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Ephraim Bubble Blower

Thoughts From My Xmas Trip Back To The Uk

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I returned to the UK (from the US) over Xmas and was hoping to get some very negative vibes from friends about the current state of the housing market. Instead I was somewhat taken aback by the degree to which people are still doing anything to get onto the housing ladder, quoting the usual 'affordability' argument alongside the 'rent is dead money' argument. Indeed with regard to the latter, despite me laying out in easily understood terms how in the context of a flat (or falling) market, and low rental yields, a renter 'saves' quicker than a homebuyer on a repayment mortgage, they still look at you like you're crazy. It really hammered home to me how far off the crash will be because a major sentiment change is required in my view before it can properly unravel.

Interestingly, I also chatted to a couple of friends who (with hindsight) sensibly bought in 1998 and have since both moved up the ladder once. However they both moaned to me about how, despite having a lot of equity (on paper), they were unable to move onto the next rung in order to accomodate their recent new arrivals. For them, being on the ladder was a poisoned chalice since now they were stuck - it makes you wonder why they bothered. Of course what they should do (in my view) is to sell-to-rent, stick the equity in the bank, wait for a correction and then move smoothly onto the next rung with plenty of cash to spare. However in light of the mania that 'being on the ladder' generates, they are rightly concerned they'll never get back onto it again.

I couldn't help thinking on my return that my hopes of returning to the UK in the next 3-4 years would see us immediately leapfrog the usual first-time buyers and buy heavily discounted property, are likely to be dashed. I was also disillusioned to read that Capital Economics had adjusted their forecast and now see virtually no nominal falls in house prices - in this context, what hope do us bears have?

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What you have failed to relaise is that house price crashes are only ever recorded in history as people continue to buy property all the way through them.

If the UK stopped buying property all together and therefore no houses were sold, how would we know that the price of a home is dropping?

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What you have failed to relaise is that house price crashes are only ever recorded in history as people continue to buy property all the way through them.

If the UK stopped buying property all together and therefore no houses were sold, how would we know that the price of a home is dropping?

Unfortunately not everwhere is recording falls. Of friends that have sold recently (South East and London) no one has had to drop by more than 5% off asking and in one case there was a bidding war to above the asking price. London also seems to be witnessing slight rises if the last lot of stats is to be believed.

Without a rise in interest rates IMHO the appetite for debt amongst the Bristish public is far from over.

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... Instead I was somewhat taken aback by the degree to which people are still doing anything to get onto the housing ladder, quoting the usual 'affordability' argument alongside the 'rent is dead money' argument. Indeed with regard to the latter, despite me laying out in easily understood terms how in the context of a flat (or falling) market, and low rental yields, a renter 'saves' quicker than a homebuyer on a repayment mortgage, they still look at you like you're crazy. It really hammered home to me how far off the crash will be because a major sentiment change is required in my view before it can properly unravel.

It takes ages for this change in sentiment to occur. I think we were a good 2 years into the last crash before it was widely accepted as such. In that time countless people believed the hype and unthinkingly paid top dollar in the falling market.

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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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