks making noises about raising theirs - there is only so long that the BoE will be able to hold off.

This is all going to end in tears. David I do not understand your eternal bullishness on property. The market has corrected before and it will do so again.

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Done my bit, added this:

Disturbing trend appearing in latest land registry report doesn't point to a very stable market!!

THE SHARP RISE IN % OF MORTAGAGED PROPERTIES NATIONWIDE.

Looking back at data as far back as 1998 it shows a steady trend line of around 70%, but in the last 6 months of data it has risen around 4% above trend,

This is probably down to Mortgage Equity Withdrawals to consolidate debt. (remember the headline credit card debt has fallen for the first time in 10 years, whilst mortgage lending has seen record figures for a single month (yet houses weren't selling?)

Posted by alarm bells at November 8, 2005 05:25 P

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Professor Steve Nickell- what a pillock:

Second, the disappearance of the front end loading problem when inflation rates and nominal interest rates are low. For example, it might be quite sensible for young professionals to borrow, and for banks to lend them, four or even five times annual earnings to purchase a house given both their very high level of job security and their very rapid rate of prospective earnings growth.

This so-called problem was what enabled people to move up the ladder. Now they can't move anywhere, unless they want to borrow another 200K...

Still, at least he answers his critics, unlike GB

Edited by RichM

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Professor Steve Nickell- what a pillock:

This so-called problem was what enabled people to move up the ladder. Now they can't move anywhere, unless they want to borrow another 200K...

Still, at least he answers his critics, unlike GB

I respectfully disagree. The front-end loading problem when I first bought was very real, due to high inflation and higher interest rates. I remember doing calculations at the time which indicated it would be far easier to get onto the ladder in the first place, then move up, with both factors lowered.

Problem is, this benign influence has now been capitalised, so the situation for FTB's is in fact worse. It is still much easier than it was during the late 70's to move up the ladder, provided you can sell first.

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Also there's a terrific post from pirata, which I have taken the liberty to paste:

David,

I have not had the benefit of your years of study, but here is my simplistic analysis of the situation.

After the early 90s crash, house prices started to naturally gravitate towards the long term trend line. However, they then drastically overshot the long term trend line because:

low interest rates post 9/11 meant banks felt comfortable drastically eaing lending restrictions, taking salary multiplies from 3.5 to 4 right up to six, then interest only, and the evil of all evils - self certification AKA lie to buy.

So a far greater number of £££ were chasing broadly the same number of properties. Result=inflation. eg you are earning marginally less than me and we both want to buy the same property, if the bank will lend you 5x income rather than 3.5 to bid for it, I must also borrow 5x to outbid you. So the price rises.

Added to this was the Buy to Let craze, banks seemingly turned a blind eye to the extremely high gearing of many of these investors, allowing them to buy house after house using equity from previous houses, so even more £££ chasing a relatively fixed number of properties. In fact this has the hallmarks of a pyramid selling scheme.

Now there is ultimately a limit to this that we are slowly reaching. Wages and therefore rents have come nowhere near to catching up with house price rises, so buy to let margins have been squeezed and are for all intents negative. This must start to restrain what investors are willing to pay. And lenders have pushed salary multiples to the limits of comfort at a time when interest rates are more likely to go up than down.

The immigration issue is an interesting one - it will help push returns that little bit higher for those landlords prepared to get into the business of slum landlording, as you can get that little extra by cramming people into properties. I know personally of 10 Brazilians living in a 3 bed flat. But even that will reach its limit. And these immigrants in the vast majority have no chance of buying property themselves, given that British graduates are now priced out until their mid-thirties.

So we have more or less reached the point where the great wall of money thrown by lenders at the housing market in the last 5 years is coming to an end. As the money supply contracts back to normal levels, prices must fall. How fast they fall depends on how fast interest rates have to rise - if at all.

* Tips hat to Pirata, for expressing my views better than I ever could. *

(Wouldn't a hat tip emoticon be useful ;) ?)

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I respectfully disagree. The front-end loading problem when I first bought was very real, due to high inflation and higher interest rates. I remember doing calculations at the time which indicated it would be far easier to get onto the ladder in the first place, then move up, with both factors lowered.

Problem is, this benign influence has now been capitalised, so the situation for FTB's is in fact worse. It is still much easier than it was during the late 70's to move up the ladder, provided you can sell first.

Yes, i recognise that the problem was real, but the high inflation that came with it meant that you move "up the ladder" - no high inflation, no moving up the ladder, as far as I see it (unless prices crash!)

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Has Property Guru joined us in the debate?

'Hi David,

I have read your article and agree totally with the logic. I think the doom and gloomers have misread the economics data and in fact house prices are cleary sustainable at current levels and there will be no house price crash.

Do not be concerned if you suddenly get a load of negative comments / posts here as a organised trolling of this site has been arranged by www.housepricecrash.co.uk. (a well known doom & gloomers / loser site)

If you go to that site you will see the thread in the main forum telling members to come here.

Just thought I would tip you off !!

I think it is a sign of now the house price crash has been cancelled they are getting desperate !!'

'house price crash has been cancelled' sounds remarkably like PG drivel to me?

I wonder what everybody else thinks?

:o

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Ha ha! Paul IS Property Guru!!

Just look at the following post where I'm sure some of you will recognise his usual hallmarks...

He also just happens to be online at SingingPig at present...

'Hi !

I can see with my post hit a raw nerve with the guys from www.housepricecrash.co.uk who seem angry that I have exposed their childish organised trolling of David's excellent forum.

Their trademark flood of abusive, aggresive chav like comments and weak economic analysis is indeed a symbol of www.housepricecrash.co.uk

However David do not worry they reguarly invade other forums with their fundamentalist doom and gloom approach and usually it is a sign they fear your economic analysis. So if anything I would take it as a compliment.

It is amusing that their site which they try to project as "credible" to the media is so easily exposed for trolling activities more suited to 14 year olds.

And these people wonder why they are renters and don't get anywhere in life.

They seem very upset that the house price crash has been cancelled and their trolling exposed.'

As usual he's got bugger all useful to say, rather prefering the offensive 'doom and gloomers' strategy... I'm sure David Smith will be well impressed...

:blink:

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I have to say, all credit to David Smith, there are very few in his position who'd enter such a debate, I haven't joined in but it's the kind of debate that is a pleasure to read, respectful and challenging. It does, however, seem to have decended into a squabble since 'Paul' entered. Shame.

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i just love that girly comment you hear now and again from gushy sellers.

'the crash has been cancelled'

haha - cancelled. like its a pop concert that can just go away.

the economics control this. not some notion of being able to call it off.

makes me laugh, buts its worrying that these people have managed to make money from being so childishly dumb. still buying 3 years ago, you couldnt mess it up. and doom and gloom 'mongers'. its like being in a playground, yet these people are middle aged. amazing....!!

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David

A lot of folks in the city know you are a crisp packet economist. Maybe you should read some real economic books than those book written by Gordon Bling.

The success of the new labour government who lines the pockets of your newspaper is built on lies and fraud. Debt is that a way to real run an economy. There is no growth in the UK the 'growth' in this case is thank to the balloning public sector.

You highlight figures from the CML these are skewed by the fact most are from MEW. Most folk have borrowed to much now they are sinking. New labour has built its so called economic success on debt.

Up with US IRs, UP with EU IRs = Death of new labour.

Posted by Ian Smith at November 9, 2005 12:36 PM

if that isn't E Powell I'll eat my hat......

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Yes, i recognise that the problem was real, but the high inflation that came with it meant that you move "up the ladder" - no high inflation, no moving up the ladder, as far as I see it (unless prices crash!)

Ah yes, I see what you're driving at. Ummmmm ... mutters into beard for a while ... I think I want to work this through with a spreadsheet. (But not until tomorrow evening Australian time.)

B)

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A whole industry has built up around the crash story, with websites, weblogs (blogs) and newsletters. I can only think this is driven by schadenfreude - pleasure in the (potential) misfortune of others.

What about the misery/misfortune of people unable to afford a home. Jeez!! :angry:

Agreed. And with a liitle editing and swapping of words:

"A whole industry has built up around the house price boom and the story that it's different this time, with websites, weblogs (blogs), newsletters and property investment seminars. I can only think this is driven by greed - and it has the (definite) misfortune of keeping first time buyers out of the property market."

JF

Edited by jf72

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Hey!! I need help from my fellow bears to fight the bulls...

I've already got a bull horn puncture in my bear butt.

Come along and join in...

www.economicsuk.com

Click on comment box for 'Don't get suckered by the house price rally'.

:(

Edited by werewolves

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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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