jpidding Posted March 14, 2006 Share Posted March 14, 2006 I'm sure we've all read in the blog that wholesale gas prices spiked hugely. We read about how first time buyers are getting ever more inventive to buy.....100%+ mortages, personal loans for deposites, part rent/part own, shared ownership schemes, help from parents, 35 year mortages, interest only mortages etc etc etc. This phoenominen is typical of the last desparate embers of a toppy market and will prolong the agony a bit longer. Hell, it may not be the end yet, but one thing is for sure, energy is getting LOTS more expensive. Much as Gordon likes to remove fuel from the "core" inflation figures, you cant get away from the fact that EVRYTHING we do relies on energy being cheap and readily available. We have played the chinese card and once fuel gets too expensive to allow joke cheap imports things will change. Keep saving, buy some gold, spread your risk, but dont for one minute believe that we have reached a permenant high plateau of house prices. JP. Quote Link to comment Share on other sites More sharing options...
look to the past Posted March 14, 2006 Share Posted March 14, 2006 That’s right – a permanently high plateau has never been achieved before We are either half way up and cheap loans and dodgey CPI measurements may make house prices double again – or the pyramid will topple and go all the way to the bottom again – I reckon the odds are still 50: 50 up or down Quote Link to comment Share on other sites More sharing options...
?...! Posted March 14, 2006 Share Posted March 14, 2006 Eh? Half way up? 50:50? That would defy the laws of physics let alone economics. If houses double again from £185,000 to £370,000 for the average house, who the hell would be buying them? Speculators. That would mean houses going for ten times the sum of their parts? The only reason they have sustained a plateau is because hype and greed is still driving the market up but prices are on the absolute outer limit of feasibility. They cannot climb faster than inflation from here. The market can now do two things; A) Track inflation Depreciate. Only a feckless pig-eyed moron would want a huge asset that can only track inflation, when realisation sinks in property can only depreciate. It’s comparable to gravity. There are two kinds of speculators in the market place 1). Speculators 2). Victims Can you guess what separates them? Knowing when to sell. Quote Link to comment Share on other sites More sharing options...
OzzMosiz Posted March 14, 2006 Share Posted March 14, 2006 I would've thought with all these problems Debt Shares would've been a good bet (I did buy a few), but they have taken a fairly big dip in the last week. Therefore I can't see why things like gold would be good. It kinda makes sense, but seeing that debt is fricking huge, you would think that debt management companies shares would be rising around now (and for the next year or two). Makes me kinda wiery getting involved in gold. Quote Link to comment Share on other sites More sharing options...
look to the past Posted March 14, 2006 Share Posted March 14, 2006 That would defy the laws of physics let alone economics. If houses double again from £185,000 to £370,000 for the average house, who the hell would be buying them? Speculators. Is that just what has happened in Ireland? (10 x the average wage) If what you were saying was true – house prices would have stopped going up when FTB’ers were priced out – but investors stepped in Quote Link to comment Share on other sites More sharing options...
?...! Posted March 14, 2006 Share Posted March 14, 2006 Is that just what has happened in Ireland? (10 x the average wage) If what you were saying was true – house prices would have stopped going up when FTB’ers were priced out – but investors stepped in Errr... Did I not state that by answering my own question in my original post? or have I misread something? You refer to ten times the average wage in response to my referal to ten times the sum of the parts (ie building materials). These are different things. In Ireland Houses are about ten times the average wage but are nowhere near ten times the sum of material costs. Where I live houses are twelve times the average wage and about three times the sum of the parts. They are falling at about 2 - 5% pa. Mainly because the market was bouyed by people buying second homes here, thus inflating the price. All the young people in the area were priced out and have simply moved away. Now there are no shops, few restaurants (can't get staff) or manual workforce, the whole place is empty for most the year and prices are falling in response. If prices double again this could easily happen on a national scale, we have freedom of labour right accross Europe. Quote Link to comment Share on other sites More sharing options...
look to the past Posted March 14, 2006 Share Posted March 14, 2006 If prices double again this could easily happen on a national scale, we have freedom of labour right accross Europe. I think we are driving at different angles “ 50:50? That would defy the laws of physics let alone economics. “ – why can investors take us further – to £370000 – I believe this has happened in Ireland where houses are about 10x the average wage. “That would mean houses going for ten times the sum of their parts?” – yes why should that be important - does that make software over priced – people will pay what they think it’s worth – or will be worth not how much it cost to build Quote Link to comment Share on other sites More sharing options...
Come On Down Posted March 14, 2006 Share Posted March 14, 2006 Dont forget about LAND prices as well as material costs, AND labour. Quote Link to comment Share on other sites More sharing options...
jpidding Posted March 14, 2006 Author Share Posted March 14, 2006 That’s right – a permanently high plateau has never been achieved before We are either half way up and cheap loans and dodgey CPI measurements may make house prices double again – or the pyramid will topple and go all the way to the bottom again – I reckon the odds are still 50: 50 up or down I'm afraid I have to agree with you that there is a POSSIBILITY that the madness goes further. Bubbles normally go on FAR longer than those with rational though can believe. In the Dutch tulip mania (circa 1640 I think) one tulip bulb was documented to have sold for equivalent to in excess of £2000 in todays money. I'm sure we'd all agree that £1000 would be total madness, but that doesn't mean it cant double. My personal opinion is that pertol is being thrown on the last dying embers of this bubble in terms of the recent bounce reported. Only drastic cuts in IR's will prolong the agony further...I haven't rules that out which is why I advocate holding a large proportion of your savings in gold. I'm prepared to hold out for the long haul if necessary, content that I'm renting and saving a large sum each month without risk. JP. Quote Link to comment Share on other sites More sharing options...
AntiSpeculator Posted March 14, 2006 Share Posted March 14, 2006 I would've thought with all these problems Debt Shares would've been a good bet (I did buy a few), but they have taken a fairly big dip in the last week. Therefore I can't see why things like gold would be good. It kinda makes sense, but seeing that debt is fricking huge, you would think that debt management companies shares would be rising around now (and for the next year or two). Makes me kinda wiery getting involved in gold. Many debt shares have doubled in the past six months. very good bet if you bought then. In the last week there has been a pullback, but they will more likely continue upwards, so still a reaosnable bet now, IMO. Not everything grows every week/month. Quote Link to comment Share on other sites More sharing options...
look to the past Posted March 14, 2006 Share Posted March 14, 2006 In the Dutch tulip mania I'm prepared to hold out for the long haul if necessary, content that I'm renting and saving a large sum each month without risk. I still have got that “one tulip bulb” –and it only cost me £2000 - bulbs can only go up in value you just have to wait long enough - £2000 was a lot of money back then - not long before £2000 will buy you a pack of bulbs for a garden shop – and a few years from then it will all be profit. Are you sure you would be happy renting if you new that prices would double and the crash is 5 + years off Quote Link to comment Share on other sites More sharing options...
jpidding Posted March 14, 2006 Author Share Posted March 14, 2006 Are you sure you would be happy renting if you new that prices would double and the crash is 5 + years off Yes, because its all about risk. With average prices at 7x average earnings a big fall is much more likely than a big rise. Picking the top is ni on impossible. I am happy renting cos its LOTS cheaper and if prices never re-adjust then I will never buy in this country. (for what its worth buying in germany looks pretty attractive.....a lovely 2 bed apartment near the city centre, 80 sqm, well under £100k) At £2000 for one tulip bulb, prices COULD have doubled again, but I bet you wouldnt be queing up to buy at £2k, would you? Same with houses. JP. Quote Link to comment Share on other sites More sharing options...
?...! Posted March 14, 2006 Share Posted March 14, 2006 What I’m saying is that prices cannot go up indefinitely in real terms. There is an inevitable ceiling, and I feel we are very close to that ceiling. You have quoted the highest priced tulip of the 1640 boom, and I agree that could have doubled and doubled again. But for the average tulip price to continue to double the economy need to keep finding the cash to fund it. You could put four zero’s on the most expensive house in the country and it would be nowhere near the required cash to double the mean national price. There is not much more cash around for the housing market to absorb, personal debt is now larger than GDP and is growing faster than GDP. A sizable portion of personal expenditure is now going towards servicing debts. This redirection of money creates fewer jobs than if it were spent elsewhere eg the high street. We will inevitably pay for this bubble with tougher economic times ahead. Fewer jobs created and less disposable income than before. We are becoming poorer already. If you never repay the bank they don’t make any money. They will only lend what they believe they can recoup profit on. If the economy can’t provide you with an income the bank are unlikely to provide you with a loan. Although I believe they have been irresponsible and stand to lose a fair bit. Houses are bought on speculative prices but the debt created in the process needs to be serviced with real earnings, our ability to service that debt is already near breaking point. There is no 50:50 situation There are two scenarios 1) We maintain this knife edge position. 2) We slip into oblivion. It will only take a slight shock in circumstances for us to stumble over the edge. Quote Link to comment Share on other sites More sharing options...
homeless Posted March 14, 2006 Share Posted March 14, 2006 (edited) is everyone earning 37k a year now? im surely in the wrong job and am going out to day to jump on the government job bandwagon.Because around where i am its all the government workers that seem to own all the houses while the private sector just get shafted. Labour was never about looking out for the masses it was about looking out for the government workers in a socialist eutopia the dirty scum they are. Edited March 14, 2006 by homeless Quote Link to comment Share on other sites More sharing options...
nimmmm Posted March 14, 2006 Share Posted March 14, 2006 (edited) I am not sure that energy prices can be the pin of themselves. I do agree though that short of another interest rate cut, which is possible, HPI is dead. Even if possible, it is hard to see why with CPI just .1% below "target", interest rates would be cut. The risks, and they are many, are all favouring interest rates going up, which will surely be the end of the house price bubble. Edited March 14, 2006 by nimmmm Quote Link to comment Share on other sites More sharing options...
DonnieDarker Posted March 14, 2006 Share Posted March 14, 2006 Anecdotal...but returning to the original thread of the post...I am seeing gas/electricity prices and debt get discussed on forums where I've never seen any financical discussions (football forums) now. The cost is biting... Quote Link to comment Share on other sites More sharing options...
OzzMosiz Posted March 14, 2006 Share Posted March 14, 2006 Many debt shares have doubled in the past six months. very good bet if you bought then. In the last week there has been a pullback, but they will more likely continue upwards, so still a reaosnable bet now, IMO. I'm hoping so Quote Link to comment Share on other sites More sharing options...
Dames Posted March 14, 2006 Share Posted March 14, 2006 Err... Quote Link to comment Share on other sites More sharing options...
?...! Posted March 14, 2006 Share Posted March 14, 2006 Can any market place absorb a 400% jump in six hours? Quote Link to comment Share on other sites More sharing options...
look to the past Posted March 14, 2006 Share Posted March 14, 2006 What I’m saying is that prices cannot go up indefinitely in real terms. There is an inevitable ceiling, and I feel we are very close to that ceiling. Houses are bought on speculative prices but the debt created in the process needs to be serviced with real earnings, our ability to service that debt is already near breaking point. There is no 50:50 situation There are two scenarios 1) We maintain this knife edge position. 2) We slip into oblivion. It will only take a slight shock in circumstances for us to stumble over the edge. If there was no 50:50 scenario then how comes (arguably) rightmove and nationwide have reported 1%+ HPI – If all the money had be used then there would be no speculative buying and there would be masses of unsold houses for FTB’er as the big builders churn out 100000’s of new builds every year. I am not reading to much into the rightmove (etc) reports but if the CPI continues heading south (not likely this year because of gas etc prices) and interest rates are reduced (combined with ever easier lending) there is plenty more scope for HPI. If nothing happens (i.e. war / bird flu etc) I think we will see HPI this year (my guess 5%-10%). And it’s very unlikely that anyone will be reporting 0% HPI Quote Link to comment Share on other sites More sharing options...
StainlessSteelCat Posted March 14, 2006 Share Posted March 14, 2006 Err... Any HPI bulls like to guess where the graph will go next? Quote Link to comment Share on other sites More sharing options...
look to the past Posted March 14, 2006 Share Posted March 14, 2006 Any HPI bulls like to guess where the graph will go next? Give it time and it will go back to 70 - 100 ish We are not at a permanently high plateau for gas prices– give it time and it will revert back to the norm Quote Link to comment Share on other sites More sharing options...
?...! Posted March 14, 2006 Share Posted March 14, 2006 I agree 0% HPI is not a story. I can't see the headroom for movement upwards. Upwards movement could only be reported if volume tanked, I would read such a market very differently to any reporter. Basically I don't think there are a great deal of FTB's left capable and willing to service such a mortgage. They have all been absorbed. As for speculators holding up the market? I think the same applies to them. Most of those capable and willing are already involved. It works like a pyramid scheme you constantly need new people to fuel growth & feed demand, well the market has outstripped wages to the point those who could afford it previously now cannot. There may be room for a tiny gasp back to 2004 heights but doubling from here is impossible. Shall I prepare some numbers? Quote Link to comment Share on other sites More sharing options...
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