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Pablo-silver or lead?

Everyone Knows This Is Nowhere.

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Having been folowing these discussions for a while I have the folowing comments to make.

In 1988 (In the UK) as a property owner of 5 years, I'd only seen prices rise. At the time I was a branch manager for one of the largest Second to Market Property Retailers (Estate Agents). When the stock market crashed and with the Chancellor introducing historically low interest rates to keep the economy turning (no where near as low as today), over the next 18 months people piled into property, any property, as it was in short supply and they didn't want to miss out. I lost count of the amount of times people said to me.

"I've lost loads on the stock market, I'll never buy shares again, I've cashed in (at the bottom) and want to invest in property!" We all know what happened.

Wind forward to 2005 (In the UK) we have a generation of property owners who have only experienced properties rising in price (until recently). We have a generally under performing stock market (until recently), tax increase on pension funds and mis-selling of many financial instruments (split-caps, endowments etc). This along with historically low interest rates, has lead to many of us piling more money into property and consumer spending. We are using our new found "wealth" to borrow to fund this. Ironically it is the equity in our existing properties that has made it possible for us to borrow so much more.

After 9/11 following the US lead western governments artificially reduced interest rates to keep the world economy turning. In the US both the Goverment and individuals have a big appetite for debt. Base rates here went down to 1% since then they have increased 2 percentage points to 3% (thats a 200% increase and going up). Rates in the US are likely to go up another percentage point over time. In the UK rates will probably top out at 5 or 5.25% but rates will not be coming down in the next 12 months or so.

I wouldn't for one moment suggest a repeat of the scenario we had in the UK during 1988 to 1995. However I believe the Uk property market is much more exposed to interest rate increases because this time around in real terms the mortgage debts of individuals are much larger.

_____________

Like many people I've been a property Bull since the early 90's when property prices fell to 40% below their previous peak and 2 millon people found themselves in negative equity, with tens of thousands of repossessed homes.

Yep we've all been riding pretty high on the hog. Many people have been making more money (on paper) each month from simply owning property, than by their day jobs. That paper equity and historically low interest rates has allowed us to do two things.

Firstly borrow hugh amounts of money (real money, debt not paper) to fund futher property investments.

Secondly borrow hugh amounts of money to fund lifestyle (cars, holidays etc).

A fact of all Bull markets is that towards the end the gains accelerate and get too good to miss, sucking in lots more investors. The market feeds itself and guessing the top is 'fools gold'.

Twelve months ago I became less bullish. Comments about financial market wobbles are interesting, as they always feed through to the real world. Todays On-line Telegraph business section makes pretty salutary reading.

An excerpt from one article below

"Meanwhile, there is an over-supply of high-end rental apartments in most markets. Residential rents have fallen while running costs such as service charges have risen sharply. Overall net yields have fallen so many landlords barely cover their borrowing costs and experience little, if any, capital growth. Moreover, letting property can be hard work, even if managing agents are used.

As a last gasp, a number of the off-plan agents are pushing overseas property in places such as Spain and Florida. Gambling on new schemes in faraway markets is the stuff of madness. The room for error is huge with legal pitfalls, crooked developers, adverse currency movements, unknown local markets, high fees and so forth.

This weekend sees the Invest in Property show at Earl's Court with more than 100 seminars and workshops for amateur property players. Meanwhile, the number of buy-to-let mortgages in the UK has soared from 28,700 in 1998 to 526,200 last year. It all strikes me as a bubble waiting to burst. Watch out below!"

The froth is starting to blow off the top, lets hope its just that and the landing when it comes is soft.

____________

Mr & Mrs Smith now in their late fifties bought their first house (a 3 bed mid terrace in somewheresville, home counties) for circa £1,500 in the early 60’s, it was a stretch! Over the intervening years they’ve traded up a couple of times and although they still have a small mortgage (£ 35k) on their 4 bed detached, in smart Surrey suburbia and its now worth, lets say £ 540k, didn’t they do well. Trouble is they have two children. The first Tabitha with two young children is just coming out of a messy divorce, the proceeds of which will not buy her a 1 bed flat. Their other child Tarquin is about to leave university at 26 with a doctorate in media studies and £ 18k in debt. Now Tabitha needs a 3 bed mid terrace to accommodate her family, price around £230k and Tarquin needs a job and 50k to pay off his university debts and put a deposit on a studio flat. The kids can scratch about in rented or the parents can release equity and help. This is the have’s (the parents due to time and luck) and the have nots their children (due to bad luck and timing).

Remember 1988 (Aug) “ how are our kids ever going to afford to get on the property ladder”. A 3 bed semi in Bournemouth was £90K and the average wage in the town £ 13.5. Easy keep saving because the same house 4 years latter was £52k.

Memories are short and greed generally overcomes fear. These times are fine for speculators who by luck or judgment get may their timing right. For the rest of us who have done well over the last 25 years or so, its not real money, or is it?

__________

Elswhere on this forum someone noted 'inflation is on the up. inflation is good for propert prices'. This is usually the norm. However recently property and general inflation seem to have become disconected.

Theres been low general inflation at the same time as high property inflation. If general inflation continues to rise, interest rates will go up and property prices will go down even further. Never in such benign economic conditions has property inflation in the uk stopped so quickly and gone into reverse.

Prediction:In some sectors of the UK market the Peak asking prices in year 04/05 to bottom exchange of contract prices year 06/07 ( ie. the differance between over optimistic vendor/EA hopes and the real price as defined by the market), will be close to -40%. A 300k flat becomes a £180k flat. keep saving your deposit.

Pablo Sliver or Lead?

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Having been folowing these discussions for a while I have the folowing comments to make.

In 1988 (In the UK) as a property owner of 5 years, I'd only seen prices rise. At the time I was a branch manager for one of the largest Second to Market Property Retailers (Estate Agents). When the stock market crashed and with the Chancellor introducing historically low interest rates to keep the economy turning (no where near as low as today), over the next 18 months people piled into property, any property, as it was in short supply and they didn't want to miss out. I lost count of the amount of times people said to me.

"I've lost loads on the stock market, I'll never buy shares again, I've cashed in (at the bottom) and want to invest in property!" We all know what happened.

Wind forward to 2005 (In the UK) we have a generation of property owners who have only experienced properties rising in price (until recently). We have a generally under performing stock market (until recently), tax increase on pension funds and mis-selling of many financial instruments (split-caps, endowments etc). This along with historically low interest rates, has lead to many of us piling more money into property and consumer spending. We are using our new found "wealth" to borrow to fund this. Ironically it is the equity in our existing properties that has made it possible for us to borrow so much more.

After 9/11 following the US lead western governments artificially reduced interest rates to keep the world economy turning. In the US both the Goverment and individuals have a big appetite for debt. Base rates here went down to 1% since then they have increased 2 percentage points to 3% (thats a 200% increase and going up). Rates in the US are likely to go up another percentage point over time. In the UK rates will probably top out at 5 or 5.25% but rates will not be coming down in the next 12 months or so.

I wouldn't for one moment suggest a repeat of the scenario we had in the UK during 1988 to 1995. However I believe the Uk property market is much more exposed to interest rate increases because this time around in real terms the mortgage debts of individuals are much larger.

_____________

Like many people I've been a property Bull since the early 90's when property prices fell to 40% below their previous peak and 2 millon people found themselves in negative equity, with tens of thousands of repossessed homes.

Yep we've all been riding pretty high on the hog. Many people have been making more money (on paper) each month from simply owning property, than by their day jobs. That paper equity and historically low interest rates has allowed us to do two things.

Firstly borrow hugh amounts of money (real money, debt not paper) to fund futher property investments.

Secondly borrow hugh amounts of money to fund lifestyle (cars, holidays etc).

A fact of all Bull markets is that towards the end the gains accelerate and get too good to miss, sucking in lots more investors. The market feeds itself and guessing the top is 'fools gold'.

Twelve months ago I became less bullish. Comments about financial market wobbles are interesting, as they always feed through to the real world. Todays On-line Telegraph business section makes pretty salutary reading.

An excerpt from one article below

"Meanwhile, there is an over-supply of high-end rental apartments in most markets. Residential rents have fallen while running costs such as service charges have risen sharply. Overall net yields have fallen so many landlords barely cover their borrowing costs and experience little, if any, capital growth. Moreover, letting property can be hard work, even if managing agents are used.

As a last gasp, a number of the off-plan agents are pushing overseas property in places such as Spain and Florida. Gambling on new schemes in faraway markets is the stuff of madness. The room for error is huge with legal pitfalls, crooked developers, adverse currency movements, unknown local markets, high fees and so forth.

This weekend sees the Invest in Property show at Earl's Court with more than 100 seminars and workshops for amateur property players. Meanwhile, the number of buy-to-let mortgages in the UK has soared from 28,700 in 1998 to 526,200 last year. It all strikes me as a bubble waiting to burst. Watch out below!"

The froth is starting to blow off the top, lets hope its just that and the landing when it comes is soft.

____________

Mr & Mrs Smith now in their late fifties bought their first house (a 3 bed mid terrace in somewheresville, home counties) for circa £1,500 in the early 60’s, it was a stretch! Over the intervening years they’ve traded up a couple of times and although they still have a small mortgage (£ 35k) on their 4 bed detached, in smart Surrey suburbia and its now worth, lets say £ 540k, didn’t they do well. Trouble is they have two children. The first Tabitha with two young children is just coming out of a messy divorce, the proceeds of which will not buy her a 1 bed flat. Their other child Tarquin is about to leave university at 26 with a doctorate in media studies and £ 18k in debt. Now Tabitha needs a 3 bed mid terrace to accommodate her family, price around £230k and Tarquin needs a job and 50k to pay off his university debts and put a deposit on a studio flat. The kids can scratch about in rented or the parents can release equity and help. This is the have’s (the parents due to time and luck) and the have nots their children (due to bad luck and timing).

Remember 1988 (Aug) “ how are our kids ever going to afford to get on the property ladder”. A 3 bed semi in Bournemouth was £90K and the average wage in the town £ 13.5. Easy keep saving because the same house 4 years latter was £52k.

Memories are short and greed generally overcomes fear. These times are fine for speculators who by luck or judgment get may their timing right. For the rest of us who have done well over the last 25 years or so, its not real money, or is it?

__________

Elswhere on this forum someone noted 'inflation is on the up. inflation is good for propert prices'. This is usually the norm. However recently property and general inflation seem to have become disconected.

Theres been low general inflation at the same time as high property inflation. If general inflation continues to rise, interest rates will go up and property prices will go down even further. Never in such benign economic conditions has property inflation in the uk stopped so quickly and gone into reverse.

Prediction:In some sectors of the UK market the Peak asking prices in year 04/05 to bottom exchange of contract prices year 06/07 ( ie. the differance between over optimistic vendor/EA hopes and the real price as defined by the market), will be close to -40%. A 300k flat becomes a £180k flat. keep saving your deposit.

Pablo Sliver or Lead?

Another installment in the current HPC.co.uk sponsored series "New poster telling us what we want to hear".

It is Christmas, and you are brightening up everyone's day, but it's all a bit obvious.

:rolleyes:

[cynic mode - off]: Welocome! What a great first post! You're going to make lots of lovely new friends here!

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Pablo Silver or Lead,

Welcome to this side of the Pond buddy.

I can't argue with much of what you say, apart from the -40% by 06/07, whilst I agree it's what is needed. But I suspect interest rates and unemployment would have to increase substancialy to shakeout a lot of OO'ers down to those figures in such a short time.

Oh and Tabitha and Tarquin, in the sixties they where getting names like Claire, Heather and Mark, James, John, Paul, George and Ringo :D

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In the US both the Goverment and individuals have a big appetite for debt. Base rates here went down to 1% since then they have increased 2 percentage points to 3% (thats a 200% increase and going up). Rates in the US are likely to go up another percentage point over time.

When did you write this? The US base rate is now 4.25%

frugalista

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Why?

:unsure:

...erm because these days it's peter,jordan,alfie and zoe....and probably shayne next year.

...just goes to show you how original the sheeple are.

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To tell you the truth, the more I think about how the HPI happened the more I don't understand it. One day I will wake up and it will all be a rather unpleasant dream. The world I will wake up to will not give a fig how much their house is worth.

Do you ever think that rather than the baby bond GB should have put forward a baby land bond - every new born gets a plot of land and over the course of their life they can build on it - brick by brick, Petrocelli style.? Sensible idea? No its b%ll%cks.

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To tell you the truth, the more I think about how the HPI happened the more I don't understand it. One day I will wake up and it will all be a rather unpleasant dream. The world I will wake up to will not give a fig how much their house is worth.

Do you ever think that rather than the baby bond GB should have put forward a baby land bond - every new born gets a plot of land and over the course of their life they can build on it - brick by brick, Petrocelli style.? Sensible idea? No its b%ll%cks.

love it!

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Guest Bart of Darkness

To tell you the truth, the more I think about how the HPI happened the more I don't understand it. One day I will wake up and it will all be a rather unpleasant dream. The world I will wake up to will not give a fig how much their house is worth.

Do you ever think that rather than the baby bond GB should have put forward a baby land bond - every new born gets a plot of land and over the course of their life they can build on it - brick by brick, Petrocelli style.? Sensible idea? No its b%ll%cks.

Did Petrocelli ever finish that house or was the series cancelled first?

Continuing the US TV theme, if you do awake from the bad dream that is modern house prices, make sure Patrick Duffy ain't availing himself of your shower facilities!

With luck it'll be Victoria Principal. :)

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A good post, but not a realistic picture, more a bears fantasy.

Down the road from Tabitha and Tarquin are many new families demanding housing.

In fact a young Briton today is more likely to be called Mohammed than Tarquin.

http://news.bbc.co.uk/1/hi/uk/4148335.stm

Come a rising interest rate enviroment, rents will rise strongly as there is a real shortage of housing with very large breaks to investors in terms of cashflows from rents.

Unlike all the other bears here who have been posting the crash is around the corner for years, I have always looked deeply at the factual data, and thus been able to understand what is really going on. I expect HPI to continue in the new year, and by late spring to have registered 2-3% nominal growth, for overall HPI of 8-10% in 2006.

The only way out is for wage demands to rise via unionisation at your workplaces about this issue and your pay, I believe.

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Did Petrocelli ever finish that house or was the series cancelled first?

Don't you remember the sequel - "Petrocelli's Millions". He paid $1 per brick and every one he added increased the value of his house by 300%. He was eventually able to retire to a small island in the Pacific which he purchased on the proceeds of his house sale.

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  • 301 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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