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Sunday Express: Stock Market Crash Could Burst Property Bubble

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Property seems to be immune from the fear now gripping the global economy, but that may not always be the case.

If the share price meltdown continues and the global economy slows, eventually the UK’s house of cards may collapse as well. Chinese stock markets have plunged since the start of the year, with the FTSE 100 falling 6.5 per cent so far. There seems no end in sight to the share sell-off, but still property powers on.

The latest figures from Halifax show that property prices in the final quarter of 2015 were almost 10 per cent higher than one year earlier.

The growth seems unstoppable, with new figures from estate agency Your Move showing the average property in England and Wales has leapt £18,000 in the last year to £292,077, a growth rate of an incredible £1,500 a month.

Many Britons suspect the property market is overvalued, with the average UK home now costing more than 10 times earnings. Given that most lenders will not grant mortgages worth more than three or four times your income, this looks unsustainable.

Yet few property experts are willing to say openly that the market is in peril. Most remain deaf to warnings of contagion from the share price rout, even though it has scared the life out of some investment experts.

Last week, Andrew Roberts, research chief at Royal Bank of Scotland, warned investors to “sell everything except high-quality bonds” because the stock market and oil price crash has only just begun. He is worried about the growing public and company debt burden, and British households have plenty to worry about on that score.

All-time low interest rates have fuelled a borrowing spree that has seen Britons rack up a mind-boggling debt of £40billion. The latest figures show family that household debt rose by 42 per cent in the last six months alone, according to research from Aviva.

The average family now owes £13,520 on credit cards, personal loans and overdrafts, up from £9,520 last summer. Throw in a 20 per cent increase in average mortgage debt to £62,739 over five years and households are more vulnerable than ever. Worse, family incomes are falling and many have lost the savings habit as their finances are stretched.

Aviva managing director-protection Louise Colley says one in five is making no provision for the future: “Alarming levels of rising household debt paint an uncertain picture for the family purse in 2016.”

She fears households will be vulnerable if the Bank of England raises interest rates and cheaper credit dries up. More than half of all mortgage holders are already struggling with their bills, according to new research from TSB.

Director of mortgages Ian Ramsden said one in four would have real problems if an interest rate hike added just £99 a month to their repayments: “The statistics are fairly shocking.”

Simon Tyler, founder of Tyler Mortgage Management, is one of the few in the industry to acknowledge the danger openly, with too many happy to talk prices higher: “If global stock markets fall lower and unemployment starts to rise, inevitably this will trigger a house price correction.”

Tyler says there is another threat looming, as the Government piles new taxes onto the buy-to-let market, starting with a 3 per cent surcharge on stamp duty that kicks in on April 1.

This has triggered a rush of landlords looking to buy to beat the charge, which will raise the duty on a £300,000 property from £5,000 to £14,000.

The danger is that new investors will abandon the market afterwards, while many existing landlords will sell up once Chancellor George Osborne starts phasing out higher rate tax relief on buy-to-let mortgage interest payments from April 2017.

Tyler says: “This will virtually wipe out profits for some investors. If the Bank of England increases rates as well, we can see prices correct by as much as 10 per cent.”

However, Tyler says the shortage of property will limit homeowner losses, as younger buyers seize their opportunity finally to get on the ladder. Estate agent Jeremy Leaf, former chairman of the Royal Institute of Chartered Surveyors, agrees that a market crash and buy-to-let tax crackdown could also hit property, yet he expects the market to be “resilient” because of strong demand from buyers.

Andy Knee, chief executive of conveyancing group LMS, argues that stock market falls could even tempt investors back into property, attracted by the relative stability of bricks and mortar.

“The housing shortage means it is highly improbable that we will see a substantial fall in prices.”

Nevertheless, homeowners will be watching the global share price crash with growing concern, especially those who have taken on large debts to keep pace with rising prices.

The over-heated London market is particularly vulnerable to trouble abroad, given that its runaway growth has been fuelled by foreign money.

Investors from China, Russia, Saudi Arabia and other lands succumbing to the global financial crisis could trigger a sell-off by rushing for the exits.

There are signs the prime London market is beginning to crack, with prices falling 8.7 per cent in the last year, according to Your Move.

This could be seen as an early warning to the rest of the market.

Any house price crash will be less dramatic than the share crash as it takes months to sell a property whereas you can dump shares in seconds, but if global troubles continue, the housing market cannot escape unscathed.

http://www.express.co.uk/finance/personalfinance/635232/Stock-market-crash-could-burst-property-bubble

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Thinking of the BTL lot mentioned in this article. I bet a lot of them are expecting to sell just before the tax reliefs are removed in April 2017.

If you can't comprehend property price falls, then you would ride the gravy train to the end and expect to flog it at asking price the month before. Those who bought BTL are the types who think property only goes up.

So we have a stock market crash bottoming end of this year. And you get huge amounts of property listed at the end of this year hoping to sell before the deadline. Early 2017 will be a great buying opportunity as sentiment will be as low as it can be for the next 7 years.

we are in the early stages of the crash, news articles are starting to appear (well after it started) and will build momentum through the whole year.

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More significantly, does this indicate the media scare mongering machine is turning to hpc in lieu of bird flu or Ebola.

This could be significant - we're only just half way through the month remember.

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I like the way they say "There are signs the prime London market is beginning to crack, with prices falling 8.7 per cent in the last year". Beginning? They're presenting a 10% fall as a worst case scenario here, and 8.7% is just beginning?

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Thinking of the BTL lot mentioned in this article. I bet a lot of them are expecting to sell just before the tax reliefs are removed in April 2017.

If you can't comprehend property price falls, then you would ride the gravy train to the end and expect to flog it at asking price the month before. Those who bought BTL are the types who think property only goes up.

So we have a stock market crash bottoming end of this year. And you get huge amounts of property listed at the end of this year hoping to sell before the deadline. Early 2017 will be a great buying opportunity as sentiment will be as low as it can be for the next 7 years.

we are in the early stages of the crash, news articles are starting to appear (well after it started) and will build momentum through the whole year.

Spring is regarded as the best time to sell so I'd agree, except I imagine a fair few would be looking at this Spring - especially as they start to read more and more articles like this on a Sunday morning.

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Any house price crash will be less dramatic than the share crash as it takes months to sell a property whereas you can dump shares in seconds, but if global troubles continue, the housing market cannot escape unscathed.

It can still be pretty quick and dramatic - if people around you are regularly selling at falling prices.

Edited by billybong

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Think sentiment on housing is still at high levels. I expect this spring to be similar to last spring. Low volumes to market. Lots of kite flyers. At least with buyers being put off, should see some volume slowly building through the year. Especially with people who do start the buying process being made very nervous with the deteriorating news head-lines daily, start pulling out. (Seen friends sales suddenly fall through last minute without a chain)

think end of this year on top of the steady build up of unsold properties we will get the portfolios starting to offload. everyone expects to sell at peak prices but it's starting to be too late already.

will be lots of job losses, and plenty of people who have one property (old home) which they will be subsidising (kept as they could not sell at 'market value'). Who suddenly want to become more lean and free up some funds.

Job losses and relocations will also force a few sales.

markets move at the margins. eventually the kite-flyers will capitulate.

Edited by jiltedjen

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Thinking of the BTL lot mentioned in this article. I bet a lot of them are expecting to sell just before the tax reliefs are removed in April 2017.

If you can't comprehend property price falls, then you would ride the gravy train to the end and expect to flog it at asking price the month before. Those who bought BTL are the types who think property only goes up.

So we have a stock market crash bottoming end of this year. And you get huge amounts of property listed at the end of this year hoping to sell before the deadline. Early 2017 will be a great buying opportunity as sentiment will be as low as it can be for the next 7 years.

we are in the early stages of the crash, news articles are starting to appear (well after it started) and will build momentum through the whole year.

This could be interesting if (and that's a big if) in their panic about the impending tax changes they try and sell in March, find they can't and desperately start dropping the asking price.

They might well be the sort that thinks property only goes up but if their fear/resentment of the taxman is whipped-up by the likes of the DE and DM they might just get desperate to enough to sell to panic. It'll take only a few BTLers in their area to lower their asking prices to topple the first domino - a BTL LL who bought in 1997 will still have "doubled their money" is more likely to do that than one who bought in 2007.

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They will sell as they can't afford to pay the correct tax now the relief has been lifted.

They will be forced to sell.

But they will expect to ride the train to the last few months, and sell it at the price they bought it for plus 20%. and the sale to be done as dusted. in their minds if they sell it for 10% on top of what they bought it for it will be a bargain and gone in a few days.

they have not entertained price falls at all, otherwise they would not of bought in the first place.

They don't realise when they bought they paid 20% too much. and with BTLs no longer buying the clearing level will be 20% below their buying price.

they will hack asking prices down to maybe 5% above their purchase price then sit there refusing to believe no one wants it.

They will sit like a frog in heating water loosing money until they loose it all.

Meanwhile the death, divorce, job moves, probate sales will be clearing at the new FTB level.

A few months into 2017 all hell breaks loose with repossessions. and a flooded property market.

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Think sentiment on housing is still at high levels.

Did you see the link I posted on the 2016 predictions thread?

People's 2016 predictions for house prices, interest rates and more

70% think prices will rise. But still, 26% thinking they'll be flat or falling is fairly substantial (albeit I have nothing to compare that against), and that's against a huge amount of mania about rising prices in the media. Only 22% agreed with the ONS forecast of 5%+.

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Crikey, with the Sunday Express printing this I expect A&E and Monday morning's GP surgeries to be overrun with OAPs "coming over all funny".

:lol:

Good job the MoS isn't running the story as well.

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he latest figures show family that household debt rose by 42 per cent in the last six months alone, according to research from Aviva.

The average family now owes £13,520 on credit cards, personal loans and overdrafts, up from £9,520 last summer

That's extraordinarily bad

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This could be significant - we're only just half way through the month remember.

Brilliant link. Google search tracks sentiment perfectly, and coupled with RM's asking and selling prices it tells you all you need to know. I'll give the media experts a swerve.

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On two of the last three year occasions we got a stock market crash the housing market powered ahead. It doesn't always play out the way you would expect, it tends to reinforce the dumb view about houses as the only investment left.

Actually had a conversation with an 87 year old Guardian reading retired teacher who said he was considering liquidating his Equities and buying a BTL. this is what we are up against.

What the f**k is it with these Guardian reading school teachers.

1987-88 fastest HPI increase in history (FTSE 100 collapses on black Monday in October 1987)

2003-04 second fastest HPI in history (FTSE 100 finally halves from 1999 peak to 3,400 in February 2003)

2009-2010 saw the housing crash start to bottom. ( FTSE 100 again collapses to just above 3,500 in spring 2009)

Edited by crashmonitor

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The Daily Express was spouting this only a month ago:

http://www.express.co.uk/news/uk/626511/House-prices-soar-record-highs-expected-2016

What a crock of s**t that newspaper is

Small wonder the Express has lost one third of its readership over the last five years.

674K daily readership down to 457K . See first table...

https://en.wikipedia.org/wiki/List_of_newspapers_in_the_United_Kingdom_by_circulation

Edited by juvenal

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Spring is regarded as the best time to sell so I'd agree, except I imagine a fair few would be looking at this Spring - especially as they start to read more and more articles like this on a Sunday morning.

http://www.manchestereveningnews.co.uk/news/greater-manchester-news/house-prices-greater-manchester-abroad-10746596

People will start waking up and realising hpi morons in this country have lost their minds.. The living conditions i.e tiny houses is down right embarrassing..

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I think you should start another thread on that .

Quotation Details

http://www.quotationspage.com/quote/35513.html

icon_info.gif Quotation #35513 from Contributed Quotations:

The
war
debt
is not meant to be
won
paid
, it is meant to be continuous. Hierarchical society is only possible on the basis of poverty and ignorance. This new version is the past and no different past can ever have existed. In principle the
war
debt
effort is always planned to keep society on the brink of starvation. The
war
debt
is waged by the ruling group against its own subjects and its object is not the victory over either Eurasia or East Asia, but to keep the very structure of society intact.
(Me)

English essayist, novelist, & satirist (1903 - 1950)

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Actually had a conversation with an 87 year old Guardian reading retired teacher who said he was considering liquidating his Equities and buying a BTL. this is what we are up against.

What the f**k is it with these Guardian reading school teachers.

1987-88 fastest HPI increase in history (FTSE 100 collapses on black Monday in October 1987)

2003-04 second fastest HPI in history (FTSE 100 finally halves from 1999 peak to 3,400 in February 2003)

2009-2010 saw the housing crash start to bottom. ( FTSE 100 again collapses to just above 3,500 in spring 2009)

This is my main worry ,after watching the teacher types piling in and bailing out the last lot from 2010 on ,

This time around i`m hoping it will be different ,but that hope if i`m honest is relying on how the BOE use the tools they have been given ,concerning restricting BTL lending

I think the first lot to bailout on mass will be in the South or more specifically any areas with higher rents these people will be more adversely affected as even one BTL is likely to put them in the higher rate tax bracket due to higher rent and the fact the areas with higher rents will also have higher wages

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