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“Remember toilet paper in April...that’s like houses now!”


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I saw that exact quote on Facebook from a Realtor friend in Barrie Canada where I used to live. There are no houses left for sale and silly Toronto money is chasing the few left. I am seeing the same thing in Sussex now...my watchlist has virtually all gone SSTC in the last week. It’s happening in New Zealand according to friends there too. Houses are the new toilet paper, and there is absolutely no denying it. I am expecting August prices to be up 2-4% MoM.

As a Bear who wants to buy, it hurts, and here are the market-based reasons why I could/should buy now:

1.This is the last chance to buy a piece of land with the old fiat money before the CBs completely destroy their value.

2. The British Government will never let house prices fall. They will rescue home owners in trouble and along with the banks there will be no repossessions etc and prices will be underpinned.

3. Renting is dead money, borrowed money is ridiculously cheap and in a years time I will have paid down 10% of my mortgage.

4. The SD holiday means I will be 15k better off.

5. It’s different this time, house prices will never crash again.

Here are the market reasons why I shouldn’t buy now:

1. The underlying fundamentals are shocking. Even if a vaccine was made available tomorrow, or everyone woke up to the fact the virus is not so bad after all, the damage done to the economy is permanent. We are looking at a square root shaped recovery...a lopsided V. We will probably exit 2020 with an economy 5-8% smaller than it was at the end of 2019 even if we are fully out of the COVID mess. That will mean significant unemployment, reduced confidence and ultimately less money to buy houses.

2. The market is now at all time high at the same time as facing these current headwinds. The current situation is as artificial and insane as the toilet paper crisis of earlier this year. There has been a supply shock combined with a huge demand surge Concentrated into 2-3 month period. The supply shock is caused by the fact that very people are selling up unless they have to. This particularly applies to those who fear for their jobs. They know/hope the government/banks will Come to their rescue if they lose their jobs so they are better off staying put than selling up and being vulnerable. People are not changing jobs, many are earning less, lots don’t want people tramping around theiR homes and its summer...normally a dead time. On the demand side you have lots of people wanting to move out of London competing with those who ant to get the SD holiday savings. Both of these are short term and likely to fade. Once London opens again, and people wake up to the fact the countryside is boring, especially in the soggy British winter, and colleagues are getting promoted because they are in the office having those water cooler discussions with leadership, the rush to the country Will come to a grinding halt. This will coincide with the end of the SD rush, even If Sunak extends this permanently.

3. The government And banks can’t afford to pay for everyone’s mortgages forever, and once the banks realise this, there may be a rush to the exits.

4. While the Bulls keep saying there is a lot of availability of 90 and 95% mortgages, that is nonsense. there are about a quarter of products around now that were available at the beginning of the year, and the qualifications to get them are extremely tight.

5. London is going down, and if that trend continues, the rest of the country will follow very quickly.

I am on the fence, and have made a few offers recently, but due to my taking a new job, I have decided to sign my lease for another 6 months and sit this one out. I am not making a choice not to buy because of the market necessarily, but I am of the view that I may ending up benefitting by not buying now. I believe that while houses will never be toilet paper, come February we will regard this current mania in much the same way we look back to the bog roll crisis.

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the current mania takes me back to Dubai around the middle to the end of 2008. 

By then the global financial crisis was well underway, yet the mindset of the Dubai speculators had yet to catch up. So in those final heady days, new projects were being launched daily, people were queueing up and hiring people to queue up for them to be "first in line" for real estate developments. 

Brown envelopes were being exchanged with sales agents for the chance to be "first in line" ! It was utter insanity, and the entire place was whipped into a frenzy along with all the international tentacles (India, Russia, Nigeria, UK etc... who were the key players in Dubai). 

Fast forward 12 years. I'm getting occasional emails from agents in dubai (not sure why!)... price per meter for properties is about 60% LESS than in 2008! Its been a devastating collapse for them. This despite Dubai being in a reasonably good shape financially (certainly better than London).


As for our situation. I would say London is a great place to buy and the country is a great place to sell right now. But you have to bash into the agents heads that asking prices are just the beginning of a Dutch auction!

Edited by hayder
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32 minutes ago, hayder said:

the current mania takes me back to Dubai around the middle to the end of 2008. 

By then the global financial crisis was well underway, yet the mindset of the Dubai speculators had yet to catch up. So in those final heady days, new projects were being launched daily, people were queueing up and hiring people to queue up for them to be "first in line" for real estate developments. 

Brown envelopes were being exchanged with sales agents for the chance to be "first in line" ! It was utter insanity, and the entire place was whipped into a frenzy along with all the international tentacles (India, Russia, Nigeria, UK etc... who were the key players in Dubai). 

Fast forward 12 years. I'm getting occasional emails from agents in dubai (not sure why!)... price per meter for properties is about 60% LESS than in 2008! Its been a devastating collapse for them. This despite Dubai being in a reasonably good shape financially (certainly better than London).


As for our situation. I would say London is a great place to buy and the country is a great place to sell right now. But you have to bash into the agents heads that asking prices are just the beginning of a Dutch auction!

Yeah that’s a great insight. This mania and the S & P/NASDAQ mania are one and the same thing. There is always the possibility that it really is “different this time” because the one time that it is different, is that time, but I don’t think so.

I watch these guys once a week and they are going through what we are going through in terms of investing in stocks. They are mostly cash with some Gold miners etc. They are saying how hard it is resist the pressure of FOMO, but they keep saying to themselves “I’d rather look like a fool now that look like a fool later”.

I’m not quite in that camp as I would buy a house now if my situation was less complex what with changing jobs, but at the same time, I think I may end up looking smart by not buying now.

Oh, and I forgot to ad Brexit to my list of Bearish reasons. That could really add to to the downward sentiment come January, as well as put pressure on the pound and cause IRS to rise...wouldn’t that be fun!!!

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@HovelinHove neatly sums up the situation.

I too think this recent wave of activity will push prices up, which will of course queue a lot of 'I told you so' from the property bulls.

Let them have their moment in the sun, the fundamentals remain horrible and for me it's a down hill trajectory for house prices after what I think will turn out to be a brief period of mania.

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1 minute ago, Switch625 said:

@HovelinHove neatly sums up the situation.

I too think this recent wave of activity will push prices up, which will of course queue a lot of 'I told you so' from the property bulls.

Let them have their moment in the sun, the fundamentals remain horrible and for me it's a down hill trajectory for house prices after what I think will turn out to be a brief period of mania.

I actually think this spike could make the crash worse. The further the deviation up, the further the deviation down. All the demand that has been bought forward now, is an even greater reduction in demand come January. Add Brexit, a possible sterling crisis with IRs possibly needing to rise a bit to defend it, and it’s game on. Of course, that may not happen...it may really be different this time.

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If you have a good deposit, a good income and are able to clear 10%/year off your mortgage i would be buying now. You are immune from falls to the extent yours be in negative equity. The choice available right now is amazing which is a massive plus. We can fantacise about the whole world selling their gaffs for 90% off at the same time but that will never happen. 

Perhaps the landscape will look different in February, perhaps not. What you might find is it's worse with people front running the sdlt holiday just like the spike in btl eff witts pre 3% surcharge. 

If you can afford it and you're convinced the currency will be trashed (I'm not sure it'll be totally trashed but it'll take a battering), can save 15k on stampduty i do not know why you'd continue to hand money over to a property hoarding people farmer.

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Lots of people saving to buy have had a boost with the stamp duty holiday and are able to bring forward plans to buy.  Probably a false economy but also some may just want out of their current flat or house in case there is another lockdown.  That demand and sentiment will probably change and I can’t help agreeing it’s a mania at the moment.  Given the eviction holiday/ban I could see a wave of property coming onto the market once this is lifted and mortgage holidays stop.  There are too many people coming off furlough and being made redundant.  Honestly I can see the government offering FTB grants of 10k to prop it up so who knows. 

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I think the current situation mirrors many others in history. 
 

We are in standard bull trap territory. In every bull trap, incumbents try to "shore up the market" . This always fails if sentiment has turned.

Whilst for most people in the UK real estate just means their home, prices and values are set at the margin. Even if every OO sits tight and doesn't sell "bag holder" is their name... the speculators and forced sellers will set prices at the margin.

But of course the major key difference to most previous bull markets is that this involves almost the entirety of society and the state. 

The only precedent really for that is the south sea bubble from many moons ago... what lesson did we learn there?

Edited by hayder
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2 minutes ago, adarmo said:

If you have a good deposit, a good income and are able to clear 10%/year off your mortgage i would be buying now. You are immune from falls to the extent yours be in negative equity. The choice available right now is amazing which is a massive plus. We can fantacise about the whole world selling their gaffs for 90% off at the same time but that will never happen. 

Perhaps the landscape will look different in February, perhaps not. What you might find is it's worse with people front running the sdlt holiday just like the spike in btl eff witts pre 3% surcharge. 

If you can afford it and you're convinced the currency will be trashed (I'm not sure it'll be totally trashed but it'll take a battering), can save 15k on stampduty i do not know why you'd continue to hand money over to a property hoarding people farmer.

Good point about moving money out of a currency that might go down

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1 minute ago, HovelinHove said:

it may really be different this time

It could be, but I strongly doubt it, just as I doubt that we will see a true crash.

My take is that we will see decent correction, but those hoping for a crash are likely to be disappointed once again as the vested interests have already shown they are more than willing and capable of sacrificing the futures of others to preserve their own undeserved wealth.

Very reasonable points @adarmo

3 minutes ago, adarmo said:

i do not know why you'd continue to hand money over to a property hoarding people farmer

For those paying high rental costs you have a valid point, but my personal situation is a comfortable house at below market rental, so I am happy to sit tight for now. Obviously thats only my situation and a lot of people won't have that.

7 minutes ago, satsuma said:

Good point about moving money out of a currency that might go down

Sterling is likely to be reduced relative to the dollar, so best advice is act accordingly.

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10 minutes ago, adarmo said:

If you have a good deposit, a good income and are able to clear 10%/year off your mortgage i would be buying now. You are immune from falls to the extent yours be in negative equity. The choice available right now is amazing which is a massive plus. We can fantacise about the whole world selling their gaffs for 90% off at the same time but that will never happen. 

Perhaps the landscape will look different in February, perhaps not. What you might find is it's worse with people front running the sdlt holiday just like the spike in btl eff witts pre 3% surcharge. 

If you can afford it and you're convinced the currency will be trashed (I'm not sure it'll be totally trashed but it'll take a battering), can save 15k on stampduty i do not know why you'd continue to hand money over to a property hoarding people farmer.

Because I will be starting a new job at around the time I would move and that would affect my new job. Also effects my ability to access good mortgages. Finally if my new job is horrid, then I want to be able to leave and not worry.

also, I am not immune to falls as we may leave the UK in a 2-5 year time frame, so a large drop could massively impact our purchasing power. As for protecting against currency fluctuations I have good exposure to bullion and miners, and CAD and NZ$.

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Just now, Switch625 said:

It could be, but I strongly doubt it, just as I doubt that we will see a true crash.

My take is that we will see decent correction, but those hoping for a crash are likely to be disappointed once again as the vested interests have already shown they are more than willing and capable of sacrificing the futures of others to preserve their own undeserved wealth.

Very reasonable points @adarmo

For those paying high rental costs you have a valid point, but my personal situation is a comfortable house at below market rental, so I am happy to sit tight for now. Obviously thats only my situation and a lot of people won't have that.

Sterling is likely to be reduced relative to the dollar, so best advice is act accordingly.

I am paying nosebleed rents, so I am somewhat motivated to buy. I also agree that we won’t see a massive crash. 10-20%.

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I would counter your point 5.

London is not currently dying. Or certainly not where i am looking is SW london. 

Any 2 or 3 bed houses are going in hours to days for asking pricrs.

Maybe flats are sitting on market for longer but im not convinced of this mass exodus to the peak district on the basis your boss has said wfh till January. 

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31 minutes ago, hayder said:

I think the current situation mirrors many others in history. 
 

We are in standard bull trap territory. In every bull trap, incumbents try to "shore up the market" . This always fails if sentiment has turned.

Whilst for most people in the UK real estate just means their home, prices and values are set at the margin. Even if every OO sits tight and doesn't sell "bag holder" is their name... the speculators and forced sellers will set prices at the margin.

But of course the major key difference to most previous bull markets is that this involves almost the entirety of society and the state. 

The only precedent really for that is the south sea bubble from many moons ago... what lesson did we learn there?

The problem when people infer dutch tulips or the south sea bubble to housing is you are forgetting housing has a net postive cashflow and income compared to renting (or if you btl) thus it carries an asset value in the way a tulip doesn't. 

Of course if people suddenly dont need places to live then that changes but... Ive heard of more likely prospects. 

While a 5 year fix repayment mortgage remains cheaper than the rent, someone buying is hardly purely speculative, but logical l, unlike the olde tulips 

Edited by captainb
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Compared to the start of the year, this is a terrible time to buy in the area I’m looking at. The area is a south London suburb with uniform roads and many of the same type of 4 bed house. They were being listed around the £1.3m mark and eventually selling around £1.15m at the start of the year. Now the ones that didn’t sell before lockdown have all sold, new ones listed at £1.35m and sold immediately and they are now being listed at £1.4m because presumably they are getting those asking prices.

So the price has basically jumped by £200k in 6 months or so, or about 15-20%. Surely this is not sustainable and the money will run out - returning prices to something vaguely sane. Or maybe not,  but they surely can’t go up much more.

Either way my view Is why but now when I could possibly get the same next year and save £100k+?

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After seeing a mad rush in my area central Scotland things appear to have slowed down quite a bit. Some of the houses that sold just after lockdown have now come back on the market. There have also been some reductions. One house in particular is on for less than in sold for in 2009 it has also been reduced recently, nice house, nice area.

I have also been tracking the used prices and numbers of bmw I3s on autotrader. These are electric cars that have been in demand recently. For about a year there was about 300 for sale at any one time. Over the last 3 months this has jumped to 475, a huge increase. At a time when used cars are in demand it seems the higher end of the market is stagnating or people are getting rid of their expensive assets. My sister is looking for a VW polo these are hard to find and have gone up by 10-15 since she started looking near the end of the lockdown.

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1 hour ago, satsuma said:

Lots of people saving to buy have had a boost with the stamp duty holiday and are able to bring forward plans to buy.  Probably a false economy but also some may just want out of their current flat or house in case there is another lockdown.  That demand and sentiment will probably change and I can’t help agreeing it’s a mania at the moment.  Given the eviction holiday/ban I could see a wave of property coming onto the market once this is lifted and mortgage holidays stop.  There are too many people coming off furlough and being made redundant.  Honestly I can see the government offering FTB grants of 10k to prop it up so who knows. 

To paraphrase Henry Pryor who I find a good level head - The logic of saving a couple of grand upfront to see it and more go up in smoke is well underway and baffling

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35 minutes ago, LookingForLondon said:

Compared to the start of the year, this is a terrible time to buy in the area I’m looking at. The area is a south London suburb with uniform roads and many of the same type of 4 bed house. They were being listed around the £1.3m mark and eventually selling around £1.15m at the start of the year. Now the ones that didn’t sell before lockdown have all sold, new ones listed at £1.35m and sold immediately and they are now being listed at £1.4m because presumably they are getting those asking prices.

So the price has basically jumped by £200k in 6 months or so, or about 15-20%. Surely this is not sustainable and the money will run out - returning prices to something vaguely sane. Or maybe not,  but they surely can’t go up much more.

Either way my view Is why but now when I could possibly get the same next year and save £100k+?

Same here... Though I am interested to see if the bumper up prices and SSTCs filter into completions my area NR12 is quite shocking for SSTC to fall throughs which gives it a synthetic market feel as you never know if the prices are real or not.

What is certain is if you where going to save XX K with the stamp duty holiday you wont now and prices have factored this in +

So if the market was not shifting and the key was this saving.... its spent

Edited by Fromage Frais
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3 hours ago, HovelinHove said:

As a Bear who wants to buy, it hurts, and here are the market-based reasons why I could/should buy now:

1.This is the last chance to buy a piece of land with the old fiat money before the CBs completely destroy their value.

2. The British Government will never let house prices fall. They will rescue home owners in trouble and along with the banks there will be no repossessions etc and prices will be underpinned.

3. Renting is dead money, borrowed money is ridiculously cheap and in a years time I will have paid down 10% of my mortgage.

4. The SD holiday means I will be 15k better off.

5. It’s different this time, house prices will never crash again.

 

Only point 4 is a proper reason, tangible and quantifiable. The rest is guesswork and assumption.

I hope this helps balance out the decision! You know your situation best though.

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Posted (edited)
5 hours ago, captainb said:

The problem when people infer dutch tulips or the south sea bubble to housing is you are forgetting housing has a net postive cashflow and income compared to renting (or if you btl) thus it carries an asset value in the way a tulip doesn't.

If prices drop 10% On a 500k property then I am just up on 2 years rent for a property. Works for me.

Edited by HovelinHove
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6 hours ago, HovelinHove said:

I saw that exact quote on Facebook from a Realtor friend in Barrie Canada where I used to live. There are no houses left for sale and silly Toronto money is chasing the few left. I am seeing the same thing in Sussex now...my watchlist has virtually all gone SSTC in the last week. It’s happening in New Zealand according to friends there too. Houses are the new toilet paper, and there is absolutely no denying it. I am expecting August prices to be up 2-4% MoM.

As a Bear who wants to buy, it hurts, and here are the market-based reasons why I could/should buy now:

1.This is the last chance to buy a piece of land with the old fiat money before the CBs completely destroy their value.

2. The British Government will never let house prices fall. They will rescue home owners in trouble and along with the banks there will be no repossessions etc and prices will be underpinned.

3. Renting is dead money, borrowed money is ridiculously cheap and in a years time I will have paid down 10% of my mortgage.

4. The SD holiday means I will be 15k better off.

5. It’s different this time, house prices will never crash again.

Here are the market reasons why I shouldn’t buy now:

1. The underlying fundamentals are shocking. Even if a vaccine was made available tomorrow, or everyone woke up to the fact the virus is not so bad after all, the damage done to the economy is permanent. We are looking at a square root shaped recovery...a lopsided V. We will probably exit 2020 with an economy 5-8% smaller than it was at the end of 2019 even if we are fully out of the COVID mess. That will mean significant unemployment, reduced confidence and ultimately less money to buy houses.

2. The market is now at all time high at the same time as facing these current headwinds. The current situation is as artificial and insane as the toilet paper crisis of earlier this year. There has been a supply shock combined with a huge demand surge Concentrated into 2-3 month period. The supply shock is caused by the fact that very people are selling up unless they have to. This particularly applies to those who fear for their jobs. They know/hope the government/banks will Come to their rescue if they lose their jobs so they are better off staying put than selling up and being vulnerable. People are not changing jobs, many are earning less, lots don’t want people tramping around theiR homes and its summer...normally a dead time. On the demand side you have lots of people wanting to move out of London competing with those who ant to get the SD holiday savings. Both of these are short term and likely to fade. Once London opens again, and people wake up to the fact the countryside is boring, especially in the soggy British winter, and colleagues are getting promoted because they are in the office having those water cooler discussions with leadership, the rush to the country Will come to a grinding halt. This will coincide with the end of the SD rush, even If Sunak extends this permanently.

3. The government And banks can’t afford to pay for everyone’s mortgages forever, and once the banks realise this, there may be a rush to the exits.

4. While the Bulls keep saying there is a lot of availability of 90 and 95% mortgages, that is nonsense. there are about a quarter of products around now that were available at the beginning of the year, and the qualifications to get them are extremely tight.

5. London is going down, and if that trend continues, the rest of the country will follow very quickly.

I am on the fence, and have made a few offers recently, but due to my taking a new job, I have decided to sign my lease for another 6 months and sit this one out. I am not making a choice not to buy because of the market necessarily, but I am of the view that I may ending up benefitting by not buying now. I believe that while houses will never be toilet paper, come February we will regard this current mania in much the same way we look back to the bog roll crisis.

Great post :)

This summer may well turn out to be the silliest season EVER, in more ways than one.

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  • 417 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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