Visitor Posted August 31, 2007 Share Posted August 31, 2007 Perhaps we will get a soft landing but from 10000 metres there could be a precipitous fall before that gentle touch down. Quote Link to comment Share on other sites More sharing options...
bomberbrown Posted August 31, 2007 Share Posted August 31, 2007 A soft landing only for those with money illusion. To a degree, I'd say I suffer from money illusion. I still regard £150k a massive amount of money, one that should get you a pretty decent flat in a nice area of London. In 1999, the pretty decent flat I was renting in Lower Clapton, Hackney sold for £48k. You'd be lucky to get a studio bedsit crack den for £150k these days. Quote Link to comment Share on other sites More sharing options...
silver surfer Posted August 31, 2007 Share Posted August 31, 2007 There has only really been one hard landing in UK - the end of the last boom in the late 80s.Earlier booms ended with stagnant prices while (rampant) inflation brought prices and incomes back to historical norms. i.e. soft landings. Unfortunately you're right. Since the second world war there's been many booms but only one hard landing. The 1989-95 crash was the only time house prices actually fell, every other time was a soft landing with house prices staying flat and inflation doing the dirty work. I still believe we'll see some actual price falls over the next few years, I'm hopeful of about 20%. But taken in an historical context I'm realistic enough to recognise that 20% is pretty extreme. Even then 20% is an average, London and flats will fall a bit more and the rest of the country and family houses will fall a bit less. Quote Link to comment Share on other sites More sharing options...
geneer Posted August 31, 2007 Share Posted August 31, 2007 http://business.timesonline.co.uk/tol/busi...icle2360384.ecea typical soft landing? anyone able to cite other examples? Is this the same "soft landing" predicted by all and sundry before the credit lines imploded. Guess sub-prime will have no effect them. Quote Link to comment Share on other sites More sharing options...
Ethel Posted August 31, 2007 Share Posted August 31, 2007 Ahem! Why is a crash in real house prices, caused by high inflation but with no drop in nominal house prices, being touted as a "soft landing"? I disagree. Quote Link to comment Share on other sites More sharing options...
silver surfer Posted August 31, 2007 Share Posted August 31, 2007 Ahem!Why is a crash in real house prices, caused by high inflation but with no drop in nominal house prices, being touted as a "soft landing"? I disagree. Because without significant falls in nominal prices it wouldn't meet most people's definition of a crash, nor the aspirations of most of the bears on this forum, including myself! As a STR'r a price correction achieved entirely through inflationary adjustment over a protracted period would mean I'd probably made a mistake with my STR strategy. Quote Link to comment Share on other sites More sharing options...
Ethel Posted August 31, 2007 Share Posted August 31, 2007 (edited) Because without significant falls in nominal prices it wouldn't meet most people's definition of a crash, nor the aspirations of most of the bears on this forum, including myself! As a STR'r a price correction achieved entirely through inflationary adjustment over a protracted period would mean I'd probably made a mistake with my STR strategy. Who said anything about a protracted period...? All I'm saying is that it doesn't HAVE to be nominal falls to make a crash. If there was overnight huge inflation and wages rose very rapidly, it could make houses equally more affordable as nominal falls would, could it not? Why could this not be called a crash? I'm not suggesting this scenario is likely, I just want to be clear on how we are defining a crash and a soft landing. Edited August 31, 2007 by Ethel Quote Link to comment Share on other sites More sharing options...
silver surfer Posted August 31, 2007 Share Posted August 31, 2007 Who said anything about a protracted period...?All I'm saying is that it doesn't HAVE to be nominal falls to make a crash. If there was overnight huge inflation and wages rose very rapidly, it could make houses equally more affordable as nominal falls would, could it not? Why could this not be called a crash? I'm not suggesting this scenario is likely, I just want to be clear on how we are defining a crash and a soft landing. I don't think there's any clear and broadly accepted definition of a property crash. During the 1989-95 housing crash the biggest annual nominal fall in property prices was only 9%, where as in the stock market any fall of less than 10% doesn't normally qualify as a "correction" let alone a "crash"! Personally I'd argue that any adjustment achieved just through inflation would be generally regarded as a soft landing. But as you say, without a broadly accepted definition of a house price crash everyone's completely at liberty to define the terms in anyway they like, so let's not fall out, your crash can be my adjustment! Quote Link to comment Share on other sites More sharing options...
Magpie Posted August 31, 2007 Share Posted August 31, 2007 Who said anything about a protracted period...?All I'm saying is that it doesn't HAVE to be nominal falls to make a crash. If there was overnight huge inflation and wages rose very rapidly, it could make houses equally more affordable as nominal falls would, could it not? Why could this not be called a crash? I'm not suggesting this scenario is likely, I just want to be clear on how we are defining a crash and a soft landing. Isn't the easiest thing to be clear about whether one is talking about a nominal or real crash? The two have rather different consequences. If someone is waiting for a nominal crash to buy, a real crash might not do them any good. If however you are comparing HPI to other investments, a real (not nominal) crash can be highly significant. So it's important to define which you are talking about. Quote Link to comment Share on other sites More sharing options...
Guest Skint Academic Posted August 31, 2007 Share Posted August 31, 2007 Agree. But with Brown announcing he wants to keep public sector pay at CPI or less, around 1.5%, do you see the type of inflation we had in the 60's and 70's coming back ? I don't, so something will have to give. We'd price our workforce in the private sector out of many markets if inflation soared. If the prison officers and police officers are already making noises or actions towards striking, then do you think that Brown would manage to keep public sector pay at CPI when wage inflation starts in the private sector? If nothing else people would quit and find new jobs. Quote Link to comment Share on other sites More sharing options...
Ethel Posted August 31, 2007 Share Posted August 31, 2007 If nothing else people would quit and find new jobs. I'd like to see them find a better employment package than the one they're already getting. Quote Link to comment Share on other sites More sharing options...
bobthe~ Posted August 31, 2007 Share Posted August 31, 2007 the language used by VI commentators has a certain chronology to it- stellar performance - robust growth - in line with expectations - below average increase - gentle inflation - below general inflation - almost static - static - soft landing <- (we are here) - bumpy landing - hard landing - c-c-c-c... can't say it Followed by x years of signs of recovery green shoots really strong growth predicted for next year. lather rinse repeat. Quote Link to comment Share on other sites More sharing options...
Guest wrongmove Posted August 31, 2007 Share Posted August 31, 2007 (edited) Who said anything about a protracted period...? How are you going to get a real crash, with no nominal falls, in a short period? Crashes are nominal to virtually everyone. Ever heard of a "real" stock market crash? edit: just noticed you had covered this - "huge overnight wage inflation" We all wake up one morning with a 20% pay rise. Well, if that happens, I'm sure everyone will let you call it a crash. Edited August 31, 2007 by wrongmove Quote Link to comment Share on other sites More sharing options...
Benedict Posted August 31, 2007 Share Posted August 31, 2007 Ahem!Why is a crash in real house prices, caused by high inflation but with no drop in nominal house prices, being touted as a "soft landing"? I disagree. Depends on the level of equity surely? On a 100% mortgage if there's no change in nominal house prices then you're no worse off after the crash than before. If you've got 100% equity that's a bit of a crash though. Quote Link to comment Share on other sites More sharing options...
Guest mSparks Posted August 31, 2007 Share Posted August 31, 2007 Hmm Im in a funky mood today.... Rightmove:We have been buying mattresses like crazy, the more we have the softer the landing. Quote Link to comment Share on other sites More sharing options...
Guest wrongmove Posted August 31, 2007 Share Posted August 31, 2007 Depends on the level of equity surely? On a 100% mortgage if there's no change in nominal house prices then you're no worse off after the crash than before. If you've got 100% equity that's a bit of a crash though. Exactly - investors would feel pretty sick. OOs wouldn't even notice. Quote Link to comment Share on other sites More sharing options...
Benedict Posted August 31, 2007 Share Posted August 31, 2007 Exactly - investors would feel pretty sick. OOs wouldn't even notice. Quite the opposite surely? Investors on 100% IO mortgages with massive portfolios won't care, OO's with high equity in a single home watching their downsizing pension pot disappear in real terms will be gutted. Quote Link to comment Share on other sites More sharing options...
Guest wrongmove Posted August 31, 2007 Share Posted August 31, 2007 Quite the opposite surely? Investors on 100% IO mortgages with massive portfolios won't care, OO's with high equity in a single home watching their downsizing pension pot disappear in real terms will be gutted. I don't think an OO should regard their home as a pension pot - that would make them an investor to me. You cannot get 100% BTL mortgages - you must tie up cash, and pay interest on your borrowings. This is not good is your asset is stagnant while everything else inflates. The investor has options with their capital/equity. Clearly (to me) having that capital unproductive in a period of high inflation is not a good option. Quote Link to comment Share on other sites More sharing options...
Benedict Posted August 31, 2007 Share Posted August 31, 2007 I don't think an OO should regard their home as a pension pot - that would make them an investor to me.You cannot get 100% BTL mortgages - you must tie up cash, and pay interest on your borrowings. This is not good is your asset is stagnant while everything else inflates. The investor has options with their capital/equity. Clearly (to me) having that capital unproductive in a period of high inflation is not a good option. All down to semantics really, I think any OO with a family home whose next move is downwards is entitled to hope for their home to be a pension pot without being labelled an investor (which is a bit of a dirty word on this site). Presumably in a period of stagnation that'd hasten people downshifting too, while prices keep going up there's no sense releasing all these big homes onto the market but when it's a choice between cashing in and getting 6% or staying around and getting nothing there's a bit more incentive. Should hopefully free the top rungs up a bit, less couples kicking around an empty 4 bed family home. Quote Link to comment Share on other sites More sharing options...
Guest wrongmove Posted August 31, 2007 Share Posted August 31, 2007 All down to semantics really, I think any OO with a family home whose next move is downwards is entitled to hope for their home to be a pension pot without being labelled an investor (which is a bit of a dirty word on this site). Presumably in a period of stagnation that'd hasten people downshifting too, while prices keep going up there's no sense releasing all these big homes onto the market but when it's a choice between cashing in and getting 6% or staying around and getting nothing there's a bit more incentive. Should hopefully free the top rungs up a bit, less couples kicking around an empty 4 bed family home. Investor is certainly not a dirty word to me. I just mean someone who views their property(s) as cash generators, not as simply a place to live. Even having said that, an OO's paid for prop is part of their pension in that it massively reduces their outgoings in later life - no rent to pay. I don't really get your point about timing - I would have thought that booms are the best time to downsize - maximum gap between the "steps on the ladder". I certainly agree with your concluding sentence though. Trouble is, it's just more competion for FTB type props. Quote Link to comment Share on other sites More sharing options...
Benedict Posted August 31, 2007 Share Posted August 31, 2007 Investor is certainly not a dirty word to me. I just mean someone who views their property(s) as cash generators, not as simply a place to live. Even having said that, an OO's paid for prop is part of their pension in that it massively reduces their outgoings in later life - no rent to pay.I don't really get your point about timing - I would have thought that booms are the best time to downsize - maximum gap between the "steps on the ladder". I certainly agree with your concluding sentence though. Trouble is, it's just more competion for FTB type props. I'd have thought there's lots of people who've stretched for a big family home and perhaps made less contributions to their pensions on the grounds that they get the benefit of a big house when they need it and can downsize to a retirement flat later and top up their pension then. Which is speculation of a sort, but not really rampant profiteering I'd have thought. Hmmm . . . my point about timing . . . well, best to do it at the top of a boom really rather than at the bottom, obvious I guess. I suppose I was thinking that the supply and demand get skewed, with HPI everyone wants to trade up because the rungs are widening thus increasing demand at the top while because their capital is doing as well in the house as anywhere else and they get to stay in their big home while they're about it nobody wants to trade down thus constraining supply. So the supply / demand pressures are most acute at the top of the ladder. Quote Link to comment Share on other sites More sharing options...
Austin Allegro Posted August 31, 2007 Share Posted August 31, 2007 Trying to engineer a soft landing is like trying to "engineer" a bridge made out of crisps Alec Guinness: 'we're going to build you that bridge of crisps Colonel Brown...and it'll be the best damned bridge you've ever seen! *cue 'Colonel Bogey' theme* Quote Link to comment Share on other sites More sharing options...
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