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Roger Bootle Expects 30% Drop In 4 Years

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History - in Roger Bootle's words - may tell us that such high loan to salary ratios cannot be maintained, but to be frank, nothing that has happened since 2008 bears any relation to history. :blink:

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Thought this was from 2003 when RB was predicting 30% down over four years.That call worked out well.

http://money.uk.msn.com/news/articles.aspx?cp-documentid=153268417

'Capital Economics' forecasting results

None of CE's forecasts that I found came near the reality. It's worst prediction, -30% from October 2003, would have meant that house prices would be at £110,000 in 2007. They were at £195,000.'

Edited by Sancho Panza

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History - in Roger Bootle's words - may tell us that such high loan to salary ratios cannot be maintained, but to be frank, nothing that has happened since 2008 bears any relation to history. :blink:

History wise this crisis is exactly like the railway mania collapse.

There was an initial collapse and the banks were bailed out, no lessons were learned and it was followed a few years latter by another collapse, some banks shut their doors for a bank holiday, not all were re-opened, the banks were then regulated. There were too many politicians/elites up to their eye balls in the mania so nothing was done. IN the end a couple were made scape goats.

If that scenaro is played out we will see another collapse...soon.

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History - in Roger Bootle's words - may tell us that such high loan to salary ratios cannot be maintained, but to be frank, nothing that has happened since 2008 bears any relation to history. :blink:

Well there has been the small matter of stimuli......

Car scrappage scheme - Labour.

Boiler scrappage scheme - Labour.

QE - Labour.

Funding for lending - Coalition.

Help to buy - Coalition.

Help to buy 2 - Coalition.

Socialism in action and they wonder why so many will be voting UKIP next year.

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Unfortunately, Roger Bootle's record in forecasting means that it's no surprise the MSM have ignored him. He may be right this time, but he's been wrong so often now that he no longer has any credibility at all and should just keep quiet on this subject!

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Unfortunately, Roger Bootle's record in forecasting means that it's no surprise the MSM have ignored him. He may be right this time, but he's been wrong so often now that he no longer has any credibility at all and should just keep quiet on this subject!

He was right about low interest rates for 5 years. I think it's impossible to know when the tipping point will come markets can stay irrational longer than you can stay solvent. I think the tipping point is in in London. The rest of the country is a mix. Hope this goes well for everybody on HPC.

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He was right about low interest rates for 5 years. I think it's impossible to know when the tipping point will come markets can stay irrational longer than you can stay solvent. I think the tipping point is in in London. The rest of the country is a mix. Hope this goes well for everybody on HPC.

Solvency is not a problem in this case, unless of course you buy a house at the top of the market using borrowed money.

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It's a similar word with huge differences....

Median home prices are currently 5.7 times the average salary

and

The Bank of England recently introduced new mortgage controls, effective from October 1, limiting loans to 4.5 times income

Mortgages, of which 15% can be 4.5x household income or greater, won't put any brakes on 5.7x average salary prices. We have people having to use using two incomes to buy houses from people that bought them using one income.

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Solvency is not a problem in this case, unless of course you buy a house at the top of the market using borrowed money.

True I should have said . markets can stay irrational longer than you aspect.

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Real or nominal? If wages start to rise at 3% per year (stop laughing at the back) this makes a big difference. I suspect that Lab and Cons will do whatever they can ie use as much taxpayer money as needed to prevent a nominal fall.

Nominal.

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It's a similar word with huge differences....

Median home prices are currently 5.7 times the average salary

and

The Bank of England recently introduced new mortgage controls, effective from October 1, limiting loans to 4.5 times income

Mortgages, of which 15% can be 4.5x household income or greater, won't put any brakes on 5.7x average salary prices. We have people having to use using two incomes to buy houses from people that bought them using one income.

The point about macro prudential counter-cyclical 'rules' is that they work both ways.

Lending multiples are the new base rate

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Real or nominal? If wages start to rise at 3% per year (stop laughing at the back) this makes a big difference. I suspect that Lab and Cons will do whatever they can ie use as much taxpayer money as needed to prevent a nominal fall.

The UK's already in a debt spiral, the more they spend the faster we accelerate to our demise.

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We have a gauge of multiples for lending which provides the link between incomes and house prices, but is there an equivalent link in the rental market which is even more directly linked to incomes?

I think the % of income spent on mortgages fluctuates mainly when rates are altered and the market takes time to get back to equilibrium. This doesn't occur in the rental market directly, so what is the link? I think the % spent on rent (and mortgages too of course) can be higher in areas of higher incomes as a smaller proportion of income is needed to be spent on essentials like food and heat. i.e. there is a link to the discretionary element of incomes.

I'm sure you're familiar with this chart of loan to income multiples, rates and repayments % of incomes. They're as close to a low as they get in the cycle. It's counter-intuitive, but we're closer to cyclical lows than cyclical highs (London aside). That would make sense if we're nearer the start than the end of this 16 year (or however long) credit cycle.

House prices are (imo) a bit of a red herring. Nominal prices are just the corollary of everything else. They're the outcome, not the driver.

The relationship between loan-to-income ratios, mortgage rates and mortgage repayment affordability pic.twitter.com/DtHz03Xva8

Edited by R K

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I'm sure you're familiar with this chart of loan to income multiples, rates and repayments % of incomes. They're as close to a low as they get in the cycle. It's counter-intuitive, but we're closer to cyclical lows than cyclical highs (London aside). That would make sense if we're nearer the start than the end of this 16 year (or however long) credit cycle.

House prices are (imo) a bit of a red herring. Nominal prices are just the corollary of everything else. They're the outcome, not the driver.

The relationship between loan-to-income ratios, mortgage rates and mortgage repayment affordability

The transition in the chart from the 1980s part to 1990 is interesting. Vertical around 1990.

One minute they were less than 22% of income and the next minute they were 28%.

Around that time the base rate had been continually increasing for years, there was a MIRAS change in 1988 and house prices had been rapidly increasing at that time but the peak was Q3 1989 (base rates peaked around the same time) rather than 1990.

The mortgage rate must have really shot up in 1990? (from about 9% to about 12%) even though house prices and the base rate were both falling at the time.

The base rate in 1990 was 13.875% - higher than the mortgage rate of around 12%. The base rate isn't always lower than the mortgage rate.

Edited by billybong

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When it becomes obvious to people/sheeple that asking and selling prices are falling consistently month on month, they will hold back from buying/borrowing to buy IMO. The one thing this Ponzi needs to stay alive is participants who believe it can only go up. Take that away and the game ends. 30% would be getting off lightly in those circumstances I think.

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When it becomes obvious to people/sheeple that asking and selling prices are falling consistently month on month, they will hold back from buying/borrowing to buy IMO. The one thing this Ponzi needs to stay alive is participants who believe it can only go up. Take that away and the game ends. 30% would be getting off lightly in those circumstances I think.

Sheeple like myself are going to have to buy into the deflating bubble long before it reaches the bottom, the fact this website exists and millions of under 45s are priced out tells me there is a vast amount of demand for vaguely affordable property

But as selling prices are still well above last year the falls are going to take a long time unless interest rates spike or some black swan event happens.

I wish Gidiot and his family nothing but pain as this time last year prices were coming into that vaguely affordable range i mentioned, now we are a 20% fall from there.

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Sheeple like myself are going to have to buy into the deflating bubble long before it reaches the bottom, the fact this website exists and millions of under 45s are priced out tells me there is a vast amount of demand for vaguely affordable property

But as selling prices are still well above last year the falls are going to take a long time unless interest rates spike or some black swan event happens.

I wish Gidiot and his family nothing but pain as this time last year prices were coming into that vaguely affordable range i mentioned, now we are a 20% fall from there.

Why is that, wouldn`t you be better to save even more money by holding on?

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Why is that, wouldn`t you be better to save even more money by holding on?

Due to having a 4 year old i cant wait too much longer and my life seems on hold, got to bite the bullet when they get to a certain point and buy .. if prices had continued going down before scum cnt came up with H2B there is a good chance id have bought this year

But i wont be buying in this bubble, im hoping that something comes up for around 180K around a year from now due to small interest rate rises and a Labour victory which will frighten the markets.

Besides im tired of working, fancy a couple of years off and creating a couple of small business. Working really is a mugs game these days, especially when i can cash in on being a single parent. Also saving money is a risky business these days, far safer to be a borrower.

If i can get 20% off current prices i'll bite the bullet but will hope the value of my house falls ... then i can buy one for my kid.

Edited by Corruption

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I think a psychologist would have a better chance of forecasting than an economist.

Actually, a criminologist might be a better bet.

We all know that using models of actuality bear no resemblance to the criminality of the banking sector from 2000 right up to today.

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I'm sure you're familiar with this chart of loan to income multiples, rates and repayments % of incomes. They're as close to a low as they get in the cycle. It's counter-intuitive, but we're closer to cyclical lows than cyclical highs (London aside). That would make sense if we're nearer the start than the end of this 16 year (or however long) credit cycle.

House prices are (imo) a bit of a red herring. Nominal prices are just the corollary of everything else. They're the outcome, not the driver.

The relationship between loan-to-income ratios, mortgage rates and mortgage repayment affordability pic.twitter.com/DtHz03Xva8

This guy works for Savills. He's an estate agent not an economist. What else is he likely to say except buy, buy, buy? :rolleyes:

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