Who Is Fueling This Market At The Moment?

[Guest The_Oldie]

Is that insider information?

It would appear that cuckoo may have a commercial vested interest in talking up the property market.

[Goat]

It would appear that cuckoo may have a commercial vested interest in talking up the property market.

I've noticed that there are quite a few new posters on here who are very bullish. Are these the same people who were trying to disrupt the forum a few months ago, having another go at trolling but trying to be not so obvious.

[Guest The_Oldie]

I've noticed that there are quite a few new posters on here who are very bullish. Are these the same people who were trying to disrupt the forum a few months ago, having another go at trolling but trying to be not so obvious.

Let's just say that a number of extremely bullish posters started posting immediately after the BoE raised interest rates .

[Peter Pumpkin]

awooga

Edited August 17, 2006 by Peter Pumpkin

[Guest grumpy-old-man]

Momentum

The housing market is like an oil tanker. It keeps on moving after its engines are turned off and takes time to slow down. The housing market engines were turned off somewhere between summer 2004 and summer 2005 but the slowdown is only just starting to be noticeable.

what a great, simple analagy Viterbi & I totally agree

[brassfarthing]

Well at least the nutters haven't got here yet and started bleating about the crash already happening etc. As the first poster rightly observed - the market is alive and still rising.

I hate to admit it - I STRed late in 2003 and I WAS WRONG. It did look as though I was right throughout 2004 and the first half of 2005 as the market definitely stagnated (in my area) and the only houses that did sell sold well below their (madly inflated) asking prices.

I used to report on here on the sales of local BTL new build flats - how only 4 out of 8 in a certain block had sold and how the 4th one sold for 10% less than the 1st one etc etc. How in another one, after a year, half of them were still unsold etc. I have just checked again - they are all sold now and the ones that have sold in the last 6 months have sold for a bit more than the ones that sold in 2004 and 2005.

It is clear the market is being sustained by:

1) A small number of high earning FTBs that can afford to buy - and they are buying

2) Wealth transfer from parents to children - a 50k deposit provided by Mummy and Daddy

3) Buy to Let - probably more popular than ever as a way of providing that elusive pension

Buy to Let must be the biggest factor and it is the only one that something could be done about. Now if the government leveled the playing field by insisting that loans for BTL were a maximum of 50% - it would remove a lot of the new BTL purchasers and leave the property market for people who want to buy homes. Prices would adjust without the need for an accompanying recession (although, of course, it would have a big effect nonetheless - but not as bad as a house price crash caused by economic crisis).

You have the problem. While investors keep investing the property market goes from strength to strength. Many chains now have no FTBs involved. You are priced out and NOT NEEDED. You can kid yourself some magic correction is about to happen - but the level of delusion is mind-boggling. A market is the sum of the actions of the people in the market. Whilst 95% of the people in this country still think that property is a good long term investment and enough of them are willing to accept a low yield in the belief (doesn't matter if they're right or wrong) that the price of the property will go up in the long term then this market will continue.

I agree it cannot go on forever. House prices cannot double in the next 10 years or whatever nutty figure the papers want to come up with. For the simple reason that there has to be a limit to how much BTL landlords can afford to pay on top of the rent received to service the mortgage. However, unless something dramatic happens (like much higher interest rates) it can stagger on pretty much as it is. What if our economy slows again (which looks likely) and interest rates go down again for a few years. You still won't be able to afford to buy but BTL landlords will.

You face a gloomy outlook. You might get 10 years of a market that just bobs along going up in line with inflation. If you can't afford to buy now you won't be able to afford to buy at any time in that 10 years. The housing market seems to have a knack of going up more than wage inflation in almost all circumstances.

So think about it. In 10 years time another huge swathe of the UK housing stock will be in the hand of investors and you will be doomed to renting forever. I have said before and I find myself saying it again - your generation needs to get angry to get something done about this. The structure of the UK housing market is changing before your eyes driven by the favourable tax treatment of BTL - and you just sit around and do nothing. It baffles me.

Good post.

I agree that BTL demand is a key factor in continuing HPI. It can't be beyond the wit of a government to come up with a financial penalty to dampen this down.

[brassfarthing]

<snip>

As for this obsession you have with protesting. That's the hallmark of a "nutter" if ever I saw one. A few saddos in the rain outside Downing Street - OK Marina, be my guest!

Crikey, I find myself supporting Marina again - what's the world coming to?

I think he's absolutely right to urge people to protest properly. Yeah, holding placards outside Downing St (so to speak) is pretty useless but that's to caricature a decent argument. If the visitors to this site are anything to go by, people who feel disappointed and cut off by HPI would prefer to bellyache to other people similarly fed up, and sit in front of their computers blaming anyone and everyone for their plight, rather than do something constructive about it. "Protesting" means getting organised, creating a credible pressure group and tapping into mainstream politics and the media. It's not that difficult, especially in this age of global and instant communication.

Face it - you can't be arsed.

Edited August 17, 2006 by brassfarthing

[bugged bunny]

Crikey, I find myself supporting Marina again - what's the world coming to?

I think he's absolutely right to urge people to protest properly. Yeah, holding placards outside Downing St (so to speak) is pretty useless but that's to caricature a decent argument. If the visitors to this site are anything to go by, people who feel disappointed and cut off by HPI would prefer to bellyache to other people similarly fed up, and sit in front of their computers blaming anyone and everyone for their plight, rather than do something constructive about it. "Protesting" means getting organised, creating a credible pressure group and tapping into mainstream politics and the media. It's not that difficult, especially in this age of global and instant communication.

Face it - you can't be arsed.

For those who can be arsed, there's a demo planned for October this year in Central London. For details and some constructive debate see:

http://www.pricedout.org.uk/

[expatowner]

For those who can be arsed, there's a demo planned for October this year in Central London. For details and some constructive debate see:

http://www.pricedout.org.uk/

Then we will see how many really can be arsed.

[adibrown]

Let's just say that a number of extremely bullish posters started posting immediately after the BoE raised interest rates .

I hate to disappoint but as a new poster and some may say a bullish poster there is no conspiracy behind me joining at this point in time. I happened to be sent a link by a friend saying "check out these guys there still going on like you did 4 years ago". Simple as that really.

[Charles_Darke]

my friend her her boyfriend are FTBs and are buying in London around the £400k mark and are paying £15k over the asking price due to a bidding war!

apparently house prices only go up! (thats according to his father)

she's my best mate and it really worries me, but they are determined to get on the ladder

Hi Rachel!

Yes, things here are still booming. A lot of fence sitters appear to have just gone for it (myself included). Most of my colleagues have an attitude of 'house prices always go up'.

One guy I know is very cautious but is kicking himself now because his worrying stopped him from getting on the ladder back in 2001 so now he wants to get on there. The scary thing is he's looking at a 400k-500k mortgage! That's about 5 times their joint salary!

I've set my sites lower and just bought a place to live (offer accepted) on a small hovel quite close to where you used to live. I figured I'd rather have an 'OK' place to live (as opposed to my dream house) and have a manageable mortgage. Everybody else is advising me to 'stretch' which of course would have been great advice 5 years ago, but I'm not so sure now.

You need a history lesson. You also need to understand how money is created

Firstly, and most importantly, money is not created by governments. The control of the money supply is now almost exclusively in the hands of the banks and private financial institutions. After WW2, about 50% of the UK money supply was created debt free by the democratically elected government of the time. Today, only about 3% of all the money in circulation is 'debt' free money. Virtually all modern money has been 'lent' into existence by banks, to be repaid + interest. Very democratic isn't it!!!!!!!! The other important thing to understand is that currency today is intrinsically worthless. It is not backed by anything 'real'. The Gold Standard was abandoned, the dollar and Sterling are fiat currencies. The volume of money being pumped into the world economy is no longer relative to what is being held in reserves, either in cash or gold reserves. Gordon Brown sold 60% of the UK's gold reserves for $320oz! Nice one Gordo. Anyway, the point is, you can't base economic growth on 'confidence' forever! There has to be something 'tangible' and 'real' underpinning peoples' supposed wealth. I'm afraid there isn't!

I guess the Dollar is backed by oil.

[Charles_Darke]

4.1% gross; is that fantastic in your fantasy land of BTL? You can put it in the bank hassle free and get more. You can buy Lloyds TSB, Legal and General and Vodafone yielding more with exposure to capital gain. What a mess the BTL crowd are in.

I love living on a 'ghost' development. It's so quiet. I agree with Jean-Paul Satre "hell is other people"!

There is massive OVERSUPPLY of property in the UK and we all know what happens when supply outstrips demand don't we?

You're forgetting the leverage effect.

Assume 10k deposit on a 100k BTL.

2% net yield = 2k 'profit'.

Put your 10k into a bank:

assuming 10% interest paid = 1k 'profit'.

[grim up north]

You're forgetting the leverage effect.

Assume 10k deposit on a 100k BTL.

2% net yield = 2k 'profit'.

Put your 10k into a bank:

assuming 10% interest paid = 1k 'profit'.

Yes, and what does that leverage effect do if prices drop?

Assume 10k deposit on a 100k BTL.

10% price drop = 100% loss (not taking into account all the fees, mortgage and other costs incurred)

20% price drop = 200% loss and soiled underwear.......

[Charles_Darke]

Yes, and what does that leverage effect do if prices drop?

Assume 10k deposit on a 100k BTL.

10% price drop = 100% loss (not taking into account all the fees, mortgage and other costs incurred)

20% price drop = 200% loss and soiled underwear.......

Agreed it works both ways. But people are being extended more credit than ever so what if you do this:

You borrow £10 million around 2001 and buy property/BTLs.

In 2005:

a) Property prices more than triple so you sell and bag yourself £20m less taxes.

Property prices fall to zero, you go bankrupt and lose your initial deposit.

Upside is limited only be available credit, downside is limited by the assets you own. For many people this is almost a one-way bet and one that has paid off!

[Guest donall]

The changes in the UK population have meant that although the birth rate is below the replacement rate to keep a stable population, the number of deaths is less than births - so the population is stable/growing slowly but getting older (on average)

The supply and demand problems are interesting.

Some of you are saying that there are too many properties on the market - while others say that there is a shortfall of 47,000 each year. I've also heard that the types of houses being built are not the types that people want to live in (e.g. families don't like living in flats in the UK)

The demand is being driven by reduced household sizes e.g. second houses divorces, smaller families. And also by immigration.

The big problem with property now is that people are obsessed with it - with shows about how idiots can make millions on investing in delabitdated barns in Romania.

I problem that I have with property is the high cost of buying and selling.

If you look at the cost of taxes, fees, refurbishment etc... if you plan to move house in the next year or two it might be better renting. But do your sums!

The property issue is more a symptom of the money problem - which someone mentioned earlier.

The Dotcom crash should have decimated the DowJones in America - the low interest rates and generous money supply prevented a major crash.

I unfortunately don't know how this is going to play out -

[Peter Pumpkin]

Debt has to be paid back in the end. No bulls have explained so far how this debt can be repaid without it causing an economic slow down. If the economy slows it is unlikely that house prices will stay flat. They will, more likely, decrease.

The altermative of ever increasing debt will lead to currency devaluation and inflation.

All the debate is around timescales and triggers but the principles of the situation are very clear.

Anyway house prices are coming down in many areas and it is irresponsible, IMO, to harangue people into buying now if those people feel the debts incurred by a purchase are too high. Renting isn't all bad as many here have pointed out.

[oracle]

Well I've heard it all now. I wondered when World War 3 would rear its head as a possible reason for a house price crash

you might laugh but it's looking likely.

Given that this region supplies something like 1/3 of the worlds oil it's not to be overlooked.

if you think petrol at £1/ltr is bad news imagine what the damage will be if we DO get a full-scale breakout of hostilities.

if you think it's absurd,just remember where Dubya's financial backing came from...that's right...texas oil magnates.

...now wouldn't he be doing those guys a favour if he increased their companies profits!!!!...WW3 would be bad news for anyone heavily invested in iran etc...like total,but good for more "secure" sources.

looks like the house of Saud are with us,they've just bought £10Bn of eurofighter.

[Marina]

For those who can be arsed, there's a demo planned for October this year in Central London. For details and some constructive debate see:

http://www.pricedout.org.uk/

Where is it on the web site - not splashed all over the home page!

[Keith.G]

A housing market requires fresh blood at the bottom rung or it dies.

At current prices there's negative returns for BTlers at the moment, and FTBs would save 50% by renting.

So someone pray tell me, who are the fecking morons fueling this market.

16% of FTB's are now buying with Interest only mortgages!

This is up from 9% in Jan 2004

[bugged bunny]

Where is it on the web site - not splashed all over the home page!

Apologies - re Priced Out demo, I should have said 'details coming soon'. The planned demo is mentioned in some of the threads on the Priced Out forum, and no date has yet been fixed. It's well worth checking out the Website IMO.

I don't think anyone is naive enough to believe that one demo alone will be enough to bring about change.

If nothing else, a demo will bring together like-minded people and provide the opportunity to share ideas and experiences and let off steam together - a bit like this forum really, but perhaps more satisfying for not being virtual.

And no I'm under no illusions that the BBC news would give the demo more than a 5 second mention.

Edited August 18, 2006 by bugged bunny

[KingCash]

I couldnt tell you because I dont have a crystal ball. But if prices continue to slide upwards even at an almost stagnant rate of 1% he will be able to sell in 20 years and regain all his money plus a little extra.

No one knows when the crash will come, but one thing I confidently maintain is that prices will not simply rise 1% a year, year after year. Once prices have levelled off the number of new buyers will fall dramatically ("why buy now when I can buy cheaper next year") and the crash will begin.

[adibrown]

No one knows when the crash will come, but one thing I confidently maintain is that prices will not simply rise 1% a year, year after year. Once prices have levelled off the number of new buyers will fall dramatically ("why buy now when I can buy cheaper next year") and the crash will begin.

I dont see it.....If the market drops by 1% say in 2007 people will still buy because people will start talking up the market again. New buyers will want to take advantage of the lull in prices before the next boom...Olympics 4 years down the line...get in now...etc. At the same time property shows will still be showing people how they can renovate their garden/loft/garage and make money on their property that way because the value isnt just increasing as it did in previous years and they will show them walking away with a quick 30k. These shows slowly grind down the renters watching them. Also if volume of sales go down the numbers renting will increase along with rents and yields will begin getting attractive again, the BTL's will come back into the market.