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apom

Poll Time So No Bubble Has Ever Not Burst.

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I thought the Japan version was not a pop but a 10-year slide in property?

(Sarcastic mode on) But here in Britain we don’t have a bubble just house prices that can continue going up to new highs forever – we have yet to start the bubble (sarcastic mode off)

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If Gordon Brown says no more boom and bust it must be true.

I think not.

There are lies and there is the Labour party

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Guest horace

apom

quote

`The fact that no bubble has ever not burst ....`

unquote.

I am at a loss to comprehend this appalling English.

Please rewrite for my benefit.

horace

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Japan slid big style over the 10 years though!!!

40% over 15 years, but can you call it a crash because it was a slow long drawn out proccess, people locked into property for the rest of there lives in places they didnt want to live.

http://www.mailtribune.com/archive/2005/07...ories/02biz.htm

Edited by moosetea

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Seems to me bubbles are probably defined as bubbles once they

burst. The ones that don't burst probably just slip into history

unnoticed.

Pent

Which sudden increases in asset value on the scale of the house price bubble/house price inflation we've seen recently has slipped into history unnoticed? I would suspect that there have been none without signifiicant changes in availability as could plausibly be the case for fossil oil at the moment.

Billy Shears

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the way to think about this is like an energy system. An example even the most 'hopeful' bull might be able to understand is sprinting. When you sprint (sprinting = run very fast, explained for those like TTRTR who have very little real world experience) you rapidly use up all the resources you have to draw on. That's why after a few hundred yards you have to stop. There's nothing left.

You have effectively been running a 'deficit', using resources NOW that would in the normal course of affairs have been used LATER.

Now, in the same way that there is no such thing as free money there is no such thing as free energy. Even olympic altheletes have to stop after a few hundred yards and recover. The same with a bubble.

Bubbles use 'deficit' consumptiuon to fuel today's activities. There is a limited amount of deficit resources to be called upon, because we live on a planet with finite resources, and once they are all gone, the bubble pops. The equivalent of a sprinter stopping in the case of the housing market is a 30% collapse to allow resources to be rebuilt and reversion to mean to occur.

The ONLY confusing thing about this is HOW LONG it can go on. Just as a sprinter can summon one last desperate effort to go another 5 yards, so a bubble can continue to expand past the point that seems 'reasonable' to 'reasonable' people. But eventually, they ALL burst. Period.

it aint rocket science.

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the way to think about this is like an energy system. An example even the most 'hopeful' bull might be able to understand is sprinting. When you sprint (sprinting = run very fast, explained for those like TTRTR who have very little real world experience) you rapidly use up all the resources you have to draw on. That's why after a few hundred yards you have to stop. There's nothing left.

IMHO this is a very good analogy. People only earn a certain amount over their lifetimes, and if they spend over their means now, they'll have to spend less at some unspecified future time. Though I once had an argument with a "property prices can only ever go up" type who claimed that this wasn't true as people could borrow, refuse to pay the loans, the banks would write off the loans, and then continue spending. I would like to argue that this isn't true, but there have been some high profile bankruptcies recently on television where people do seem to get away with borrowing money, and not paying it back.

Billy Shears

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Bubbles sometimes do not burst! (This one will though!)

http://www.olis.oecd.org/olis/2006doc.nsf/.../ECO-WKP(2006)3

OECD report over 17 countries since 1970 identified 37 instances of HPI in excess of 15%.

In 24 of these 37 instances a fall correspondent which in some cases wiped out 100% of all gains.

But in 13 of these rises (generally the slower ones) no burst bubbles (or rather smaller falls that don;t show up).

Very good read!

- Pye

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Seems to me bubbles are probably defined as bubbles once they

burst. The ones that don't burst probably just slip into history

unnoticed.

Quite - prices for assets or goods can clearly rise without subsequent falls, but you wouldn't call that a bubble. Examples might include Picassos, a loaf of bread (excluding wartime), stamps, Mars Bars, land in central London, I'm sure there are more examples. Also excessive price rises for an asset can be corrected by extended periods of stagnation rather than by falls, as has happened with house prices after some previous periods of rises.

There really isn't an answer to the poll that I can agree with. Personally I don't think that saying bubbles always burst counts as an argument at all.

The question is tautological. Once you define something as a bubble, you are saying that it is a price rise in an asset that is based purely on speculative interest without any other real foundation. By the laws of supply and demand, yes, such a bubble has to burst. But the question you need to ask is to what extent HPI is a bubble.

Personally I think it is to a moderate or large degree, but there are those who would argue otherwise. To play devil's advocate, one could argue that the 1995 price level was unnaturally low because sentiment sent prices below their natural level, so the sharp rise was only a natural adjustment to an underpriced asset. One could also argue that the fact that a much larger part of the population now see property as a long-term investment, to replace pensions, means that the demand and supply curve applying to property has been irredeemably altered and that the equilibrium price point is now at a higher ratio of price to income than in past decades. If that's the case this isn't a bubble.

So yes bubbles burst, but no that doesn't win the argument because you're assuming the answer you want in the question.

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How about the fact that an able bodied guy (or determined gal) in their 20's with a bit of knowledge (maybe from night school) and help could build a decent sized three bedroom detached house with a garage for about £60K.

A builder friend of mine charged £13,000 to build the exterior shell of such a house including materials. It took him 6 weeks. Another two weeks and £4,000 and the roof was down and insulated.

Plastering, wiring and plumbing take longer but materials are much cheaper.

When this house was finished it was sold for £170,000 or £112,000 profit in spring 2005.

Does anyone here know the price of a breeze block? No?

Well a block costs anywhere from 22 - 40p depending on grade and how solid a house you are building.

You will use about 10,000 blocks on a semi to 20,000 blocks on a typical detached house.

20,000 * 40p = £8,000 on bricks to build a solid detached house.

Rest assured it's a speculative bubble.

Time spent perusing EA's would be better spent brushing up on planning law. But since comittee plannning is likely to get overhauled later this year you might as well sit back and relax. Or brush up modern building techniques.

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I am at a loss to comprehend this appalling English.

Please rewrite for my benefit.

horace

T*sser I think probably you is.

IMHO this is a very good analogy. People only earn a certain amount over their lifetimes, and if they spend over their means now, they'll have to spend less at some unspecified future time. Though I once had an argument with a "property prices can only ever go up" type who claimed that this wasn't true as people could borrow, refuse to pay the loans, the banks would write off the loans, and then continue spending. I would like to argue that this isn't true, but there have been some high profile bankruptcies recently on television where people do seem to get away with borrowing money, and not paying it back.

Billy Shears

Property prices will only go up in the long run – money always devalues and soon the £2 coin will be phased out like the ½ pence coin- Even if you bought at the top of the last crash and sold now you would have made a good investment although you may only break even after the crash -But unlikely that you would have actually lost money on it £ for £

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Rest assured it's a speculative bubble.

I'm not saying it isn't - I'm just saying that simply calling it a bubble and then saying bubbles always burst isn't an argument at all, but a tautology.

Your example of building a house is a better argument as you are trying to demonstrate that it is a bubble, rather than assuming that. Though there are of course issues of land, permission etc. Not much land around my bit of North London where I could sling up a 3 bed house without anyone noticing... And are you saying that everyone should build their own house? If not, the people who do are presumably entitled to some profit on the sale? (Though maybe not quite as much as in your example... remember I'm playing devil's advocate)

Edited by Magpie

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Quite - prices for assets or goods can clearly rise without subsequent falls, but you wouldn't call that a bubble. Examples might ... land in central London...

About 60 years ago the krauts were dropping tons of high explosive incendiary devices on central London, nightly, as it happens. You couldn't give it away back then. The only person with the sense to exploit the situation was the bloke who founded NCP, who snapped up all the bombed out land for a song and turned it into car parks. People thought he was mad. There only were about 3 cars in the whole country back then.

You can't make 100% predictions about the future values of any assets beyond TINYl timescales because of the inherent nature of our transactional-based society. If this were not true, you would create an opportunity to rapidly aquire all the assets in the world, as long as you could keep the info secret - a share trader's wet dream.

And btw, there are probably some people on this forum who were alive when the kraut bombs were falling - it *aint that long ago* yet people blindly assume the current situation has 'always existed' and 'will continue for ever'. People are pigshitthick like that. Just another reaon why a crash is now underway.

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About 60 years ago the krauts were dropping tons of high explosive incendiary devices on central London, nightly, as it happens.

OK, so drop central London land prices, they weren't the best example. But it is clearly not true that any price increase for any asset will be followed by falls. Price rises are not necessarily a bubble, so the argument can only be won by showing that current HPI is a bubble, not by declaring it to be a bubble and then saying that bubbles always burst.

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you also can't say rising prices are NEVER followed by falling prices either, as you don't have access to ALL prices for ALL time. How do you know that circumstances wont dictate that in 5 years time a Mars Bar will be 10p again, while crisps will be £1.20? You can make guesstimates about it, and they may be pretty accurate, but you can't have certainty unless you think you are Mystic Magpie all of a sudden. In whcih case, who will win the 3:30 at Lingfield please.

What you CAN say is that relative asset prices compete for the attention of investors, which is one of the prime reasons why bubbles form in the first place, then later burst.

This one has popped, but the general public are being hoodwinked by desperate VIs who want to keep on earning their nice commissions no matter what the cost to peoples lives, the UK economy as a whole, and the global economy either. Scumbags.

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apom

quote

`The fact that no bubble has ever not burst ....`

unquote.

I am at a loss to comprehend this appalling English.

Please rewrite for my benefit.

horace

The English is actually sound. its a play on something quite famous..

I will let you stew for a bit.. :) how are your classics??

you should spot this.. please.. give me hope :(

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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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