Lessons From History, But Not Your Wacko History

[BBB]

BBB - if economic activity rather than sentiment drives house prices then why didnt house prices start recovering at the end of 1992 - when the recession ended?

if you think a recession can end, and everyone ''the next month'' finds a job (we're talking approx 2.9m people in 1992 who were unemployed) and then immediatley buys a house then your grasp of economics (and reality) is far worse than i first thought.

the simple fact is after months and years of unemployment, people took time (as the uk did) to get back on their feet. by 1995 they were back on their feet (depost saved up,working, confidence in the economy etc) and prices were rsing again. if you lost your job and were out of work for 18 months would you buy (or indeed be able to) within the first months or indeed year of employment?

Its a simple point - yet fundemental - and it is your failure to grasp this point which has caused you to loose out on 30-40% of your wealth.

i completed on a house 2 weeks ago, the sale had been spun out (from the vendors side) from may of this year (so i completed at mays price) i bought the house for 44.5k it is now worth 55k. what do you think has also happened to my other properties since may? (big clue .......^)

.........care to recalculate your wealth (ahem) ''calculations''

besides there is more to wealth than what you have in the bank or on paper, it's income that is ''the daddy'' IMO.

[London-loser]

Only estate agents describe falls as "negative growth".

Still, I'm sure there will be plenty more talk of negative growth to look forward to in 2005.

[Time to raise the rents.]

..i'm sure you've been asked this before but why do you bother..??

<{POST_SNAPBACK}>

I have an Auntie who STR'd in 1991 in Sydney. It was due to a breakup and she could have afforded to buy on her own with the enourmous deposit she got out of the sale. She had sold a house & had enough to buy a 2 bed flat outright, but she wouldn't stoop that low.

She now lives in a caravan park & still has the money in the bank. She very nearly lost most of it on shares, but managed to get out with most of what she started with through luck more than anything else. Her cash has been in the bank since and is now less than 20% of what the 2 bed flats cost in her old Sydney neighbourhood.

I genuinely want to help others from making the same mistake as her. It's very sad as she's now about 55 & has little chance of independance in her old age.

[Bubble Trouble]

BT - Youre missing the real fundamentals:

No catastrophic event this time - unlike the ultra high rates lst time

Pensions are shite

Demand much higher due to investor element and more single people

Affordable interest rates

Much more generous income multiples / affordability calculations now (you couldnt get above 4 x income during last crash

Twitchy FTBs anxious not to be 'left behind yet again' - ready to move in on recent 15% falls therefore reversing the falls

Self Cert mortgages are now widespread

Self - Invested Pensions - you can now buy property and ring - fence this within youre Tax efficiant pension pot instead of allowing city spiffs to throw darts at a board and take a big cut for the privellage

Immigrants - wont rent forever, if you think they will you are ignoring all other immigrant wave experiences from history

Rents increasing - so more investors attracted

Brits love property & gardens etc - unlike Japanesse who see property as a short life commoditiy to be demolished and re - built every 20 years.

<{POST_SNAPBACK}>

Dealing with you point by point:

1. Yes pensions are shite - and this time round one added factor we will get is people panicking about their pensions (as people have not been paying off their mortgages but have instead been releasing the equity AND not saving for a pension). They are also paying off their mortgages far more slowly (as inflation is not 'speeding up' repayment).

2. Investor element will (has already) disappear when prices start falling - BTL economics only work when there are capital gains (and then it works very very well - just not now).

3. Affordable interest rates? No - in actual fact because people have borrowed so much more money this time even with the lower interest rates they are paying a LARGER PROPORTION OF THEIR INCOME IN INTEREST PAYMENTS THAN AT THE PEAK OF THE LAST BOOM. Yep - think about it - higher even than when interest rates were double what they are now. Also remember that taxes have gone up hugely:

for an everage higher rate tax payer (now on £50,000) 48% of their income goes in taxes (wheras in 1997 only 35% of their income went in tax) - that is virtually a third higher taxes!!! (the respected independant accountants Smith & Williamson produced these figures)

4. Muliples etc - you could get more than 4 times salary BEFORE the last crash. But yes you are correct that once teh crash started these deals were no longer on offer. Thats one of the self feeding dynamics of a crash - the lenders start tightening their criteria - its already started - and it will become more rapid as the falls continue - causing more falls etc etc.

5. FTB who have waited for years will not react to falling prices by jumping in. Why would someone want to race into buying an asset which is falling? - each month they wait they are savings thousands.

6. Self cert criteria have been some of the first things to tighten - and more and more wikll be withdrawn/ not offered (as the banks and advisors will be too scared getting caught in fraud - as will the self cert people themselves).

7. Self invested pensions - no it hasnt happened yet. But when it does people will wait until prices stop falling - again: why are you so convinced people like buying falling assets. They don't. Thats part of the self feeding dynamic of a crash.

8. Immigrants are nothing new. There is no shortage of housing - as evidenced by the fact that rents have been stagnat for the last 5 years during the boom - there is no shortage.

9. Rent have not been rising. They have been stagnant for 5 years. I just asked for and got a 10% reduction in my rent (greenwich , London).

10. You have confused a Japanease tradition with their view of housing. hey do what you say to important buildings (e.g. temples etc) - as they see it as more authentic to keep rebuilding such things as new - so that they are the same as when they were first built centuries ago (rather than letting temples age - which would mean that they were not like they were originally). In terms of there own housing they are far more long term than us. Indeed, along with the house you inherit the mortgage as well quite often - handed down the generations . . .

Enjoy the self feeding crash.

[non-FTBer]

BT,

Agree completely about rents going down.

My current 12 month lease is up in a month or so. currently paying £750pcm.

Just seen an almost identical property (but with balcony - ooh luxury) in the same building for £700 a month including council tax....

Thats a difference of £170 a month taking into account council tax.

Some idiots are still asking for £850 a month for similar flats in the building, but as I live there I know that they have had voids for most of 2004....

Bring on the crash.

[zzg113]

Some idiots are still asking for £850 a month for similar flats in the building, but as I live there I know that they have had voids for most of 2004....

I'd like to know the mentality behind this. Hold out for an imaginary rent=no money coming in. Cut rent, get tenant=money coming in. Presumably there are paying the mortgage on these properties every month; so why not cut the rent?

[Cityfool]

If you've been thinking of getting a property to rent out, then you need the information in this report and you need to act now.

<{POST_SNAPBACK}>

that for me says everything I need to know about these people and their predictions.

[Yonmon]

SNIP

I genuinely want to help others from making the same mistake as her. It's very sad as she's now about 55 & has little chance of independance in her old age.

<{POST_SNAPBACK}>

A tragic tale, which helps us understand why you have such a personal downer on any form of investment other than property**. Suggests you are not an objective commentator...

**btw, at the expense of seeming harsh, the fact she managed to lose money on shares in the 90s, the time of the biggest stock market bull market in history suggests more about her shortcomings than about the relative merits of shares vs property

[zzg113]

That is a bit harsh Yonmon. I think that's a terrible thing that has happened to TTRTR's aunt and I would never want that to happen to me. It sounds awful.

[Bubble Trouble]

TTRTR - I agree with your aunt parable - it really is important to get on the 'housing ladder' - as it is (over a life time) cheaper than renting - and is an asset which (in the UK) rises by inflation plus 2.3% a year.

That is all true.

The trouble is that NOW is not the time to be buying - as prices are over 40% overvalued on all measures (yes even including affordability despite the low interest rates). This means that now is a time in which it is safe/advantageous to stay of the ladder or get off the ladder.

After the crash I will be getting back on the ladder - and encouraging friends and family to do the same. I will also be doing as many BTL properties as I can (I am already doind the background research on how to do this as efficiently etc as possible - although I will not be doing it for at least another 3 years - and maybe not for another 5-7 years).

[BBB]

After the crash I will be getting back on the ladder - and encouraging friends and family to do the same. I will also be doing as many BTL properties as I can (I am already doind the background research on how to do this as efficiently etc as possible - although I will not be doing it for at least another 3 years - and maybe not for another 5-7 years).

<{POST_SNAPBACK}>

the question you need to be asking yourself is, how many people are considering doing this who aren't expecting the market to crash?

3 million is the answer, i read a couple of weeks back (soz can't remember site.....bear in mind this is just people ''considering'' buying a BTL in the next 12 months)

[Yonmon]

That is a bit harsh Yonmon. I think that's a terrible thing that has happened to TTRTR's aunt and I would never want that to happen to me. It sounds awful.

<{POST_SNAPBACK}>

Indeed it does, but forgive me if I don't blub too much for TTRTR and his clan.

After all, this is the guy who thinks all tenants are bad people and laughs at the misfortune of others quite regularly on HPC

[zzg113]

the question you need to be asking yourself is, how many people are considering doing this who aren't expecting the market to crash? 

3 million is the answer, i read a couple of weeks back (soz can't remember site.....bear in mind this is just people ''considering'' buying a BTL in the next 12 months)

BBB, this was from a news release by Charcol, a mortgage lender. Not exactly independent are they.

[Dicky]

the question you need to be asking yourself is, how many people are considering doing this who aren't expecting the market to crash? 

  3 million is the answer, i read a couple of weeks back (soz can't remember site.....bear in mind this is just people ''considering'' buying a BTL in the next 12 months)

<{POST_SNAPBACK}>

Total number of sales for 2004 so far is about 1.35 million, mmm 3 Million eah, someone somewhere is talking out of their ****.

[Time to raise the rents.]

**btw, at the expense of seeming harsh, the fact she managed to lose money on shares in the 90s, the time of the biggest stock market bull market in history suggests more about her shortcomings than about the relative merits of shares vs property

<{POST_SNAPBACK}>

Right you are. She studied hard to work out the ins & outs of the market. In 1998 she was ready to invest (it took her a long time to work up the courage), she invested all of her money in one stock & watched it fluctuate for a few weeks until she pulled out, then she invested in a biotech stock that went up 40% within 2 weeks of her purchase, then it went back down quite quickly & she was discussing her 'loss' with me and I, being worried she'd lose all she had, told her that she should cut her loss & keep what she's still got. She took that advice & sold up & got back slightly less than she invested. She then watched the shares wither for months & was very happy that she'd gotten out. That stock is now worthless BTW.

During the same conversation I told her that a better investment for her was an index tracker which has doubled since then. She would have doubled her money if she'd stayed with a more conservative long term bet. But she kept in in the bank & has been drawing the interest off all these years.

The problem for her is that she's looking for the big one all the time. She still talks about her next big thing. She could still afford a 1 bed flat near the caravan park she lives at now & I've told her to buy one, but she says she wants to buy a big place & subdivide the land & make a killing etc etc. But she has no income to speak of & therefore any loans are a serious risk.

But that says a lot about people. She won't do what's obviously a decent thing to do, she just dreams of what could be rather than accepting reality.

[Randall Herbert]

I have an Auntie who STR'd in 1991 in Sydney.......

I genuinely want to help others from making the same mistake as her. It's very sad as she's now about 55 & has little chance of independance in her old age.

<{POST_SNAPBACK}>

OH MY GOD TTRTR.... I think I'm going to vomit........ nice little old aunty.......lost her fortune.......in financial desparation............... I genuinly want to help others.....

Barf! Barf! Vomit!

Please TTRTR, spare us all the amateur dramatics concerning your mythical Aunty. Face it your a Bull and your only reason to contribute here is to try in some way to buoy up up market sentiment to prevent your very own get rich quick pyramid pension BTL portfolio from going down the swanee where at the moment it belongs.

Funny how your alter egos BBB/Hanable Lechter dissapear for a week and turn up in close formation singing from the same hym sheet, tempting peoples fortunes and futures back towards the abyss? Very strange? Have you no morality whatsoever?

Face it BTL is doomed. The housing market is doomed.

[Time to raise the rents.]

Maybe you should post the 88-94 stories again, we haven't seen those for a while, we might have forgotten.

[ours brun]

Please TTRTR, spare us all the amateur dramatics concerning your mythical Aunty. Face it your a Bull and your only reason to contribute here is to try in some way to buoy up up market sentiment to prevent your very own get rich quick pyramid pension BTL portfolio from going down the swanee where at the moment it belongs.

Face it BTL is doomed. The housing market is doomed.

<{POST_SNAPBACK}>

It is easily possible to have lost out by not being invested to the max in property the last few years. A regret I have is that I didn't trade up several years ago when I had the opportunity. However even if it was right then it doesn't make it right now. Do not use the past as a guide to the future!!

I am in no hurry to move now as I know the market is moving DOWN.

[zzg113]

she invested all of her money in one stock

Not good risk diversification to put all your money in one share. Very risky.

The problem for her is that she's looking for the big one all the time.

Sounds like your aunt is a bit of a get-rich-quick money-for-nothing type TTRTR. All of a sudden I don't feel quite so sympathetic.

[rainbow]

IMO, in the unlikely event of house price inflation re-appearing next year, the BOE will not hesitate increasing IR's again.

I believe that Mervin King and the rest of the MPC became extremely worried of what was happening with house price inflation and related debt, hence Mervs' doom laden warnings' to the market (desperate attempt to stop it?).

He is probably breathing a little easier now and will do whatever is needed to avoid returning to the situation.

The reality is that Merv is there long term and will therefore have to answer awkward question further down the road, unlike Mr Brown, who one way or the other, will be moving to pastures green in the not too distant future.

[Time to raise the rents.]

Not good risk diversification to put all your money in one share. Very risky.

Sounds like your aunt is a bit of a get-rich-quick money-for-nothing type TTRTR. All of a sudden I don't feel quite so sympathetic.

<{POST_SNAPBACK}>

She just recognises that if there is little risk, there is little reward. A pity more on this site don't recognise that though.

Unfortunately she's paralysed by those same risks though, a bit like people here as well.

But the fact is that her personal circumstances, no income & no home, don't warrant taking much risk.

[Big_Bad_Bear]

Little risk=little reward? Thats what those little tossers that sell financial products tell you isn't it? Probably why they are just selling the things. The smart money knows there ARE in fact scenarios where the reward far outweighs the risk and those people actively seek that type of investment.

You're not a fund salesman are you TTRTR?

[GCS15]

Only estate agents describe falls as "negative growth".

Still, I'm sure there will be plenty more talk of negative growth to look forward to in 2005.

<{POST_SNAPBACK}>

There is a great book called "weasel words" full of quotes like the "negative growth". My favourite (so far) is describing being sacked as a 'negative career event'

GCS15

Tonight I'll be experiencing a positive beer event

[London-loser]

She just recognises that if there is little risk, there is little reward. A pity more on this site don't recognise that though.

Unfortunately she's paralysed by those same risks though, a bit like people here as well.

But the fact is that her personal circumstances, no income & no home, don't warrant taking much risk.

<{POST_SNAPBACK}>

But TTRTR, aren't us HPC boys taking massive risks?

Isn't this absolutely the best time to buy a property... and if we don't we could end up like your poor aunt? That's a major risk, although one I'm happy taking.

Aren't the guys, like Van, on here who sold their homes to profit from their anticipated correction in house prices taking big enough risks for you?

Aren't I taking a huge risk in not buying a property even though I can when some people will tell me they will cost me twice as much in just six years' time?

We're just not taking the risks convention wants us to take - the "close your eyes and jump on the bandwagon, trust me 22 Acacia Avenue will be your way to a secure old age, blah, blah" type approach.

We have very much been standing against the consensus, although the consensus seems to be starting to agree with us. I expect to be made significantly wealthier from it than I would have been had I just blinded followed the orthodox view once I was financially able to do so.

Us HPC bears believes these opportunities (to profit significantly from other people's stupidity) come along only a few times in each of our lifetimes and that we should take them.

[Michael]

GCS15

Tonight I'll be experiencing a positive beer event 

<{POST_SNAPBACK}>

Not if you're drinking Aussie beer, you won't!