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How Long Can House Prices Stay High ?

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This is a letter taken from the "Letters Page" over at MoneyWeek

How long can house prices stay high?

Dear MoneyWeek - Philip Coggan in the FT at the weekend asked 'how long can asset prices remain so high?'

His answer, logically, is 'not forever' but as long as papers such as the FT continue to hype property prices, maybe for a little longer...

One problem is of course lax monetary policy but he didn't mention property where additional forces are at work. A different article in the FT in the same section made a typical exaggeration of TWENTY FIVE PER CENT.

In the UK, there is a whole industry devoted to talking property prices UP. Of course estate agents will, that's their job but the lenders are at it too. They have bought into estate agency groups and property websites (such as Rightmove, owned by Royal & Sun Alliance, HBOS, Countrywide and Connells). The conflicts of interest should be obvious.

And there are other players in the 'positive property spin' industry...The Sunday Times 'Home' supplement, being funded mainly by estate agents advertising, may look like a newspaper but it's tone is of course, 'buy, buy, buy'. There are seldom any articles suggesting that 'prices can go down as well as up'. Many journalists are personally up to their necks in property and loans, they need to keep pumping air into the property balloon themselves.

And this weekend there is a classic example of spin in the Financial Times...

The latest method Building Societies have of keeping money pumping into property is to allow parents to borrow to help their kids buy ever more expensive property. Few people seem to have realised that the reason property keeps going up, is because the lenders keep finding ways of enabling people to borrow more and therefore pay more. It's so un-British to haggle, we're too shy, it's easier to ask for a bigger mortgage.

The FT article starts off by stating 'with the average UK home creeping above the £200,000 mark...'. WRONG! WRONG! WRONG!!

This nonsense figure of £200,000 was a cleverly and widely spun piece of statistical tosh from Rightmove (the website owned by you know who) and was only an average of THEIR asking prices in January. VERY, VERY different was the Nationwide average price at £158,573 and the Hometrack average price £161,700. The average of those two prices being £160,136, some 25% adrift from the article. Maybe that's why their readers' kids need to borrow so much money from their parents, because they are buying into the whole 'it can never go down' industry.

UK property is an over inflated, pumped up and very dangerous bubble, utterly dependent on hype, lies, low interest rates and excessive lending...(and compliant journalists). Low interest rates and easy money are of course unsustainable. In The Times, Anatole Kaletsky, like a man in a washing basket trying to lift himself off the floor, cannot seem to understand, you cannot keep on borrowing forever. And don't ask George Osborne to understand any of this; the Tories are clueless.

There is no further upside to property prices. Prices are already too high, yields are pathetic, downside risk for most amateur investors is a tragi-comedy. People are up to their borrowing limits, many are re-scheduling loans to help make repayments on existing loans. And that seductive phrase 'equity withdrawal' is merely 'equity destruction' and when those central bankers or Asians decide enough is enough, the pack of cards will collapse.

I was an estate agent in the last boom and crash. I sold all my properties and the business in 1988. I went back in during the 90's. I'm now just clearing out my final properties and suspect that the coming crash (it's already started...stage 1, flat line/stagnation) may, at last make people realise, that prices can go down as well as up.

Someone recently said 'ah but the demand is still there'. Well, of course it is...as long as they press can keep persuading people it is. That can turn on a sixpence.

What short memories some of us have. Philip Coggan is trying, very politely, to remind people of this.

Russell Hicks (06/03/2006)

Comment:

If this is not a candidate for being PINNED I don't know what is Especially as there apppears to be many "new members" of late trying to sow doubt as to the validity of the CRASH argument. Who these "new" posters really are? no one knows for sure. But many a green First Time Buyer may possibly be taken in by these....... shall we say "Plants" :rolleyes: and therebye possibly end up making the biggest financial decision of their entire lives at the worst time in the housing market cycle.

Edited by Catch22

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And that seductive phrase 'equity withdrawal' is merely 'equity destruction'

Great letter

end up making the biggest financial decision of their entire lives.

don't you mean 'biggest financial mistake'?

Edited by munimula

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Good letter. Of course, the grim conclusion is that this boom will carry on for a while longer.

Don't get me wrong, I do think it will crash, but there's more people to be fleeced yet.

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Great letter

don't you mean 'biggest financial mistake'?

looks like we both noticed the meat was missing at the same time :D

I prefer to use the word "Decision" instead of the word "Mistake" because although I personaly think it would be a Mistake, thats because my own 38 year experiance of the housing market and how it works, is just that....my opinion. And I will tell you this I spent the most of that time Not understanding it. Blind faith, luck and never a week going by without a wage coming into the house saw me through it.

But I fear many will not be so lucky this time around, the last full housing market cycle has taken 17 years to play out from peak to peak. Of course the peak may not be quite here yet, peaks can only be recognised for certain well after the event took place. Mabye it will take one last splurge of parent to offspring loans to reach the top. But when the "Top" is reached it will be a long financialy painfull process spiralling all the way down for alot of people who don't realise the are destined to drown in debt. And those who induced them into that debt will not be throwing lifebelts to them. More likely as is the way with the banking industry, they will take back that "Brolly" they lent you when the sun was shining.

I'm not here to impress my opinions on anybody.....I just ask them to THINK FOR THEMSELVES, not to take all that is written as Gospel especially when said Gospel is preached by those with a vested interest in keeping this bubble inflated.

As I say I believe many familes are going to be destroyed when it eventally bursts, but why add to that list through blind faith in the "property never falls" lie. The housing Market is cyclical always was and always will be, more so now that there are so many people using it as an investment vehicle. All Markets ultimately fluctuate between two extemes Over Bought and Over Sold. And the 64,000 dollar question is where do you as a FTB'er think this market is right now? ......................It's all about Market Timing.........get it wrong and you will be totaly F.........

Edited by Catch22

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superb letter - thanks for posting it here! :P

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The bit that caught my attention was this

I was an estate agent in the last boom and crash. I sold all my properties and the business in 1988. I went back in during the 90's. I'm now just clearing out my final properties and suspect that the coming crash (it's already started...stage 1, flat line/stagnation) may, at last make people realise, that prices can go down as well as up.

So there you have it. This is another guy who stands to look very very stupid indeed if prices continue to rise. If prices crash, he wins. If prices rise, he loses.

Is it therefore any wonder that he is now talking up the prospects of a crash?

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The bit that caught my attention was this

So there you have it. This is another guy who stands to look very very stupid indeed if prices continue to rise. If prices crash, he wins. If prices rise, he loses.

Is it therefore any wonder that he is now talking up the prospects of a crash?

Give over Londoner. He obviously thinks it will crash and has written a letter to that effect. It's not a plan to use the power of his letter to push the market over the edge for christ sake.

Now where did I leave my magical pen; I have a letter to write to Angelina Jolie.

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Guest

Good letter. Of course, the grim conclusion is that this boom will carry on for a while longer.

Of course it will. That's been in the monetary policy plan for ages. They're not making us pay back the money we owe. Yet.

Yesterday I mentioned :

1. It would have been a disaster for New Labour if the housing market had gone tits up before the election. This was NOT to happen.

2. It would be a double disaster for Britain as we'd now have been in a housing market induced recession for ~18 months and with the USA housing party only just finishing and seemingly on the verge of tipping over, if they go (say in a years time) we'd have that to contend with as well.

With this monetary policy we can minimise the total amount of time that the UK could expect to be in recession, for which we need some very very very minor house price rises and a LOT of carrot-dangling and a ladel-full of SPIN.

B)

Edited by megaflop

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The bit that caught my attention was this

So there you have it. This is another guy who stands to look very very stupid indeed if prices continue to rise. If prices crash, he wins. If prices rise, he loses.

Is it therefore any wonder that he is now talking up the prospects of a crash?

Of course a realist would conclude, here is a man who obviously understands the concept of "Market Timing" He got out of property at it's peak prior to the last property crash. And he looks like doing the same this time around.

You on the other hand appear to approach the housing market with a "Buy and Hope" stratergy. Look another messenger at odds with my hopes, and at the same time re eforcing my nightmares..........shoot the ba......... :rolleyes:

Edited by Catch22

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Look another messenger at odds with my hopes, and at the same time re eforcing my nightmares..........shoot the ba......... :rolleyes:

Good grief. What a comment to come out with on HPC. It' s not like much "shooting of messengers" goes on around here is it? lol

I understand though. A VI who says anything positive about house prices is evil and dishonest. A VI who says something negative about house prices is a bloomin' hero. Makes perfect sense.

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Of course a realist would conclude, here is a man who obviously understands the concept of "Market Timing" He got out of property at it's peak prior to the last property crash. And he looks like doing the same this time around.

You on the other hand appear to approach the housing market with a "Buy and Hope" stratergy. Look another messenger at odds with my hopes, and at the same time re eforcing my nightmares..........shoot the ba......... :rolleyes:

I think Londoner's comment was fair enough. If the situation were reversed, accusations of VI wouldn't take long to appear.

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I think Londoner's comment was fair enough. If the situation were reversed, accusations of VI wouldn't take long to appear.

There is a clear difference between one man writing a letter about his personal experiences and opinions and a multi national media corporation parroting the opinions of estate agents and mortgage providers.

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There is a clear difference between one man writing a letter about his personal experiences and opinions and a multi national media corporation parroting the opinions of estate agents and mortgage providers.

Yes, there is, but it still wouldn't have taken long for the VI accusations to appear had the situation been reversed.

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Yes, there is, but it still wouldn't have taken long for the VI accusations to appear had the situation been reversed.

Then it will be easy for you to produce a few examples of bullish letters to a similar publication being met with accusations of the writer being a VI. A few links and you will get a rare bandylegs full apology.

Go for it.

Edited - by the plain English Society.

Edited by bandylegs

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When you consider the very basic logic that house prices are hyperinflated only then do you stop reading VI newspapers and reports, and treat them with the contempt they deserve

Yet again more reason the get this website mentioned everywhere possible

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Of course a realist would conclude, here is a man who obviously understands the concept of "Market Timing" He got out of property at it's peak prior to the last property crash. And he looks like doing the same this time around.

You on the other hand appear to approach the housing market with a "Buy and Hope" stratergy. Look another messenger at odds with my hopes, and at the same time re eforcing my nightmares..........shoot the ba......... :rolleyes:

exactly - Buy and Hope AKA Greater Fool Principle

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When you consider the very basic logic that house prices are hyperinflated only then do you stop reading VI newspapers and reports, and treat them with the contempt they deserve

Like it, summarizes my feeling of the media. My bro. was a professinal premiere player and has mentioned in the past do not talk to reporters.

Do we really think they print news or are willing to bend things to their fulest for a story.

A news story is a mixture, and statistically have been a joke with the recent housing market.

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Then it will be easy for you to produce a few examples of bullish letters to a similar publication being met with accusations of the writer being a VI. A few links and you will get a rare bandylegs full apology.

Well done Bandylegs - that shut him up :lol:

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hi

just been to a property auction at Cafe Royal in Regent Street, what a shock. I thought people there were in it for a bargain ?

1 bed flats reaching 185K and reserve not being met. What a joke. If the people dont wanna pay then its obvious the price is inflated. Loads of Halifax deals that had to be completed within 10 days. 7 as the 10th landed on the monday and friday was the deadline. Hhhhmmm. There were SOME bargains, if you like redevelopment.

Personally, it is beyond belief and makes me wonder if the natural behaviour of the market is now void.

Edited by debtfree

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here's another letter to moneyweek from "Russell Hicks" from last Summer.

Merryn Somerset Webb, Editor writes:

P.S. Naturally, I get many letters from readers. Some with praise. A few with arguments. One of my favorites was this:

I'd cancelled my sub to MoneyWeek a few weeks back as I thought I was overloaded with reading matter but I'm about to renew. Your 11th June issue was so SPOT ON with its warnings of 'time bombs' it made me realise that your publication is the FIRST not the last weekly thing to read... You're spot on...

Russell Hicks, Surrey

Coincidence?

Russell sounds like a model reader of this bearish magazine!

Read the EA letter again. It sounds more like a made up rant from a bear to me. He's managed to slag everyone off but himself (a common trait amongst 'all knowing' bears).

Even if it is genuine I am surprised he is not being slagged off on here. He's obviously bought into the boom with multiple properties (BTL?) and now he's cashing in. He's 'done his bit' in the creation of this boom and now he's got the cheek to complain that prices are too high (after conveniently cashing in).

A familiar desperate STR ploy. There's a lot of it about...

Why aren't you HPCers attacking him for this?

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http://www.moneyweek.com/file/7067/whats-r...rty-market.html

Some Jewels from the Blog list.

Take the Government’s estimate of average annual wages of £23,400 and the Land Registry’s most recent (July-September) house price average of £194,589, and the HPE appears to be 8.3 times.

But as he then points out, they aren’t really – of the surveyors and estate agents surveyed, 24% reported that prices had fallen in the preceding three months and 11% said they had risen, giving an unadjusted balance of –13%. “However, estate agents tend to be unduly pessimistic in November, so the RICS seasonally adjusted measure turns the negative reading into a positive balance of +4%.” It doesn’t matter how negative the number; those with a vested interest in making the market look good can find a way to report them as positive.

Ian.

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  • 337 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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