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Tricksy

Looking Forward - The Options For Playing A Fall In House Prices...

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The mechanics of house price inflation have been well examined by this forum over the years. Opinions have been expressed as to the magnitude, timing and duration of the inevitable correction.

Huge energy has been devoted elsewhere (118, MSE etc) as to how to "play" the inflationary phase, and there are many who have prospered from this.

But I can find little discussion as to how savvy individuals can "play" the deflationary phase / correction for financial gain, and I would welcome an examination of the available options. I guess the central question is this: What are the practical ways to short residential house prices in the UK?

Here are some starter thoughts for consideration. At this point I will present them without discussion in the hope of starting a robust exchange...

1. Short the equity of house-builders

2. Short the equity of banks with high exposure to UK residential property

3. Short the equity of estate agents

4. Short the equity of any publicly traded funds that have material exposure to UK residential property

5. Own the equity of ancillary services businesses (insolvency practitioners?) that may benefit from the correction process

6. Spread-betting on residential house prices (not sure if this is still offered or not)

No apology is offered for the cold and cynical nature of this discussion. A group of cold-hearted individuals have benefitted cynically by exploiting the inflationary phase. Perhaps a different group can benefit in the next phase...?

Over to you...

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Thank you for taking the time to respond Uncle_Kenny, but I'm interested in examining the opportunities for profiting from the correction process itself. Shorting BDEV, BVS, FOXT, SVS, ZPLA, BKG etc is the obvious route in theory but I suspect is challenging to structure and execute efficiently. I'm interested in exploring this, and also in generating some lateral thinking on other ways to capitalise.

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I'm sure shorting is dangerous and risky business for the average bloke. I'll be avoiding it and continuing to drip into equities instead as my long term investment.

However, on this particular topic, had anyone mentioned shorting mortgage backed securities of any kind?

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the crash has been rolling on for 7 years, you must have missed it.

maybe you mean, how will you play the London mega bubble collapse?

no one should be speculating on houses, if we had decent men in charge we all be working for a kill instead of trying to make a fast buck.

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If/when house prices crash, then cash is king. Keep working, keep saving, stay focused.

house prices in North west and north East, down around 50% in real terms since 2007 and 20% nominally

do you mean, when the speculative London bubble prices collapse and take down the low sales volume prices of the surrounding shires?

maybe it's time people stopped thinking of the London housing market as the housing market, it's more a ponzi scheme for criminals and idiots.

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If we have a proper HPC - you could go long on a selection of retailers - because the wider economy will benefit from a HPC.

With no proper HPC, seek any thrift-orientated business - discounters, low-budget products / services.

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How about buying shares in Kingfisher which is B&Q, Screwfix etc. If George Osborne does succeed in transferring ownership form BTLers to OOs then there will be a lot of DIY taking place.

Edit to add. They do quite a bit of business in France and some in the rest of Europe so a bit watered down. Any DIY companies that only trade in the UK?

Edited by GTFO

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Another argument for shorting housebuilder stock is the change to social rents for housing associations (-1% for 4 years)

associations have put massive brakes on their own expansion which means builders can't so easily fulfil the affordable housing requirements imposed by planning, which ultimately means they can't sell all of the private stock (as condition not satisfied)

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I can't find the post now but I remember that in 2008 someone on here made good money shorting BDEV. Not sure I fancy shorting but I'm jolly tempted to buy some put options on BKG this time round...

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