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Sparker

I Just Don't Get It!

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I'm a bear through and through and have been analysing the property market through this site for over a year and a half. In that time I've seen:

- taxes increase massively, 66 stealth taxes since 1997

- Council tax increase for the 10th year in a year

- energy costs gone up 70% in just a few years

- transport fuel costs way ahead of inflation

- manufacturing at dangerously low levels

- oil prices tripled in the last year

- reposessions up massively

- insolvencies up massively

- unemployment increasing

- debt at an all time high, in fact UK debt accounts for two thirds of the debt of the whole EU

- retail sales down to lowest point since 2nd world war

- house prices to earnings ratio the highest in history. Increase to between 6 and 8 times in income depending on which survey you subscribe to.

- current house prices are simply unaffordable to most

- UK economic growth down to one of the lowest in the EU

- Pensions crisis

- BTL no longer profitable, it's cheaper to rent

- first time buyers at an all time low, down to 12%

- The big banks such as HSBC are advising against investment in residential/commercial property

- property transactions in 2005 lowest in 9 years (see proviser.com)

The facts are plain, so why is everyone in denial? Interest rates are low and lending is lax but can people really believe this can keep the market going?

The irony is, the very people that are in denial about the crash are putting off the crash by continuing to buy and sell and pay silly prices. How long can it go on?

I think you would need to be a psychologist as well as an economist to understand what's happening.

Edited by Sparker

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The facts are plain,

Property defies logic and can't be labelled and boxed. There are always shedloads of bearish inputs, the question is whether todays are any worse than those different inputs of say 5 years ago. Bearish natured people are very 'here and now' focused and have a tendancy to always think thier little 'here and now' is somehow critical or special.

In the end most people consider mortgages affordable, end of.

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It always appears to be darker defore the dawn! Todays bull news is just that--bull. Read the financial reports--mortgage lending down, employment down, exports down, confidence down, retail sales down, number of FTBs down, affordability down.

The only thing going up is the BS level at Rightmove! "Asking prices" are meaningless.

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Property defies logic and can't be labelled and boxed. There are always shedloads of bearish inputs, the question is whether todays are any worse than those different inputs of say 5 years ago. Bearish natured people are very 'here and now' focused and have a tendancy to always think thier little 'here and now' is somehow critical or special.

In the end most people consider mortgages affordable, end of.

Most people are not financially aware, once IR starts to rise a mere 0.50% will have huge implications to the mortgages they percieve affordable.

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To grossly generalise, most people just want to get on with their lives in the way that this society considers the norm.

That's how it all keeps going, for if too many stopped to really think about it all chaos would ensue.

It does amaze me though that people continue to fall for it.

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It always appears to be darker defore the dawn! Todays bull news is just that--bull. Read the financial reports--mortgage lending down, employment down, exports down, confidence down, retail sales down, number of FTBs down, affordability down.

The only thing going up is the BS level at Rightmove! "Asking prices" are meaningless.

I would counter your view with my experience of bearish types. I have a freind who's always citing bad financial new as evidence of a crash around the corner. He's always been this way. He considers himself very much a realist.

Im often bearish but I also recognise the fundamental truth that Human kind has a vested interest to muddle through.

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Most people are not financially aware, once IR starts to rise a mere 0.50% will have huge implications to the mortgages they percieve affordable.

Many people will only start to take notice IF they loose their jobs or can no longer afford their mortgage repayments. Not everyone is on 100% mortgage, or even 85% and many are sitting on huge chunks of equity.....

Spring is coming so heating bills will decrease etc....

Unless 0% interest credit cards are banned and not handed out like water, people will still think they are on "easy street".

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The facts are plain, so why is everyone in denial? Interest rates are low and lending is lax but can people really believe this can keep the market going?

Sparker,

Everything you mention has no doubt had a huge drag on the housing market ... which is why it has slowed down, but it appears it's not enough to cause a full on 1989-style crash ... yet.

The New Year has arrived and EAs and sellers think it's OK to jack up prices yet again to cancel out all of the falls from last year.

Throughout 2006, the market probably then fall back again, until next January when EAs/sellers will jack prices back up again to cancel those falls out again, etc. This has the effect of having a prolonged stagnation on the market.

The key is definitely Interest Rates, and it's the only thing that will work. Hitting people where it hurts and raising them is the only thing that will make people wake up and smell the coffee.

THE BANK OF ENGLAND MUST ACT. Other banks are raising theirs including the Fed, and one of the things I would definitely like to see is the international money supply from Ireland and the States cut off.

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I would counter your view with my experience of bearish types. I have a freind who's always citing bad financial new as evidence of a crash around the corner. He's always been this way. He considers himself very much a realist.

Im often bearish but I also recognise the fundamental truth that Human kind has a vested interest to muddle through.

Look even the CBA are slating our monetry policy why do you think our members of the BoE are suddenly citing higher IR?

If the worlds top banking authority are warning on our economy then I for one am not going to argue with those considerably more qualified than myself, buying property now is extremly risky.

http://www.telegraph.co.uk/money/main.jhtm...0/ixportal.html

UK policy blamed for soaring debt levels

By Edmund Conway, Economics Editor (Filed: 20/02/2006)

The world's top central banking authority has warned that the Bank of

England's inflation-busting tactics are largely responsible for the

dangerous pile-up of household debt, which last year passed £1,158

billion, £30 billion more than the country's total economic output.

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I think people generally buy a house, especially a first one, when key events in their life allow it, say a marriage, inheritance, or better job, and the decision is made almost without any reference to the state of the market; they decide first, then go along to the EA or surf the property websites to find out what they can get for their money. After the reality check of talking to the mortgage broker and being appalled at the prices there then follows a longish period of anxious worrying supported by family and friends, and finally the “if they are this high now, just think what it will be like if you leave it any longer” and “my mate made a shed load of money from his house” type advice wins out and they “take the plunge”. At no point is there any reference to p/e graphs, boom and bust cycles, or anything else we might consider “normal” before handing over such a huge wedge of (borrowed) money. It’s simply programmed behaviour triggered at key events (personal, independent of the market) in ones life.

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Guest wrongmove

I think people generally buy a house, especially a first one, when key events in their life allow it, say a marriage, inheritance, or better job, and the decision is made almost without any reference to the state of the market; they decide first, then go along to the EA or surf the property websites to find out what they can get for their money.

This is my experience too. People think "I want a house", they check the latest prices and get the best they can afford. They have no intention of calling the market like most here. They just say "oh dear, houses are expensive", but they just get on with it. Many will not check prices again until they need to buy another one.

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Guest Winners and Losers

This is my experience too. People think "I want a house", they check the latest prices and get the best they can afford. They have no intention of calling the market like most here. They just say "oh dear, houses are expensive", but they just get on with it. Many will not check prices again until they need to buy another one.

That is so true, and that is when they will get a shock.

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Absolutely W&L and wrongmove - the decision is, in effect, made with zero information about the market; then the reality of high prices is simply an obstacle that has to be overcome to allow them to get on with their lives. The EAs and lenders know this, and put up a reassuring barrage of “news” while bending over backwards to provide innovative products that allow people to “get on the ladder”, i.e. to fulfil their aspirations and make their dreams a reality. Mostly this work out fine, but, as we all know, there are dangerous points in the cycle when some care and serious reflection is needed.

Edited by spline

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It always appears to be darker defore the dawn! Todays bull news is just that--bull. Read the financial reports--mortgage lending down, employment down, exports down, confidence down, retail sales down, number of FTBs down, affordability down.

The only thing going up is the BS level at Rightmove! "Asking prices" are meaningless.

Mortgage lending appears to be up again and booming according to most reports.

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in answer to the original question - an analogy:

one cannot throw a runaway train into reverse with the click of a finger. And nor will the reversal be smooth.

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Guest Winners and Losers

Oh, for f*cks sake, let them buy. Fools. The bigger they are the harder they fall. No crash, oh well. Is it really the end of the world. You can't take it with you anyway. Just rent, plenty of people have done this their whole lives (not by choice I am sure). My grandmother brought up 7 children in a 3 bed council house. She is happy today. I want to be able to buy a house, but I'm not going to sell my soul to do it!

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Oh, for f*cks sake, let them buy. Fools. The bigger they are the harder they fall. No crash, oh well. Is it really the end of the world. You can't take it with you anyway. Just rent, plenty of people have done this their whole lives (not by choice I am sure). My grandmother brought up 7 children in a 3 bed council house. She is happy today. I want to be able to buy a house, but I'm not going to sell my soul to do it!

Well said that man....errrr dog!

Precisley why I will not buy a house in London absoloutley crazy to think about it years and years of hyper-inflated debt no thankyou I would rather enjoy my life.

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This is my understanding also, there comes a time when is right to

move out of the parents house and in with the girlfriend/wife.

Your parents are driving you nuts to get out, your girlfriend is driving you nuts

to get a place of your own, renting is a waste of money (you think),

You will get your leg over every night (you think).

So you buy a house, you have some niggling doubts in the back of your mind

that prices are too high but what can you do about that.

So you buy. I did in 1991. What a good decision that was (not). But I didnt

have a crystal ball so wasnt to know prices would fall.

Was in town at the weekend, always make a point of looking in the

estate agents windows, saw about 3 young couples sitting in there

one couple with parents. Felt like telling them now is not a good time to buy

but they would only tell me to ****** off and mind my own business.

But what do I know.

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affordability.htmTo me the key issue of HPI is affordability but I think we have been deluding ourselves by believing that HP multiples of income measures that. What really matters in affordability terms is the money being spent by individuals servicing mortgage costs. This is obviously a function of interest rates. The attached graph is my rather simplistic analysis based on HBOS figures. In summary I took the avg price of a house for each year, calculated the cost of servicing a 90% IO mortgage at the prevailing rate and calculated this as a percentage of average income.

By this measure houses appear no less affordable than before and as long as there is confidence in interest rates remaining low HPC does not look likely in the short term. Perhaps I have missed something and would welcome input

affordability.htm

Edited by vorpalsword

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Guest Winners and Losers

Well said that man....errrr dog!

Precisley why I will not buy a house in London absoloutley crazy to think about it years and years of hyper-inflated debt no thankyou I would rather enjoy my life.

I'm a WO-man. My dog is very pretty don't you think? House prices, ramped, VI's, MEW etc.etc. (just to keep on topic!).

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Guest Winners and Losers

ooops....proabably deserve a slap for that no offence meant....lovely doggie ;-)

No offence take. I love your name by the way - how's about those house prices? Can you hear the repossers Fernando..... (ABBA). I have a dog just like the one in my avatar. Sadly, I am in love with my dog and no amount of money could part me from her.

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  • 302 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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