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dog

Caveat Emptor

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There is compelling evidence that the UK housing market is facing a very rough ride. This follows problems in France, the US and Spain. A year ago when the housing market was absurdly overvalued, what did people do?

Investors dump shares to buy property

BTLs not only bought property at grossly over valued prices but they also paid scant attention to rental income. Over valued assets with negative income. As investments go, these truly qualify as 'pedigree dogs'.

Why did people do it? The only answer to this question can be 'because 'everyone else was doing it'. A classic case of a market driven by herd mentality. When these people sold their shares, they would have been fixated on the following statistic:

Over the past 10 years house prices have risen by more than share prices. Property values are 182% higher, according to the Halifax house-price index, compared with a rise of 57% for the FTSE All-Share index.

If they had looked earlier statistics however they would have seen a different picture.

In the preceding 10 years, 1986 to 1996, the All-Share rose 138%, while house prices went up by only 62%.

So what about the next 10 years? My prediction is:

Shares up by 150%

House prices fall by half.

Many more BTLs back in honest work.

Edited by dog

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So what about the next 10 years? My prediction is:

Shares up by 150%

Houses down by 100%

If houses go down by 100%, people will be giving them away. Even in a GC2 scenario I'd be surprised if things get that good bad!

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If houses go down by 100%, people will be giving them away. Even in a GC2 scenario I'd be surprised if things get that good bad!

I put it badly. What I meant was house prices fall by half. I shall correct it.

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I put it badly. What I meant was house prices fall by half. I shall correct it.

I've starting to wonder with debt markets screwed and property slumping whether shares (for perhaps the first time in history) become the safe haven for cash.

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I've starting to wonder with debt markets screwed and property slumping whether shares (for perhaps the first time in history) become the safe haven for cash.

I have thought the same myself.

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Guest Skint Academic
I've starting to wonder with debt markets screwed and property slumping whether shares (for perhaps the first time in history) become the safe haven for cash.

Apparently during Japan's last bubble, both shares and property prices rose together. The reason being that when valuing a company you take into account the assets that it holds. This includes the property owned by the company such as outlets and stores.

There's been quite a bit of investment in HPI by companies. Even Alan Sugar now seems solely concerned with properties in Mayfair.

http://en.wikipedia.org/wiki/Alan_Sugar

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