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Swimming Against The Tide.

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I’m a new member and pleased to see so many people resisting the spin put out by the usual suspects. I am also a homeowner who purchased later than most and at the bottom of the last property downturn. See, it does pay to listen to the experiences of your Father after all. 'Seen it all before lad' he would often say. How right he was.

Now I'm going to say something I would never have believed possible. Something most of you don't want to hear. Hell, I don't want to hear it either, but this could be what we face in the near future. Basically, there are only three ways the housing market can go - Up, down or static. Many posts to the forum have anticipated an imminent fall for a couple of years. Well, I've been doing the same for a lot longer and I've been wrong for a lot longer. I know some of the reasons fuelling the ludicrous rise in property values, low interest rate, lax lending policy, rising incomes, housing stock shortfall, buy-to-let, self certified mortgages, interest only mortgages, Government collusion/stupidity/indifference, etc. You could probably suggest more. The fact is the bubble keeps growing against expectations and living on a small island with a growing population suggests to me the market isn't going to drop 50% this year or next, despite what Roger Bootle and Co claim.

I have spent a few weeks considering the facts. My reason is the same as many. I am close to retirement, have an under performing pension and need to find the best home for some savings. My aim is an investment that will outperform bonds, ISA's, pensions or shares. I've tried them all and all performed poorly in my view. Had I invested in property for the same period I would have been considerably wealthier today. So, it’s not news to anyone that property has been the best investment around for years. The important question is, will it continue? Of course not! All bubbles end in tears and this will be no exception. I just can't see the end anytime soon. Bursting this bubble will need something drastic. Rapid increase of the interest rate? Doubtful! Decrease in population? No chance! Credit squeeze? Unlikely! Relaxation of planning rules? No way! Massive increase of investment in social housing? Dream on! Run out of first time buyers? Almost there already!

Barring a world recession or a total loss of interest in buying houses, I see no reason for the bubble ending in the UK yet. I will watch the market for another year and maybe take the plunge if the signs are right. I'm taking no notice of recent silly predictions for growth over the next five years. Equally, I don't expect to make much real money letting the property. As long as it can pay for itself, I will be happy with capital growth. I would be happier if property values did crash back ten years, then I could buy two flats. Don't see it happening though. I’m not aiming to become an evil blood-sucking landlord. I just don’t plan on ending my days in poverty.

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Go for it, then. Buy a house. It's a lucid post. It's exactly what most people think. I respect your point of view (you also write well, which is refreshing) but I happen to disagree.

If I were about to retire, I would invest in stock, not property; it's far more flexible, you can sell little bits of it (or lots of it) at no notice if you need an operation or a holiday. Selling property is hard - and getting harder.

I'm a potential FTB with easily enough cash to get on the ladder. But I refuse to do so, because I think house prices are ridiculously high for what you get (i.e. bad value.)

I'm not going to buy a Ferrari or an island either. Because I think they are too expensive. Houses are in the same category.

I'd rather do something else with my money.

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That's one big paragraph you've got there!

I am also astonished that prices have risen to the extent they have. I also agree, that those in power will do absolutely everything to prop up the market, and they are doing.

But for FTBs is jumping in now a smart move? Or investing in a BTL? The later, no way the downsides are huge with little upsides.

FTBs? Well a home is a home, but statistics show they would take on a abnormally large mortgage for a very small property.

I was talking to someone the other day, about London and they were saying FTBs can afford tiny property as they would commute into the city and earn megabucks. But I mentioned about all local jobs, the low paid jobs in shops etc. Where would they live? I had a typical thoughtless answer in that it's siblings living with their parents who do these jobs. He agreed people wouldn't move to the area to do these low paid jobs as it is too expensive.

But what happens when they want to leave their parents home? Where are they going to live? If they move out of the area the local economy would collapse; unless all low paid jobs will be reliant on 16 to mid 20 somethings.

What i'm trying to say, is it is a bubble. I have been through all the bull arguments, and the only feasible bullish conclusion there is, is that the bubble will grow yet further.

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I very much agree with you. There is no obvious clue to why a crash will happen in the near future, otherwise something would have triggered it already by now.

If prices keep rising as they are at the moment, prices would only drop to todays levels which is not going to be worth waiting for. Might as well get on with our lives but be more careful in terms o type and location of property. It seems that some members on this site are setting there standards too high when they could afford to get onto the ladder if they didn't want new build luxury homes. The only way for ftb'ers to get onto the ladder is to buy a place needing work.

Joe public is still managing to buy at these prices so only a significant IR rise will make it impossible for them. And I agree that this will cause problems for a majority of buyers that have mortgaged themselves upto their eyeballs which is why I can't see the Gov/BoE gambling with homeowners livlihoods even at the expense of wanton homeowners.

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The fact is the bubble keeps growing against expectations and living on a small island with a growing population suggests to me the market isn't going to drop 50% this year or next, despite what Roger Bootle and Co claim.

Japan had a crash in their property market about 15 years back, despite being a small island and having a growing population. The size of the country and population growth do not seem reduce the risk of a crash.

I have spent a few weeks considering the facts. My reason is the same as many. I am close to retirement, have an under performing pension and need to find the best home for some savings. My aim is an investment that will outperform bonds, ISA's, pensions or shares. I've tried them all and all performed poorly in my view. Had I invested in property for the same period I would have been considerably wealthier today.

Hindsight is a poor reason to see property as a good investment now, it would be better to look at what fundimental economical conditions changed that led to the unpresidented increases in property prices and what direction you see these taking in the future.

So, it’s not news to anyone that property has been the best investment around for years. The important question is, will it continue? Of course not! All bubbles end in tears and this will be no exception. I just can't see the end anytime soon. Bursting this bubble will need something drastic. Rapid increase of the interest rate? Doubtful! Decrease in population? No chance! Credit squeeze? Unlikely! Relaxation of planning rules? No way! Massive increase of investment in social housing? Dream on! Run out of first time buyers? Almost there already!

Barring a world recession or a total loss of interest in buying houses, I see no reason for the bubble ending in the UK yet. I will watch the market for another year and maybe take the plunge if the signs are right. I'm taking no notice of recent silly predictions for growth over the next five years.

It would be prudent to watch the market for another year first, increases in interest rates and a gradual credit tightning are likely to play out over the next year when the UK begins to follow the rest of the world.

Equally, I don't expect to make much real money letting the property. As long as it can pay for itself, I will be happy with capital growth.

It is quite difficult to find a property at the moment that can pay for itself from the rental income. It is difficult even with an interest only mortgage before considering periods with no tenants and maintenance costs.

I would be happier if property values did crash back ten years, then I could buy two flats. Don't see it happening though. I’m not aiming to become an evil blood-sucking landlord. I just don’t plan on ending my days in poverty.

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I am close to retirement, have an under performing pension and need to find the best home for some savings. My aim is an investment that will outperform bonds, ISA's, pensions or shares. I've tried them all and all performed poorly in my view. Had I invested in property for the same period I would have been considerably wealthier today.

Beware the big basket with your single illiquid pension egg in it.

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Japan is an island which in the early 90's had terrible house inflation. The same arguments for their increases back then are what we are hearing now in the UK. Their house prices dropped 60-70% over a ten year period where interest rates were taken to zero.

Want to know why houses have shot up over the last five years? Take a look at the governments published M4 figures. Property is where most of this M4 "money" has gone. This "money" only exists as debts justified by the ever increasing upward spiral of property prices.

Prices are a matter of opinion, but the debt is REAL, and this debt is ultimately going to cause the biggest bust the UK has ever seen.

It doesn't matter if interest rates stay where they are or even go down anymore. Commodity prices will push inflation up as they filter through to everyone's paycheck. It cannot be avoided.

It's a shame, but a lot of good folk are going to get burnt.

Edited by Pluto

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Fair points. The bit I don't get.

- You are nearing retirement

- You are looking for a home for savings

- You are going to choose something that won't generate decent income (according to you)

So, why? If you are counting on capital growth, then there are costs of buying/ selling to consider.

Meh - your money. Just seems a little odd. PS - index linked gilts are the UK govt's gift to retirees wanting to sleep peacefully at night.

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Beware the big basket with your single illiquid pension egg in it.

Indeed, past performance is not necessarily indicative of future results and so on. Yields being so low it is hard to see how a sane calculation of the value of a BTL (based on rental income) can go higher unless we see a lot of wage inflation, which I think is unlikely.

More on BTL investment in this Moneyweek article.

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Guest mattsta1964

Japan is an island which in the early 90's had terrible house inflation. The same arguments for their increases back then are what we are hearing now in the UK. Their house prices dropped 60-70% over a ten year period where interest rates were taken to zero.

Want to know why houses have shot up over the last five years? Take a look at the governments published M4 figures. Property is where most of this M4 "money" has gone. This "money" only exists as debts justified by the ever increasing upward spiral of property prices.

Prices are a matter of opinion, but the debt is REAL, and this debt is ultimately going to cause the biggest bust the UK has ever seen.

It doesn't matter if interest rates stay where they are or even go down anymore. Commodity prices will push inflation up as they filter through to everyone's paycheck. It cannot be avoided.

It's a shame, but a lot of good folk are going to get burnt.

Well said!

There are some obvious parallels between what happened in Japan and our current situation in the UK

Yes, the Japanese had massive HPI in the 90's and they have been paying for it ever since. It's taken 7-8 years for their economy to recover from the huge credit splurge in the 90's

The difference between Japan and the UK however, is that Japan is still a manufacturer and produces the finest quality goods in the world. The UK, by contrast, couldn't make a coathanger

When the crash happens, the UK is totally screwed. Our destiny is a smashed economy and 3rd world status.

I wont be around to witness it. I'll be out of the UK for good

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I see no reason for the bubble ending in the UK yet

you need to read up on asset bubbles - theres a book called 'extraordinary delusions and the madness of crowds' (or something like that). A bubble grows because everyone thinks its a 'no-brainer' - easy money. the herd doesn't even stop to think that prices could go down, let alone see any reason for a downturn. thats what makes a bubble so dangerous and why so many people lose so much money.

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I very much agree with you. There is no obvious clue to why a crash will happen in the near future, otherwise something would have triggered it already by now.

If that were the case bubbles would never form!

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I think your right to wait a year. I am a first time buyer and doing the same. I think that the introduction of HIPs will have a small effect next year but also the tightening of credit lending and self-certifying mortgages will be the pinch.

Who will be able to afford to buy? In the current situation only a Doctor can afford the average house price!!!!!!!!

Anecdotally - I saw the look on two of my husbands colleagues, who have both recently bought, when it was announced thier company would be making cut backs and the first step was to reduce thier hours - next step redundancies! How many other companies - and recent mortgagees are in the same situation. lets not forget the effect of oil prices on industry.

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What I don't understand is that you are nearing retirement and only now are looking for a way of generating a better income for yourself. Why didn't you do this decades ago? And why not consider ways in which you can earn money in your retirement and leave those flats for the FTBs? Do you feel you have a more deserving case than they do?

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I’m a new member and pleased to see so many people resisting the spin put out by the usual suspects. I am also a homeowner who purchased later than most and at the bottom of the last property downturn. See, it does pay to listen to the experiences of your Father after all. 'Seen it all before lad' he would often say. How right he was.

Now I'm going to say something I would never have believed possible. Something most of you don't want to hear. Hell, I don't want to hear it either, but this could be what we face in the near future. Basically, there are only three ways the housing market can go - Up, down or static. Many posts to the forum have anticipated an imminent fall for a couple of years. Well, I've been doing the same for a lot longer and I've been wrong for a lot longer. I know some of the reasons fuelling the ludicrous rise in property values, low interest rate, lax lending policy, rising incomes, housing stock shortfall, buy-to-let, self certified mortgages, interest only mortgages, Government collusion/stupidity/indifference, etc. You could probably suggest more. The fact is the bubble keeps growing against expectations and living on a small island with a growing population suggests to me the market isn't going to drop 50% this year or next, despite what Roger Bootle and Co claim.

I have spent a few weeks considering the facts. My reason is the same as many. I am close to retirement, have an under performing pension and need to find the best home for some savings. My aim is an investment that will outperform bonds, ISA's, pensions or shares. I've tried them all and all performed poorly in my view. Had I invested in property for the same period I would have been considerably wealthier today. So, it’s not news to anyone that property has been the best investment around for years. The important question is, will it continue? Of course not! All bubbles end in tears and this will be no exception. I just can't see the end anytime soon. Bursting this bubble will need something drastic. Rapid increase of the interest rate? Doubtful! Decrease in population? No chance! Credit squeeze? Unlikely! Relaxation of planning rules? No way! Massive increase of investment in social housing? Dream on! Run out of first time buyers? Almost there already!

Barring a world recession or a total loss of interest in buying houses, I see no reason for the bubble ending in the UK yet. I will watch the market for another year and maybe take the plunge if the signs are right. I'm taking no notice of recent silly predictions for growth over the next five years. Equally, I don't expect to make much real money letting the property. As long as it can pay for itself, I will be happy with capital growth. I would be happier if property values did crash back ten years, then I could buy two flats. Don't see it happening though. I’m not aiming to become an evil blood-sucking landlord. I just don’t plan on ending my days in poverty.

Surely you ought to just admit you have missed the boat. I am in my 50s - but with my youngest only 11, still a good few years away from retirement. But, I understand your mentality. You are not a risk taker.

You watch the stock market go up and up and think 'I must get a bit of this action, but is it about to fall? So you prevaricate and don't invest'.

You watch gold go up and up and think 'I must get a bit of this action .... etc.'

Same with property. You've watched it go up and up, you're watching it now defy gravity and you think 'what the heck, I really, really must get some of this action.'

I'd buy stocks in companies that make money from people's debt problems if I were you. You won't find BTLs that pay for themselves and investing in what is probably the most illiquid of investments seems a bit foolhardy if you are retiring soon. I bet you're really thinking 'If I could only buy 5 properties that would pay me a pension throughout my retirement ....' - well, dream on, you should have done it 10 years ago. You'll have to look abroad for decent yields now.

Regarding everyone trying to keep this thing going - did anyone WANT the recession in the early 90s? Of course not, but the markets will always have their way. You cannot run an economy on borrowing - forever.

Edited by Marina

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Rapid increase of the interest rate? Doubtful! Decrease in population? No chance! Credit squeeze? Unlikely! Relaxation of planning rules? No way! Massive increase of investment in social housing? Dream on! Run out of first time buyers? Almost there already!

Just read that UK GDP growth without public sector spending would have been below 1% last year. That's hardly a healthy economy and the Gordon Brown debt splurge is still continuing.

Take this public sector growth in spending away, and the reduction in retail spend due to indebted consumers (consumption is 2/3s of GDP) and you've got the recipe for a recession.

Recession will lead to further credit squeeze and as was the case in Japan it was the ever tightening credit squeeze that drove prices down for 15 years. It is also a small island, more densely populated than UK and population was growing in that period.

Credit tightening is underway. Last week my bank informed me of a 4.7% increase on my credit card rate. From 12.2% to 16.9%

When this kind of credit tightening spreads to the mortgage sector then it's the end of the party.

Credit tightening, rising 'real' inflation and rising unemployment will lead to large falls in property prices...WITHOUT THE NEED FOR ANY INTEREST RATE RISES

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My two pennorth. As a long time HPC contributor and arch-bear I've said for years that it couldn't possibly continue - I reckon I came to that conclusion in about 1998 when I moved out of London. My house had gone up in value by £1500 every month I owned it. Crazy. But I kept on being wrong. Property did carry on going up.

I've nearly paid off the mortgage now, and I'm buying a holiday let. Why? I want my kids to have some access to the countryside before they're grown up. I can let it out thirty or forty weeks of the year, bringing money into a rural area where jobs are scarce, and thereby getting other people pay the interest on the mortgage. I plan to own it for twenty years, so I don't much mind if there's a property crash; but I don't think there will be any more, for all the reasons posted at the top of this thread. OK, the economy could slow down, but if so interest rates will be cut. Otherwise the population isn't going to get any smaller and demand for property isn't going to fall. Large numbers of FTBs have been priced out of the market, and if the BTL brigade bail out in will come the FTBs to prop up the market. Seems to me that there's been a major shift in the way property is owned in this country. It may well be a bad thing, but there it is.

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The only way for ftb'ers to get onto the ladder is to buy a place needing work.

hahahahahahaha! there aren't any left, all the bleeding aspiring property developers have bought them to do up!

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My two pennorth. As a long time HPC contributor and arch-bear I've said for years that it couldn't possibly continue - I reckon I came to that conclusion in about 1998 when I moved out of London. My house had gone up in value by £1500 every month I owned it. Crazy. But I kept on being wrong. Property did carry on going up.

I've nearly paid off the mortgage now, and I'm buying a holiday let. Why? I want my kids to have some access to the countryside before they're grown up. I can let it out thirty or forty weeks of the year, bringing money into a rural area where jobs are scarce, and thereby getting other people pay the interest on the mortgage. I plan to own it for twenty years, so I don't much mind if there's a property crash; but I don't think there will be any more, for all the reasons posted at the top of this thread. OK, the economy could slow down, but if so interest rates will be cut. Otherwise the population isn't going to get any smaller and demand for property isn't going to fall. Large numbers of FTBs have been priced out of the market, and if the BTL brigade bail out in will come the FTBs to prop up the market. Seems to me that there's been a major shift in the way property is owned in this country. It may well be a bad thing, but there it is.

I think you are dellusional.

You are missing one viatal point. If we assume that current high house prices are here to stay but make the assumption they will only go up with inflation from now. How are today's FTBers going to move out of their 1-bed flats that are already consuming 50% of their take home pay (on average)? In 5-10 years time (if prices don't fall) it's going to start to dawn on all FTBers buying today that there is no housing ladder and the 3-4 bed family home is still as elusive as ever.

So for now we've got a generation that is happy to put up with small overpriced flats because they believe that they are on the first rung of the 'ladder'. How long before they realise that they are going to remain stuck on the first rung of the ladder and the image of the housing ladder is shattered.

Edited by munimula

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As the Halifax reported 1.2% of falls I think you should whatch what happens over the next few months whilst investing in what you consider the best option after receiving financial advice

- Or you could put in some low offers on property as you are prepared to walk away!

I read about a B2L who has 150 properties. He bought 50 last year and intends buying 100 this year. However he has already made a good start so he can afford to buy more. And he

is taking a very long term view as he says he is buying for future generations of his family so does will not mind any short term price variations. However, I see he could have a problem if ever the properties would not let - but I guess he'd just sell

Good luck!!

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Surely you ought to just admit you have missed the boat. I am in my 50s - but with my youngest only 11, still a good few years away from retirement. But, I understand your mentality. You are not a risk taker.

You watch the stock market go up and up and think 'I must get a bit of this action, but is it about to fall? So you prevaricate and don't invest'.

You watch gold go up and up and think 'I must get a bit of this action .... etc.'

Same with property. You've watched it go up and up, you're watching it now defy gravity and you think 'what the heck, I really, really must get some of this action.'

Risk takers in overblown markets more often than not dont win because they took the risk per se but rather because other risk takers lose.

So in truth it doesnt matter what the market is - just that enough people are convinced that sufficient numbers of others will try and do the same thing.

Edited by Wuluf

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There just isn't enough wage inflation to erode the debt sufficiently anymore to allow you to take the next step up the ladder. Someone buying a starter home today and spending 50% of their take home pay servicing the mortgage will NEVER be able to move up to a larger place if house prices were to rise in line with earnings over the next 10 years - unless their earnings rose much faster than average earnings.

Important to remember that the average age of a FTB is 34 and the average cost of a mortgage is 50% of income for the average FTB.

Today's FTBs (on average) are not going to get the wage inflation to catch up with property prices and those that have bought at the bottom of the ladder are not going to get the high inflation needed to erode their mortgage debt and propel them up the 'ladder'. The average FTB is already at or very near their peak earning potential.

Imagine, you and your partner are 34, you've just bought a 1-bed flat for £180K as your first property, 100% mortgage. You are only going to get average UK salary increase. How long before you can move upto a 3-bed house? Is that going to be in time for you to have the 2 kids that you would like? How are you going to move to that 3-bed house and afford to have the 2 kids (assuming house prices don't fall)? Without doing the maths I would guess that it is many more years than the FTB expects to have to live in their 1-bed flat.

It may take many years for the penny to finally drop, but when it does the masses perception of property as 'an investment' will take a knocking the likes of which we have never seen before.

Absolutely, brothers and sisters reaching FTB age will look at their older siblings still stuck in their tiny flats and may decide that there is no urgency to buy your first property. Parents maybe forced to concede that renting and saving until you can buy a 3-4-bed house is the only way. I can see this mentality changing over the next 5-10 years. The mood will change from that of self-congratulation for getting on the property 'ladder' to one of anger that they can't move onto family-sized housing.

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Agreed. This point is often overlooked, or brushed under the carpet with the excuse that we're living longer and can therefore retire later.

The point is of course, that at 34 you're 10 years closer to peak earnings than at 24 - no matter how long you continue to work for. You're also 10 years closer to not being able to put off starting a family.

I think that a lot of people like the originator of this thread actually have no real concept of how bad the situation is for my generation.

My nan is always telling me that 'it has always been difficult buying your first home'. I put her straight when I point out that her first home was a 3-bed bungalow in a nice part of the SE and she was 21 and never worked!!!!! I tell her that it would take the incomes of two very good earners to buy a 1-bed flat in the same place as their 1st home now. Things have never been so hard for the younger generation.

What they all seem to overlook is the fact that this can't continue.

Do they really think that our generation is going to accept that a pokey 1-bed flat is all they are going to get.

When it dawns, if prices haven't fallen as they should then in 5 yrs+ there is going to be civil unrest in this country. The only reason that I'm not out on the street is because I still believe that the market will correct. The FTBs of today will soon be the middle class voters of tomorrow and so much on this site is said about the young not doing enough about the situation. Young people don't vote but they don't stay young, they will vote - especially if there is something to motivate them to vote and being stuck in a 1-bed flat in your 40's will be enough to motivate anybody.

The big parties all know they have to change the planning laws to allow more building, it is a matter of time before these are changed.

Edited by munimula

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When it dawns, if prices haven't fallen as they should then in 5 yrs+ there is going to be civil unrest in this country. The only reason that I'm not out on the street is because I still believe that the market will correct. The FTBs of today will soon be the middle class voters of tomorrow and so much on this site is said about the young not doing enough about the situation. Young people don't vote but they don't stay young, they will vote - especially if there is something to motivate them to vote and being stuck in a 1-bed flat in your 40's will be enough to motivate anybody.

So the young are going to throw their dummies out of the cot. Likely story. And if you were going to go "out on the street", what would you do there? "I say everyone! I can't afford No 19 Acacia Avenue!" If people didn't have anywhere to live, fair enough, there'd be riots. But the ipod generation not being able to buy the semi of their dreams? Oh come on. This is Britain. Save your money. Wait for things to creep back in your favour. It's a cyclical thing.

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  • 302 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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