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Rough Diamond

What Would It Take For Prices Not To Fall?

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A lot of emphasis is placed on what it would take to cause a HPC, but looking at it the other way round what would it take for HPI to continue booming? I guess the answer would be for the factors that have contributed to the boom to keep going.

1) Cheap credit: What would it take for this to continue? Is there a way round the debt so that people can continue to borrow? What would it take for interest rates to remain low (linking to inflation)* The typical house now costs over 5 times the typical persons salary. What would it take for this to continue/rise further? Surely lenders have to draw the line somewhere. If people are taking out large (5x) mortgages then surely a small rise in interest rates would cause a greater rise in monthly payments. But would they be forced to sell? (provided an IR rise does occur). Haven't people taken out mostly fixed rate mortgages? Surely that would hedge them for the duration of the fixed rate. Since a typical fixed rate is about 3-5 years, would it take this long for the downturn to even begin?

2) *Interest & Inflation: To keep within the governments 2% target, will the MPC have to raise rates? Are we facing increased inflation, or is everything rosy? can the government doctor these figures to suit? To me it looks as if interest rates are in a precarious position and the MPC cite house price inflation as a reason not to lower rates further. However with falling retail spending, could the MPC actually forsake HPI and lower them anyway? It looks as if they are too scared to move it either way, which doesn't exactly trigger a house price crash - they are still historically low. Will Oil prices and higher US base rates/Long term bond yields cause higher inflation over here?

3) Low unemployment: I've heard reports that unemployment is rising, and there are plenty of reports on the blog of job losses in retail. But I've also heard reports that the amount of people "employed" is rising. Which figure should we be taking note of? rising unemployment would affect the supply side as people would inevitably have to sell upon losing their income, but rising employed people would increase demand, wouldn't it? Does immigration contribute to this "rise in employment" (if it exists) and would it counter the effect of job losses?

4) Buy to Let Brigade: Traditionally BTL'ers look for a 10% yield on their properties a year. For there not to be a crash, yields would have to remain quite high wouldn't they? but with so many BTL properties around surely it cuts yields to a point where BTL is no longer a viable investment. For the boom to continue, yields/capital gains must remain above the level of mortgage rate - simple profit and loss. For the boom to continue, not only must existing investors be comfortable with their investment and not sell, but new BTL's must still be attracted to the market as FTBs are priced out. How much can they possibly borrow for this and does it honestly make financial sense yield/capital wise to invest right now? I guess it boils down to interest rates again - but what do you think?

5) Speculation: It seems much of the asset value increase has been attributable to the general attitude of either "property never goes down (!)" and "buy before it's too late". Clearly this is a very destructive take on any commodity be it housing or tulips, but is it sustainable? Can people honestly believe the market will go up forever - forever??

RD

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The paper wealth of house prices would have to be backed up with real wealth. Oil under the Sussex downs, rich diamond seams found in abandoned Welsh coal mines, and the Penines being found to be solid gold might do it.

Billy Shears

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The elimination of the economic cycle.

True,

but as we all no that is an economic impossibility.

(bulls argue this, but as every boom market has crashed that means that every boom market has had it's bulls and they have always been wrong.... bulls are essentially the flat earth society, but instead of being surprised when they don't fall of the edge of the worls they will be surprised when they do.)

But the economic cycle has run through the housing market three times in recent history but there have been actual significant price falls just once....!!!!!!!!!!!!!!!

How can this be.

Wage push inflation.

Chart hous prices against time and you will see a bullish output.

get an IQ, chart average house prices against average salary... See a very different story..

and then read all that has been said about wage push inflation by the MPC and god bless him even Gordon Brown...

and then you are either a bear, or you havent understood the simple truth.

:)

Third, Mr King is nervous that homeowners may not realise that although low interest rates make mortgage repayments affordable, high inflation will not erode the value of their borrowing, as it did in the 1970s - and when they do catch on, house prices will plunge.

:)

It's complicated... But paying back a £180,000 IO mortgage at 8 times your salary is more so..

http://business.guardian.co.uk/story/0,3604,843624,00.html

For the economy to recover its balance one of three things might happen. First, sterling could weaken against foreign currencies, cutting the value of the pound in shoppers' pockets and forcing them to tighten their belts.

Second, a rise in unemployment or interest rates could shock debt-laden households and cause a sharp downturn in consumer spending.

Third, Mr King is nervous that homeowners may not realise that although low interest rates make mortgage repayments affordable, high inflation will not erode the value of their borrowing, as it did in the 1970s - and when they do catch on, house prices will plunge.

"The immediate question is whether changes in asset prices have led to an imbalance within the economy that poses the risk of a large negative demand shock at some point in the future," he said. "I believe the answer is yes."

Edit,

The above article was made just before the gulf War..

at that point Interest Rates were dropped massivly..

Edited by apom

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A big bucket of bullsh*t.

You dont have to know about economics to realise that this cannot go on. Unless wages rise 50>100% in the next few years, which is highly unlikely, then its gonna blow!

TB

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I spoke to an estate agent/mortgage broker last week who is in London. He says the market is "booming" at the moment, but its all foreign investment. Reckons he has not sold to an English ( I mean people who live here - including non-whites for the BNP supporters out there) person in the last year.

It seems houses are becoming more and more of an investment, so even more likely that they will go down? Has there ever been an investment which was not subject to the economic cycle?

So Im not sure if there is anything that could stop prices falling.

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It seems houses are becoming more and more of an investment, so even more likely that they will go down? Has there ever been an investment which was not subject to the economic cycle?

Belly button lint?

Billy Shears

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It seems houses are becoming more and more of an investment, so even more likely that they will go down? Has there ever been an investment which was not subject to the economic cycle?

I was once almost convinced, that normal market cycles had

Been broken and we were in a new era of sustainable high markets.

It was when Bryan Adams had a number one hit with ‘everythingy I do’.

Look into my eyes - you will see

What you did to me

Search heaart - search for sold

And when you find reductions there you'll search no more

Don't tell me it's now worth buying for

You can't tell me it's not worth waiting for

You know it's true

Everything they Mew’d - they’re gonna get screwed

Look into LR for a start - you will find

There's nothin' there to hide

Take away TTRTR’s rent - take TTRTR’s life

He wouldn’t give it all – we’d have to sacrifice him

Don't tell me it's not worth fightin' for

he can't help it - there's nothin' he posts that makes sense any more

Ya know it's true

Everything is in dodo – I’d wait if I were you

There's no rent - like their mortgage

And no other - could give more

There's nowhere to we can afford - unless they drop prices

All the time - all the way

Oh - you can't tell me it's not worth tryin' for

I can't help it - there's nothin' I want more

I would fight for you - I'd lie (self-cert) for you

Walk the wire for you - ya I'd buy for you

Ya know it's true

Everything I do - I do it for you

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Guest Winners and Losers

I got my first real Buy to Let

Bought it from Haliwide

DIY'd 'it til my fingers bled

It was summer of 2005

Me and some guys from school

Had a drill and we tried real hard

Jimmy quit and Jody got married

I shoulda known we'd never get far

Oh when I look back now

That summer seemed to last forever

And if I had the choice

Ya - I'd always wanna be there

Those were the best days of my life

(CHORUS)

Ain't no use in complainin'

When you got a job to do

Spent my evenin's down at the B&Q

And that's when I decided to MEW

Loggin on to HPC

TTRTR told me that I'd wait forever

Oh and when he held my hand

I knew that it was now or never

Those were the best days of my life

(Chorus) Back in Summer of 2005

Man we were in huge debt

We were young and stupid

We needed to offload the buy to let

I guess nothin' can last forever, no

And now the times are changin'

Look at everything that's come and gone

Now I'm forced to sell that sh*t flat

I think about it wonder what went wrong

Loggin in to HPC

TTRTR told me it would last forever

Oh the way he'd lied to me

I knew that it was now or never

Those were the worst days of my life

(Chorus) Back in summer of '2005

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I spoke to an estate agent/mortgage broker last week who is in London. He says the market is "booming" at the moment, but its all foreign investment. Reckons he has not sold to an English ( I mean people who live here - including non-whites for the BNP supporters out there) person in the last year.

It seems houses are becoming more and more of an investment, so even more likely that they will go down? Has there ever been an investment which was not subject to the economic cycle?

So Im not sure if there is anything that could stop prices falling.

I heard that most of the property investment in London is being done by the Irish.

If the pound does fall a lot agains't the euro then won't this mean more investment into property from overseas?

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I heard that most of the property investment in London is being done by the Irish.

If the pound does fall a lot agains't the euro then won't this mean more investment into property from overseas?

Possibly. The point here is that when people are treating houses as investments, they will sell them when they start to notice that the returns are shite, as opposed to owner occupiers.

If you are living in a nice house which you are content with and a slimy estate agent tells you it has gone down 10% in value, your not going to rush to sell normally are you? But if on the other hand that house is your pension fund and it starts to slide you will want to get out as soon as possible. House prices have already start to decline, so most of the smart investors will be moving their money leaving the suckers to take the fall.

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A lot of emphasis is placed on what it would take to cause a HPC, but looking at it the other way round what would it take for HPI to continue booming? I

1) Cheap credit: What would it take for this to continue?

2) *Interest & Inflation: To keep within the governments 2% target, will the MPC have to raise rates?

3) Low unemployment: I've heard reports that unemployment is rising, and there are plenty of reports on the blog of job losses in retail. But I've also heard reports that the amount of people "employed" is rising.

RD

In anwser to your question - HPI isn't booming, but its still positive say around 3% - so prices are rising in line with wages, which makes sense.

1. IRs to stay at 4.5% - they will. Take with a hefty pinch of salt talk on here about IRs rising. There is no reason for them to rise in the UK.

2. Inflation will stay around 2% for the next two years, so again, no reason to raise IRs

3. Yes, employment is rising faster than unemployment. We have massive, open door immigration which creates demand for housing.

There will be no price crash in the foreseeable future.

If you are a bear, the most sensible thing you can say at the moment is that " there will be a house price crash starting in 2007/08 and it will last at least 5-7 years before we reach the bottom" - in other words its so far out into the future, ie 10 years, I couldn't possibly argue with you !

Mmmm, funny that, it does seem to be the position of an ever increasing number of bears.

I'm afraid, I'll be dead and buried before then !

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What would it take for prices not to fall?

Probably the new Foxtons standard EA issue vehicle of choice to help spread their bullsh!t...

manure-spreader.jpg

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There will be no price crash in the foreseeable future.

If you are a bear, the most sensible thing you can say at the moment is that " there will be a house price crash starting in 2007/08 and it will last at least 5-7 years before we reach the bottom" - in other words its so far out into the future, ie 10 years, I couldn't possibly argue with you !

Mmmm, funny that, it does seem to be the position of an ever increasing number of bears.

I'm afraid, I'll be dead and buried before then !

Yes - because houseprice crashes normally happen overnight?? I was pregnant with my son when they had already begun to rise by a fortune - he is nearly three now.

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A lot of emphasis is placed on what it would take to cause a HPC, but looking at it the other way round what would it take for HPI to continue booming? I guess the answer would be for the factors that have contributed to the boom to keep going.

1) Cheap credit: What would it take for this to continue?

A. The BOE printing money - raising the money supply into double digits per year. As it is doing.

2) *Interest & Inflation: To keep within the governments 2% target, will the MPC have to raise rates?

The inflation measure is whatever they say it is. 2% is a laughable joke.

Because the inflation measure treats essential consumption like utilty bills as optional consumption, the inflation measure substitutes those unaviodable huge electricity and gas bill rises with cheap toasters from China. A person on the average salary, £26k, faces well over 3% real world inflation just in unavoidable bills rising 13%. God help him if he has a car - even a quick toot to the shops and back of 3 miles costs over 70p, because petrol is heading over £1 per litre.

Add this in and debt secured on assets like housing simply pays and pays!

3) Low unemployment: I've heard reports that unemployment is rising, and there are plenty of reports on the blog of job losses in retail. But I've also heard reports that the amount of people "employed" is rising. Which figure should we be taking note of?

Really a lot of unemployment is simply displacement, as millions and millions of immigrants undercut native citizens. Normally unemployment is created by higher interest rates as a way of stopping demand from undue liquidity becoming inflationary. Mass immigration drops real wages by greater supply in relation to demand and thus lowers inflation. Therefore workers have a much lower price for thier labout in terms of buying real capital assets.

4) Buy to Let Brigade: Traditionally BTL'ers look for a 10% yield on their properties a year. For there not to be a crash, yields would have to remain quite high wouldn't they? but with so many BTL properties around surely it cuts yields to a point where BTL is no longer a viable investment. For the boom to continue, yields/capital gains must remain above the level of mortgage rate - simple profit and loss.

This is nonsense. The yield depends on the tax breaks given. Sindicated SIPPS means people like doctors and dentists etc.. can buy property with a whopping 40% tax break, making even a 4% yield on £100k property to a ordinary working person, a 6% yield to a tax advantaged SIPP buyer with REITS investment to look forward to later.

5) Speculation: It seems much of the asset value increase has been attributable to the general attitude of either "property never goes down (!)" and "buy before it's too late". Clearly this is a very destructive take on any commodity be it housing or tulips, but is it sustainable? Can people honestly believe the market will go up forever - forever??

Because of the tax breaks to investors, a structural change has occured. This is also reflected in the mortgage market as it has polarised in favour of investors and away from ordinary buyers. This means comparisions with higher interest rates for ordinary people are totally different to other periods in the past, and houseprices will remain higher than before if interest rates are raised sharply.

Edited by brainclamp

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In anwser to your question - HPI isn't booming, but its still positive say around 3% - so prices are rising in line with wages, which makes sense.

Prices are rising in some parts of the country. If your arguments about house prices are correct, why are house prices falling in some regions?

1. IRs to stay at 4.5% - they will. Take with a hefty pinch of salt talk on here about IRs rising. There is no reason for them to rise in the UK.

For how long? What happens if the UK holds rates while the rest of the world continues raising them? What if the pound drops, leading to inflation in all those imports including oil?

2. Inflation will stay around 2% for the next two years, so again, no reason to raise IRs

Inflation isn't even 2% now. Haven't you noticed your energy bills going up?

3. Yes, employment is rising faster than unemployment. We have massive, open door immigration which creates demand for housing.

What percentage of these immigrants are able to buy overpriced inner city flats. What percentage of them can buy anything? What percentage of them can afford rents high enough to support current prices. If wages effectively deflate due to oversupply in the labour market, then where is the increase in demand going to come from?

Let's say that we have 2000 people in a town who can afford a 100K house. Another 500 people come to the town increasing competition for jobs, so that the salaries go down. It's then easy for there to be fewer people in the town who can afford a 100K house even thought the number of people has increased.

There will be no price crash in the foreseeable future.

A few lines later you say.

If you are a bear, the most sensible thing you can say at the moment is that " there will be a house price crash starting in 2007/08 and it will last at least 5-7 years before we reach the bottom" - in other words its so far out into the future, ie 10 years, I couldn't possibly argue with you !

2007/08 is not "the forseeable future"? I call that the very near future. It's only a year away. What is your definition of "the forseeable future"?

Mmmm, funny that, it does seem to be the position of an ever increasing number of bears.

If you say that there will very likely be a crash in 2007/8 then I'd classify you as being more bearish than many. Why is such a belief "funny"?

I'm afraid, I'll be dead and buried before then !

Before 2007/8? Do you have health problems meaning that you are unlikely to live a few more years? Or are you talking about your online HPC forum personality?

Billy Shears

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I spoke to an estate agent/mortgage broker last week who is in London. He says the market is "booming" at the moment, but its all foreign investment. Reckons he has not sold to an English ( I mean people who live here - including non-whites for the BNP supporters out there) person in the last year.

It seems houses are becoming more and more of an investment, so even more likely that they will go down? Has there ever been an investment which was not subject to the economic cycle?

So Im not sure if there is anything that could stop prices falling.

They've heard of the amazing yields in the UK versus their own countries & want some.

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Guest Winners and Losers

Before 2007/8? Do you have health problems meaning that you are unlikely to live a few more years?

Billy Shears

On no, only 12mths left to live. Maybe his implants went wrong? Maybe he thinks we are in 1987? :blink:

Edited by Winners and Losers

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They've heard of the amazing yields in the UK versus their own countries & want some.

LOL! Seriously!

If the yields in the UK are amazing compared to their own countries, then this perhaps says much more about their own countries than the UK. 1% yields anybody?

If Father Ted were remade, would Ted, Dougal, and Jack be estate agents?

Billy Shears

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Guest Winners and Losers

If Father Ted were remade, would Ted, Dougal, and Jack be estate agents?

Billy Shears

Yes. Drriiink.

Champers anyone? Tonight we're gonna party like its 1989.

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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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