Will FTB's jump in too quick?

[London-loser]

BBB,

I'm sorry you feel offended by my suggestion that your argument lacks logic.

This is not a personal attack, more a statement of fact.

And you did actually say something to the effect of 'you guys will kill me on theory all day, I'm just out doing it for real'.

Again I didn't mean it as a personal attack. I apologise (genuinely).

Now... back to work.

[Time to raise the rents.]

LL, I hope you see my other thread, but in case you don't:

http://www.thisislondon.co.uk/news/article...ning%20Standard

A certain amount of support in there with regard to higher tenant demand from incoming foreign workers in there....

[Casual Observer]

I cant understand why the Mail and Express haven't adopted their usual style on the recent news of house price falls e.g."Middle classes facing property price nightmare". In my opinion these kind of headlines in the popular so-called serious tabloids would quickly accelerate price falls.

[BBB]

LL.........

yes i did say that, the very fact you bring it up proves my point (ie, i see and hear the market first hand). thanks for that.

regards BBB.

ps: sorry for being a 'wet lettuce', no offense taken whatsoever. (seriously)

[BBB]

LL..............

PPS: do you have a little black book, with bulls memorable quotes to throw back at them when the time suits?.......LOL

[London-loser]

I'm not an economist, but won't a massive and sustained inflow of Poles, Estonians etc have an inflationary impact on Britain?

You suggest it will in terms of rents.

I suggest it will generally (either in terms of increased competition for ALL goods, not just rental accomodation, or because we will need to either produce or import more goods to go around).

Or will this all allow Britain's economic growth rate continue notably above trend?

All of this will bring interest rates rises won't it?

That won't be good for house prices will it?

Unfortunately none of these things have an isolated effect (let's not ignore the knock-on impact of increased job competition and the likelihood of lower income growth... the life-blood of stagnation theorists).

Or perhaps we are in a new paradigm in terms of the country's economic growth too?

[Time to raise the rents.]

massive and sustained inflow of Poles, Estonians etc have an inflationary impact on Britain?

I say yes in rents, no in wages. The other things, how many lettuces are sold etc, they'd eat in their own country and we live in a global economy now, so no change in demand overall.

[London-loser]

But surely it is not GLOBAL demand that affects UK interest rates.

For example, the fact that the eurozone economy is stagnating (and has been for some time) has not stopped UK interest rates jumping 1.25% in nine months or so.

Is your argument that their arrival will have no impact on wages?

Or that they will in fact drive average wages lower?

I find it extremely difficult to see how the first will be true and I find the second rather worrying in terms of 'affordability' of house prices.

[Time to raise the rents.]

They're here already. I employed 8 of them in March for a few weeks. £40 a day. They were very happy with it and worked very hard.

I had English builders knocking on the door (they'd seen the scaffolding up) looking for work, offering to start now for £100 per day. Obviously I turned them away.

The UK has no control over international inflation. If deflationary pressures continue from China & other emerging countries, how could the UK continue to keep rates high?

Mild rental inflation wouldn't be enough to raise rates either.

[The Masked Tulip]

I saw a programme on the TV a few months ago with Polish and Czech builders working on renovating houses.

They charge far less than British builders and, frankly, were doing a much, much better job. The guy who owned the company said he would no longer hire British workers as he could not get the same quality of work from them as he got from the Poles or Czechs.

Of course, there might be economic reasons and exploitation issues going on here but the firm looked legit. You never know though as the building trade is so unregulated.

[London-loser]

TTRTR,

You need to remember that the 'global village' idea is actually still a fantasy - there are still a bunch of segmented markets.

While you are right that a Pole demanding a lettuce in London rather than Warsaw does not alter the global demand for lettuces it DOES very distinctly affect prices - the Pole is now paying 50p per lettuce rather than 10 zloty. This IS inflationary.

Your argument also seems to be that their arrival will have a negative impact on income growth (for example, you are paying £40 when you would have paid £100). Your builder who isn't getting £100 can afford a £160k house even less than he could yesterday (incidentally £100 a day = £500 a week = £25k a year = less than one-sixth of an average house = an unsustainable housing market).

As for the Pole, he can only dream about home ownership.

[Sledgehead]

1 ) there's nothing new about migrant workers in the UK (so no particularly new effect) as TTRR says:

They're here already.

2 ) they work for wages we wouldn't (deflationary) as TTR says

I employed 8 of them in March for a few weeks. £40 a day

3 ) they like taking money home (deflationary)

4 ) they find here v expensive - so don't expect them to increase your rental yields, NOT as TTRR says:

Mild rental inflation wouldn't be enough to raise rates either.

Try here for more:

Migrant workers in the UK

But damn you TTRR, you had to go and spin it again, putting in that stuff about renting to migrants, but that was nothing compared with:

.... If deflationary pressures continue from China & other emerging countries, how could the UK continue to keep rates high?

Economic growth in China has long since seen demand for commodities outstrip supply: consequently China is now exporting inflation, not deflation: look at the price of oil for God's sake!

[Time to raise the rents.]

As for the Pole, he can only dream about home ownership

He doesn't dream of owning in England, he needs a landlord to do that for him.

TMT,

I was redecorating while doing a loft conversion at the same time. The entire staff (except the boss) in the loft conversion company were Lithuanian. And they did a fast and high quality job.

[London-loser]

Like I said, I'm no economist.

But hopefully we will agree migrant workers etc will be either inflationary (and likely to drive up interest rates) OR deflationary (and likely to drive down income growth).

I can't see that this is good for the housing market either way.

TTRTR, your £40-a-day Pole gets £200 a week = £10k a year. What does he rent in London? Even assuming he doesn't pay tax, and takes the whole £10k cash-in-hand, he's not really affecting the market much at all.

Without wishing to be offensive to Poles who are seeking a better life, doesn't he rent the back room in his friend's aunt's house?

Incidentally I've got NO sympathy for lazy English people who feel they are owed a living just for showing up to work.

If you can hire better workers for less money (and they happen to be Poles, Lithiuanina or whatever) good on you and tough on the people who lose out.

Right, better get back to earning my living.

[Time to raise the rents.]

Sledgehead,

China has demand for commodoties that can be supplied. For a long time now, 2+ years, the Australian papers have been brimming with stories of how good it is to be a commodoties supplier.

The spin on it has been that this demand can easily be supplied by what has until now been a declining industry. You need to have the stuff to be able to supply it though (which Aus does).

On the other hand, any country can set up a manufacturing base. Factories can be bought off the shelf (so to speak) and workers in these emerging economies will work for peanuts. So competetive they must remain.

I don't buy the oil argument anyway. It's priced in USD and the USD is weak just now. If oil were so high, why is it still sub 83p a litre in London for petrol?

Here in Sweden, it's just topped 10 krona per litre and has been between 8 & 10 kr for the last 4 years (going up when the Iraq war started etc).

[Time to raise the rents.]

TTRTR, your £40-a-day Pole gets £200 a week = £10k a year. What does he rent in London? Even assuming he doesn't pay tax, and takes the whole £10k cash-in-hand, he's not really affecting the market much at all.

You're right, he has to club together with others to afford a place. But he doesn't live in a park. And once he's established in our economy, he desires a better place & a car etc etc. So although each person's initial demand on our economy is low, it grows quickly.

Most of the people who helped me work on the house said they wouldn't return to their countries ever as things were so difficult there.

But I believe that once they've made some money, they'll return to their own country as their own economies will be better in 5-10 years from now (after the impact of joining the EU).

The thing is, they're just the early groups from their countries. Once they've set up & the words gets back home, there'll be plenty more coming to replace the one's that go back.

[Sledgehead]

Sledgehead,

China has demand for commodoties that can be supplied. For a long time now, 2+ years, the Australian papers have been brimming with stories of how good it is to be a commodoties supplier.

The spin on it has been that this demand can easily be supplied by what has until now been a declining industry. You need to have the stuff to be able to supply it though (which Aus does).

On the other hand, any country can set up a manufacturing base. Factories can be bought off the shelf (so to speak) and workers in these emerging economies will work for peanuts. So competetive they must remain.

I don't buy the oil argument anyway. It's priced in USD and the USD is weak just now. If oil were so high, why is it still sub 83p a litre in London for petrol?

Here in Sweden, it's just topped 10 krona per litre and has been between 8 & 10 kr for the last 4 years (going up when the Iraq war started etc).

What is all this ?

Are you denying that commodity prices have risen and that that is feeding into rising inflation? The only thing holding it back is the strength of the pound / euro. I can't hope to hold a debate with you if you can't accept international commodity prices as de facto evidence of this.

[Time to raise the rents.]

Sledgehead,

Would you please do me a favour and let me know what the current inflation rate is? What about the BOE's outlook for inflation over their 2 year horizon?

While you're at it, has the pound been relatively stable for the past 5 years or so?

[Warren BuffetCar]

FTB are desperate for a house to call their own (i never realised just how much until i came on here, i'm not being funny just reporting the sentiment i feel) they will look upon ANY falls as a buying opportunity, thereby stalling any further freefall in prices.

Problem is most people buy houses with borrowed money.

During times of falling property prices, lenders will be wary of lending money secured on a property that might fall in value (and has been falling in value).

Its the reverse of what fuelled the bubble. Easy lending (100% mortgage no problem, self cert etc). What works going up works the opposite coming down.

These FTBs who are waiting to flood in won't be able to afford to in many cases. So they will be forced to wait for prices to come down even further. The ones with bigger deposits could probably afford to buy already - they are the smart ones who are clearly waiting for prices to come down, they won't jump in early.

[hedi]

TTRTR

i was under the impression that your flats were in good locations and had good tennents, does it now appear that you pack your rooms with east eurpean migrants.

i think we should know

[Time to raise the rents.]

It was in there much higher up the list:

They're attracted to London for the jobs and economy and although I don't provide rental places for them, they create demand for the cheapest of places that pushes people who can afford a little more into the more expensive places.

[Bubble Trouble]

I think most FTBs will be worried about entering a falling market - and the lenders will also be frightened to lend to them (tightening up their criteria - surveyors pricing things more keenly etc etc) - so I don't think that we need worry too much about FTB entering too quickly and thus curtailing the crash.

[George Mainwaring]

Yes - I think the effect will be small and only last a while. You may see a dead cat bounce, but the market will fall until supported by it's fundamentals (income multiples).

[Sledgehead]

Would you please do me a favour and let me know what the current inflation rate is? What about the BOE's outlook for inflation over their 2 year horizon?

You want me to quote you history? History and predictions based on history? Sterling is overvalued. When it falls you'll have a nasty surpise cos you've got your eye on the rearview mirror.

While you're at it, has the pound been relatively stable for the past 5 years or so?

No. Back in April 01 it was ~1.4 USD. Since then it has risen to ~1.9USD (a ~36% increase). This unremitting rise has protected us from rising energy prices which are denominated in USD. In effect the rising pound against the USD has decreased oil prices by 27% during this time. A return to the 2001 exchange rat enow would result in a 38% increase in crude oil. Fancy some of that in your inflation figures?

Sterling is now at 1.8USD. Some might say "and falling".

[Time to raise the rents.]

Come on, now you're clutching at straws.

I've been watching sterling since 1992 when I first moved to the UK. Post 98-99, it has been higher, but is relatively stable to where it was in 99 (against other currencies in general).

The USD argument is an argument of how much the USD has fallen, not how strong sterling has become. USD has fallen against all major freely traded currencies.

A bold prediction: if and when the USD recovers, oil etc will drop back as it's priced in USD, but demanded by other currencies.