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There Will Be No Hpc; The Bank Of England!

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I know this has been mentioned in a few threads but generally overlooked (suprise, suprise). Bootle back tracked on the 20% correction of prices, and predicts maybe 5% down over a few years and then stagnant.

THAT IS NOT A CRASH OR CORRECTION!!!!!

Anybody who str is set to become the biggest SUCKER ever. A 5% correction will not even cover your selling and buying costs( on a decent purchase)

ps I hope your landlords don't hand you an eviction notice on Christmas day!!! :):):)

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I know this has been mentioned in a few threads but generally overlooked (suprise, suprise). Bootle back tracked on the 20% correction of prices, and predicts maybe 5% down over a few years and then stagnant.

THAT IS NOT A CRASH OR CORRECTION!!!!!

Anybody who str is set to become the biggest SUCKER ever. A 5% correction will not even cover your selling and buying costs( on a decent purchase)

ps I hope your landlords don't hand you an eviction notice on Christmas day!!! :):):)

Stagnation for three or four years before I buy more property.

That's what I'm banking on.

Any fall in prices above that will be a (welcome) bonus.

If I'd sold my house to rent in 2003 I would already be losing out.

I wouldn't rule out big falls, but something ugly would have to happen to cause this IMO.

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I know this has been mentioned in a few threads but generally overlooked (suprise, suprise). Bootle back tracked on the 20% correction of prices, and predicts maybe 5% down over a few years and then stagnant.

THAT IS NOT A CRASH OR CORRECTION!!!!!

Anybody who str is set to become the biggest SUCKER ever. A 5% correction will not even cover your selling and buying costs( on a decent purchase)

ps I hope your landlords don't hand you an eviction notice on Christmas day!!! :):):)

Er....oh I can't be bothered

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Er....oh I can't be bothered

I am old enough to remember the crash last time around and I distinctly remember the very same Roger Bootle saying in about 1995 that in the future houses would be seen as a place for living in and not as an investment. He was about 100% wrong then and his timing was uncanny as it was shortly after that that prices started to rise again. So if anything Itake encouragement from his change of stance. As it happens I have STRd and the interest on my capital pays my rent, so a 5% fall will do nicely, but it is only the start.

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I know this has been mentioned in a few threads but generally overlooked (suprise, suprise). Bootle back tracked on the 20% correction of prices, and predicts maybe 5% down over a few years and then stagnant.

THAT IS NOT A CRASH OR CORRECTION!!!!!

Anybody who str is set to become the biggest SUCKER ever. A 5% correction will not even cover your selling and buying costs( on a decent purchase)

ps I hope your landlords don't hand you an eviction notice on Christmas day!!! :):):)

I promised myself that I would not bite. CRASH maybe not but CORRECTION you bet yer ass it is!

What you fail to realise is that when HPI was going up people were paying far over the odds to get thier property. When the prices come down or HPI starts being negative you are not so keen to offer a good price for a depreciating product. i.e. ROVER cars - I have seen these being sold off at COST! £8,000 for a sports MG is ludicrously low - are they flying out??

NO! because even though you may get a good price - can you get spares? And what do you think the resale value will be? BUGGER ALL. People are not so keep to see something as a bargain and not factor in the 'future proof' of the product.

Here is a scenario, I'm not saying it will happen but I am saying it is possible.

Prices will continue to drop.

They will get to a level where there is more affordability.

The OO's will see a gap between upgrades that is now achievable.

There will be a feel-good factor again.

IR's may rise and possession WILL rise.

Banks will feel the pinch when they make losses on borrowing.

Lending Criteria will be tightened.

Those wanting to buy will be limited to the best credit rated borrowers.

Therefore a shortage of buyers in CERTAIN price ranges.

This range of housing needs to drop to make it more affordable to the masses.

Those houses around this price range need to re-adjust in ratio. (why pay £240K for a 4 bed when we can get a 3-bed for £160K)

You dont know what the market is gonna do - I dont. But to say there will be no correction is absolute B0ll0x!!! BTL has forced the prices up and now they are starting to realise all the scams and fraud that is going on. This is going to make BTL an unattractive proposition and to the majority quite difficult to finance. Once all these so-called 'luxury apartments' sell for buttons the other houses will follow suit. EXPECT the flats/city living to go absolutely TITS-UP! Then watch the rest follow, but not as fast.

TB

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I know this has been mentioned in a few threads but generally overlooked (suprise, suprise). Bootle back tracked on the 20% correction of prices, and predicts maybe 5% down over a few years and then stagnant.

THAT IS NOT A CRASH OR CORRECTION!!!!!

Not another over leveraged Landlord, I can feel the dryness in your throat.

ps I hope your landlords don't hand you an eviction notice on Christmas day!!!

Who would that be?, the lender who has just repossessed the property.

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I promised myself that I would not bite. CRASH maybe not but CORRECTION you bet yer ass it is!

What you fail to realise is that when HPI was going up people were paying far over the odds to get thier property. When the prices come down or HPI starts being negative you are not so keen to offer a good price for a depreciating product. i.e. ROVER cars - I have seen these being sold off at COST! £8,000 for a sports MG is ludicrously low - are they flying out??

NO! because even though you may get a good price - can you get spares? And what do you think the resale value will be? BUGGER ALL. People are not so keep to see something as a bargain and not factor in the 'future proof' of the product.

Here is a scenario, I'm not saying it will happen but I am saying it is possible.

Prices will continue to drop.

They will get to a level where there is more affordability.

The OO's will see a gap between upgrades that is now achievable.

There will be a feel-good factor again.

IR's may rise and possession WILL rise.

Banks will feel the pinch when they make losses on borrowing.

Lending Criteria will be tightened.

Those wanting to buy will be limited to the best credit rated borrowers.

Therefore a shortage of buyers in CERTAIN price ranges.

This range of housing needs to drop to make it more affordable to the masses.

Those houses around this price range need to re-adjust in ratio. (why pay £240K for a 4 bed when we can get a 3-bed for £160K)

You dont know what the market is gonna do - I dont. But to say there will be no correction is absolute B0ll0x!!! BTL has forced the prices up and now they are starting to realise all the scams and fraud that is going on. This is going to make BTL an unattractive proposition and to the majority quite difficult to finance. Once all these so-called 'luxury apartments' sell for buttons the other houses will follow suit. EXPECT the flats/city living to go absolutely TITS-UP! Then watch the rest follow, but not as fast.

TB

You say that neither of us know what is going to happen and then you fly away with your predictions!!

:rolleyes:

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I am old enough to remember the crash last time around and I distinctly remember the very same Roger Bootle saying in about 1995 that in the future houses would be seen as a place for living in and not as an investment. He was about 100% wrong then and his timing was uncanny as it was shortly after that that prices started to rise again. So if anything Itake encouragement from his change of stance. As it happens I have STRd and the interest on my capital pays my rent, so a 5% fall will do nicely, but it is only the start.

Thats interesting. If you live anywhere half decent you will be paying say £800pcm. To earn that from interest fom a bank you will need to have £190k cash in the bank. Thats not taking into account tax, in which case you will need circa £250k in the bank to get £800pcm after tax. If you have that much cash you could buy the property out right! If the prices drop 5% a £250k prop will be worth £237k, ie £13k less but you are spending £9.5 k a year in rent. After 2 years you are out of pocket!!!

:lol::lol:

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Not another over leveraged Landlord, I can feel the dryness in your throat.

Who would that be?, the lender who has just repossessed the property.

Its a shame and perhaps a sign of the paranoia here that everyone thinks I'm an over leveraged landlord. I'm afraid thats not true. My very modest portfolio was bought over 4 years ago so prices will have to drop 35% + to really upset me. Even if they did I can ride it out.

I've abstained from further investment for the last 2 years also fearing a large correction, but now I think I might buy up some more stuff ( with a long term ie 15years outlook). Unless something 'ugly' happens prices will just remain flat for a while. I might aswell let some renter help my pension pot

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I think this really underlines the difference between property and other types of assets. To my mind, while property is an asset, it is also the only asset you can become emotionally attached to - you make you home in it, have your family life in it, it's your escape from the world, and a place you can be safe. We make them into places we like being in, and stamp our personalities on them.

STR's are bold in that they have given all this up in the hope that they will make a financial gain from doing so.... this is a much bolder step than other asset gambles.

But that's what it is - a gamble. We will have to wait and see if time and price falls are of the right magnitude to enable their financial plans come to fruition. While I would be pleased for them if they did, it's a gamble which I considered, and decided not to take, since to me my home is far more than just an asset.

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Thats interesting. If you live anywhere half decent you will be paying say £800pcm. To earn that from interest fom a bank you will need to have £190k cash in the bank. Thats not taking into account tax, in which case you will need circa £250k in the bank to get £800pcm after tax. If you have that much cash you could buy the property out right! If the prices drop 5% a £250k prop will be worth £237k, ie £13k less but you are spending £9.5 k a year in rent. After 2 years you are out of pocket!!!

:lol::lol:

Hmmm

Person A starts off with house worth 250k owned outright.

year 1. keeps house

year 2. keeps house

At end of year 2 person A has house worth 237k

Person B starts off with house worth 250k owned outright.

year 1. at beginning of year sells house and banks 250k. Pays rent using post-tax interest from the 250k

year 2. continues to pay rent using post-tax interest.

At end of year 2 person B has cash of 250k

Please explain how person B is out of pocket.

frugalista

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I've abstained from further investment for the last 2 years also fearing a large correction, but now I think I might buy up some more stuff ( with a long term ie 15years outlook). Unless something 'ugly' happens prices will just remain flat for a while. I might aswell let some renter help my pension pot

Blimey, you're going to invest your money into something that will remain flat? I'm investing my money into something that's rising. Whilst renting the thing that's staying flat and being subsidised for doing it. I might as well let some landlord help my pension pot

Each to his own I suppose.

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Hmmm

Person A starts off with house worth 250k owned outright.

year 1. keeps house

year 2. keeps house

At end of year 2 person A has house worth 237k

Person B starts off with house worth 250k owned outright.

year 1. at beginning of year sells house and banks 250k. Pays rent using post-tax interest from the 250k

year 2. continues to pay rent using post-tax interest.

At end of year 2 person B has cash of 250k

Please explain how person B is out of pocket.

frugalista

Or alternatively you could have that persons A and B both start off with 250k cash, person A buys a house outright, person B rents from the interest. Same result.

frugalista

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Its a shame and perhaps a sign of the paranoia here that everyone thinks I'm an over leveraged landlord. I'm afraid thats not true. My very modest portfolio was bought over 4 years ago so prices will have to drop 35% + to really upset me. Even if they did I can ride it out.

I've abstained from further investment for the last 2 years also fearing a large correction, but now I think I might buy up some more stuff ( with a long term ie 15years outlook). Unless something 'ugly' happens prices will just remain flat for a while. I might aswell let some renter help my pension pot

Well that explains your positive stance. If you have no problems with drops up to 35% why the hell are you bothering to post on this site. :rolleyes:

Edited by fedupwaiting

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I know this has been mentioned in a few threads but generally overlooked (suprise, suprise). Bootle back tracked on the 20% correction of prices, and predicts maybe 5% down over a few years and then stagnant.

THAT IS NOT A CRASH OR CORRECTION!!!!!

Anybody who str is set to become the biggest SUCKER ever. A 5% correction will not even cover your selling and buying costs( on a decent purchase)

ps I hope your landlords don't hand you an eviction notice on Christmas day!!! :):):)

Hi,

Aw! It's christmas and goodwill to all etc., I really was going to let this go BUT it is my last post for a couple of weeks so here goes my final few words for 2005.

There is a way to go yet. Bootle's report has not been published yet in the mainstream. You will notice that the only converage really given so far has been a couple of one or two sentence quotes by a lender and a couple of pro-property pundits. It's like everything we read in media, it can be selectively quoted. You will notice also that a couple of the early quotees have already removed their initial comments. Unless you have full access to capital economics as a subscriber, it is difficult for us to guage their work until we get a series of detailed reports from both bull-bear reporters as to its contents before we can add it to the 'for' or 'against' pile of hpc. It is a bit frustrating that it is getting no in-depth coverage at this time from either side. I am hoping to get access to it after the holidays. It will be an interesting perspective from either viewpoint.

It is too early to call. This present time does feel abit like the begining of the last crash where there was much confusion and contradictions in statistics and media reporting, a cloud of confusion. Are we there now? Only time will tell, if we are, it will not be fully exposed until there is no doubt and by then it is too late. That is what happened last time.

Crash? Correction? That is another area of debate. Did you know that the BoE definition of a softlanding was put forward as a 15% initial fall over 24 months followed by several years of sub-inflation or zero percent rises over several years thereafter. Depends what your position is. If you are a cash investor, that is a pretty big hit in the wallet. If you are a home buyer using a wage packet to pay off mortgages, that could be possible to take the hit on, if you avoid the intial 15% fall bit. Particularly until the economy and job security show some improvement over the coming year or two. Considers where you live as well. Let's use land registry figures. Say you were a buyer in the past year in the London Boroughs of Bromley or Merton. You've seen a fall of 7%-ish in property values in a year. Add inflation to that. Then add Bottle's guess of 5% falls for two years to that as well as inflation of say 2%, if that is what he is saying. Then the two more years of 0% and again inflation figures of 2% as an assumption. That is 25% real falls over 5 years. And at a time of high risk where sterling has been subject of attention in the currency markets and consumer indebtness has been at record levels as personal bankruptcies have also reached record levels and economic growth slumped. It could all turn out OK but equally, one shock to the UK economy or the world economy and many people in that bracket will have very little room to manoueuvre compared to times in the past. It's a bigger risk than it's possibly ever been for some. It's a personal choice to them.

Let's hope it ends up OK. In a dream world, wages and productivity in UK plc would rocket in the face of another economic boom in business, services and industry and everything will work out OK. It is christmas, I am trying to be optimistic for the market.

PEACE AND GOODWILL,

boomer

Edited by boom_and_bust

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Hmmm

Person A starts off with house worth 250k owned outright.

year 1. keeps house

year 2. keeps house

At end of year 2 person A has house worth 237k

Person B starts off with house worth 250k owned outright.

year 1. at beginning of year sells house and banks 250k. Pays rent using post-tax interest from the 250k

year 2. continues to pay rent using post-tax interest.

At end of year 2 person B has cash of 250k

Please explain how person B is out of pocket.

frugalista

hmm..... good point!!

:)

Thats why I'm not a millionaire I suppose!! :lol:

Seriously though, there is a little more to it as life is never that straightforward. If the sell was not timed PERFECTLY then prices may have risen another 5% prior to a fall. Now if you take into account buying and selling costs on a £250k property that means prices then have to drop 15% to make it even start to be worthwhile. To really gain you some money you need 20% drop.

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My very modest portfolio was bought over 4 years ago so prices will have to drop 35% + to really upset me. Even if they did I can ride it out.

Geez, my speculative investments are up over 20% in three months, and I don't consider that a particularly impressive return for the risks involved. What kind of person gets so worked up about a 35% rise in four years?

Edited by MarkG

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Or alternatively you could have that persons A and B both start off with 250k cash, person A buys a house outright, person B rents from the interest. Same result.

frugalista

? Unless interest rates fall?

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Geez, my speculative investments are up over 20% in three months, and I don't consider that a particularly impressive return for the risks involved. What kind of person gets so worked up about a 35% rise in four years?

Not quite. 35% is just the increase in value, if you take into account the capital sum paid off by rent its ?45% + gain. Also I 've said this before, its not just the %age gain its the absolute amount. I would guess that your speculative investments are relatively small. I'm not trying to insult you but since you imply that they are highish risk I presume you haven't dumped everything you own into them. On the other hand the amount property is bought for is large and so even small %age increases mean lots of money.

btw who said I was getting worked up about it?

B)

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? Unless interest rates fall?

Well, you could add in all sorts of things to the model, interest rates or rent rising or falling, maintenance and transaction costs, the intangible value of owning your own place, difficulty of selling in a falling market etc.

I was just using your simple model, and showing that the results came out differently.

If one adjusts one's theory each time it is proven incorrect that is known in the philospophy of science as an "ad hoc modification". If a theory has gone through a few such adjustments, it tends to be discarded!

frugalista

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Well, you could add in all sorts of things to the model, interest rates or rent rising or falling, maintenance and transaction costs, the intangible value of owning your own place, difficulty of selling in a falling market etc.

I was just using your simple model, and showing that the results came out differently.

If one adjusts one's theory each time it is proven incorrect that is known in the philospophy of science as an "ad hoc modification". If a theory has gone through a few such adjustments, it tends to be discarded!

frugalista

Er, its a discussion and expression of opinions isn't it? I'm not trying to advocate that I have scientific theory regarding the property market. I think it has been shown time and time again that 'science' or rigid theories don't do well when dealing with the prop market

You're right DRS - IR's will crash, house prices will keep on booming up. Everything's different this time :lol:

Er I said ? interest rates may fall and house prices stay flat. How did that translate into ' IRs crashing and house prices booming'

I've told you a million times before, don't exaggerate

:lol::lol::lol:

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Er, its a discussion and expression of opinions isn't it? I'm not trying to advocate that I have scientific theory regarding the property market. I think it has been shown time and time again that 'science' or rigid theories don't do well when dealing with the prop market

You stated, given some assumptions that person B, who sold to rent was worse off after 2 years. I showed from the same assumptions that the person A, who held on to their house was worse off. My question was "please explain why person B is out of pocket", but all you could suggest was to change the set of assumptions.

Of course, how sound different sets of assumptions are is a matter of opinion. I am not questioning your assumptions, I am questioning your maths!

frugalista

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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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