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Ineresting Anecdotal Email From A 1980's Bear

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This email was sent to me by someone that wanted to pass on their own experiences for the benefit of everyone:

A 1980's bear writes:

I dont want to join the forum - as a busy father of 4 I don't have time - but I thought you might appreciate some imput from someone who refused to buy during the great 1980's boom and bust.

I will call myself 1980sbear. I own a house worth about £200,000, I only owe about a fifth of that on the mortgage and I have never earned enough to pay higher rate tax. What happened?

When I first went to work in the mid 80s, the great 1980s property boom was underway and prices were spiralling. About a year after I went to work I went into lodgings in Sussex, it didnt work out and I soon went back home. While there I was paying £40 a week for bed and board (out of a takehome wage of £66). I remember the landlady telling me how her two daughters (late teens) were planning to buy a house/flat together because if they didn't soon, prices would be too high, and they would never be able to afford a place of their own (sound familiar?).

I made my first investment at the time - eurotunnel shares. Over several years I bought about two grands worth at an average of £3.00 and watched them soar to £11.00 each and then collapse to their present value of er.. 25p. It cost me a fortune but the lesson hard lesson learnt saved me far more.

A couple of years later promotion beckoned and I had a reasonable wage of about £8,500 and a job in South London. Others I worked with had bought flats for £25,000 a few years back but there was no way I could afford anywhere in Greater London - or Surrey or Sussex now. One perk I did have was free rail travel. One chap at the office was commuting from Corby to south London - all of 90 miles - so I went to Northamptonshire and had a look. I fond a poky flat in a nearby Northamptonshire town. It was one bedroom and had been converted to a flat from a house. There was a mound of rubble in the garden. But it was only £33,000 and I could afford it. However my parents insisted I had a building survey and paid for one. Good thing too - It trashed the place. I pulled out - the estate agent was horrified and basically said "What the hell did you expect for £33,000".

Instead for the next three years I left work and went full time to uni to study engineering, going back in the summer for holiday work. When I entered university it was the passport to a fabulous career. By the time I left, three years later in the early '90s, I was thankful I had my old job open so I wouldnt join the ranks of the unemployed as so many of my friends did upon graduation.

I went back home and resumed work. Home didnt really work out after 3 years away. So I decided to leave and - horror and horror - looked in the paper for somewhere to rent. I found a 4 bed house occupied by 2 other chaps and joined them. The rent was £600 divided by 3 and the council tax was divided by three - friends and family (parents excepted who didnt get involved) thought I was mad - rents throwing money away etc. etc. Most of these people had a property whos value was going backwards.

For 2.5 years I watched as prices fell around me, then one day I noticed a two bedroom maisonette in a nice estate, with its own garden that was on sale for £46,000. I offered £41,000 and it was accepted. A lot of people who had told me I was silly renting went very quiet when they found out what had happened. A survey showed it was sound but needed modernising. Fair enough. Near identical flats had gone on the market for £72,000 at the height of the boom.

Several years later I married and transferred to a job in central London. I sold for over double what I paid and bought a three bed house with garage about 40 miles north of London for only about £16,000 more than I sold the flat for.

The score now. The house has doubled since in price since then and the flat went recently for more than 4x the price I paid for it. When a local estate agent congratulated me on my good fortune he was most taken aback when I said "what good fortune, The moneys no use to me and it means my children can't afford a place when they grow up. I hope there is a house price crash as the only people benefitting from this are the treasury in stamp duty and inhereitance tax, plus you lot with your precentage commissions."

Will there be a house price crash? I view the market as very very fragile but there are several different factors. The 1980s boom went to insane levels between April and June 1988 after the chancellor gave three months notice in the April budget of double tax relief on houses being scrapped (this was where two people buying a house together could both claim a tax rebate on £30,000 of the mortgage). The boom ended abruptly in June 1988. Interest rates stayed ludicrously high (as high as 15%) until 1992, owing to the governments mulish determination to keep the pound within its permitted value band within the ERM, this stupididy also put three million people out of work with countless businesses folding. In 1992 came black Monday, Britain out of the ERM, millions of voters furious at being ruined by high interest rates for basically, nothing and a further four years of House Price Collapse despite interest rates falling.

Whats different this time. Once bitten twice shy. The government are well aware that a house price collapse would destroy the party presiding over it and will do all they can to avoid one. Not just stand back and watch as Majors administration did. A smiliarity ifsthe late spike. In the 1980s it was caused by three months notice of a tax relief ending. This time it seems to me to be thousands of amateurs piling into buy to let at a time where the dividend (rent) cost ratio is appalling, and whats more, in many cases increasing the mortgage on their main residence to pay the deposit and only taking out an interest only mortgage on the BTL hoping to make their money on capital increases. I predict that may will be ruined.

So will prices collapse or not. Its fragile, it might, but I won't say it will unless there is a major economic disaster, I'm not a prophet. I thought it would collapse three years ago. But then the dotcom share price bubble continued for a good two years after I thought a collapse was inevitable and I was just starting to wonder if the "its different this time" brigade were right when the share price collapse did come. I think a collapse this time would be less linear - I suspect the south will suffer less than the north (where prices seem to be to be utterly ludicrous) and be offset to some extent by the government being proactive. A collpase may well be masked, as most previous collapses have been, by rampaging inflation. However the debt bubble is terrifying and could still produce a collapse that makes the 1990s collapse look like a vicarage tea party. It may be selfish to say so, but for the sake of my children I hope there is a major collapse. Otherwise I will be advising them to go abroad to avoid a lifetime of hand to mouth living while watching most of their salary get paid to a bank.


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Been there got the blood stained T-shirt. I looked around me the other day and realised a lot of my neighbours. With 2 x new cars (4x4 + sports number), two to three properties, small to medium service based business and kids just coming up to school age, are all too young to have been effect by 'the last time' (they're 33 to 38 yrs old). All bought their first properties in the mid to late 90's. All have only seen property go up in price, all by there own admission are highly geared and see that as a good thing! (Having come late into buy/fly to let). All want to send their kids to private school.

These people plus, FTB's, second time buyers and rung on the ladder jumpers who have taken on huge debts in the last 3 years are really going to suffer. It's horrible but only the market can teach us what we should already know.

Pablo Silver or Lead?

Edited by Pablo-silver or lead?

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Just for historical accuracy by the way, 16th Sept 1992 was Black Wednesday not Black Monday [get real]

To be really accurate, it was White Wednesday -- as demonstrated by the subsequent performance of the economy.

Despite this lesson in why single currencies don't work there are still some numpties who think the UK should join the Euro.

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I am new to this site, so please bear with what might appear to be my somewhat simplistic views. I am not too sure that this is the right string for this but here goes....

I have been keeping an eye on house prices since my divorce (and the loss of my house) in 2000.

In that time my philosophy has been simple, “if I can’t afford to buy a house…I wont.” I know, I know…a rather dated mantra to live by, but there you go!

Even in 2000 and 2001 I thought that house prices were high. As a result, since then I have lived in rented property. I re-married a few years ago, inherited 2 step kids as well as seeing my own two regularly and guess what? We have been very happy! I am not in any sort of debt what so ever (in fact quite the reverse) and we have lived in some really nice places. The current house is a detached 4 double bedroom place. Whenever something goes wrong, I call the landlord and he sorts it. I costs roughly £300 - £400 per month less than owning it and that is excluding solicitors/mortgage/estate agent’s fees etc. OK the lease can be terminated, but due to the hoards of eager capitalists who have bought to rent, there is no shortage of nice places to move to at very reasonable prices. A lot of the BTLers have been ‘mortgage poor’ whilst we have had a very nice lifestyle thank you very much. Apparently, decent tenants are hard to come by! Any way I get bored after a few years and I enjoy the freedom moving from one nice house to another.

I too can remember buying in 1990 as prices were on their way down. We bought a terrace house in west Cornwall for £52,000, which had been priced at £63,000 less than a year previously and patted ourselves on the back at having been SO astute.

I can also remember how Norman Lamont and John Major wrung their hands on the news in 1992 as interest rates finally finished at 15%, after being increased several times in one day.

We sold for £39,000 in 1994 and considered ourselves lucky!! I walked around the area where we had been renting 4 years earlier and I have never forgotten the gut wrenching feeling of having been a total mug.

Having moved, we congratulated ourselves in 1997 when the house next door sold for roughly what we had paid for ours…finally this millstone of bricks and mortar was worth what we paid for it. In short, even though I spent loads on house ownership, I never really enjoyed it. Apart from making short-term financial gains on paper, I don’t see why we are all so obsessed with property.

I have been told that I am suffering all sorts of syndromes…from post dramatic stress to complete lack of any financial acumen. However, as hard as I try to understand certain aspects of modern living, I cant.

· How can the average price of a house be 7 – 8 times the average wage?

· How can this country carry on with over £1 Trillion of personal debt?

· How can the market continue to tolerate an estimated 770,000 people defaulting on their mortgages?

· How is all of that sustainable?

I also agree with the sentiment that the current generation of 20 - 35 yrolds don't really understand just how brown and smelly it can get. What we have seen for a long while is sheep mentality (or is that lemming mentality?)

It’s all been image and no substance (rather like the rabble that have been in charge for the past 9 years). Now un-employment is increasing, as too is inflation and interest rates!

I will continue to top up my savings account with the difference between my rent and how much a mortgage would cost me, until the inevitable happens.

No one has ever really seen a crash coming, from tulip bulbs to high tech Internet stocks. Remember these 2 things…

1. You can’t eat equity.

2. The bigger they are, the harder they fall!

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