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sam

This Crash Is Not Happening Like Most Of You/us Wanted

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THE PROPERTY MARKET.

In 2003 i knew it all, in 2006 i now know nothing, but i do have far more information in my head these days.

I witnessed the property crash in the late 80's early 90's, so of course that made me an expert come 2003, people who were taking on £70,000 mortgages when the previous year they were nervous about taking on £50,000 mortgages was a sure sign that 1990 was here again, and the fact that people only a few years later were taking out £150,000 mortgages made a crash a dead cert.

I took a long look at myself when i moved areas and was thinking about getting another property, this cannot last forever(property boom), what was needed was a strong nerve and a strong self belief that this would all end in tears. Ok your friends would be full of themselves for the next year or maybe two, or just maybe a little longer, but you really knew what was around the corner, your patience would reward you eventually.

We all know these days that people have taken on debt like they have never before, we know that familys are working harder than they ever did before. So what does this all equate to, WELL A CRASH OF COURSE, they will crumble, just a matter of time.

I am not sure about anyone else, but just to cover myself i gave a date of Spring 2005 when this property crash would be it's infancy, when the facts were starting to emerge. That gave me a bit of breathing space as it was a way off, in all honesty i thought it would start a lot earlier.

So here we are in Spring 2006, what am i to think now, well like i said earlier i know nothing. I made the stupid mistake of trying of not only predicting a crash, but comparing it with the last one.

There are a new bunch of questions that need answering(one of which was asked by another poster today)

1. where is the money coming from, and who is crazy enough to lend it if it is being borrowed.

2. who is buying these property's (if you believe property is selling)

3. will there ever be a credit crunch(it does look to me when homeowners get that littel bit too deep, the lenders help out with that little pick me loan), and so another year passes.

4. how tough are the British public these days, IMO they are far tougher than the baby boomers.

5. is it now excepted that property is very expensive abd always will be(of course this will be proved rubbish), but it could take a few decades.

Look, i know what a few of you are thinking about my posts, i feel the anger, but you anger is not aimed at me, it is the fact that you know i am speaking some truth, that little demon in your head that says that this crash should really have kicked off by now.

You wake up everyday, and at some point logging on to your property site of the moment, praying that at last there will be that one big news story or bit of evidence to confirm what you allways knew was going to happen, but it never comes.

Just little snippets here and there, rates might go up or down 0.25%, property selling or not selling, Joe has knows this bloke that........and on it goes.

And now for the bit where i say i still think you Guys are right(in a way), and being the clever types some of you are, you pick up on that troll like quality that makes us pretend that we are on your side (O;

Maybe the lenders did learn from the last crash, maybe the reason there is no credit cruch is because they are holding THEIR NERVE, unlike last time when there was a stampede for the exit.

All of a sudden i now see a load of maybes, and if you lot can be honest for one minute, you will admit that the length of this cycle has taken you by supprise and could go on far longer than we thought.

I will give you one of many possiblities why i think we could be talking decades rather than years now.

Say a couple in their early 30's and both working, they buy a small 2 bedder flat in a ok sort of place, they knuckle down with their work happy in the knowledege that they are now on the ladder and in years to come will get that faily house. The only thing is that there is no such thing as a property ladder anymore, maybe it is going to take 5 years, maybe 10 before the penny drops, that is when i think we are more likely to get our crash.

OK, the thought of that scenario is S**t, who wants me now to tell them a fairytale...

Sam

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For all those people who come on here periodically and proclaim a soft landing and all's well on the housing front, may I suggest they follow their own excellent advice - Take out a hefty mortgage, buy that 4x4, plasma telly, exotic holiday, BTL investment et al. After all, who are they trying to convince us (bears).......or themselves?

I look forward to bottom fishing a few nice assets in a few years time. After all, one man's fortune is another's.............

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Yeah l think this has gone on more than long enough. I think the amount of easy credit available has been partly responsible, and l believe the VI spin has been more intelligent and sophisticated. Last crash was essentially pre-internet and the first one to occur in the day of rapid personal comms. Many lessons learned from that are being applied today.

There are now more people with their hand in the cookie jar that have conflicting interests in media. Every monkey is a landlord..some of those monkey's are journo's...many more are MP's!

It's like the emporers new clothes, except the little boy has already been given a pack of sweets and a silver shilling to shut the *&%$ up.

It will still come. Its just the herd wont falter until its too late for all of them.

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Well Sam

I have seen you getting a bit of a beating on here of late but after reading your post you have summed up my predicament totally.

I am an STR and I sold my House last year for the full asking price paid off the mortgage and banked the rest.

I don’t get up hoping for the top news story telling me what I want to hear.

I go to bed where I have developed this awful habit of looking at the bbc financial news last thing at night hoping for the holy grail of news headlines.

I must admit still do not think that there will be any serious changes in the Housing market until Late 2007and with the current economic car crashes we are witnessing in the UK at the moment it will happen (rising unemployment, increased debt etc)

But it still does not remove my frustrations which you have summed up in your post

To the letter

I am struggling at the moment with how much peeps are willing to pay for property

I don’t know whether I am just tight but I have several friends that are currently looking to purchase there 2nd home stepping up fro there 1st purchase and they are looking to spend 250k for a 3 bed semi and I find that shocking and somewhat depressing.

I bought my first house 6 years ago and paid 45k for it in a nice street nice area etc ok it did need some serious work but after spending 14k I sold it for 70k and was extremely happy with the sale price.

Now for those of you who are about to jump on my post from a great height with throw away comments like you are a troll etc etc.

Look at my current situation I have sold my house I am renting in some mid terraced

2 up 2 down new build shoe box I have put my family’s live on hold completely and I am so far into the HPC thing its too late to turn back without even thinking about the amount of crap I would get form the numerous friends and associates that have branded me a mad man.

I will finish on this note Sam many thanks for your post I do not feel like the only person out there wondering when it will happen and it steadies my nerve slightly.

Many Thanks

The COW

Edited by cowtipper

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IMHO opinion the whole housing debacle is akin to Enron accounting or Nick Leesons meddling with Barrings. It has gone too far for banks, politicians, Building firms etc to apply any form of "fix". The conseqences will just be too drastic and so all logic is swept under the carpet.

NOTHING will change until there is a major economic change. It may take some time, but remember you take on a 25 year morgage and are subject to the economic climate over a 25 year period.

If people are streaching themselves to breaking point with low inflation and high employment (if our spin meister govt is to be trusted) then more fool them.

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So what were you expecting ? Prices to peak, then fall back to trough over two years. Even though prices apear to have levelled off for the past two years you are no saying any correction will not occur, you seem want to dwell on the most negative scenarios, I even saw a posting on here recently saying If I bought now the crash would probably begin the week I moved in (or something over those lines) .....

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The last thing I expected after two years of stagnation was a return to rising house prices. Can somebody explain what is going on and how this is happening...again?

I've held off buying for the last 6 months principally on the advice of this site. So far it has cost me 10-15K, much more than I have been able to save. Don't get me wrong I don't blame hpc, it was my decison to wait and I will have to stand by it, but it is frustrating when there seems to be no rhyme nor reason for what I am seeing out there.

:(

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2. who is buying these property's (if you believe property is selling)

If you believe property is selling ....

1995 173,328 205,931 213,737 207,233 800,229

1996 179,507 232,099 272,104 282,778 966,488

1997 223,016 282,186 308,804 308,804 1,122,810

1998 213,982 274,026 294,018 268,526 1,050,552

1999 214,361 286,263 333,660 296,920 1,131,204

2000 197,974 232,537 239,104 236,979 906,594

2001 199,077 280,339 336,295 324,204 1,139,915

2002 229,591 295,672 328,184 295,499 1,148,946

2003 217,260 245,630 290,636 301,443 1,054,969

2004 243,906 299,986 309,099 229,731 1,082,722

2005 159,130 216,884 261,481 258,762 896,257

Those are the number of house sales per quarter for the last 10 years with the total in the right column. Now one has to admit the total for 2005 was down on the previous 4 years - but nonetheless nearly 900,000 properties changed hands.

As you can see the last quarter of 2004 and the first two quarters of 2005 were a bit slow but the market recovered a bit in the last two quarters. I will confidently predice a figure above 200,000 again for the first quarter of 2006. Maybe higher as we are seeing a real bounce at the moment.

So, next time you feel you must post about all the houses that aren't selling, in your opinion, the facts are that even in a quiet market last year - a large number of properties still sold.

Also, the figures give the lie to the much mentioned Spring Bounce. You actually tend to get one quiet quarter (the first reflecting the lack of sales in the run up to Christmas) and followed by three equally busy quarters.

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The last thing I expected after two years of stagnation was a return to rising house prices. Can somebody explain what is going on and how this is happening...again?

I put it all down to the IR cut last August. The housing market was inches away from heading over the cliff edge, and the VI spin that accompanied that 0.25% cut turned the market around.

IMO its now insanity, but the difference that a 0.25% cut made shows how on a knife-edge the market is, and how IR sensitive things are. A bubble market that's this fragile cant last forever.

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If you believe property is selling ....

1995 173,328 205,931 213,737 207,233 800,229

1996 179,507 232,099 272,104 282,778 966,488

1997 223,016 282,186 308,804 308,804 1,122,810

1998 213,982 274,026 294,018 268,526 1,050,552

1999 214,361 286,263 333,660 296,920 1,131,204

2000 197,974 232,537 239,104 236,979 906,594

2001 199,077 280,339 336,295 324,204 1,139,915

2002 229,591 295,672 328,184 295,499 1,148,946

2003 217,260 245,630 290,636 301,443 1,054,969

2004 243,906 299,986 309,099 229,731 1,082,722

2005 159,130 216,884 261,481 258,762 896,257

Those are the number of house sales per quarter for the last 10 years with the total in the right column. Now one has to admit the total for 2005 was down on the previous 4 years - but nonetheless nearly 900,000 properties changed hands.

As you can see the last quarter of 2004 and the first two quarters of 2005 were a bit slow but the market recovered a bit in the last two quarters. I will confidently predice a figure above 200,000 again for the first quarter of 2006. Maybe higher as we are seeing a real bounce at the moment.

So, next time you feel you must post about all the houses that aren't selling, in your opinion, the facts are that even in a quiet market last year - a large number of properties still sold.

Also, the figures give the lie to the much mentioned Spring Bounce. You actually tend to get one quiet quarter (the first reflecting the lack of sales in the run up to Christmas) and followed by three equally busy quarters.

I'd be interested to know what the figures were for 1988, 1989,1990 and 1991 S.I.T.A, if you have them - so that I can compare the data from that crash to the one that is about to happen now. :D

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Do you really think 0.25% either way would make the slightest diff ?

so you think last year's rate cut had no effect? - loon

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I've held off buying for the last 6 months principally on the advice of this site. So far it has cost me 10-15K, much more than I have been able to save. Don't get me wrong I don't blame hpc, it was my decison to wait and I will have to stand by it, but it is frustrating when there seems to be no rhyme nor reason for what I am seeing out there.

But you *are* blaming HPC :) Your comment "I've held off buying for the last 6 months principally on the advice of this site" suggests that you are :)

Anyhow, I personally think that house prices will come down in price (either real terms or nominal. It doesn't really matter to me personally which way they correct, just that they do). Just by looking around there is a lot of job losses going on up and down the country, retail is doing badly, massive rises in utility costs etc etc.

The VI's always say that house prices are supported by high employment etc etc, but that support is eroding away. There will be many forced sellers eventually, putting downward pressure on house prices.

I will admit, though, that this bubble has gone on for a lot longer than I thought it would, but it doesn't mean it will not pop. There's no sense to the madness that are house prices, and eventually they will correct.

Personally, I'm happy waiting around while renting, but for others that may be harder.

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I put it all down to the IR cut last August. The housing market was inches away from heading over the cliff edge, and the VI spin that accompanied that 0.25% cut turned the market around.

IMO its now insanity, but the difference that a 0.25% cut made shows how on a knife-edge the market is, and how IR sensitive things are. A bubble market that's this fragile cant last forever.

You are posting on a forum which is censoring any real debate as to the factors in the marketplace! Its plain why houseprices have moved far beyond anyones ability to own one from earnings.

Anyone can see with thier own eyeballs and ears when they go out to a town or city how the population has changed vastly.

If you think thats great and is having a good effect on you then vote for more of it!

If you think thats bad then vote against it!

If you want to sit on your backside endlessly whining about houseprices, yet ignoring and censoring information around you muttering about a crash as you head into a rentier society run for landlords and bug business - thats also upto you!

(No doubt this whole thread will be moved again).

Edited by brainclamp

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Just a quick question...

If house prices did drop by say 10% this year would this not just cause a rush of bargain hunters back onto the market and so push the price back up again?

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I will admit, though, that this bubble has gone on for a lot longer than I thought it would..

I read somewhere that that's the definition of a bubble

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Just a quick question...

If house prices did drop by say 10% this year would this not just cause a rush of bargain hunters back onto the market and so push the price back up again?

It depends how obvious it was that they had fallen. In a bubble everyone is looking for a way to buy, but that evaporates pretty fast if people really start believing that prices are falling. If there really is the kind crash that is predicted then the sentiment could easily swing a long way to the other extreme. Not expecting the 10% fall myself, but if it happens and people realise it's happened it could be followed by more.

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It depends how obvious it was that they had fallen. In a bubble everyone is looking for a way to buy, but that evaporates pretty fast if people really start believing that prices are falling. If there really is the kind crash that is predicted then the sentiment could easily swing a long way to the other extreme. Not expecting the 10% fall myself, but if it happens and people realise it's happened it could be followed by more.

So if your not expecting a crash of 10%, what axactly are you expecting ? A Crash of two percent ???????

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Hi,

This is a line of reasoning I have been following up the past few weeks, exactly how a big, nationwide fall was avoided - so far - a year ago, when all the signs were ripe. I am trying to approach the question from the viewpoint 'how will prices continue to rise?' One thing for sure, with both America and the UK hiding - or at least keeping them tucked away or not updated regularly - their broad scale money supply measures now (also see my previous posts-links below on new labour macro economic approach reposted below). The treasury and BoE are supporting credit expansion covertly within the private sector, with houses the preferred tool of demand management and channel for money supply control. Can this private-sector keynesianism carry on forever? It didn't in the seventees (different methods, same policy) and governments going to the printing presses has had some catastrophic affects in history. Will prices fall everywhere? If Gordy can time the UK economic cycle cleverly to the world economic cycle, maybe he can get away with it and stay within his 'golden rule' with the debt burden being eroded of a couple of decades. He is most definitely running out of time though. If he doesn't pull it off, you are looking at at a 1976 type scenario, bringing a faltering economy through a recession by public spending and stimulating demand in a non-productive area could just delay and worsen the outcome. Interseting times!

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

Hi,

Higher up the VI chain, they are looking at Gordon's (and New labour's) policy of private sector kenysianism. If you want to follow the underlying battle of the VI sales men, this is the area to follow, particularly in trying to second guess where it may all end. The old brand of kenysianism was discredited in the 1970's for it's failure to control inflation, the failure of government to adapt public investment into the economy and manage demand in in an efficient and orderely manner, amongst other things. You cannot really separate Kenyesian management of an economy from labour policy for ideological reasons, New Labour's modern day Kenysianism could be heading just the other way as the old one, the VI's know that the Treasury and BoE will covertly support irrational bank lending and credit into the economy for as long as the government will provide a tacit support, or encouragement, to those organisations. That is the whole point of their policy, to continue Kenysian style management of an economy but using private, citizen's debt to try to deliver full employment and growth during the business cycle. When Gordon says 'no more boom and bust', he is basing that on a theoretical economic policy that was stumbled upon by chance and has no precendent to compare.

One excellent backgruond article on the subject by Dr Madsen Pirie at the adamsmith institute of economics ;

http://www.adamsmith.org/thinkpiece/000515.php

Governments seem to have stumbled upon a modern version which seeks similar results to those planned by Keynes, but in which private spending rather than just government spending is encouraged to smooth the economic cycle. Prompted largely by government policies in both the UK and USA, private consumption did not dry up as the most recent cycle turned down. Instead it increased, largely at the expense of saving and by increasing levels of indebtedness. It remains to be seen if the new model Keynesianism can escape the consequences of the old...........................

There are indications that this new approach was not deliberately planned by the UK and US governments, but resulted partly from their actions, and was then seized upon and amplified deliberately once its effects were evident. Certainly it was widely noted that consumer spending in the US was a significant, perhaps even a crucial contributor to the shallowness of the recent low point of the cycle.

The US spending has been accompanied by record levels of personal indebtedness. Its counterpart in the UK also saw record levels of debt, and was added to there by a rise in property prices which encouraged people to borrow against housing equity.

Government actions have made savings less attractive, certainly in pension funds and equities. Debt has been made more attractive, partly by lower interest rates. The housing market has encouraged people to put money into housing, and see their investment grow in nominal value. They have then released part of the gain by re-mortgaging, and used it to sustain consumption.

In the UK the savings ratio has declined, and the stock market has not reflected the growth of the economy. Chancellor Gordon Brown took over £5b a year from pension funds with the ending of ACT in his first budget. He has also ended the preferential tax treatment of ISAs. Amongst other measures, these actions made saving and investment in equities relatively less attractive.

The UK's planning regulations have largely prevented the supply of housing from keeping pace with a demand which increases as people live longer, opt to live singly, and increasingly prefer the Southeast. This has led to a continual rise in house prices. Reductions in interest rates aimed at keeping the currency stable have had the effect of making mortgage outgoings and other debt less costly, and encouraged people to borrow and spend more. A recent measure will allow property to feature in personal pension funds, generating further demand pressure on house prices. The government's recognition of the importance of high spending which these make possible was evident when Gordon Brown moved within hours to contradict a warning from the Bank of England that house prices could crash. Commentators other than the Bank have warned that housing might be over-valued, but the point is that people have seen its nominal worth continue to rise, and seen it as a highly profitable investment.

The key difference this time is that government has found that private citizens can be bribed and bullied into becoming big spenders, keeping the economy going by their demand at a time in the cycle when it might otherwise falter. In effect government has privatized Keynesianism, steering people to borrow and spend just as governments used to. That private spending can now be skillfully manipulated to make the downturn shallower, and perhaps to make the economy perform to the government's electoral needs.

It seems to have worked this time, although many commentators are warning that it was only trouble stored. The debt has to be repaid at some stage. If it comes down calamitously in a major recession, they will argue with justice that it merely postponed the inevitable, and ultimately made it worse.

If, on the other hand, rising growth and prosperity diminish the debt as a proportion of the economy, and enable it to be steadily repaid out of rising wealth, its proponents will probably make the new policy instrument part of the range of options by which governments try to fine tune the economy. We can expect future chancellors to stimulate demand when they need it by making private borrowing and spending more attractive, and savings less attractive. The excess of debt, the lack of pension provision, and the shortfall in investment will all have to be dealt with at a later date, and their hope will be that the boom part of the cycle will come to the rescue.

Since most such policy instruments have consequences far beyond those intended by government, we could be embarked with government onto a learning curve which leads into uncharted territory.

You can also check out a good academic article on the New Labour 'Private Sector Kenysian' model of economic policy from Warwick and Cambridge Universities here;

http://www2.warwick.ac.uk/fac/soc/pais/sta...eynesianism.doc

And some interesting words from Gordon on his ideas of Private sector Kenysian demand management in a globalised world here;

http://www.pbs.org/wgbh/commandingheights/...ordonbrown.html

The point is, it is an unchartered experiment that is heavily reliant on an upturn in the business cycle within the near future if he is to pull it off. So far, some of the strains of Kenysian policy begining to show again. If your outward policy is to support private sector credit binges and housing bubbles to smooth the economic cycle, you live and die by your covert support for that policy. I don't think this is a point lost on many Bank and Loaning institute boardrooms. Will the distortion-making economic policies of new labour's 'Private sector Kenysianism' cause unbearable imbalances within the economy? Will he run out of time during the business cycle? Will some other external shock topple the precarious position? That would be my main concern, we have reached an astounding and deliberate position of debt, focused on housing as an assest, stumbled upon by government - quite by accident - to prop up an economy that was headed for recession and now is boxed in by that policy.

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I'm really getting tired of all these "give-it-up-folks-the-crash-ain't-never-going-to-happen" posts.

If anybody here is getting cold feet, then, by all means, jump into the market and buy a house. Just don't come back whining in a year or two about how you're in negative equity.

As far as I'm concerned, all the fundamentals are on target for a crash. In fact, it's already happening, folks. (How soon people forget that house prices were skyrocketing annually by 20% just a year or two ago.) But if you can't or don't want to see what's happening to the housing market, then just go ahead and buy. Do it. I don't care.

I'm not buying. Houses in Britain are so overvalued, it's obscene. The money I've put aside to buy in Britain is steadily earning interest and house prices in the area in which I intend to buy have fallen by 10% to 15% over the past year. In the meantime, I rent during my visits there.

I'm old enough to remember past housing crashes--in Britain and in certain areas of the U.S. Been there. Done that. Those of you who think it's not going to happen again, well, fine. Buy. What are you waiting for?

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I dont think that most people these days have the patience to wait for massive falls in house prices (especially if this was to take a year or two). Also the perception of debt is different now, for example 200,000 is a massive amount of money but our perception of it is not as great as it once was. So I think that there are still lots of people out there just waiting for minimal falls or even just a long period of stagnation so they can buy.

10 years ago people would have had mortgages but not coupled with the amount of personal debt (credit cards , store cards ) they have now. It almost the norm to have this kind of debt and that why I dont think house prices will fall that much.

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I'm really getting tired of all these "give-it-up-folks-the-crash-ain't-never-going-to-happen" posts.

If anybody here is getting cold feet, then, by all means, jump into the market and buy a house. Just don't come back whining in a year or two about how you're in negative equity.

As far as I'm concerned, all the fundamentals are on target for a crash. In fact, it's already happening, folks. (How soon people forget that house prices were skyrocketing annually by 20% just a year or two ago.) But if you can't or don't want to see what's happening to the housing market, then just go ahead and buy. Do it. I don't care.

I'm not buying. Houses in Britain are so overvalued, it's obscene. The money I've put aside to buy in Britain is steadily earning interest and house prices in the area in which I intend to buy have fallen by 10% to 15% over the past year. In the meantime, I rent during my visits there.

I'm old enough to remember past housing crashes--in Britain and in certain areas of the U.S. Been there. Done that. Those of you who think it's not going to happen again, well, fine. Buy. What are you waiting for?

My sentiments exactly.

God Sam, give it a rest ... I have light at the end of my tunnel, so you don't scare me :P

I have seen price falls in the South East.

I am saving and the reality of ownership is getting closer.

Sounds like you are trying to breath life into a dead cat m8.

.

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I don't feel frustrated at all.

My money is working much harder for me than it could in property.

I will be in a dilema when I come to buy because I will see spending the money on a house as reducing my capital income (investmnet yield). So I don't really want to buy, I'm too greedy.

Half the stock markets in the world nearly doubled over the last 12 months.

Commodities are climbing way beyond property. It's a no brainer.

There's a looming energy shortage, it's no secret. Any group that can supply resources is going to do well.

Property is going to provide boring returns for years to come. Living alone will be ever more expensive as utilities and taxes grow beyond inflation.

Show me one arguement to say another property boom is on the horizon.

People who say "we haven't seen a property crash yet, so your wrong" have completely missed the investment boat.

You should have ploughed cash into groups who supply energy and resources i.e. the four oil majors and the mining sector. If not your cash is now worth alot less than it was a year ago. It's not too late mind, the commodity boom is just taxiing to the run way. Profits will not be taken out of these positions until an absolute energy crisis has been and gone. Some people on here have been saying for months what will/has happened and are consistently proven to be correct.

HPI is a sympton of positions in the economic cycle (it demonstrates liquidity). All the cash in the commodities market will stay there until an energy crisis forces crude oil prices astronomically higher, supply is maxed out wait and watch demand run riot. Utilities will rocket and alot of people will go to the wall. The four oil majors are going to strangle the world economy, refinery capacity is running full tilt.

It's a simple transfer of wealth, we all know that all raw materials are more expensive than last year. That means the currency you hold is worth far less.

Most the cheap easy oil has been recovered, there is only the tricky/expensive stuff left. This means energy is more expensive, everything will cost more to produce/run, raw materials cost more to recover (including oil, you need energy to recover oil).

Your currency is worth a lot less, it's power to get something done is dimminishing fast.

.

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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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