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Mikhail Liebenstein

Getting that 2003 feeling again

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Just had this in an email from Zoopa (which Spellcheck corrects to Zooplankton)

https://m.zoopla.co.uk/discover/property-news/house-price-growth-in-northern-regions-outstrips-south/?utm_source=content&utm_medium=email&utm_campaign=zoopla-20180106&utm_content=hero&utm_term=text#V6b52WEBotIyUJKB.97

I last recall this happening in around 2002, about 2 years after I first bought. London and the SE had had a strong dose of HPI, and slowed off somewhat whilst the North started making the running. This trend lasted for a while, perhaps 18 - 24 months, and then we got another London surge which ran us upto to 2007 prices and we all know what then happened in 2008.

Based on reading Fred Harrison, I do believe we are roughly in an 18 year cycle, though it feels like we have perhaps pulled forward a couple of years perhaps due to low interest rates.

On this basis, I reckon we may get another London led boom around 2020,  peaking in 2023 with the Wylie Coyote moment in 2024, crash in 2025 and Bank Bailouts etc again by 2025.

Thoughts?

The current slow down in London is not that strong and feels like a bear trap.

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10 minutes ago, Mikhail Liebenstein said:

Just had this in an email from Zoopa (which Spellcheck corrects to Zooplankton)

https://m.zoopla.co.uk/discover/property-news/house-price-growth-in-northern-regions-outstrips-south/?utm_source=content&utm_medium=email&utm_campaign=zoopla-20180106&utm_content=hero&utm_term=text#V6b52WEBotIyUJKB.97

I last recall this happening in around 2002, about 2 years after I first bought. London and the SE had had a strong dose of HPI, and slowed off somewhat whilst the North started making the running. This trend lasted for a while, perhaps 18 - 24 months, and then we got another London surge which ran us upto to 2007 prices and we all know what then happened in 2008.

Based on reading Fred Harrison, I do believe we are roughly in an 18 year cycle, though it feels like we have perhaps pulled forward a couple of years perhaps due to low interest rates.

On this basis, I reckon we may get another London led boom around 2020,  peaking in 2023 with the Wylie Coyote moment in 2024, crash in 2025 and Bank Bailouts etc again by 2025.

Thoughts?

The current slow down in London is not that strong and feels like a bear trap.

Who is going to be paying these ever higher prices in London against a backdrop of increasing interest rates? There is a great deal of political risk for foreign buyers and prices are no so far out-of-whack with wages it's hard to see the locals taking up the slack.

Oh, and buy to let parasites are selling up en masse (or at least complaining about voids having tried to put the rents up). It is my belief that IO BTL has largely been responsible for keeping prices inflated since the 2008 'crash'. The Section 24 torpedo has now holed that business model below the waterline. Some don't yet know the ship is sinking but it is.

London is particularly screwed.

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I don’t get the surge-ahead feeling out there right now at all/ the opposite I think with more fear out there than confidence. 

I cant see where people will get the sentiment that will drive them to choose to buy at today’s eye-watering prices which are based on ridiculous multiples of income and 3000-Year artificial low rates. 

Unless they are sellers swapping with other sellers. And I don’t think that’s sustainable.

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27 minutes ago, Mikhail Liebenstein said:

On this basis, I reckon we may get another London led boom around 2020,  peaking in 2023 with the Wylie Coyote moment in 2024, crash in 2025 and Bank Bailouts etc again by 2025.

No way will we have any more price rises in London soon. You make the basis for your opinion looking at the market from 2000/2002 until the present time you need to look back further to understand where we are now. 

Until the early 90's the property market worked by people stretching themselves to buy their first home. Over the next few years the value increased as did their wages. So 2.5x their wages after a few years gave them the opportunity to borrow more money without increasing the multiples of wages they borrowed. They then sold the first home taking the profit to put down as a deposit on the next home and increased their mortgage. Many then stayed in that home for years and years raising a family seeing their mortgage decrease in real terms as their wages rose. There was very little if any re mortgaging , withdrawing the equity from homes back then . People just paid off the debt.

 The average interest rate in the 80's was about 11.5%. We get to the early 90's the property market is on the floor after the late 80's crash and we leave the EMF. At this point wages have started to rise much slower than they had in the past. As we leave the EMF John Majors government slash interest rates and we get a mortgage rate of 7.5%-8%. Recent  Home buyers have not seen interest rates this low in their buying life and pile in. At the same time banks raise the multiples of wages people can borrow so people could borrow more on these increased multiples without their wages rising as fast. The market moves upwards.

By the late 90's the Market had recovered from the 80's crash. IO mortgages for owner occupiers were introduced and buy to let was introduced. Again people could borrow bigger amounts of mortgage and pay more for houses as they did not need to make repayments. At this point interest rates carried on being cut and a standard mortgage rate of 5% -6% appeared. We saw bigger and bigger multiples of earnings and mortgages being given out on rental values not earnings plus  mortgages being given out on lies. The market rises.

We then get to 2008/2009 and the financial crises hits the housing BUBBLE is about to crash so the government slash the interest rates to a fake rate and we see mortgage rates of 2% and under. THIS IS NOT NORMAL. So now today we are at the peak of another BIGGER BUBBLE. 

There is a massive over supply of new build expensive apartments in London normal people cannot afford these on wages only rich investors can and the rich investor has disappeared along with the BTL people. The BTL people were mopping up the cheaper new builds in London but now they are not doing that so now there is also an oversupply of apartments in the lower price bracket.

So now we are at a place where people buying cannot borrow any more money to pay higher prices unless their wages rise , WAGES ARE NOT rising. People cannot borrow any more money unless multiples of earnings are increased MULTIPLES OF EARNINGS ARE NOT INCREASEING. People cannot borrow any more money unless the interest rates are slashed again ...... WE ALL KNOW INTEREST RATES  CANNOT BE SLASHED AGAIN. 

We are at the peak of a massive BUBBLE that is about to crash. The 80's crash took 10 years to turn around with rising wages and lowering interest rates enabling the turn around. This time with no rising wages and no lowering of interest rates it will be much longer. 

 

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2 hours ago, Mikhail Liebenstein said:

Based on reading Fred Harrison, I do believe we are roughly in an 18 year cycle, though it feels like we have perhaps pulled forward a couple of years perhaps due to low interest rates.

What is his argument for an 18 year cycle?

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All depends what the boe does at the behest of the government.

They have proven that they can do anything they want, that will include bankrupt us all if they want to.

The housing market as such does not exist, just the supply of finance to whomever they wish.

For example, htb, they know who is benefiting the most and it is the already wealthy, it certainly isn't the jams .

Maybe the Tories just don't like the jams, they see them as pathetic, aspirational low achievers .

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Harrison says the "economy rises and falls like clockwork"

“With the exception of World War II, the peak of most real estate cycles is roughly every 18 years,” Hanke wrote. He shows this has remained mostly consistent over the last 200 years with land value peaks in 1818, 1836, 1854, 1872, 1890, 1907, 1925, 1973, 1979, 1989, and 2006.

What is special about WWII that disrupted the cycle? Could any other event disrupt it? I suppose 1979-1989 is known as the short 18 years and 2006-2026 will be known as the long 18 years. It's almost as if Harrison doesn't even believe this 18 year cycle himself.

 

Even if the market peaks in approximately 2026 that doesn't tell us whether prices should go up until then, stagnate or crash now and then recover.

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The one thing that worries me a little is that there seems to be an absolute consensus across the media that prices are due to flatline or fall over the next few years. The contrarian within me suspects that the opposite might happen, just on this basis alone.

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3 minutes ago, mattyboy1973 said:

The one thing that worries me a little is that there seems to be an absolute consensus across the media that prices are due to flatline or fall over the next few years. The contrarian within me suspects that the opposite might happen, just on this basis alone

I understand that feeling 

But maybe it is a case that the opposite to what  they say will happen. They say flatline or fall. They never say Large Crash . Maybe the opposite of what they say is No Flatline NO fall but BIG  crash. That would fit as an opposite. 

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4 minutes ago, mattyboy1973 said:

The one thing that worries me a little is that there seems to be an absolute consensus across the media that prices are due to flatline or fall over the next few years. The contrarian within me suspects that the opposite might happen, just on this basis alone.

....some asset prices will rise, some will fall and buying/selling at the right price, right time.....the hard part is picking the right ones.

....but income is as important or more important for most people than growth......income is the only thing that will support when all else fails, the main objective is that all people continue to receive an income that pays enough to live, to stay safe and healthy.;)

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1 hour ago, Kosmin said:

What is his argument for an 18 year cycle?

Spotted that some of the other posters have responded already. There are some videos on this old link: 

Yes, The 18 year cycle is based on a couple of hundred years of detailed data and perhaps thinner Data from the century before that. So it is empirical. 

That said the theory is based on the price of land getting out of control due to limited supply and the phases he describes follow the typical life cycle of a market crash model. Slow build up, bear trap, boom phase, new paradigm/winners curse, Crash including my bull trap.

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6 minutes ago, Mikhail Liebenstein said:

 

That said the theory is based on the price of land getting out of control due to limited supply and the phases he describes follow the typical life cycle of a market crash model. Slow build up, bear trap, boom phase, new paradigm/winners curse, Crash including my bull trap.

No. Where is the money for that boom going to come from?  No yields for BTL, high stamp duty for prime, FTB graduates are skint from the student loan "tax". 

 

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If anybody had the magic numbers to predict what was going to happen they'd be sat on the beach surrounded by girls and champagne not sat with Keiser telling us tinfoil hatters about it.

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Can’t see it myself.. immigration and housing are already the top 2 most important issues.. next election they will be under pressure to do something.. price is the number one problem for the working poor! How can they ramp it up more? The public will cotton onto the politicians and banks doing it on purpose sooner or later! 

I see a reduction or crash,, 2 years tops.. debt is just too high, jobs will go.. plus we have all the renters heading to retirement with crap pensions.. something is either going to kick off or brake very soon! How much higher can homelessness get? How high can inflation go? Will oil prices continue to climb? 

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8 hours ago, Mikhail Liebenstein said:

Just had this in an email from Zoopa (which Spellcheck corrects to Zooplankton)

https://m.zoopla.co.uk/discover/property-news/house-price-growth-in-northern-regions-outstrips-south/?utm_source=content&utm_medium=email&utm_campaign=zoopla-20180106&utm_content=hero&utm_term=text#V6b52WEBotIyUJKB.97

I last recall this happening in around 2002, about 2 years after I first bought. London and the SE had had a strong dose of HPI, and slowed off somewhat whilst the North started making the running. This trend lasted for a while, perhaps 18 - 24 months, and then we got another London surge which ran us upto to 2007 prices and we all know what then happened in 2008.

Based on reading Fred Harrison, I do believe we are roughly in an 18 year cycle, though it feels like we have perhaps pulled forward a couple of years perhaps due to low interest rates.

On this basis, I reckon we may get another London led boom around 2020,  peaking in 2023 with the Wylie Coyote moment in 2024, crash in 2025 and Bank Bailouts etc again by 2025.

Thoughts?

The current slow down in London is not that strong and feels like a bear trap.

Not so sure ... viewed a house today nice little development only 4 fair sized detached 15 mins to London only 2 stops ( South Herts) completed in July only one sold already knocked £100k off and they now will pay the stamp duty so on what was up for £900k over £130k off their initial valuation 

This has the makings of a decent down turn for at least 2 years 

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5 hours ago, winkie said:

Found this....

 

Interesting video. All well said and ideas. He misses one thing out though, the rich own the land, so there is no way they are going to tax it, who cares if the eceomony is shafted, as long as the landowners get richer. TPTB do the exact opposite of what he suggests. In his utopian state it would be beneficial not to own land and not pay taxes.. yeah right, on that basis all hot air and no substance.

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The same London falling and the "north" still shooting up happened as you say right before 2008 as well.

Who knows. 

Today of course we have already had an - albeit tiny - rate rise. 

That's one big difference.

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17 hours ago, Mikhail Liebenstein said:

Just had this in an email from Zoopa (which Spellcheck corrects to Zooplankton)

https://m.zoopla.co.uk/discover/property-news/house-price-growth-in-northern-regions-outstrips-south/?utm_source=content&utm_medium=email&utm_campaign=zoopla-20180106&utm_content=hero&utm_term=text#V6b52WEBotIyUJKB.97

I last recall this happening in around 2002, about 2 years after I first bought. London and the SE had had a strong dose of HPI, and slowed off somewhat whilst the North started making the running. This trend lasted for a while, perhaps 18 - 24 months, and then we got another London surge which ran us upto to 2007 prices and we all know what then happened in 2008.

Based on reading Fred Harrison, I do believe we are roughly in an 18 year cycle, though it feels like we have perhaps pulled forward a couple of years perhaps due to low interest rates.

On this basis, I reckon we may get another London led boom around 2020,  peaking in 2023 with the Wylie Coyote moment in 2024, crash in 2025 and Bank Bailouts etc again by 2025.

Thoughts?

The current slow down in London is not that strong and feels like a bear trap.

Some say 13years cycle so it would be 2021 ;)

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Nah.

2003 was when the market pretty much ran out of FTBs.

What happened next was the nuts stuff.

OO switched to IO only mortgages esp. London

IO BTLers started out in vengeance.

Then 6m-9m EUers poured in, with a huge demand for accommodation.

Last 4 years of Browns credit til 2008 was a nuts as the buffoon himself.

UK has had a couple of blips - 2008 mainly. Then the MMR came in a cleared most OO. IO BTLers carried on a bit, but these were only 1 or 2 houses and baked by their soon to repo'd main residence.

 

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1 hour ago, spyguy said:

Nah.

2003 was when the market pretty much ran out of FTBs.

What happened next was the nuts stuff.

OO switched to IO only mortgages esp. London

IO BTLers started out in vengeance.

Then 6m-9m EUers poured in, with a huge demand for accommodation.

The biggest hike in house prices was 1996-2004 i.e. before the central and eastern European countries joined the EU. 2004-7 HPI was relatively small in comparison except in Northern Ireland.

nominal-UK-house-prices-91-

Edited by Dorkins

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  • 407 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% +
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      • Even
      • up 2.5%
      • up 5%



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