It's Getting Nasty On Moneysavingexpert!

[red]

http://forums.moneysavingexpert.com/showth...460#post1863460

[Converted Lurker]

I luv this guy, set up a website encouraging everyone to adopt penny pinching behaviour "Weh-heh! apply for credit card, take last minute.com vouchers, take a trip, send card back!" Meanwhile he becomes rich Top idea , I love his ad on the front of the site "Martin Lewis - make me rich!" Good on ya son!

[zag2me]

Funniest thing is the guy who started the thread was a staunch believer in the property crash and kept referencing housepricecrash everytime someone said prices where going up. Recently He's changed his tune and predicting "house prices must rise 50% for before a crash".

Personally I'm with the guy on this one. The only people who are on here, rightly complaining about houses being too expensive are STR'ers and single FTB's. A house is still easily affordable to a couple around my area. Until prices rise alot more pushing out the dual buyers and interest rates go up you wont see a crash.

Edited March 28, 2006 by zag2me

[jimmy]

A house is still easily affordable to a couple around my area

Oh that's alright then. Lets make it so that everyone has to work full time to afford to pay the mortgage and we can forget living a life and starting a family.

[libitina]

Funniest thing is the guy who started the thread was a staunch believer in the property crash and kept referencing housepricecrash everytime someone said prices where going up. Recently He's changed his tune and predicting "house prices must rise 50% for before a crash".

Personally I'm with the guy on this one. The only people who are on here, rightly complaining about houses being too expensive are STR'ers and single FTB's. A house is still easily affordable to a couple around my area. Until prices rise alot more pushing out the dual buyers and interest rates go up you wont see a crash.

Not around here..

My husband and I would need another £80k at least to be able to afford here. And thats for a retirement flat! Don't think they'd approve of my son living there........

[Catch22]

Funniest thing is the guy who started the thread was a staunch believer in the property crash and kept referencing housepricecrash everytime someone said prices where going up. Recently He's changed his tune and predicting "house prices must rise 50% for before a crash".

Personally I'm with the guy on this one. The only people who are on here, rightly complaining about houses being too expensive are STR'ers and single FTB's. A house is still easily affordable to a couple around my area. Until prices rise alot more pushing out the dual buyers and interest rates go up you wont see a crash.

MoneyWeek

* Why investing in any type of UK property is a bad move

* Is the UK picking up tax tips from Venezuela?

* RECOMMENDED ARTICLES: Are stocks headed for a 1987-style crash?... How public spending is hurting the UK...

There’s been a lot of upbeat talk on the property market recently. And the latest surveys seem to back it up.

Property group Hometrack reckons house prices rose for the fourth month in a row in March, by 0.5%. Prices rose by 0.1% on last March - the first annual increase Hometrack has reported since the start of 2005.

And the British Bankers’ Association reports that the number of new mortgage approvals for house purchase came in at 57,585 in February. That’s up 22% on a year ago. So is the property market firmly back on the upward path?

We don't think so - and we're not the only ones...

Think tank Capital Economics points out that February’s 22% annual increase in the number of mortgage approvals “is nothing to write home about, because late 2004/early 2005 was the trough for mortgage demand.”

And BBA figures aren’t seasonally adjusted – in other words, they don’t make any allowances for the fact that certain times of year are generally busier for house sales than others. After adjustments, CE reckon “new approvals actually fell 5% in February. Moreover, they have fallen 11% since November.”

And in fact, the February figure was the weakest since July last year. “With affordability remaining stretched, it is looking more likely that mortgage demand has now peaked.”

But if mortgage demand has peaked, why has Hometrack recorded a rise in prices? That seems pretty straightforward. The group said the growth was mainly fuelled by rising London prices. Houses in London are much more expensive than anywhere else in the UK. If a larger proportion of sales are being made in the capital, that would push up the average sale price, even if the number of sales remained static or even fell.

And the "Christmas bonus effect" can only boost the sales of bachelor pads in Mayfair for so long. Even City bankers have a limit to the number of glass and chrome penthouse flats they want in their portfolios.

Things aren’t much better in commercial property. Although Gordon Brown delivered a boost to the sector with his relatively benign tax treatment of Real Estate Investment Trusts, the cracks are appearing.

Martin Allen, property analyst at Morgan Stanley, pointed out that “all the Reits provision does is return property companies to the position they were in prior to the erosion of dividend tax credits that started in 1992”, says The Telegraph.

“I’ve been a property analyst for 18 years and this is the fourth property share bubble in that time. I know a property share bubble when I see one and it doesn’t matter whether we’ve got Reits or not. Property shares are overpriced.”

But despite the UK public's almost supernatural fear of falling house prices, there are upsides to declining or static home values. And one of those is that Gordon Brown might not get his hands on your money when you die. House price growth has far outstripped Mr Brown's miserly increases in the inheritance tax threshold, leaving many more people potentially subject to the tax.

And of course, as the Chancellor widens his net, he has also made it much harder to avoid inheritance tax. Budget 2006 contained more such widely-anticipated "loophole closures". He has introduced rules to stop people using various types of trust to leave money to their heirs without having to give 40% of it to the Government.

The really nasty thing about these new rules is that they apply to trusts that have already been set up, not just to ones that are being set up this tax year or in the future. So many people who have spent a lot of time and money trying to plan for their children's futures have seen it all go to waste.

In effect, Mr Brown has outlawed tax planning. By deciding that it’s acceptable to make retrospective tax laws, he can effectively confiscate any amount of wealth he likes, at any time he likes.

The philosophy of the laughably-nicknamed Iron Chancellor seems to be that all private sector wages generated in the UK belong to the State, except the proportion which the State generously allows you to keep so you can buy food and shelter. So it’s only fair that the State should be able to demand it back any time that it likes, even if that means rewriting tax law.

Another person who believes in rewriting fiscal history is Venezuela’s left-wing President Hugo Chavez. The country has just presented BP with a back-tax bill of £35m, dated between 2001 and 2004. In the 1990s, Venezuela signed deals with various companies at a tax rate of 34%. But now President Chavez believes that the deals should have been made at 50%.

Backdating taxes creates an incredibly uncertain investment environment. If the Government can effectively confiscate your property at any time it likes by introducing a new tax law, then there’s no incentive to save or build up wealth or start up a business. It’s a certain route to economic stagnation and collapse - the kind of thing that only an unreconstructed, economically-blind socialist could consider to be a good idea.

North Sea oil producers must be hoping that Mr Brown doesn't get any big ideas about backdating their taxes. They already pay 50%.

The FTSE 100 closed 64 points lower at 5,972. Fund managers Amvescap and Schroders were among the main fallers, amid concerns that the US Federal Reserve will keep hiking interest rates for the forseeable future. For a full market report, see: London market close (http://www.moneyweek.com/file/10307)

Over in continental Europe, the Paris Cac 40 was down 56 points at 5,162, while the German Dax fell 60 to close at 5,912.

Across the Atlantic, US stocks were mixed as investors stayed cautious ahead of the Federal Reserve's interest rate decision, due later today. The Dow Jones fell 29 points to 11,250, while the S&P 500 slipped 1 to 1,301. The tech-heavy Nasdaq climbed 2 to 2,315.

In Asian trading hours, oil was edging lower, trading at around $64.10 a barrel in New York. Brent crude was trading at around $62.80 a barrel.

Meanwhile, silver hit a new 22-year high, rising to $10.92 an ounce, before easing back to $10.89, on continued excitement over the anticipated approval of a US-based silver exchange-traded fund. Spot gold was trading at around $565 an ounce.

In Asian stock markets, the Nikkei 225 gained 40 points to 16,690. Machinery makers such as Kubota and Komatsu were among the top risers on increased demand for agricultural machinery and diggers.

And the UK today is facing its biggest strike since the 1926 General Strike, according to unions. Up to 1.5m local government workers are set to down tools over proposed changes to public sector pensions. The Government is trying to scrap the 85-year rule, which says that members of the Local Government Pension Scheme can retire at 60 on a full pension if the sum of their age and years of service comes to 85 or more. The action will close at least 70% of schools in London, says Reuters.

And our two recommended articles for today...

Are stocks headed for a 1987-style crash?

- Developed stockmarkets are hitting five-year highs, commodity prices are booming, and house prices are at record levels. But the threats facing the global economy are formidable - a vulnerable dollar, inverting yield curves and a new Federal Reserve Chairman in the US. It's all looking a lot like 1987 out there, says Jeremy Batstone at Charles Stanley - to find out what that could mean, click here: Why markets could be heading for a 1987-style crash (http://www.moneyweek.com/file/10274)

How public spending is damaging the UK

- The British public has a long tradition of appreciating privacy and respecting individuality. But this tradition is being destroyed steadily by New Labour, says Brian Durrant in the Fleet Street Letter. It's in the Government's interest to make the majority of voters dependent on the state - and this has already been achieved. To find out how, and how to protect your investments in an increasingly centralised UK economy, click here: How public spending is damaging the UK (http://www.moneyweek.com/file/10332)

Until tomorrow,

John Stepek

Money Morning

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© MoneyWeek Ltd, 2006

[Guest Riser]

I remember reading somewhere that retrospective taxation was a violation of human rights. It would be great if someone were to make a legal challenge Brown on this. I would imagine a few well healed land owners may fancy their chances

Edit: Found it:

http://www.taxationweb.co.uk/taxlaw/article.php?id=13

The proposed Law has an Achilles Heal that has not been fully appreciated by the Revenue and which really makes it a non-starter: - Its RETROSPECTIVE!

That means that it is a law that effects events (and in this case tax planning) that took place before it was introduced. Generally such laws whilst not automatically struck down, are frowned upon as they do not enable a person to know what the consequences of their actions are at the time they carry out that course of action.

The arguments against Retrospective laws were strengthened in the UK with the Introduction of the Human Rights Act 1998 that incorporated the European Convention on Human Rights into UK Law.

Article 1 of the first protocol to the Convention guarantees the individual a right to the peaceful enjoyment of his possessions.

When Retrospective tax laws interfere with the right to enjoyment of possessions, then it must serve a legitimate purpose and not be disproportionate. That means that although the Government can theoretically introduce Retrospective tax legislation it must not do so in a way that results in unfairness to the taxpayer.

The Pre-Owned Assets proposed law would in my view do just that because it introduces an income tax charge to counter inheritance tax planning!

Taxpayers would face an income tax charge not just on Double Trust Schemes, but also on any transaction however long ago, where they gifted an asset, but reserved an interest or benefit.

The Revenue have acted in the past when small sections of tax law have been shown to be Retrospective in effect and have agreed not to impose them in that way.

Also there is an obligation on the Government under the Human Rights Act 1998 to certify that all new laws are compatible with the European Convention on Human Rights. And all new bills before parliament need a "Statement of Compatibility" to that effect. The Government will be hard pressed to include such a statement in the light of European Case law.

Edited March 28, 2006 by Riser

[ca-uk]

interesting - yet will he get away with it? of course he will.

you are now entering england - sensible population soon to be emigrating!

[Guest]

Personally I'm with the guy on this one. The only people who are on here, rightly complaining about houses being too expensive are STR'ers and single FTB's. A house is still easily affordable to a couple around my area. Until prices rise alot more pushing out the dual buyers and interest rates go up you wont see a crash.

Incorrect.

Two friends of mine bought an 80K terrace in 2000, and did some renovation work to it, bringing its value up to, say, 105K ish in year 2000 terms. But because the prices doubled they reckoned it's worth £200K. Then 'she' got itchy feet, and started looking for houses, hoping for something less, er, terracy, more semi or small end of the detached market.

Their conclusion after a few weeks?

"Oh, we just can't afford to move house!"

Why?

Because the higher end houses had also doubled, keeping them ever out of reach. All that equity, and it's useless.

Let us not forget that it isn't just FTBs the British people are trapped in their homes - they think they're worth something, but they're not because there's nobody able to buy.

I am convinced that the pricing down of larger properties will be an important factor in this correction. I live with my parents in one of the most affluent areas of south Manchester, which boasts the largest - and arguably some of the most desireable - detached property Manchester has to offer.

For about a year now, my friend's neighbour has had his £675K detached on the market. Two signs. No sign of moving though. Recently my neighbours have joined them, similar price bracket, been on (seriously) about 6 months, just sprouted a second agent's sign last weekend. Two more neighbours have similar properties on the market covertly - Rightmove only - but no signs. Unsurprising really, since it's a cul-de-sac, and too many signs would look bad. Driving around I noticed another such house had sprouted two signs.

I have noticed that the plight of the current home OWNERS is sorely overlooked on this FTB / STR-biased web site, because they are in the stronger position, and are often ignored, along with the impact they will have on this market now.

Until prices rise alot more pushing out the dual buyers and interest rates go up you wont see a crash.

The low wage inflation throughout this boom MUST mean that people are:

1. more highly geared and

2. more exposed to IR rises than last time around.

This would be consistent with the observation that just 3.5% -> 4.75% (35% increase in base rates) caused HPI to fall perilously close to 0%, before that August '05 rate cut saved the day.

This compares starkly with 87% that was needed to turn the market last time ( 8% -> 15% (87% rise) seen DURING the last boom 1986 -> 1989 ).

I'm not sure we really need that much of an IR increase to turn this. Why else would the BOE be cagey about increasing rates, particularly now the USA are level?

[keepwatching]

Agreed

[?...!]

I have noticed that the plight of the current home OWNERS is sorely overlooked on this FTB / STR-biased web site, because they are in the stronger position, and are often ignored, along with the impact they will have on this market now.

The low wage inflation throughout this boom MUST mean that people are:

1. more highly geared and

2. more exposed to IR rises than last time around.

This would be consistent with the observation that just 3.5% -> 4.75% (35% increase in base rates) caused HPI to fall perilously close to 0%, before that August '05 rate cut saved the day.

This compares starkly with 87% that was needed to turn the market last time ( 8% -> 15% (87% rise) seen DURING the last boom 1986 -> 1989 ).

I'm not sure we really need that much of an IR increase to turn this. Why else would the BOE be cagey about increasing rates, particularly now the USA are level?

Very important numbers here.

This shows exactly how stretched people are currently.

Home owner disposable income is currently an oxymoron.

It is easy to see how two rate increases would hurt the UK economy. The problems will come from overseas factors mainly steming from the US and Europe, our two largest trading partners.

[eurows]

Two friends of mine bought an 80K terrace in 2000, and did some renovation work to it, bringing its value up to, say, 105K ish in year 2000 terms. But because the prices doubled they reckoned it's worth £200K. Then 'she' got itchy feet, and started looking for houses, hoping for something less, er, terracy, more semi or small end of the detached market.

Their conclusion after a few weeks?

"Oh, we just can't afford to move house!"

I have a friend in exactly the same position. Bought house for £80,000. Gloating all last year about how much they had made.

Told me this year they are moving and looking round. Spoke to her last week and she is now complaining about the price of houses.

She cannot afford to move. Anything bigger is too far out of her reach. She is no better than a ftb. Stuck in the same house for the rest of her life unless things pickup.

Reach for the ant-depressants. What a thought.....

Last year they thought they hd made money...This year they realise this house price madness has been affecting them through stealth.

Edited March 28, 2006 by eurows

[red]

I have a friend in exactly the same position. Bought house for £80,000. Gloating all last year about how much they had made.

Told me this year they are moving and looking round. Spoke to her last week and she is now complaining about the price of houses.

She cannot afford to move. Anything bigger is too far out of her reach. She is no better than a ftb. Stuck in the same house for the rest of her life unless things pickup.

Reach for the ant-depressants. What a thought.....

Last year they thought they hd made money...This year they realise this house price madness has been affecting them through stealth.

So true - I am constantly amazed/frustrated at people who preen and gloat about 'making' massive profits on their homes, only to find they can't afford to move up the ladder!

[trickster]

I am in that position, whereby i bought in 1998 for 97,500, Did it up quite a bit, now 'worth' £270,000 ish.

But to trade up to a larger house is impossible at the moment. Would like a slightly larger house with an extra reception room and bigger kitchen. But, at least I have a place to call home for me and the family with a smallish mortgage, 4 bedrooms, huge garden and the very happy thought that if I just stay as I am, then will be mortgage free by the age of 50.

[Karen]

Incorrect.

Two friends of mine bought an 80K terrace in 2000, and did some renovation work to it, bringing its value up to, say, 105K ish in year 2000 terms. But because the prices doubled they reckoned it's worth £200K. Then 'she' got itchy feet, and started looking for houses, hoping for something less, er, terracy, more semi or small end of the detached market.

Their conclusion after a few weeks?

"Oh, we just can't afford to move house!"

Why?

Because the higher end houses had also doubled, keeping them ever out of reach. All that equity, and it's useless.

That was where my hubby and I were & part of the reason we decided to STR. Our house was 4bd, but only 1338sf. It was fine when it was just us, but after adding in 3 kids...So many people told us we would be priced out "forever" , our income is right along the median. I don't see how we can be 'priced out forever.

[eurows]

I am in that position, whereby i bought in 1998 for 97,500, Did it up quite a bit, now 'worth' £270,000 ish.

But to trade up to a larger house is impossible at the moment. Would like a slightly larger house with an extra reception room and bigger kitchen. But, at least I have a place to call home for me and the family with a smallish mortgage, 4 bedrooms, huge garden and the very happy thought that if I just stay as I am, then will be mortgage free by the age of 50.

Fantastic. I have no problem with your good fortune. But the higher price suits nobody but the government. More stamp duty, more CGT. Plus in the future when they have us all paying council tax on valuations you lose both end up.

It now does not even suit your children when you die.

edit: I actually congratulated you on your good fortune and it's actually commiserations on your bad luck.

If you work out where we were four years ago, you and your children are worse off, fooled into a false sense of richness to take on more debt to keep the wheels rolling.

Edited March 28, 2006 by eurows

[clangnuts]

Fantastic. I have no problem with your good fortune. But the higher price suits nobody but the government. More stamp duty, more CGT. Plus in the future when they have us all paying council tax on valuations you lose both end up.

It now does not even suit your children when you die.

edit: I actually congratulated you on your good fortune and it's actually commiserations on your bad luck.

If you work out where we were four years ago, you and your children are worse off, fooled into a false sense of richness to take on more debt to keep the wheels rolling.

How many of the gloaters will turn into moaners, when they realise their children will have to live with them until they are 30+, or they will have to help them get that £500k mortgage for their first bedsit?

Clangnuts

[RichM]

meanmachine

EverSoRegular MoneySaver

--------------------------------------------------------------------------------

No I think Nasty has a good point - property is always valued at a level that makes it just too expensive.

Right now there is a premium on capital, offest by lower interest payments.

Previously it's been higher interest rates against lower capital (price of property).

All I can do is save what I can and hope the pendulum swings back to higher interest rates and lower capital costs. If it doesn't then I won't ever buy. Instead I'll wait and inherit.

By the way, for a few short years in the mid-late 90s it was extremely easy to buy. I know lots of people with poor wages who bought houses they couldn't hope to buy at today's prices. The reason they could do it was that there weren't any of these "investors" around. Property had just crashed and was seen as a dismal investment.

The problem now is this: at 100K 10 of my mates can buy a place. At 150K 5 of my mates can still afford to buy, the rest rent or live at home. At 200K (where we are right now), one or two people can afford to buy.

The higher your house goes the fewer people you can sell it on to, and/or the more stretched they are.

Homeowners are basically impoverishing an entire generation. They might not give a damn now, but they will soon when retail goes down the tubes and the service sector goes into recession. when that happens, what will there be to bail us out? Manufacturing? Nope.

That is a lovely post. Very simple.

Some sensible guys on MSE.com

[Casual Observer]

So true - I am constantly amazed/frustrated at people who preen and gloat about 'making' massive profits on their homes, only to find they can't afford to move up the ladder!

This is why I've always hated HPI. I first bought in 1975, and it always held me back from buying the kind of house I thought I'd earned the right to live in, having worked hard to carve a successful career.

The best time for me was in 1994, when I was able to trade up to a house much better than the one I was in - before that particular crash it was completely out of my reach.

That is a lovely post. Very simple.

Some sensible guys on MSE.com

Well it was all very sensible until the last paragraph. Does he expect people to sell for less than they can get?

That was where my hubby and I were & part of the reason we decided to STR. Our house was 4bd, but only 1338sf. It was fine when it was just us, but after adding in 3 kids...So many people told us we would be priced out "forever" , our income is right along the median. I don't see how we can be 'priced out forever.

I agree with all of this of course, but we have to accept that people trading down ARE better off

[red]

That is a lovely post. Very simple.

Some sensible guys on MSE.com

Yes there are - but the notion that property has 'always been too expensive' is blown out the water by the fact that I bought my first flat (zone 2, London) for 50 grand on my 1995 20K salary. Not even 2.5 income multiple considering a small deposit. The same flat up for sale recently at 175K. Average wage now about 30K...what gives?

I am sure many others could provide anecdotals proving my point. Or was that period a never-to-be-repeated one-off? Are we entering that new paradigm?

[Casual Observer]

Yes there are - but the notion that property has 'always been too expensive' is blown out the water by the fact that I bought my first flat (zone 2, London) for 50 grand on my 1995 20K salary. Not even 2.5 income multiple considering a small deposit. The same flat up for sale recently at 175K. Average wage now about 30K...what gives?

I am sure many others could provide anecdotals proving my point. Or was that period a never-to-be-repeated one-off? Are we entering that new paradigm?

What was the mortgage interest rate?

[RichM]

Yes there are - but the notion that property has 'always been too expensive' is blown out the water by the fact that I bought my first flat (zone 2, London) for 50 grand on my 1995 20K salary. Not even 2.5 income multiple considering a small deposit. The same flat up for sale recently at 175K. Average wage now about 30K...what gives?

I am sure many others could provide anecdotals proving my point. Or was that period a never-to-be-repeated one-off? Are we entering that new paradigm?

Oh yeah, that was complete BS. I think that should go in the myths/FAQ section - property hasn't always been hard to buy at all...

[Guest Cletus VanDamme]

Yes there are - but the notion that property has 'always been too expensive' is blown out the water by the fact that I bought my first flat (zone 2, London) for 50 grand on my 1995 20K salary.

I am sure many others could provide anecdotals proving my point. Or was that period a never-to-be-repeated one-off? Are we entering that new paradigm?

Some would say we are in a new paradigm of permanently high house prices. Given that we are always being told that past performance is not necessarily an indication of the future, this could be the case.

Given the changing demographics of this country since 1995 it would be hard to imagine a scenario where you could ever buy a flat in Zone 2 for 2.5 times an average/reasonable single person's salary.

Most would say, as soon as prices look like they're dropping, FTBs and trader-uppers will pile back in, ensuring prices don't fall far. So, it would take a massive paradigm shift for property to become abhorrent to the masses to such an extent for prices to fall back to these levels.

[Time Will Tell]

A house is still easily affordable to a couple around my area. Until prices rise alot more pushing out the dual buyers and interest rates go up you wont see a crash.

Idiot..!!

[zag2me]

Idiot..!!

Charming

Just as an example of the couple affordability thing.

2 people earning ave wages round here of about 25k. 50k combined * 3.5 is 175k, exactly what a 2 bedroom family starter home costs in the area. If they went up by 50%, then yes the whole thing would fall to pieces.

Edited March 28, 2006 by zag2me