Jump to content
House Price Crash Forum
Bee Bear

Getting The Jitters

Recommended Posts

http://www.telegraph.co.uk/money/main.jhtm.../19/pword19.xml

Good article! :)

"... the old adage about how a bubble only bursts after the last bear becomes a bull is annoyingly accurate.....

Let's take the example of a 27-year-old hedge-fund manager, Mr X. Over the past few years, he has saved £200,000 for a deposit. He is taking out a £700,000 mortgage on a big London flat, and so big is the mortgage that the monthly payments are bigger than his take-home monthly salary. In other words, he is bargaining that the bonus he receives this Christmas is enough both to pay off a significant chunk of his mortgage and to provide his living costs.

If rates rise too high, or if bonuses disappoint, people in similar straits might be forced into a panic sale of their home.

Then there's the legion of homeowners with one or two buy-to-let properties, many of whom will now be realising that rents are simply not moving, and that it's often difficult to fill their flats. If these people decide that their second homes aren't the investment they hoped for and sell up, we might really be in trouble.

Both of these are gloomy scenarios, and neither seem particularly likely. But there's no avoiding the fact that higher interest rates have increased their probability. And record gas and electricity bills, not to mention higher taxes, are not helping"

Share this post


Link to post
Share on other sites

Am i the only one who saw this article? I tried to add it to the news blog but didn't work!

read it bears (or should i really be directly the bulls)

Oh who cares....

Share this post


Link to post
Share on other sites
I'm starting to get a little worried about house prices. It's not pleasant to contemplate the potential doom of the housing market - particularly if you're a first-time buyer who's barely got his fingernails on the first rung of the ladder. But in my view things are looking a lot hairier than for some time.

This is a reflection of most people's thoughts. They don't actually expect a crash (because house prices only go up in a miracle economy) but there is that fear that creeps over them every now and then. Sentiment is turning sharply bearish and I do not expect the market to last through another winter.

Share this post


Link to post
Share on other sites

I have been reading the news articles mostly over the last few months, as this forum had started to become too bearish and opinionated - with not much fact behind the opinions.

The news stories have taken a significant turn over the last week, well since two days before the BOE's decision. I would tend to agree with the statement that the housing market won't last much past the winter. However, I strongly disagree with most people’s thoughts that this is a good thing.

I worked out about a fortnight ago that inflation must be a good 10-15% from my household finances (I have become a right geeky home accountant!). Both the missus and I are saving hard - wedding, potential house. We enjoy life, but try to do it on the cheap. These days we have to add to the joint account (used solely for food and bills), where as in Jan & Feb we ate out 2 or 3 times a month on the same money and didn’t have to skimp on the food bill as we do now.

I really hope hyper or chronic inflation never happens, as this would be really bad for everyone living in the UK. But let’s face it, chronic inflation is what - 15-25%. How far off that are we really, not the silly CPI, but the day-to-day inflation. If inflation hits home, excuse the French, we really are in a world of SH*T!

Last week I read some SILLY person saying engineering would be a good vocation in a recession/time of inflation. I am an engineer; my place of work is a significant international manufacture with $22 billion turn over last year. My plant has a £20million turn-over (not a lot of profit, but enough). In a meeting last week the MD (reading between the lines) stated that if a recession hits before 2008 it’s likely my plant and maybe the organisation will not come out the other side! They ran some business models of a light recession 2008 and a heavy recession in 2009 (or they are the models he is allowed to talk about!)

IF WE HAVE A HEAVY RECESSION THERE WILL BE VERY FEW THAT CAN WALK OUT THE OTHER SIDE WITH THE SAME SPRING IN THERE STEP AS THEY HAVE NOW. Whatever vocation you choose.

I am personally saving all I can, and bracing. Not that it will do that much, as by its very nature:

High Inflation = Savings buy less

It’s how much less that I am scared about.

House prices - don't worry about them. Not until you can easily afford a house. Worry about having an extra £500 a month so you can EAT!

I remember reading about some forum member a year ago, saying they could live for 9 months without working. That’s what I am working towards now.

Just my thoughts - sorry it went on some.

JJ

Share this post


Link to post
Share on other sites

I have been reading the news articles mostly over the last few months, as this forum had started to become too bearish and opinionated - with not much fact behind the opinions.

The news stories have taken a significant turn over the last week, well since two days before the BOE's decision. I would tend to agree with the statement that the housing market won't last much past the winter. However, I strongly disagree with most people’s thoughts that this is a good thing.

I worked out about a fortnight ago that inflation must be a good 10-15% from my household finances (I have become a right geeky home accountant!). Both the missus and I are saving hard - wedding, potential house. We enjoy life, but try to do it on the cheap. These days we have to add to the joint account (used solely for food and bills), where as in Jan & Feb we ate out 2 or 3 times a month on the same money and didn’t have to skimp on the food bill as we do now.

I really hope hyper or chronic inflation never happens, as this would be really bad for everyone living in the UK. But let’s face it, chronic inflation is what - 15-25%. How far off that are we really, not the silly CPI, but the day-to-day inflation. If inflation hits home, excuse the French, we really are in a world of SH*T!

Last week I read some SILLY person saying engineering would be a good vocation in a recession/time of inflation. I am an engineer; my place of work is a significant international manufacture with $22 billion turn over last year. My plant has a £20million turn-over (not a lot of profit, but enough). In a meeting last week the MD (reading between the lines) stated that if a recession hits before 2008 it’s likely my plant and maybe the organisation will not come out the other side! They ran some business models of a light recession 2008 and a heavy recession in 2009 (or they are the models he is allowed to talk about!)

IF WE HAVE A HEAVY RECESSION THERE WILL BE VERY FEW THAT CAN WALK OUT THE OTHER SIDE WITH THE SAME SPRING IN THERE STEP AS THEY HAVE NOW. Whatever vocation you choose.

I am personally saving all I can, and bracing. Not that it will do that much, as by its very nature:

High Inflation = Savings buy less

It’s how much less that I am scared about.

House prices - don't worry about them. Not until you can easily afford a house. Worry about having an extra £500 a month so you can EAT!

I remember reading about some forum member a year ago, saying they could live for 9 months without working. That’s what I am working towards now.

Just my thoughts - sorry it went on some.

JJ

The economy is currently hitting a down turn, in this country and world wide.

IMO a dangerous inflation rise inevitable.

Share this post


Link to post
Share on other sites

The economy is currently hitting a down turn, in this country and world wide.

IMO a dangerous inflation rise inevitable.

I am personally saving all I can, and bracing. Not that it will do that much, as by its very nature:

High Inflation = Savings buy less

It’s how much less that I am scared about.

JJ

Of course we could get deflation instead and then holding cash would be good.

Share this post


Link to post
Share on other sites

How can house prices be rising when people are flat broke? Retail sales prices saw a 2% fall (deflation) in 2005 compared to the heavily tweaked CPI which bears NO relation to reality. Sainsbury's reported a 1.5% fall in prices. So we can't afford food but we can afford a big house?

According to the Daily Mail's "Britons are mortgaged to the hilt", the record for repossessions was in the early 1990s when 75,500 homes were repossessed in one year.

Over the last year repossessions have risen to 8,140 from the previous year's 4,620. However, legal proceedings to evict another 55,000 are under way and a further 15,070 haven't paid their mortgages for at least 12 months. Insolvencies are forecast for over 100,000 this year.

The evidence that there's still growth in house prices has been flimsy. For example, a survey of RICS surveyor's putting their fingers in the air and guessing whether there's been a rise in prices is hardly accurate or precise. All the headlines reporting a rising house price have been of this sort.

How can a home borrower afford 7 times their income? Will they ever pay it off? Will they lose their job and default at some point during the remainder of their million year mortgage?

Share this post


Link to post
Share on other sites

2 - 3 weeks ago Edmund Conway was roundly criticised for his article on HPC. Everyone concluded the man was an idiot and not to be believed, ever.

Now - he's everyones favourite journo.

No bear should read Telegraph articles without allowing for their VI in bringing down the current goverment.

Share this post


Link to post
Share on other sites

I have been reading the news articles mostly over the last few months, as this forum had started to become too bearish and opinionated - with not much fact behind the opinions.

The news stories have taken a significant turn over the last week, well since two days before the BOE's decision. I would tend to agree with the statement that the housing market won't last much past the winter. However, I strongly disagree with most people’s thoughts that this is a good thing.

I worked out about a fortnight ago that inflation must be a good 10-15% from my household finances (I have become a right geeky home accountant!). Both the missus and I are saving hard - wedding, potential house. We enjoy life, but try to do it on the cheap. These days we have to add to the joint account (used solely for food and bills), where as in Jan & Feb we ate out 2 or 3 times a month on the same money and didn’t have to skimp on the food bill as we do now.

I really hope hyper or chronic inflation never happens, as this would be really bad for everyone living in the UK. But let’s face it, chronic inflation is what - 15-25%. How far off that are we really, not the silly CPI, but the day-to-day inflation. If inflation hits home, excuse the French, we really are in a world of SH*T!

Last week I read some SILLY person saying engineering would be a good vocation in a recession/time of inflation. I am an engineer; my place of work is a significant international manufacture with $22 billion turn over last year. My plant has a £20million turn-over (not a lot of profit, but enough). In a meeting last week the MD (reading between the lines) stated that if a recession hits before 2008 it’s likely my plant and maybe the organisation will not come out the other side! They ran some business models of a light recession 2008 and a heavy recession in 2009 (or they are the models he is allowed to talk about!)

IF WE HAVE A HEAVY RECESSION THERE WILL BE VERY FEW THAT CAN WALK OUT THE OTHER SIDE WITH THE SAME SPRING IN THERE STEP AS THEY HAVE NOW. Whatever vocation you choose.

I am personally saving all I can, and bracing. Not that it will do that much, as by its very nature:

High Inflation = Savings buy less

It’s how much less that I am scared about.

House prices - don't worry about them. Not until you can easily afford a house. Worry about having an extra £500 a month so you can EAT!

I remember reading about some forum member a year ago, saying they could live for 9 months without working. That’s what I am working towards now.

Just my thoughts - sorry it went on some.

JJ

I agree johnney that we should be careful what we wish for. I think that we are headed for some kind of major downturn and I dont believe any business will be entirely insulated. Some will go to the wall....some will survive.....probably the ones that supply staple items that people must have. Also I think that companies with lower debt and flexible capacity will weather the storm better than over-leveraged ones which have recently extended capacity.

I've been saving like mad for a few years now. For the last 10 months I have noted EVERYTHING I've spent in an Excel sheet....hard discipline, but worth it.

If I lost my job right now I would move back with my parents and live comfortably but relatively frugally. I could live pretty well on my savings for AT LEAST 10 years if not 15. I have no debts and no children to support.

J.

Share this post


Link to post
Share on other sites

I agree johnney that we should be careful what we wish for. I think that we are headed for some kind of major downturn and I dont believe any business will be entirely insulated. Some will go to the wall....some will survive.....probably the ones that supply staple items that people must have. Also I think that companies with lower debt and flexible capacity will weather the storm better than over-leveraged ones which have recently extended capacity.

I've been saving like mad for a few years now. For the last 10 months I have noted EVERYTHING I've spent in an Excel sheet....hard discipline, but worth it.

If I lost my job right now I would move back with my parents and live comfortably but relatively frugally. I could live pretty well on my savings for AT LEAST 10 years if not 15. I have no debts and no children to support.

J.

Nothing personal but surely there has to be a balance between existing frugally and living a healthy and balanced life.

Also suppose your parents don't want or can't have you to live with them?

Share this post


Link to post
Share on other sites

There's an awful lot of negativity on here. i'm sorry but i just don't see this huge gloom. Maybe i have a rose tinted outlook but these "storm clouds are gathering" stories have been around for about 6 or 7 years. Since 1999 we've been through several iffy patches of reduced economic growth and then things bounce back .

I can't see why this will be different, in fact UK annualised growth last quarter was 3.2%, which is pretty darn good and shows no signs of "falling off a cliff". I don't see a huge amount of belt tightening going on myself. "Bargain chic" has been a phenomenon for many years and people do want good value when they shop, go to restaurants etc but they're still going to them, and taking foreign holidays in their millions.

The picture painted (wished for?) by some people on here of a harsh winter to come of people huddling around their one bar electric fire, eating beans, bears absoultely no relation to reality so far as i can see.

As for earlier posters talking about a greet Australian Property Crash, yes there's been a fari amount of resi development over there which has gone rather ahead of immediate demand, very similar in terms of product to the ridiculous "investment club" type developments here in the UK, which anyone with half a brain can see are riding for a fall and no one would deny prices are expensive in some areas. But this is not widespread, there is steady demand and if you look at population and economic growth stats for Oz which continue to be absolutely stonking due to high continuing demand for their commodities, then it seems very unlikely the wholesale "crash" people desire will materialise anytime soon. In fact , tax rates look set to be cut again next year and wage inflation is very much under control there.

Share this post


Link to post
Share on other sites

The article was written by Edmund Conway, not the sharpest tool in the box, who recently wrote that MEWing makes people wealthier. His example of a 27 yr old hedge fundie sounds more like his day-dreaming fantasy of himself.

JY

Though I'm firmly in the bear camp, I agree that Edmund Conway is a muppet. A chinless wonder from Notting Hill probably. When I mark someone out as a muppet, I'm principled enough to disregard the articles which agree with me. Similarly, I never had any time for that numpty Bootle, a view shared by many here, albeit belatedly!

Anyway if you read Conway's article closely, you'll see he doesn't think there'll be a crash but he's hedging his bets. So whichever way it goes he'll be in the 'I told you so' crowd.

Share this post


Link to post
Share on other sites
Guest donall

I was once a thriftless student who spent all his to be hard earned student loan within weeks of getting it.

That taught me an important lession - probably the only thing that I learnt in university which I still use - and that is that you should understand money and use it responsibly.

Since then I have kept a weekly account of how much money I have, how much i've spent and how much i plan to spend in the next week/month/Q/Year.

Nerdy perhaps but by focusing on what I was spending and what I had to spend I am now in a better position for it.

On an apocalyptic note - the "recession" that we are hearing about and the coming pensions crisis (remember that - that was once a big topic before BTL hit the mainstream) - is going to affect people severely. People will retire on nothing but the state pension and what other emans that they have provided for themselves.

I guess that people here are more in tune with what is going on and are planning for the future.

That guy Edmund is talking weather ****.

The fact that he has any job is a worry. His MOR comments show us little in his analysis that is both useful and not painfully obvious to anyone which half a brain.

As for Mr X - was it worth him writing that.

Share this post


Link to post
Share on other sites

I guess that people here are more in tune with what is going on and are planning for the future.

I think many on here are slightly deluded.

They think that with one income of say £30 or £40k they should be able to buy a decent sized place.

The sad truth is that today most properties are priced to reflect that there are normally 2 earners in the family.

A £30-£40k household income really isnt much money today, and there are tens of thousands of households who earn over £100k per annum. Sorry if people on £30-£40k are offended but you may wish to reflect on this - you are not particularly wealthy, why expect to be able to buy in an expensive area. People need to be a bit more realistic.

Share this post


Link to post
Share on other sites

Cuckoo - average UK salary ~£24K

£30-40K should be more than enough to be able to buy an AVERAGE property.

Its not.

Share this post


Link to post
Share on other sites

I think many on here are slightly deluded.

They think that with one income of say £30 or £40k they should be able to buy a decent sized place.

The sad truth is that today most properties are priced to reflect that there are normally 2 earners in the family.

A £30-£40k household income really isnt much money today, and there are tens of thousands of households who earn over £100k per annum. Sorry if people on £30-£40k are offended but you may wish to reflect on this - you are not particularly wealthy, why expect to be able to buy in an expensive area. People need to be a bit more realistic.

Yes, if these low earners on 40K moved out of the very expensive areas and found jobs elsewhere, that would leave plenty of room for a reduction in demand and a consequental reduction in House Prices.

It would be even better if the people who move out are public sector workers, ideally the teachers, nurses, policemen and council officials who keep things ticking over and improve the standard of life for the rest of us. :rolleyes: After all, anyone rich enough to have a 100K income can probably affort private schools, private security and has 'a man' to collect the rubbish, etc.

Elementary Economics teaches us that there are 3 basic human needs; warmth, food and shelter. If people were speculating with food and driving the price to levels where it was unaffordable for large portions of the population you could bet that the government would have intervened before now.

Share this post


Link to post
Share on other sites

Elementary Economics teaches us that there are 3 basic human needs; warmth, food and shelter. If people were speculating with food and driving the price to levels where it was unaffordable for large portions of the population you could bet that the government would have intervened before now.

Did elementary economics not teach you that renting is an option for property but not for food? Try looking up durable goods and consumption goods in the index...

Share this post


Link to post
Share on other sites

Cuckoo - average UK salary ~£24K

£30-40K should be more than enough to be able to buy an AVERAGE property.

Its not.

I'm sure average household income is way over £24k. If you take both folks working at £24k, or perhaps man at £30k, woman at £20k, you get £48k / £50K which will will easily buy you a place, not a palace, but somewhere to start that's ok, in most places in the country .

sad fact of life that as a £30k- £40k earner,you are a low earner nowadays.

Share this post


Link to post
Share on other sites

I'm sure average household income is way over £24k.

Not talking average household. We're talking average yearly wages.

Household is different. IF you have 2 earners (15K each) earning a household income of 30K then I would agree with you

Edited by OzzMosiz

Share this post


Link to post
Share on other sites

I am worried about affordability. Not just buying.

On a second point I looked at a job that paid a tad under £100k (Freelance) but would mean commuting and losing most of my day. Thats really the only kind of money where I dont care what the price is and I can ride a £50k loss. I prob would still rent as why would I want to lose £50k+ if there is a correction(when :) )

I am worried really worried about the economy. I was only a mature student in 2000 and I have student debt late in life and no house. I could be fine in the short term but i lost the lot in 1999 and I wonder if its going to come around again.

Share this post


Link to post
Share on other sites

Hedge funds are performing particularly badly at the moment (relative to the past). If he only managed to save £200K, he's either fictional or not been in the right fund in the good years if he's a fund manager and from what I hear on the grapevine, there won't be that big a rush of hedge fund managers queuing for a 911 turbo this New Year.

Share this post


Link to post
Share on other sites

I think many on here are slightly deluded.

They think that with one income of say £30 or £40k they should be able to buy a decent sized place.

The sad truth is that today most properties are priced to reflect that there are normally 2 earners in the family.

A £30-£40k household income really isnt much money today, and there are tens of thousands of households who earn over £100k per annum. Sorry if people on £30-£40k are offended but you may wish to reflect on this - you are not particularly wealthy, why expect to be able to buy in an expensive area. People need to be a bit more realistic.

We don't. We expect at the very least to be able to buy a shit'ole, but they too are priced ridiculously.

£30-£40k might not be much darn sarf dear, but that's about average for us flat cap wearers.

Edited by Jimothy

Share this post


Link to post
Share on other sites

Cuckoo - average UK salary ~£24K

£30-40K should be more than enough to be able to buy an AVERAGE property.

Its not.

This raises a very interesting point in relation to how far prices need to fall to return to equilibrium. If we work on the basis that an 'average' house is a 3 bed semi then the prices of these need to fall to around 3.5 times household income. If the average wage is 24K then even if we are generous and assume all households have two people earning average wage we come to a figure of £168,000 for the price of an 'average' home. That isn't massively below the average house price being reported by the various official stats so it would suggest house prices don't need to crash, they just need to return to an equilibrium point by stagnating as wages rise. A very good lid has been kept on wages during the last couple of years so I wouldn't be surprised if wage inflation were to increase over the next couple of years

Share this post


Link to post
Share on other sites

Cukoo, there is a lot of dispair out there and you seem to miss it entirely. Two incomes affording a house is totally unacceptable, and we seem to be following the American middle class into financial mayhem.

Americal Middle Class fall into the Two income trap

A long article, but if you have time or inclination, worth a read.

To sum it up, two incomes being able to afford a house leaves utterly no safety net if one partner looses job or health.

It's a double whammy, people on £40k can only afford a one bed s**t hole, so no room for kids. They up their salary multiples, get two bedrooms to allow for family expansion, one looses their job........

You work it out.

Sigh, you seem to have utterly missed the fatal economics the country has been allowed to be sucked into. Like walking along a lovely beach then stepping into quicksand.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 338 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.