My Parents: An Insight To Greed And Stupidity

[BillyShears]

No I think HPI is a major problem, but nonetheless I would expect anyone with an asset to try and sell for the full price they can get.

Say Mr X has made £50K profit out of the gold bull run - it's basically a lot of money for sitting on his ass. But would you advise him to sell it at a price that means he only gets £25K profit?

I looked up the area on one or two of those price predictors and they gave more like 45-50% increase over that period which would make their £425K hopes about right. Impossible to tell from a distance of course, but maybe you're taking a bit of a low view.

I don't like your analogy to gold. It's pretty well certain that you can sell gold for pretty much what you will see as today's price without fuss and within a day. Selling a house is a much more long-winded process with no guarantee of completion even after offers are received.

Billy Shears

[CommonSense]

Its all very well to label this as greed, but as I always point out, I suspect last time you sold your car you held out for top (irrational) money!

People love to lable others 'greedy' without any honest self examination.

Reminds me of when you ask people how fast they drive on the motorway, they invariably say between 70 - 80mph, yet I see every other vehicle doing about 85. I also notice about 60 - 70% of people 'tailgate' yet no one ever owns up to it when you ask.

I sold my car for less than what it was 'worth' to a new driver as I'm a jolly decent bloke.

[right_freds_dead]

Its all very well to label this as greed, but as I always point out, I suspect last time you sold your car you held out for top (irrational) money!

People love to lable others 'greedy' without any honest self examination.

Reminds me of when you ask people how fast they drive on the motorway, they invariably say between 70 - 80mph, yet I see every other vehicle doing about 85. I also notice about 60 - 70% of people 'tailgate' yet no one ever owns up to it when you ask.

im not greedy either. im in business and now and again supplies arrive cheaper. so i refund the customers the difference. i could keep it legally and they couldnt do anything about it, but they are ordinary members of the public and i feel genuine towards them. sometimes i hear a purse click over the phone and i find it endearing. i cant stitch them up. even though i sometimes feel i should be grabbing all i can.

plus its good for business being straight....

[Magpie]

I don't like your analogy to gold. It's pretty well certain that you can sell gold for pretty much what you will see as today's price without fuss and within a day. Selling a house is a much more long-winded process with no guarantee of completion even after offers are received.

That's true and it does affect the strategic approach to selling a house. I was comparing with gold because I thought Mark was using an emotive argument that people profiting from houses don't "deserve" the money to criticise them for wanting to sell at the best price possible. In this case the EA has suggested £450-475K so it doesn't seem unreasonable for them to at least hope for £450K.

My main point was just that anyone with an asset will try to maximise the price they sell for, and why shouldn't they? If it's a strategic error as Munimula is suggesting then fair enough it may be a mistake. But it's not morally wrong on the basis that they don't "deserve" it. I also used gold as an example because I think Mark in other posts praises the virtues of making money from gold. I don't see that one deserves profit from gold (or stocks or whatever) any more or less than one deserves profit from a house.

Moral criticism of BTLs or flippers makes sense to me to a degree, but this is just a case of OOs trying to get the best price for their property in the current market.

Edited April 19, 2006 by Magpie

[munimula]

Its all very well to label this as greed, but as I always point out, I suspect last time you sold your car you held out for top (irrational) money!

People love to lable others 'greedy' without any honest self examination.

Reminds me of when you ask people how fast they drive on the motorway, they invariably say between 70 - 80mph, yet I see every other vehicle doing about 85. I also notice about 60 - 70% of people 'tailgate' yet no one ever owns up to it when you ask.

Firstly, I always advertise my car for what I think it will sell for. I've never advertised one for more than I think it is worth so actually putting your house on the market for more than you believe it is worth is quite rightly greedy IMO. If I sell a car I want to sell it, I don't want it hanging around at a price I can't sell it.

And you've completely missed the point of me describing them as greedy. They are greedy because they have said they won't sell it for less than they want for it even if nobody is prepared to buy it at that price. That is greedy. Dispute that.

Edited April 19, 2006 by munimula

[CommonSense]

im not greedy either. im in business and now and again supplies arrive cheaper. so i refund the customers the difference. i could keep it legally and they couldnt do anything about it, but they are ordinary members of the public and i feel genuine towards them. sometimes i hear a purse click over the phone and i find it endearing. i cant stitch them up. even though i sometimes feel i should be grabbing all i can.

plus its good for business being straight....

I have no clue what your prefession is but I know full well you are not an Estate Agent.

[Levy process]

Yes, they are literally waiting for a muppet to come along and pay the price. Even they know that the price is stupid but they are hoping that there is someone stupid enough to pay it. In there favour is a very limited supply of housing in the area.

They've heard that there were some good city bonuses in London this year!

Whatever else, the recipients of the big city bonuses are not muppets, and won't be buying over priced property at the other end of a 6 hour drive from London. They can dream on.

[Rachman]

Whatever else, the recipients of the big city bonuses are not muppets, and won't be buying over priced property at the other end of a 6 hour drive from London. They can dream on.

I love this talk of big bonuses. Do any of you know what the banks actually paid out in bonuses to all but the very highest few ?

My missus did the bonuses for a City Bank this year (she's the HR boss) and they were not great at all - they were middling and most of them would not buy you a nice car after tax, let alone a second house.... plus the banker's basic is almost always less than £125K - do you think most of them can afford a house in London and a £500K bolthole in Cornwall, school fees and a Cayenne ?

This bonus talk is blollocks - the only bankers I know who have bought holiday homes have 'invested' inheritances in them and are still mortgaged fairly large style on their London townhouse.

[laughing_goat]

Appologies for the long post (I get carried away sometimes)

Hi Munimula,

About 18 months ago, we had a simular situation with a relative. Had his house on the market as a 2/3 bed place for the price of an expensive 3 bed place. The house definately wasn't a 3 bed house and there wasn't truthfully the opportunity to make it a reasonable 3 bed place (a small dining area could have made a tiny extra room, but it required a wall!). Anyway, it had one offer about 12 months into it being on the market but as soon as it was accepted the buyer pulled out. The EA wasn't making an effort to market the place at this stage, so after the buyer backed out, he changed agent and dropped the asking price by 20% on new agents advice). Two years after first being put on the market a buyer came along an offered 15% less than the new asking price, what does the silly old fool do? Yes he rejected it! Amazingly, the buyer came back and asked the agent to ask what my relative wanted for it, his reply, "The asking price, of course!". It's worth noting that at this point the new EA wasn't making a lot of effort to advertise the place, he had long since given up.

Eventually, after much persuation from the family and the EA, he came to his sences and sold for the 15% reduction. However, he nearly lost that buyer too, as he didn't have all his paperwork in order (built and extension without planning permission, and had to apply retrospectively). Personally, I wanted to give the buyer a medal when it all finally went through.

This was a guy who had no pension provision,

Hated where he lived and was apparently desperate to get out.

Does this sound familiar?

When looking at property on the Net, if I see a house that has been on the market for a long time at an over inflated price, I tend to mentally skip past it.

If your parents house remains at it overinflated price for too long, the agent might not advertise it so agressively and buyers may not even notice it when it is.

There is nothing wrong with testing the market, but there needs to be a time limit set to it (weeks, not months). Also, bear in mind that a price reduction does (no matter how unreasonable) make a buyer think, "What is wrong with that place?".

LG

[munimula]

Whatever else, the recipients of the big city bonuses are not muppets, and won't be buying over priced property at the other end of a 6 hour drive from London. They can dream on.

And where do you suppose that the majority of 2nd homeowners that have bought up Cornwall come from?

In W.London where I live having a Kernow sticker on your car has become a status symbol to let everyone know that you have a 2nd property in Cornwall.

Londoners probably relish the opportunity to hit the road in the shiny 4X4s and drive to cornwall above the usual average speed of 11mph they manage in London. It makes them feel that their 4X4 is justified as they need it in the country

[Magpie]

I love this talk of big bonuses. Do any of you know what the banks actually paid out in bonuses to all but the very highest few ?

My missus did the bonuses for a City Bank this year (she's the HR boss) and they were not great at all - they were middling and most of them would not buy you a nice car after tax, let alone a second house.... plus the banker's basic is almost always less than £125K - do you think most of them can afford a house in London and a £500K bolthole in Cornwall, school fees and a Cayenne ?

This bonus talk is blollocks - the only bankers I know who have bought holiday homes have 'invested' inheritances in them and are still mortgaged fairly large style on their London townhouse.

Yes, I think by itself the idea that bonuses are supporting the market is drivel. The only thing I would say is that I think the London economy in general is a bit more buoyant than the UK economy as a whole at the minute, so bonuses or no bonuses there are a reasonable number of people who still have some money to spend. Can't see this making that much difference to Cornwall though - though I guess it's the holiday homes market that has pushed prices so high lately...

Edited April 19, 2006 by Magpie

[Rachman]

And where do you suppose that the majority of 2nd homeowners that have bought up Cornwall come from?

In W.London where I live having a Kernow sticker on your car has become a status symbol to let everyone know that you have a 2nd property in Cornwall.

Londoners probably relish the opportunity to hit the road in the shiny 4X4s and drive to cornwall above the usual average speed of 11mph they manage in London. It makes them feel that their 4X4 is justified as they need it in the country

Tell me you are not serious with that. Do you think that Fulham and Chelsea is full of bankers with no mortgage who just want to surf. The cash came out of the 'equity' in their London houses [and inheritances for the ones I know], then as interest rates fell, the Cornwall prices rose at a time when London ones were stagnant as people did not move in London but saw 'profit' in the SW. How many 30 something bankers do you know and how much of their financial position and their mortgages and outgoings do you know. I am guessing it's very few.

That bank I was talking about paid out less than £35K as an average bonus [to its bankers] - after tax that's £20K - that won't buy you a caravan.

Edited April 19, 2006 by Rachman

[Red Baron]

Many of the posts on this thread point out the danger of 'chasing the market' down.

Good advice; I saw many colleagues in the last crash turning down offers only to sell much later, and for far less. As a builder friend said at the time (the early 90s) 'It's really tough out there; selling my houses is like trying to push diahorrea up a ladder'.

[munimula]

Yes, I think by itself the idea that bonuses are supporting the market is drivel. The only thing I would say is that I think the London economy in general is a bit more buoyant than the UK economy as a whole at the minute, so bonuses or no bonuses there are a reasonable number of people who still have some money to spend. Can't see this making that much difference to Cornwall though - though I guess it's the holiday homes market that has pushed prices so high lately...

The holiday homes in Cornwall is the market.

In an area where average wage is £22K and average house price is 10X that it is only people buying holiday homes or retiring that are buying.

Tell me you are not serious with that. Do you think that Fulham and Chelsea is full of bankers with no mortgage who just want to surf. The cash came out of the 'equity' in their London houses [and inheritances for the ones I know], then as interest rates fell, the Cornwall prices rose at a time when London ones were stagnant as people did not move in London but saw 'profit' in the SW. How many 30 something bankers do you know and how much of their financial position and their mortgages and outgoings do you know. I am guessing it's very few.

That bank I was talking about paid out less than £35K as an average bonus [to its bankers] - after tax that's £20K - that won't buy you a caravan.

You must be confusing me with someone else.

I didn't say anything about bankers and their bonuses propping up the market.

Londoners buying holiday homes in Cornwall however is the market.

[Magpie]

The holiday homes in Cornwall is the market.

Actually, looking at the prices I see that must be true - I knew that locals were getting priced out, but it's pretty ridiculous now isn't it.

[munimula]

Actually, looking at the prices I see that must be true - I knew that locals were getting priced out, but it's pretty ridiculous now isn't it.

http://business.guardian.co.uk/story/0,,1753674,00.html

The Eden Project, the Tate St Ives, Rick Stein and Newquay surfers have made Cornwall cool - and turned it into the hottest property market of the past decade, according to a Halifax survey of Britain's counties published today. Average house prices in Cornwall have almost quadrupled in the past 10 years, from £53,000 to £195,000, outstripping any other county or unitary authority in Britain, said Halifax

But for local workers in Cornwall and the south-west, the house price boom, led by an influx of 80,000 second-home buyers, has left them struggling to find a place to live. Wage growth has

fallen far behind surging house prices. Ten years ago, the average wage in the south-west was about £17,000, putting average-priced houses just within the reach of someone taking out a mortgage of three times salary who had a small deposit. Today, wages have edged up to just £21,000 so buying a home now means taking out a mortgage closer to 10 times salary. In Cornwall's more sought-after addresses, prices have reached astronomical levels. In Mousehole, a picturesque village near Penzance, estate agents are currently advertising a two-bedroom harbourside flat for £450,000 and a two-bedroom cottage at £475,000.

In 10 years;

Wages £17K - £21K (25%)

Houses £53K - £195K (400%)

Edited April 19, 2006 by munimula

[onionpie]

Oh go on then. You explain how the property market works to me! I have made a living selling houses for just over 30 years. Explain to me what has sustained the market for the last 3 years. I would suggest you would judge that house prices in London and the South East have been 'unaffordable' for at least 3 years. We sold as many houses last year as we did in 2001. I know who bought the properties at the bottom of the chains. I know how much they were earning and how much they borrowed. I know which of them had large deposits and which of them had been saving for years. You deal in generalities (that are usually wrong). I deal with people. Like a deal we did last week with a couple selling their separate housing association flats (shared ownership scheme) who are pooling their resources and buying together. It takes all sorts to make a market, but only one buyer to get a chain going.

You've only ever operated in a fiat money environment. Before President Nixon, the pound was linked to the dollar by fixed exchange rates, subject to occasional devaluations, and the dollar was convertible into gold. In those thirty years borrowers have become accustomed to the belief that inflation is going to bale them out, while savers have been few because they've been hit by inflation, certainly in the seventies and eighties. Hence the enormous volume of personal debt. Banks have also become accustomed to giving easy credit because inflation is going to bale out borrowers. Money isn't the same stuff that it was before Nixon and Wilson/Heath.

In recent years, lending criteria have been relaxed to keep the party going - ever higher multiples of salaries, self certification, interest only and negative amortisation mortgages, etc. When the lenders start to be hit by bad debts they won't be able to lend, and the credit system will implode. Estate agents won't have a clue what happened.

[Levy process]

I love this talk of big bonuses. Do any of you know what the banks actually paid out in bonuses to all but the very highest few ?

My missus did the bonuses for a City Bank this year (she's the HR boss) and they were not great at all - they were middling and most of them would not buy you a nice car after tax, let alone a second house.... plus the banker's basic is almost always less than £125K - do you think most of them can afford a house in London and a £500K bolthole in Cornwall, school fees and a Cayenne ?

This bonus talk is blollocks - the only bankers I know who have bought holiday homes have 'invested' inheritances in them and are still mortgaged fairly large style on their London townhouse.

Interesting.

[vwphil]

Living in cornwall now is a nightmare of bloody Londonites invading every weekend

Clogging up the cornish lanes with their fecking 4x4's. Not having a clue how to drive or how wide there cars are.

Little do they realise the locals all dispise them.

I know of several drinkeries which operate a duel tariff one for the locals and one for the "bloody cocknies"#

If i have to see another chinless wonder dragging his black labradour wife and kids (always called tarquin or barnaby) around padstow with their cricket jumper slung casually round their neck. Well i think i'll join the Cornish liberation front!!

Phil (Rant Over!)

[MarkG]

I was comparing with gold because I thought Mark was using an emotive argument that people profiting from houses don't "deserve" the money to criticise them for wanting to sell at the best price possible.

But the same would apply if we'd built an economy where the majority of boomers thought that they could get rich by borrowing large sums of money to buy gold and then selling it on to the next generation for vastly more than they paid. The only real difference is that gold is fairly liquid and globally traded, whereas British houses are not, so maybe the gold buyers could sell on to foreigners instead.

How can any economy function for more than a short time if large numbers of people believe they're entitled to sit on their ass collecting 3-4x the national average wage for doing nothing? Even if we were to discover huge oilfields under London, that would only prop up the economy for a few years... sooner or later people have to actually do something useful in order to justify their wealth.

You've only ever operated in a fiat money environment. Before President Nixon, the pound was linked to the dollar by fixed exchange rates, subject to occasional devaluations, and the dollar was convertible into gold.

Indeed: the last thirty years has been a temporary blip.

Fiat currency barely survived the 70s, and only then because goverments raised rates to 15+% to control inflation.... given how fast commodity prices are rising now, and how reluctant governments are to raise interest rates, the world seems to be rapidly losing faith in fiat currency today.

And with fiat, once the faith is gone, there's nothing left.

[Killer Bunny]

In my road terraced houses go for £450K-500K.

Last year some muppet paid £648K for one.

Since then we have had a few sales around the £460K mark.

Currently two are on the market for around £650K (one has now dropped to £630K).

Wish I knew where that was - any chance you could update your profile?

[Magpie]

But the same would apply if we'd built an economy where the majority of boomers thought that they could get rich by borrowing large sums of money to buy gold and then selling it on to the next generation for vastly more than they paid. The only real difference is that gold is fairly liquid and globally traded, whereas British houses are not, so maybe the gold buyers could sell on to foreigners instead.

How can any economy function for more than a short time if large numbers of people believe they're entitled to sit on their ass collecting 3-4x the national average wage for doing nothing? ...

That's all fair enough, and I think it's an argument as to why HPI is unsustainable. But it's not an argument that persuades me munimula's parents should accept less than the current market price because they don't "deserve" the money.

In a way all money from investment is undeserved as it doesn't come from real work. Personally I do get angry at flippers and BTLs because I think their investment activity has had such a negative cumulative effect on our country. But I see boomers who are OOs slightly differently - they didn't plan it that way, they are just lucky to have profited from a bubble. Not much point in blaming them for that, or expecting them to refrain from trying to get the market price when they sell (even more so if they are thinking of buying elsewhere at equally inflated prices).

[RichM]

And with fiat, once the faith is gone, there's nothing left.

That sounds like a pop song.

[Kam]

Living in cornwall now is a nightmare of bloody Londonites invading every weekend

Clogging up the cornish lanes with their fecking 4x4's. Not having a clue how to drive or how wide there cars are.

Little do they realise the locals all dispise them.

I know of several drinkeries which operate a duel tariff one for the locals and one for the "bloody cocknies"#

If i have to see another chinless wonder dragging his black labradour wife and kids (always called tarquin or barnaby) around padstow with their cricket jumper slung casually round their neck. Well i think i'll join the Cornish liberation front!!

Phil (Rant Over!)

Please don't hate us all some of us south londoners are are ok,

Some of us want to escape the people you are describing too,

[Magpie]

That sounds like a pop song.

Someone with time to waste could probably do a fiat rewrite of "After The Love Is Gone" -

And now try to live a lie would be a crime

It's better this way

And we may not have tomorrow

But there's always yesterday

After the love has gone

Only fools carry on

We've been hurting for so long

And we both know that it's wrong

After the love has gone

Then we just don't belong

We both know that it's wrong

After the love has gone