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The housing market looks like it is going to fall a bit. Manufacturing seems to be doing badly so interest rates could be brought back down and with house prices not going up this wouldn’t be a problem. Manufacturing was the reason for interest rates coming so low in the first place.

I know of lots of people who are looking to buy either first time or BTL a small dip in prices would be the sign to jump in to the market.

With the above could house prices go back up in 2005?

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Manufacturing seems to be doing badly so interest rates could be brought back down

Yeah, cos we all know what an enormous part of our economy manufacturing is, the BoE sets IRs JUST FOR THEM. Not.

Manufacturing was the reason for interest rates coming so low in the first place.

No it wasn't.

I know of lots of people who are looking to buy either first time or BTL

Are they the recent beneficiaries of a frontal lobotomy?

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Are they the recent beneficiaries of a frontal lobotomy?

so what would that make you, if they are right and you are wrong over the next 12 months?

whilst i do agree with your other two comments,i do feel this last one is a little early in its call.

that said if manufacturing comes to the forefront of the news and job losses perhaps BOE would bring it to the top of the list. the forgotten cause? yes, but for how long?

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We have been over this before...but I see you are new (and in the unusual position of STRing your own place, but still sitting on two BTLs!).

I think you will find that most bears here will say that history shows that when prices start falling sentiment changes and the deflationary cycle starts when people hold out that little bit longer for prices to go further and then having waited a little bit longer and prices are still falling, wait a little bit more, until eventually prices have collapsed. Its the same sort of mentality as a bull run, but in reverse.

This "money on the sidelines" won't appear. The same argument was used for the dot.com bubble, the sidelines money never arrived and the prices still collapsed by 99% for most dot.com companies.

Also there is a lot more to the interest rate decision than just manufacturing. If you remember a few years back, the manufacturing companies and unions were clamering for rate drops saying that sterling was too high, but the BOE held firm for a long time..as there were other inflationary pressures that they needed to watch out for. Manufacturing is part of it, but only part, and its role is shrinking all the time too as the UK moves more towards a services type industry (reminds me of the Golgafrinchams B arc!)

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This "money on the sidelines" won't appear.  The same argument was used for the dot.com bubble, the sidelines money never arrived and the prices still collapsed by 99% for most dot.com companies.

how many times do i have to say? you can't compare worthless companies bought purely by investors to the intrinsic worth of property, bought by ''needy'' retail purchasers.

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A couple of points.

First of all, the Government does not care a flying fig about manufacturing.

Manufacturers in this country, compared to the US, Japan, Germany (Oddly, the 3 biggest economies.), are simply derided as manual types who aren't high up on the social pecking order. Engineers are looked down on by the former solicitors, teachers and social workers who end up in Parliament. Anyway, we have very little 'real' manufacturing left.

Secondly.

In the coming months we are going to see the continuous climb of interest rates in the US. It has started and is going to continue.

There is NO WAY that the BOE or Brown will be able to stop UK rates rising in some kind of parity with the US. Our economy is so closely linked to theirs and, by March, I think we will be reguarly reading about 7 or 8 percent possible end of 2005 IR figures forecast for the UK.

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A couple of points.

First of all, the Government does not care a flying fig about manufacturing.

Manufacturers in this country, compared to the US, Japan, Germany (Oddly, the 3 biggest economies.), are simply derided as manual types who aren't high up on the social pecking order. Engineers are looked down on by the former solicitors, teachers and social workers who end up in Parliament. Anyway, we have very little 'real' manufacturing left.

Secondly.

In the coming months we are going to see the continuous climb of interest rates in the US. It has started and is going to continue.

There is NO WAY that the BOE or Brown will be able to stop UK rates rising in some kind of parity with the US. Our economy is so closely linked to theirs and, by March, I think we will be reguarly reading about 7 or 8 percent possible end of 2005 IR figures forecast for the UK.

I totally agree with that interest rises are unavoidable, people have got accustomed to lower interest rates, they have been suckered into thinking that low interest rates are here to stay.

When they do rise above 7 or 8 percent the Sxxt will really hit the fan big time.

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When they do rise above 7 or 8 percent the Sxxt will really hit the fan big time.

1) i don't think that will be the case. nor do the people that matter (the money markets)

what makes you think it will be?

2) if you were right, obviously it would crash the market. that said how would any one benefit if the cost of borrowing the money was appox 70% more than it is now?

100k property example (cost of mortage today @90% LTV= £378 pcm).......

ie IR's rise to 8%

market falls nominally by 30% (pretty hard line bearish example,this could equate to 45% in real terms) so our 100k prop becomes 70k (ok less in real terms) this would equate to £433 pcm @8.25% (90% ltv again)

if the falls were less say only 20% nominal this would equate to £495 pcm @ 90% ltv on 80k .

my point is if you can't afford a house now or afford to trade up , how would a crash brought about by rising IR's help your situation? as far as affordability goes it would worsen it.

(obviously if someone was to pay cash here any crash would be to your advantage, i'm also ignoring the capital saving., just talking about affordability)

i'm merely pointing out to those who can't afford a property on a monthly basis that a crash (brought about by rising IR's) would add to your woes not diminish them.

so if you can't afford £378 pcm (adjust to your situation) today, then how could you afford £433-£495 when (or rather a very big ''if'') high IR's bring the market down.

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We've had Oil in the mid-50s USD now for a few months but the affects of those prices still have not worked their way through to the global economy.

It usually takes about 6 months and that is when we will see the real inflationary pressure.

I also think that Bush is now intent on his legacy being the war on terrorism and will not give a rat's monkey if Greenspan, also looking to his legacy as a finacial guru, works to bring the US deficit down by higher IRs.

I still believe, long-term, we are in a deflationary cycle but that higher IRs in the foreseeable future will actually be part of that downward spiral. Rates will rise in the US for most of next year and probably into 2006. Being the World's largest economy this will impact all other countries and, of course, the UK.

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1) i don't think that will be the case. nor do the people that matter (the money markets)

        what makes you think it will be?

2) if you were right, obviously it would crash the market. that said how would any one benefit if the cost of borrowing the money was appox 70% more than it is now?

            100k property example (cost of mortage today @90% LTV= £378 pcm).......

            ie IR's rise to 8%

          market falls nominally by 30% (pretty hard line bearish example,this could equate to 45% in real terms) so our 100k prop becomes 70k (ok less in real terms) this would equate to £433 pcm @8.25% (90% ltv again)

 

          if the falls were less say only 20% nominal this would equate to £495 pcm @ 90% ltv on 80k .

          my point is if you can't afford a house now or afford to trade up , how would a crash brought about by rising IR's help your situation? as far as affordability goes it would worsen it.

          (obviously if someone was to pay cash here any crash  would be to your advantage, i'm also ignoring the capital saving., just talking about affordability)

          i'm merely pointing out to those who can't afford a property on a monthly basis that a crash (brought about by rising IR's) would add to your woes not diminish them.

          so if you can't afford £378 pcm (adjust to your situation) today, then how could you afford £433-£495 when (or rather a very big ''if'')  high IR's bring the market down.

I dont have an evidence, just a feeling. deja-vu whatever. The BOE seems to always have its IR's higher than the FED's.

But I do agree that higher interest rates in a post crash market will not make houses any more affordable for FTB's unless they have very substantial deposit saved.

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We've had Oil in the mid-50s USD now for a few months but the affects of those prices still have not worked their way through to the global economy.

It usually takes about 6 months and that is when we will see the real inflationary pressure.

I also think that Bush is now intent on his legacy being the war on terrorism and will not give a rat's monkey if Greenspan, also looking to his legacy as a finacial guru, works to bring the US deficit down by higher IRs.

I still believe, long-term, we are in a deflationary cycle but that higher IRs in the foreseeable future will actually be part of that downward spiral. Rates will rise in the US for most of next year and probably into 2006. Being the World's largest economy this will impact all other countries and, of course, the UK.

i think you make some good points MT. however disagree with the man who sets the rates all you like, your stance won't change anything, it is his opinion that matters...........

The answer, I think, is that inflation fears are moderating more quickly than the Bank had expected. Its central projection now shows inflation as measured by the Consumer Prices Index at below 2 per cent until the third quarter of 2006. The Bank notes that there are considerable risks surrounding the central projection because of uncertainties about the oil market, global current account imbalances, house prices and wages. Nevertheless, it says, “the overall risks to growth and inflation are somewhat to the downsideâ€.

http://news.ft.com/cms/s/82b0c682-34c9-11d...000e2511c8.html

you don't answer my Question either, as to why someone priced out (or even just thinking they are priced out( ie they can afford but choose to wait) would be better of (affordability wise) waiting for a crash caused through IR' rises assuming they were using a mortgage.

the fact is property prices are only half the picture.

cheers BBB.

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I dont have an evidence, just a feeling. deja-vu whatever. The BOE seems to always have its IR's higher than the FED's.

i'm surprised at you C88, assumptions can be a very costly thing. i don't mean that disrespectfully, i just thought you would have something with a bit more ''ooomph'' to back it up.

still this is the future we're 'speculating' on here, so who knows !!!

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BBB, in your scenario, either way they're priced out. So why not wish for a crash?

good thinking Batman :lol:

actually in all seriousness a few years of real falls only would'nt go a miss to all concerned. ie nominal prices flatline. and IR's stay where they are neither stimulating nor surpressing the economy, how would this pan out?........

1) no one goes into negative equity, so no one suffers,people can still move if they wish.

2) the dick head speculators leave the BTL arena (ie why would they stay if no CG to look forward to) therefore bread and butter LL's gain from more demand (rising rents)

3) wages play catch up @ 4-5% P.A and within a few years all FTB'ers can afford to buy.

aaahhhhhh utopia B)

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my point is if you can't afford a house now or afford to trade up , how would a crash brought about by rising IR's help your situation? as far as affordability goes it would worsen it.

I am not talking about whether higher IRs will help you buy a house or not but simply stating that I believe there IRs are about to rise.

There is much nonsense talked about low IRs and how low IRs are here for the long-term. Anyone who believes that is going to get a nasty shock.

Now, your figures about the impact of higher IRs on a property are accurate BUT... they are no different to the long-running discussion on here of if a house is worth 100K and rates are 10% how is that different to a house that is, in a bubble period, 200K but the rates are 5%. Or, worse, how people buy a house on 5% rates that is 3 or 4 times the price it was when rates were 10%.

The real difference is the impact of inflation and deflation on houses. Longer-term, inflation means that house prices are difficult to pay for when you first buy them but, over time, increases in salaries compensate. The people who have bought now are in a situation where a lack of inflation means that the debt is never compensated by higher salaries so the debt stays around for longer. All of uson this forum know this as it has often been discussed.

I actually believe we are going to see something new and very worrying in the coming months. I think IRs are going to rise but salaries will stay where they are and, in some sectors, fall. This has never happened before but, this time, I think we are going to see it and I think we will see it for two reasons:

1). The global deflationary pressure on salaries in order to compete.

2). A political stance by the US to reduce its deficit. It has to start doing this or, within 4 years, the US will be bankrupt if it carries on as now. I think Greenspan is going to do it - Bush is going to say "OK" - and that is going to have enormous global economic impact.

One thing to remember is that we have been following the same economic cycle since the 1970s. That has now gone, changed forever, is old hat and a new economic cycle/model is unfolding before our eyes. It is a new thinking.

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yeah right, they will only be able to buy double what they could without the restrictions

?????????

3B, the maximum gearing is 50%. So if the SIPP fund has total capital value of £100k, it can only buy a £200k property at a maximum. How do you get from this to your quote above??? :unsure:

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?????????

3B, the maximum gearing is 50%. So if the SIPP fund has total capital value of £100k, it can only buy a £200k property at a maximum. How do you get from this to your quote above??? :unsure:

100k pot no gearing allowed = 100k's worth of property.

100k pot with 50% gearing allowed= 200k's worth of property.

100x2 = 200 ie it is ''double''

complex stuff :wacko:

ie i look at the restictions as being a bonus, you look upon them as a well errrrrr a restriction.

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Prices to rise in 2005? If we all agree that prices have begun falling, then the reverse psychology will continue to drive prices down. The boom was fueled by buyers rushing to get on the ladder in the fear of being priced out forever. In a falling market, buyers stay away because they know the price will be cheaper in the future and sellers rush to offload for the same reason.

It simply doesn't happen that buyers jump back in to prop up a falling market - it never has, and it never will. Markets swing from one extreme to the other - bull market following bear market, as surely as night follows day.

People jump in to buy property in a rising market and then continue to jump in when the market is falling? Wow, property really would be a one-way bet in that case.

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yeah right, they will only be able to buy double what they could without the restrictions. :P
100k pot no gearing allowed = 100k's worth of property.

        100k pot with 50% gearing allowed= 200k's worth of property.

          100x2 = 200 ie it is ''double''

          complex stuff  :wacko:

          ie i look at the restictions as being a bonus, you look upon them as a well errrrrr a restriction.

Amusing how "restricted to 0% gearing" evidently means the same as "no restrictions" to you. Complex stuff indeed.

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If mortgage rates double and house prices halve, I for one would be tempted back in to the market. I feel I am priced out because of the real possibility of large rises in interest rates, and because of having to pay off the original loan, not because of current affordability constraints. Plus, when prices do fall significantly, my deposit, which by today's standards seems paltry, suddenly becomes impressive. Without doubt, for this FTB (that is what anyone who does not currently own is called, even if you STR), some kind of crash is an attractive option. Realistically, its the only way I can see myself owning a property in the UK again. I'm not prepared to risk everything to buy, when I can rent in areas I am happy to live in.

Cheers,

lucky

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  • 439 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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