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Nothing Will Stop Our Urge To Buy

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http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10134077/Nothing-will-stop-our-urge-to-buy.html

Mortgage rates would have to rise to 10.5pc before it became more expensive to buy than rent.

That was the finding of a study by Forbes magazine, which analysed America’s property market and included all considerations such as deposit, insurance and the running costs of owning a home.

It assumes you live in your home for seven years and concludes that buying 41pc is cheaper than renting.

It’s a different story in the great coastal conurbations. In San Francisco, loan rates would only need to rise to 5.4pc, not a million miles away from the typical 3.9pc that Americans pay. In New York the figure is 6.8pc. The math, as they say, is simplified in that most borrowers take 30-year fixed-rate mortgages.

In Britain, such advanced calculations have not been made. Zoopla, a property listings website, regularly crunches the numbers in a more basic way, comparing the cost of renting with the cost of servicing a mortgage.

Its use of an interest-only mortgage for the sums, and based on a pricey 5pc mortgage rate, attracts criticism but Zoopla says using a repayment mortgage, where the debt is being paid down each month, would be misleading. Tenants who want to be buyers, the company says, would also put money aside for a deposit.

..

It tells a very different story from the situation in America. Its estimate is that the average mortgage rates paid by Britons would have to rise only by 0.69 points to 5.69pc, taking the cost up by £80 to £668 a month, to match the cost of renting.

Hilarious why rent from a landlord when you can rent from a bank and have all the obligations of maintaining the property for the bank and ultimately own nothing.

So what this is saying is that if your on a interest only mortgage and I presume this means you have no repayment vehicle in place as that would constitute repayment and be misleading is a small increase in mortgage rates and you might as well rent from a landlord than a bank. Still it's the right time to rent from a bank and own nothing and have none of the freedom of renting which allows an easy move in times of financial distress. Come you know it makes sense to buy now....

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http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/10134077/Nothing-will-stop-our-urge-to-buy.html

Hilarious why rent from a landlord when you can rent from a bank and have all the obligations of maintaining the property for the bank and ultimately own nothing.

So what this is saying is that if your on a interest only mortgage and I presume this means you have no repayment vehicle in place as that would constitute repayment and be misleading is a small increase in mortgage rates and you might as well rent from a landlord than a bank. Still it's the right time to rent from a bank and own nothing and have none of the freedom of renting which allows an easy move in times of financial distress. Come you know it makes sense to buy now....

Guilty as charged.

However "interest only" does not mean there is no repayment vehicle in place. It simply means that that repayment vehicle is not either an endowment policy (if such a thing still exists) or a repayment portion on the mortgage.

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Interesting. Tis strange how rates here are falling and yet rising in the US...and yet our bond yields are rising too. Presumably our variable rate mortgages mean the govt can borrow from lower short duration bonds than the longer ones required by fixed rate mortgages in the US? Which, if the tapering talk is indeed true, and we have to allow rates to rise here, a lot of UK borrowers will be fecked, very quickly.

On the other hand, given the regional disparity (the large increase in London) im less inclined to believe its due to FLS at all and rather more due to foreigners repatriating pounds and putting them into london property.

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Guilty as charged.

However "interest only" does not mean there is no repayment vehicle in place. It simply means that that repayment vehicle is not either an endowment policy (if such a thing still exists) or a repayment portion on the mortgage.

http://www.independent.co.uk/money/mortgages/the-interestonly-mortgage-time-bomb-that-must-be-defused-8497734.html

Many didn't have an investment vehicle in place to cover the capital debt, or the one they had was not up to the job – such as a poorly performing endowment product. Research from xit2, the asset management data firm, has shown that of 1.3 million interest-only mortgages set to mature by 2020, about one million do not have a repayment plan in place.

Mark Blackwell, the managing director of xit2, says: "If lenders fail to help these borrowers find a repayment vehicle, it will come back and give them a nasty bite around 2020 when the big batch of high-LTV interest-only loans granted in the mid-2000s mature.

"Eighty per cent of these borrowers have no repayment plan. Plenty of those will be families on tight monthly budgets, with low household earnings and little to no life savings. Many of these borrowers won't be able to pay off their mortgage before it matures and will be stuck in arrears."

It would appear you are 1 of the 300,000 who do. According to this 1m people do not.

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Interesting. Tis strange how rates here are falling and yet rising in the US...and yet our bond yields are rising too. Presumably our variable rate mortgages mean the govt can borrow from lower short duration bonds than the longer ones required by fixed rate mortgages in the US? Which, if the tapering talk is indeed true, and we have to allow rates to rise here, a lot of UK borrowers will be fecked, very quickly.

On the other hand, given the regional disparity (the large increase in London) im less inclined to believe its due to FLS at all and rather more due to foreigners repatriating pounds and putting them into london property.

And it will be the IO mortgage holders that will fall first £300 pcm @ 2% @ 4%=£600pcm so there maybe a bit of a problem if the rates hit 10.5%

So remind me whats the average yield now for BTL http://www.myfinances.co.uk/mortgages/2013/06/21/lsl-pace-of-rent-rises-slows-as-more-tenants-buy umm 5.3%

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And it will be the IO mortgage holders that will fall first £300 pcm @ 2% @ 4%=£600pcm so there maybe a bit of a problem if the rates hit 10.5%

So remind me whats the average yield now for BTL http://www.myfinances.co.uk/mortgages/2013/06/21/lsl-pace-of-rent-rises-slows-as-more-tenants-buy umm 5.3%

I dont *think* rates will hit 10.5% FWIW. Im certainly on the 'the economics points to deflation side'

Tapering would seem to suggest low rates would continue, but the govt would be unable to monetize such huge deficits. Given that means 6 million entitled public sector employees immediately going on strike, i don't think it will happen anyway.

OTOH if they allowed rates to return to their traditional role of reflecting risk, rather than acting as a hedge against inflation, the sky is the limit...

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I dont *think* rates will hit 10.5% FWIW. Im certainly on the 'the economics points to deflation side'

Tapering would seem to suggest low rates would continue, but the govt would be unable to monetize such huge deficits. Given that means 6 million entitled public sector employees immediately going on strike, i don't think it will happen anyway.

OTOH if they allowed rates to return to their traditional role of reflecting risk, rather than acting as a hedge against inflation, the sky is the limit...

IMO I think you're right. Deflation it is. There's no way rates can go to 10%, borrowers and non-borrowers alike are being crucified by the cost of living already. Everything is overvalued.. overvalued relative to the price of those commodities that makes it all possible: oil, energy and food.

A properly re-balanced economy might see the FTSE100 below 2000, ten million unemployed, and a litre of petrol @£3.00. Is that even possible? Things could deteriorate very quickly here if the Chinese pai gow gamblers are forced to liquidate their overseas positions. A significant swoon in China is likely to take down Japan too. The convulsions caused by a Japanese default would be without precedent. An economic world war, in effect.

.

Edited by zugzwang

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On the other hand, given the regional disparity (the large increase in London) im less inclined to believe its due to FLS at all and rather more due to foreigners repatriating pounds and putting them into london property.

Most people outside London have no idea of the wall of money that is being invested in London residential and commercial property from all corners of the globe. I don't bother posting links about it anymore because there are several reports a week of deals ranging from millions to hundreds of millions.

I guess all those freshly-printed pounds need to find a home. Another £120bn this year, who knows how much of it will end up inflating the London super-bubble further.

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Most people outside London have no idea of the wall of money that is being invested in London residential and commercial property from all corners of the globe. I don't bother posting links about it anymore because there are several reports a week of deals ranging from millions to hundreds of millions.

I guess all those freshly-printed pounds need to find a home. Another £120bn this year, who knows how much of it will end up inflating the London super-bubble further.

Yes it's all been powering up, even at the higher trading end of the global market, and certainly dealings in the lower multi-million dealing range. Too many people can't see it, as we have to be concerned about those who've over-borrowed way back in 2004/05, and feel sorry for those taking FLS to buy today. As though the borrowers are being forced into it.

20 Jun 2013 07:40 UTC

Globally, the total value of deals over US$5bn stands at US$339.9bn for the year-to-date, 56% up on the US$218.2bn that had emerged by this time last year.

Global-US5bn+-volumes.png

But now, flush with a record number of jet orders, the industry is gearing its factories to produce at high volume and low cost. More than 35,000 jets worth $4.8 trillion will be sold in the next 20 years, according to Boeing's forecast.

http://www.reuters.c...E95I19920130619

London's SW8...

Jun. 21, 2013

Chinese Conglomerate Acquires Part of One Nine Elms Redevelopment Project

By Alex Girda, Associate Editor

one_nine_elms_towers_w060212.jpg

London—A major component of London's One Nine Elms redevelopment project recently traded hands when original developer, Green Property, sold its development site to a Chinese conglomerate for a reported $140 million. Dalian Wanda, the new owner of the development site is now set to take over the reins of a project that currently has approvals in place for two high-rise buildings with 43 and 58 stories. The existing development plan calls for a 672-foot residential tower, making it the tallest residential tower in Europe.

Irish developer Green Property had acquired the portion of the One Nine Elms redevelopment site from Allied Irish Banks back in 2008. According to The Irish Times, AIB retained a carried interest in the project and will now also cash in on the increase in value that the property has experienced during the past five years. The project was then part of a deal that included assets worth in excess of $1 billion.

Now Dalian Wanda Group is set to invest a tremendous amount of money to get the two buildings to the London skyline. The Wang Jianlin-controlled conglomerate is set to inject around $1.1 billion in the development.

The new developer is now set to develop a 160-key hotel on the site, the first foray of the Wanda hotel brand in a foreign market. According to WorldPropertyChannel.com, the new owner of the development site has the full backing of Boris Johnson, the Mayor of London. Dalian Wanda is entering a massive redevelopment process with this purchase. One Nine Elms is the regeneration project for the Market Towers site. The plan would call for 1.13 million square feet of mixed-use developments to take shape in the London Borough of Wandsworth, a current hotbed for redevelopment projects.

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A properly re-balanced economy might see the FTSE100 below 2000, ten million unemployed, and a litre of petrol @£3.00. Is that even possible?

If that's what it take, that's what should be done. There is no point pretending things are better than they are. Better to face reality and make the good but tough choices. There are many examples of economies that have been in much worse shape but thanks to good decisions being made the economy bounced back. Look at Germany post WW2.

'After World War II the German economy lay in shambles. The war, along with Hitler’s scorched-earth policy, had destroyed 20 percent of all housing. Food production per capita in 1947 was only 51 percent of its level in 1938, and the official food ration set by the occupying powers varied between 1,040 and 1,550 calories per day. Industrial output in 1947 was only one-third its 1938 level. Moreover, a large percentage of Germany’s working-age men were dead. At the time, observers thought that West Germany would have to be the biggest client of the U.S. welfare state...'

http://www.econlib.org/library/Enc/GermanEconomicMiracle.html

Yet thanks to free market and sound money policy Germany became an economic powerhouse in a decade.

Higher interest rates will mean people stop investing in houses with prices inflated due to building restrictions. Instead productive assets will become attractive investments. Resources would be used to produce capital, instead of trading piles of bricks for stupid prices.

Clearly I'm not talking about central bank money going into the stock market to inflate prices. That is nonsense. I'm talking about the market making real investments of manpower and commodities into capital production. Rising stock markets used to indicate increased production and profits. That's why they becama an economic indicator, which is why they are not forced up with easy credit and money printing.

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Higher interest rates will mean people stop investing in houses with prices inflated due to building restrictions. Instead productive assets will become attractive investments. Resources would be used to produce capital, instead of trading piles of bricks for stupid prices.

Clearly I'm not talking about central bank money going into the stock market to inflate prices. That is nonsense. I'm talking about the market making real investments of manpower and commodities into capital production. Rising stock markets used to indicate increased production and profits. That's why they becama an economic indicator, which is why they are not forced up with easy credit and money printing.

Except that productive assets are only productive if there are people who are willing & able to pay to use them. In order to be able to pay to use them, the customers themselves need to be productive too - and that means lots of brain power in the modern economy. Are you sure the British workforce in general is up to that challenge ?

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It's a puff piece from Forbes magazine by a simple minded journo with little economic or mathematical credentials-my guess anyway. probably o did capital opportunity based on virtually zero cash yields. That would explain why with low mortgage rates they recommend a high deposit to make numbers add up, ie near zero opportunity cost on the deposit.

Forbes magazine. I ask you. scion of serious financial debate. Not.

PS wall of money. What nonsense. Do you have any idea how stupid this sounds in fundamental financial terms?

Edited by Si1

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Most people outside London have no idea of the wall of money that is being invested in London residential and commercial property from all corners of the globe. I don't bother posting links about it anymore because there are several reports a week of deals ranging from millions to hundreds of millions.

I guess all those freshly-printed pounds need to find a home. Another £120bn this year, who knows how much of it will end up inflating the London super-bubble further.

Outside of a few nice Areas in and around the central area, London looks so scabby though! Really does look nasty.

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Yes it's all been powering up, even at the higher trading end of the global market, and certainly dealings in the lower multi-million dealing range. Too many people can't see it, as we have to be concerned about those who've over-borrowed way back in 2004/05, and feel sorry for those taking FLS to buy today. As though the borrowers are being forced into it.

http://www.reuters.c...E95I19920130619

London's SW8...

Dalian Wanda are also buying out sunseeker Yachts too .....if its not a wall of wonger its certainly a very big pile........

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It's a puff piece from Forbes magazine by a simple minded journo with little economic or mathematical credentials-my guess anyway. probably o did capital opportunity based on virtually zero cash yields. That would explain why with low mortgage rates they recommend a high deposit to make numbers add up, ie near zero opportunity cost on the deposit.

Forbes magazine. I ask you. scion of serious financial debate. Not.

PS wall of money. What nonsense. Do you have any idea how stupid this sounds in fundamental financial terms?

The $1.1bn deal posted by Venger above was just one of several reported recently. As I said I don't bother posting about them because they are coming so thick and fast now it would be tedious, and also run counter to what most people want to hear about on here. But you can find them with the briefest of searches if you are interested.

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Outside of a few nice Areas in and around the central area, London looks so scabby though! Really does look nasty.

Yes it's astonishing, the disparity between prices and what you get for your money in on-the-ground reality. Ultimately driven by the vast seas of credit produced in the past 15 years, together with the suppression of normal price signals. Will everyone wake from the madness one day and look back in wonder? Or will it get even crazier...

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It's a puff piece from Forbes magazine by a simple minded journo with little economic or mathematical credentials-my guess anyway. probably o did capital opportunity based on virtually zero cash yields. That would explain why with low mortgage rates they recommend a high deposit to make numbers add up, ie near zero opportunity cost on the deposit.

Forbes magazine. I ask you. scion of serious financial debate. Not.

PS wall of money. What nonsense. Do you have any idea how stupid this sounds in fundamental financial terms?

Wall of money? That's probably like when in the Weimar Republic money was so cheap people used currency notes as wall paper. We are probably going in that direction. :)

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Except that productive assets are only productive if there are people who are willing & able to pay to use them. In order to be able to pay to use them, the customers themselves need to be productive too - and that means lots of brain power in the modern economy. Are you sure the British workforce in general is up to that challenge ?

Yes, they are.

Once you get above a pretty low numerical threshold, groups of people are pretty much the same. No one group (national, racial, generational, whatever) is particularly exceptional, good or ill.

Particular groups may historically display different characteristics, but this is far more as a result of what is rewarded within that social environment at that time rather than any innate ability or disability of the individual members of that society. Is British society capable and willing to morph to an environment where ingenuity, productivity and innovation is appropriately rewarded over networking and office politicking? That is the real question. For as long as it continues to be more socially acceptable and financially-rewarding to cut a path as a smarmy salesman or "manager" than it is to forge a career as an under-appreciated "geek" adding real value, I remain doubtful.

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Once you get above a pretty low numerical threshold, groups of people are pretty much the same. No one group (national, racial, generational, whatever) is particularly exceptional, good or ill.

Particular groups may historically display different characteristics, but this is far more as a result of what is rewarded within that social environment at that time rather than any innate ability or disability of the individual members of that society. Is British society capable and willing to morph to an environment where ingenuity, productivity and innovation is appropriately rewarded over networking and office politicking? That is the real question. For as long as it continues to be more socially acceptable and financially-rewarding to cut a path as a smarmy salesman or "manager" than it is to forge a career as an under-appreciated "geek" adding real value, I remain doubtful.

The lead, as ever, comes from the top.

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  • 238 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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