Jump to content
House Price Crash Forum
R K

"it Does Look Like A Bubble Ready To Burst" John Authers - Ft

Recommended Posts

http://video.ft.com/3629105408001/UK-housing-bubble/Markets

Personally I think too much emphasis is given to the price/earnings ratio based rooted in the 80s & 90s & insufficient attention given to the low yield world extant today, where as the video shows housing is 'cheap'.

But should please those betting on a crash.

As the expert says in the piece, great swathes of middle and low income buyers have been priced out of housing to be replaced by speculators and investors who have bought at the 'wrong price' ie: having dived in without having allowed a proper correction to occur.

Not sure how these middle and low earners are expected to afford the rents either. These investors must be hoping on the housing benefit gravy trains to continue or for wages to rise to support their investment.

Edited by aSecureTenant

Share this post


Link to post
Share on other sites

http://video.ft.com/3629105408001/UK-housing-bubble/Markets

Personally I think too much emphasis is given to the price/earnings ratio based rooted in the 80s & 90s & insufficient attention given to the low yield world extant today, where as the video shows housing is 'cheap'.

But should please those betting on a crash.

If it was so cheap, then why did they have to find money via QE.

Credit demand / credit availability.

The guy in the video thinks investors have been buying at the wrong price, replacing others in the market who housing is too expensive for. Chasing yield. I'll watch people in Alty beg and cry to sell their homes at lower prices.

Quite. The sudden stop in the market meant there was little liquidity and a temporary crash in transactions / market clearing and in truth no reasonable way to determine prices.

Of course a sudden stop in credit markets/transactions causes prices to fall, but to argue that is a good thing is bonkers, unless you're mega wealthy cash rich and use it to steal land from the relatively less well off. The Rothschild imperative effectively. Crash a market, pick up assets irrationally cheap when there's blood on the streets. Think German creditors v Greece for instance.

Also known as a crash.

Share this post


Link to post
Share on other sites

Quite. The sudden stop in the market meant there was little liquidity and a temporary crash in transactions / market clearing and in truth no reasonable way to determine prices.

Of course a sudden stop in credit markets/transactions causes prices to fall, but to argue that is a good thing is bonkers, unless you're mega wealthy cash rich and use it to steal land from the relatively less well off. The Rothschild imperative effectively. Crash a market, pick up assets irrationally cheap when there's blood on the streets. Think German creditors v Greece for instance.

Investors won't be buying up everything in a crash. Nice try with that one.

Yes, a good thing, when you're a a young outpriced non-owner who has saved up fair deposit for years, or well placed patient upsizer.

Perhaps not irrationally cheap, but at much more realistic prices than what some older VI view as cheap today, at the same time as arguing credit crunch (demand side or lender side or both) isn't really a crash.

That's why we're here - well not all of us, some are here to defend their VI house prices owned outright at these levels, or their big mortgages they chose to take out..

Yet Alty/South Manchester/nearly everywhere, older owners go around with their heads in the clouds, complacent to the fortunes what their homes are worth. Values are set at the margin.

Share this post


Link to post
Share on other sites

Excellent video.

Personally I think too much emphasis is given to the price/earnings ratio based rooted in the 80s & 90s & insufficient attention given to the low yield world extant today, where as the video shows housing is 'cheap'.

I think he does cover this as he is talking about how housing has become an investment for pension funds etc rather than a place to live for middle/low income earners.

Share this post


Link to post
Share on other sites

Excellent video.

I think he does cover this as he is talking about how housing has become an investment for pension funds etc rather than a place to live for middle/low income earners.

They think prices are cheap, like RK seems to do.

And apparently the same ones paying extreme prices, are going to be there to buy up houses in the crash. :lol:

We should be worrying about a Rothchild coming in and buying up the whole market after a 80% crash apparently, with no opportunity for ftb-renter-savers, patient upsizers, at 40-50-60% off today's prices, during the entire hpc, and even at 80%.

I'll see investor blood in the streets.

Share this post


Link to post
Share on other sites

As the expert says in the piece, great swathes of middle and low income buyers have been priced out of housing to be replaced by speculators and investors who have bought at the 'wrong price' ie: having dived in without having allowed a proper correction to occur.

Not sure how these middle and low earners are expected to afford the rents either. These investors must be hoping on the housing benefit gravy trains to continue or for wages to rise to support their investment.

The average investor chases returns, that's why they inevitably end up buying high and selling low. Buy high to jump on the bandwagon and sell low to jump on the next.

Share this post


Link to post
Share on other sites

As the expert says in the piece, great swathes of middle and low income buyers have been priced out of housing to be replaced by speculators and investors who have bought at the 'wrong price' ie: having dived in without having allowed a proper correction to occur.

Not sure how these middle and low earners are expected to afford the rents either. These investors must be hoping on the housing benefit gravy trains to continue or for wages to rise to support their investment.

Yes, so the low rates are protecting the speculators and banks at the cost of UK citizens and taxpayers. Nice to see who the politicians look after.

Share this post


Link to post
Share on other sites

Yes, so the low rates are protecting the speculators and banks at the cost of UK citizens and taxpayers. Nice to see who the politicians look after.

With prices rising, crazy-madly in some parts, and more bomad, btl and malinvested positions - as banks have been deleveraging in the background and spreading positions out to broader market.

A market can't crash until it's just about pulled in all those willing and able to pay the most topped out peak price.

Whilst the parents of a certain senior politician overseeing the economy downsize to a multi-million nice London home, and unless it was mortgage debt they had to repay, bank quite a fortune from the more expensive house they sold. Probably less concerned about a hpc now- but apparently no hpc ahead. Some on hpc claim no incentive to downsize for older owners from homes worth £1m as it's too expensive to do so with around £40K in costs. :lol:

Share this post


Link to post
Share on other sites

Low rates or not though, the investors (those in it for the price inflation anyway) have to exit the market at some point to see any return, and they will as soon as they see the chances of a return diminishing. Lets face it, the moment the first person sold at a profit (and by profit I mean taking money out of the market), the equivalent loss was baked in - there has to be a loser for every winner.

Share this post


Link to post
Share on other sites

http://video.ft.com/3629105408001/UK-housing-bubble/Markets

Personally I think too much emphasis is given to the price/earnings ratio based rooted in the 80s & 90s & insufficient attention given to the low yield world extant today, where as the video shows housing is 'cheap'.

But should please those betting on a crash.

Personally I think too much emphasis is given to the wage inflation model rooted in the 80s & 90s & insufficient attention given to the low yield world extant today.

Haldane talking about 4% increase, Dr Weale saying no wage inflation until unemployment falls to 5%.

C'mon, no one has a clue, they're casting tossing runes, reading tea leaves

Edited by 7 Year Itch

Share this post


Link to post
Share on other sites

http://video.ft.com/3629105408001/UK-housing-bubble/Markets

Personally I think too much emphasis is given to the price/earnings ratio based rooted in the 80s & 90s & insufficient attention given to the low yield world extant today, where as the video shows housing is 'cheap'.

But should please those betting on a crash.

Every time ive seen the haliwide affordability figures mentioned, its not simply average earnings vs mortgage payments that is reported as in ONS average wages or similar, its average earners of those who have been eligible for haliwide mortgages vs mortgage payments.

By that logic, if the average house costs £10million, so long as the average wage of mortgage holders is £3million, houses are still affordable, because 99.999% of would be borrowers are frozen out and not counted in affordability statistics.

Hence why he says middle and low income buyers cant buy and its really rather pointless to consider them as dictating prices as they are already no part of the market.

I'm not sure how much of a bust will come from investment buyers. Many are simply ageing boomer BTLers who dont really care about yields, they simply think if they hold long enough, prices will double and so on, rather than those who rotate from investment to investment as the yield dictates.

Share this post


Link to post
Share on other sites

I'm not sure how much of a bust will come from investment buyers. Many are simply ageing boomer BTLers who dont really care about yields, they simply think if they hold long enough, prices will double and so on, rather than those who rotate from investment to investment as the yield dictates.

That's the important part though, we're all living to a timescale.

Share this post


Link to post
Share on other sites

Excellent video.

I think he does cover this as he is talking about how housing has become an investment for pension funds etc rather than a place to live for middle/low income earners.

Yes, you're absolutely right. I didn't intend to imply it wasn't discussed in the video itself.

I thought it was an excellent video too. I'm a big fan of John Authers. His vids are excellent and nearly always hit the spot/nail the issue, which requires a particular skill in such a short timeframe imo. My point was a more general one, but I agree it's a hard sell especially on here. Perhaps I should just stfu.

Share this post


Link to post
Share on other sites

Lets face it, the moment the first person sold at a profit (and by profit I mean taking money out of the market), the equivalent loss was baked in - there has to be a loser for every winner.

Not necessarily, not when prices go up for ever. There is only an opportunity cost i.e. one seller exits and misses out on future profits that the next speculator makes.

Cos prices only go up forever right?

Share this post


Link to post
Share on other sites

Excellent video.

I think he does cover this as he is talking about how housing has become an investment for pension funds etc rather than a place to live for middle/low income earners.

Also mentioned that the proportion of income devoted to mortgage payments may not be as relevant given how there's a lot less people with mortgage's these days and that they've been replaced by the investment brigade.

Share this post


Link to post
Share on other sites

Yes, you're absolutely right. I didn't intend to imply it wasn't discussed in the video itself.

I thought it was an excellent video too. I'm a big fan of John Authers. His vids are excellent and nearly always hit the spot/nail the issue, which requires a particular skill in such a short timeframe imo. My point was a more general one, but I agree it's a hard sell especially on here. Perhaps I should just stfu.

Definitely not - lots of great threads and great links, RK. Thanks for posting.

Edited by ex nihilo de novo

Share this post


Link to post
Share on other sites

...

I'm not sure how much of a bust will come from investment buyers. Many are simply ageing boomer BTLers who dont really care about yields, they simply think if they hold long enough, prices will double and so on, rather than those who rotate from investment to investment as the yield dictates.

Whilst there are lots of early entrants BTLers who have a huge slug of bubble equity there are plenty of late entrants, even people entering today. As the fellah in the video points out some of these BTLs will start to be cash flow negative soon as mortgage rates move up. If prices fall at all then some of those late entrants will switch from seeing BTL as a way to produce the pension they failed to save for to seeing the BTL asset price correction eating into the modest savings that they put down as a deposit. I really think that late entrant BTL might act as an amplifier of any fall in prices as speculators exit, and if prices can start falling in a policy space where the Bank of England is not rushing to stop them falling, then they could fall a long way as successive falls discover people bottling out of the BTL game to realise their paper gains whilst they still exist of put a stop to paper losses before they get bigger.

In the same way some on the owner-occupier front, so called 'mortgage prisoners' with telephone number interest-only mortgages will be very sensitive to rate rises, especially if the boom earnings that they borrowed on are not what they once were.

I'd like to think that the whole thing is a great deal more fragile than it looks - lots of pretty weak 'investors' who will be looking to exit at the first sign of trouble, and if that happens...

Share this post


Link to post
Share on other sites

Whilst there are lots of early entrants BTLers who have a huge slug of bubble equity there are plenty of late entrants, even people entering today. As the fellah in the video points out some of these BTLs will start to be cash flow negative soon as mortgage rates move up. If prices fall at all then some of those late entrants will switch from seeing BTL as a way to produce the pension they failed to save for to seeing the BTL asset price correction eating into the modest savings that they put down as a deposit. I really think that late entrant BTL might act as an amplifier of any fall in prices as speculators exit, and if prices can start falling in a policy space where the Bank of England is not rushing to stop them falling, then they could fall a long way as successive falls discover people bottling out of the BTL game to realise their paper gains whilst they still exist of put a stop to paper losses before they get bigger.

In the same way some on the owner-occupier front, so called 'mortgage prisoners' with telephone number interest-only mortgages will be very sensitive to rate rises, especially if the boom earnings that they borrowed on are not what they once were.

I'd like to think that the whole thing is a great deal more fragile than it looks - lots of pretty weak 'investors' who will be looking to exit at the first sign of trouble, and if that happens...

Despite what the politicos would have us believing, the great unwashed are not even at these particular races.

Owner occupation is falling quicker than Rolf Harris' reputation. We should be doing more to highlight who owns our housing rather than encouraging politicians to find ways to enable us to win on what has become a housing lottery.

The landlords of this country, institutional or otherwise, have a responsibility toward the public. There is too much matter of fact opinion by people barely affected by the housing issue, ie over-40. This is going to cost far more than a few people's "pensions"

Share this post


Link to post
Share on other sites

Not necessarily, not when prices go up for ever. There is only an opportunity cost i.e. one seller exits and misses out on future profits that the next speculator makes.

Cos prices only go up forever right?

Wrong

Share this post


Link to post
Share on other sites

I can't say that I know the sum of ****** all about slavery. However I have watched 12 years a slave.

The thing that surprised me the most was that the slave were 'looked after' not because they were recognised as being deserving of it, not because they were more productive that way. No, they were looked after because they were an asset against which there was a loan.

Share this post


Link to post
Share on other sites

Not necessarily, not when prices go up for ever. There is only an opportunity cost i.e. one seller exits and misses out on future profits that the next speculator makes.

Cos prices only go up forever right?

:lol:

Despite what the politicos would have us believing, the great unwashed are not even at these particular races.

There is too much matter of fact opinion by people barely affected by the housing issue, ie over-40. This is going to cost far more than a few people's "pensions"

It's utter complacency, imo. There's loads of older owners who haven't really felt a thing of this economic situation, not just since 2008 to now, but for decades. Nothing has really impinged on their long-wave HPI reality, incomes and pensions.

Away in fantasy land about the value of their homes. Not even recognising previous crashes have been about cost of money / availability of money / real proceedable demand for debt. And dismissed as these events not being a good thing for many non-owning/upsizer hopeful market participants. The money never runs out, to pay higher prices, until it totally does.

Share this post


Link to post
Share on other sites

Every time ive seen the haliwide affordability figures mentioned, its not simply average earnings vs mortgage payments that is reported as in ONS average wages or similar, its average earners of those who have been eligible for haliwide mortgages vs mortgage payments.

By that logic, if the average house costs £10million, so long as the average wage of mortgage holders is £3million, houses are still affordable, because 99.999% of would be borrowers are frozen out and not counted in affordability statistics.

Hence why he says middle and low income buyers cant buy and its really rather pointless to consider them as dictating prices as they are already no part of the market.

I'm not sure how much of a bust will come from investment buyers. Many are simply ageing boomer BTLers who dont really care about yields, they simply think if they hold long enough, prices will double and so on, rather than those who rotate from investment to investment as the yield dictates.

They add to rental demand and rental demand adds value to BTL'ers yeilds. They still play a small part in the market.

I think you are right about some BTL'ers not caring about yields and only looking for capital gains. What sort of correction will change the believe that house prices double ever 10 years? In my eyes it has to be a long peroid of falling values and yields (aka japan) with yields on other investment rising, so only a mug would want to buy a house as rents will be so much cheaper than a mortgage.

Share this post


Link to post
Share on other sites

I'm not sure how much of a bust will come from investment buyers. Many are simply ageing boomer BTLers who dont really care about yields, they simply think if they hold long enough, prices will double and so on, rather than those who rotate from investment to investment as the yield dictates.

Not all of them though, eh.

You only have to read the West Brom thread, one guy a solicitor backing their legal action, with him and his wife having 10 investment properties in London. That woman who worked for Shelter hit by their change to commercial finance with her BTL. Other story of a couple and their teenage kids out in the cold outside a house, big frowns, with the parents nicely providing houses for other people as landlords, hit by the rise in finance costs to their tracker their BTLs.

Read landlord forums, the ones who have forgotten about the LLs 2008-2010 took down, seen reflation in their own properties, getting giddy and saying saving makes no sense when it can be deposit for new BTL, and enthusing having only a sliver of equity will mean the lenders won't look to repossess. Other forums still with pensioners having empty BTLs and being pursued by banks.

You'd almost have to forget that values in the housing market are set by transaction prices between buyers and sellers each month - not just affecting individual houses, but entire market. And money is getting tighter.

Edited by Venger

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   205 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.