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How Much Would Btls Be Willing To Lose?


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The figures are RPI adjusted. It takes the means as it shows a truer picture of the times. If you take one month in isolation, that is all it is, one month in isolation. For example 'The new paradigmn' theory isn't about one brief moment in time,  it is about a new era, with a new set of economic conditions.

      By taking the mean it is also fairer on you bears, as the very late 80's saw IR's hit almost 15%, however this was for a very short period of time, so again the mean evens the whole thing out. You say why look at 7 years? well the economic cycles have always more or less followed seven year cycles. However my point is that with this cycle, we are not even close to where rates were in the last peak. no where near, either nominal or real.

     I'll dig up the full workings of this if you want to see exactly what I mean in black and white?

    The answer to your question.

      Yes BTL's will continue to buy, anecdotally I am seeing a slight surge again, in recent weeks.However don't take my word on it try one of your own

    http://www.housepricecrash.co.uk/forum/ind...?showtopic=5476

It is lower priced properties that are being bought (sub 120k) however this is the only area BTL's need to be active in, owner occupiers can take care of the rest of the market.In London more expensive properties work as BTL a la TTRTR's sharers.

   I honestly think that fundamentally FTB'ers are no longer required to turn the market over. I know that comment may infuriate many of ou FTB'ers , however that is the reality.I know that many of you disregard Sipps, however you'd only need a 40 or 50k pension pot to get involved in this. Again this will all add fuel to the bottom end of the market.As with a fire, it's only the bottom you need to put the fuel onto. Every man and their dog wants into BTL still with the likes of you chaps sitting on the sidelines renting, you only add more fuel to the fire yourselves.

I can't believe you've 'got me into' writing reams on here, you've done it so you can call me a hypocrite haven't you?

KOTC.

KOTC,

Thanks for a vaguely sensible response. At this rate people will have to stop calling you a troll (me included) and start arguing your points.

The trouble with the "new paradigm" theory, though, is that you cannot compare it to other periods - by definition... it's a NEW paradigm. So, if you are a new paradigmer then what nominal or real IRs are compared to some time in the past is entirely irrelevant.

I'm not sure that economic cycles are seven years long (as evidence by the fact that both the seven year periods you choose to look at are boom periods). I believe Gordon Brown talks about ten years as a cycle while other argue the cycle in the housing market is a generational thing, 20 years or so (so that people have enough time to forget/not have been around for the last bust and build up the next one).

I wonder what your numbers might tell you, for example, about the real interest rate in 2004 compared with an average over say 50 years? I suspect the story is not nearly as exciting as the one you want to tell.

I'm not sure I understand what "a slight surge" is.

No matter, I don't see how your "slight surge" of BTLs buying sub-£120k properties is going to help, especially around where I live where a studio will cost you that if you are lucky. BTLs and FTBs need to buy something like 90,000 properties per month to keep the market FLAT (more to actually make it rise).

As for TTRTR buying four bed houses in London, I'm not sure how that will keep the market up if the price pressure is on the one/two bed flats (that BTLs aren't buying in your view and are too highly priced for FTBs).

Fundamentally FTBs are only irrelevant IF there are enough BTLs buying... continuously, 90,000 properties per month, every month, just to keep the market FLAT (i.e. without ANY capital growth). Given the cost of borrowing (let's say 5.5%, maybe), the typical yield (6%, maybe) it seems you need a lot of people willing to take a negative/poor return for an unknown period of time to keep pouring into the (investment) property market.

Sipps have been done to death on this site. Firstly they won't even START to help the market until April 2006 (the rules do not change until then). Secondly, your suggestion that you only need £40-50k is a bit optimistic I feel.

Someone with £50k in a Sipp can buy a £75k property (well short of the £120k you say BTLs are typically buying) AND you'd have to agree to bet your ENTIRE pension on that one £75k flat. You might feel there is a queue of people waiting to do that in 14 months' time but I very much doubt it.

As for every man and his dog wanting into BTL and renters like me adding fuel to the fire, I think that is really wishful thinking. The first is fairly evidently not true or else we would not have the current housing market slump we do have (near-ten year low in mortgage applications etc). The second? Well, I ALREADY RENT, so at best I help maintain the status quo without adding any new fuel to the fire.

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KOTC,

Thanks for a vaguely sensible response. At this rate people will have to stop calling you a troll (me included) and start arguing your points.

The trouble with the "new paradigm" theory, though, is that you cannot compare it to other periods - by definition... it's a NEW paradigm. So, if you are a new paradigmer then what nominal or real IRs are compared to some time in the past is entirely irrelevant.

I'm not sure that economic cycles are seven years long (as evidence by the fact that both the seven year periods you choose to look at are boom periods). I believe Gordon Brown talks about ten years as a cycle while other argue the cycle in the housing market is a generational thing, 20 years or so (so that people have enough time to forget/not have been around for the last bust and build up the next one).

I wonder what your numbers might tell you, for example, about the real interest rate in 2004 compared with an average over say 50 years? I suspect the story is not nearly as exciting as the one you want to tell.

I'm not sure I understand what "a slight surge" is.

No matter, I don't see how your "slight surge" of BTLs buying sub-£120k properties is going to help, especially around where I live where a studio will cost you that if you are lucky. BTLs and FTBs need to buy something like 90,000 properties per month to keep the market FLAT (more to actually make it rise).

As for TTRTR buying four bed houses in London, I'm not sure how that will keep the market up if the price pressure is on the one/two bed flats (that BTLs aren't buying in your view and are too highly priced for FTBs).

Fundamentally FTBs are only irrelevant IF there are enough BTLs buying... continuously, 90,000 properties per month, every month, just to keep the market FLAT (i.e. without ANY capital growth). Given the cost of borrowing (let's say 5.5%, maybe), the typical yield (6%, maybe) it seems you need a lot of people willing to take a negative/poor return for an unknown period of time to keep pouring into the (investment) property market.

Sipps have been done to death on this site. Firstly they won't even START to help the market until April 2006 (the rules do not change until then). Secondly, your suggestion that you only need £40-50k is a bit optimistic I feel.

Someone with £50k in a Sipp can buy a £75k property (well short of the £120k you say BTLs are typically buying) AND you'd have to agree to bet your ENTIRE pension on that one £75k flat. You might feel there is a queue of people waiting to do that in 14 months' time but I very much doubt it.

As for every man and his dog wanting into BTL and renters like me adding fuel to the fire, I think that is really wishful thinking. The first is fairly evidently not true or else we would not have the current housing market slump we do have (near-ten year low in mortgage applications etc). The second? Well, I ALREADY RENT, so at best I help maintain the status quo without adding any new fuel to the fire.

You have to look to the past in order to compare where we are at now, I find it real strange that you would want to look at here and now in isolation. How would we ever even know this was a new 'era' if we didn't compare it with the past? History teaches us that a new set of economic conditions now exist. IR's rates are historically still low whether we go off real or nominal rates. Why not compare the two peaks? It's the logical thing to do. A few lines on a graph do not tell the full story.

Think about if you did a graph on say death rates in the UK circa the 14th century, you wouldn't know why there was a huge peak around the middle of the century, unless you researched the fundamentals of the era.

The p/e ratio today is highly comparable today to what it was in the last peak, ie more or less the same (admittedly approx 10% or so higher today) however real averaged IR's are almost 140% less.

I will repeat that for clarity,mean real, or real mean! IR's that have 'brought us' to where the market is today are almost 140% cheaper today than in the last peak.

Surely even the hardest bear has to see the relevance of this? affordability.

I think comparing things to the late 80's and early 90's is more relevant to comparing things to post war britain. Today we have a similar society and economy to the former rather than the latter. none the less I would stick my neck out and say that even going that far back (as a longterm average mind you, ie the average of every year taken, they averaged again , the mean of means if you like, then takeaway the average inflation ) you will still find real IR's considerably cheaper. I've looked on the BOE website, and I don't think their pure BR's go that far back, some are retail and so forth. RPI goes back to 1800 and odd so that would be no problem. However as I say I think comparing the two recent peaks in HPI is far more relevant. (for which I've already seen the workings of)

As for the rest of your post, well we're really just swapping opinions there, however for what it's worth I stand by what I said and the reason why we have seen such an unstable market really is quite clear. The emergency IR's of 3.5% obviously could not last forever, they had to come up from their lows, most buyers need some direction, which we now have (hold) and at the end of the day who exactly would buy a house ,well apart from the brave with old Merve's immortal warnings reverbrating through their minds?

The boom is dead, I don't think anyone is disputing that with you, however the conditions simply do not exist for a full blown HPC. normality will prevail this coming spring, all in my (researched,educated, and witnessed) opinion of course.

KOTC.

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You have to look to the past in order to compare where we are at now, I find it real strange that you would want to look at here and now in isolation. How would we ever even know this was a new 'era' if we didn't compare it with the past? History teaches us that a new set of economic conditions now exist. IR's rates are historically still low whether we go off real or nominal rates. Why not compare the two peaks? It's the logical thing to do. A few lines on a graph do not tell the full story.

  Think about if you did a graph on say death rates in the UK circa the 14th century, you wouldn't know why there was a huge peak around the middle of the century, unless you researched the fundamentals of the era.

The p/e ratio today is highly comparable today to what it was in the last peak, ie more or less the same (admittedly approx 10% or so higher today) however real averaged IR's are almost 140% less.

    I will repeat that for clarity,mean real, or real mean!  IR's that have 'brought us' to where the market is today are almost 140% cheaper today than in the last peak.

  Surely even the hardest bear has to see the relevance of this? affordability.

I think comparing things to the late 80's and early 90's is more relevant to comparing things to post war britain. Today we have a similar society and economy to the former rather than the latter. none the less I would stick my neck out and say that even going that far back (as a longterm average mind you, ie the average of every year taken, they averaged again , the mean of means if you like, then takeaway the average inflation ) you will still find real IR's considerably cheaper. I've looked on the BOE website, and I don't think their pure BR's go that far back, some are retail and so forth. RPI goes back to 1800 and odd so that would be no problem. However as I say I think comparing the two recent peaks in HPI is far more relevant. (for which I've already seen the workings of)

  As for the rest of your post, well we're really just swapping opinions there, however for what it's worth I stand by what I said and the reason why we have seen such an unstable market really is quite clear. The emergency IR's of 3.5% obviously could not last forever, they had to come up from their lows, most buyers need some direction, which we now have (hold) and at the end of the day who exactly would buy a house ,well apart from the brave  with old Merve's immortal warnings reverbrating through their minds?

    The boom is dead, I don't think anyone is disputing that with you, however the conditions simply do not exist for a full blown HPC. normality will prevail this coming spring, all in my (researched,educated, and witnessed) opinion of course.

    KOTC.

If interest rates are 140% cheaper i think you will find that property is 140% more expensive therefore counteracting your argument and meaning you are a sucker for believing yourself

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If interest rates are 140% cheaper i think you will find that property is 140% more expensive therefore counteracting your argument and meaning you are a sucker for believing yourself

You'd have a point if wages had not increased over the last 15 or so years. If you read my post I do acknowledge that p/e is slightly higher today , but only 10% or so. I'm not being rude but you obviously don't understand economics if you don't know what I mean by that.

Go and learn the basics then I can at least speak to you on the same level.

KOTC.

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The boom is dead, I don't think anyone is disputing that with you, however the conditions simply do not exist for a full blown HPC. normality will prevail this coming spring, all in my (researched,educated, and witnessed) opinion of course.

KOTC.

I'll give you some conditions for a HPC. Firstly I think we are starting to witness the first phase of a HPC anyway but for arguments sake let's say we need a trigger. All those people that have bought in the last 12-18 months with 95% - 100% LTV mortgages are probably now in NEGATIVE EQUITY (7 months of price falls). Even if things stabilised now when they come off their fixed income mortgages they won't be able to switch and will have to go onto the banks SVR mortgage. If we only get a .25 or .5 increase in IRs which IMO is looking increasingly likely these people will be looking at their mortgage IRs DOUBLING. You watch the repossession figures then and given that it doesn't take much of a shift in buyers v sellers to put more property on the market than there are buyers for that property you have one very good ingredient for a massive crash!

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You'd have a point if wages had not increased over the last 15 or so years. If you read my post I do acknowledge that p/e is slightly higher today , but only 10% or so. I'm not being rude but you obviously don't understand economics if you don't know what I mean by that.

    Go and learn the basics then I can at least speak to you on the same level.

    KOTC.

If i didn't understand basic economics i think i would be saying what you are saying and believing my own b#ll#cks. Think I have forgotten more than you know!!

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You have to look to the past in order to compare where we are at now, I find it real strange that you would want to look at here and now in isolation. How would we ever even know this was a new 'era' if we didn't compare it with the past? History teaches us that a new set of economic conditions now exist. IR's rates are historically still low whether we go off real or nominal rates. Why not compare the two peaks? It's the logical thing to do. A few lines on a graph do not tell the full story.

  Think about if you did a graph on say death rates in the UK circa the 14th century, you wouldn't know why there was a huge peak around the middle of the century, unless you researched the fundamentals of the era.

The p/e ratio today is highly comparable today to what it was in the last peak, ie more or less the same (admittedly approx 10% or so higher today) however real averaged IR's are almost 140% less.

    I will repeat that for clarity,mean real, or real mean!  IR's that have 'brought us' to where the market is today are almost 140% cheaper today than in the last peak.

   Surely even the hardest bear has to see the relevance of this? affordability.

I think comparing things to the late 80's and early 90's is more relevant to comparing things to post war britain. Today we have a similar society and economy to the former rather than the latter. none the less I would stick my neck out and say that even going that far back (as a longterm average mind you, ie the average of every year taken, they averaged again , the mean of means if you like, then takeaway the average inflation ) you will still find real IR's considerably cheaper. I've looked on the BOE website, and I don't think their pure BR's go that far back, some are retail and so forth. RPI goes back to 1800 and odd so that would be no problem. However as I say I think comparing the two recent peaks in HPI is far more relevant. (for which I've already seen the workings of)

   As for the rest of your post, well we're really just swapping opinions there, however for what it's worth I stand by what I said and the reason why we have seen such an unstable market really is quite clear. The emergency IR's of 3.5% obviously could not last forever, they had to come up from their lows, most buyers need some direction, which we now have (hold) and at the end of the day who exactly would buy a house ,well apart from the brave  with old Merve's immortal warnings reverbrating through their minds?

    The boom is dead, I don't think anyone is disputing that with you, however the conditions simply do not exist for a full blown HPC. normality will prevail this coming spring, all in my (researched,educated, and witnessed) opinion of course.

    KOTC.

KOTC,

I do not want to look at the past in isolation. I am not a new paradigmer (who says "history is bunk, it's all different this time"). Equally I do not want to look selectively at the past.

But if you look to the past how can you ONLY compare one peak with another peak?

If you look at the number of deaths in WW2 and compare them with the number of deaths in WW1 would that help you decide whether the level of deaths is high or not and whether this level of deaths will continue forevermore? Would you conclude we should all just get used to the idea that we are most likely going to die soon?

Would you not instead conclude WW1 numbers were outrageously high but then the death rate returned to "normality", we are currently in a war, death rates will be high until the war ends when we might expect a return to normality?

Similarly a comparison with death rates during the Black Death period (in isolation) will not help you greatly.

Feel free to generate long-term real interest rates to justify your view that the current levels are incredibly low.

You may or may not know it but Tim Congdon (of Lombard Street Research), has actually analysed in-depth the impact of changes in real interest rates on the current housing market. He concluded they have been a little lower in recent years (but not dramatically) and can explain a small part of the differential between today's housing prices and historic averages. He still concludes we need something like a 30-40% real-terms correction.

I think he is a very bright guy and actually a housing market bull (relatively speaking anyway - he does not see a CRASH coming more of a steady downward correction).

As for the rest of your comments they seem like wishful thinking again rather than backed up by solid evidence.

I would say your "emergency" IRs were actually not an emergency but were an over-reaction (hence RPIX inflation rode above the MPC's target some 18-24 months after the action was taken). They stoked the bubble, which we now need to correct.

I'm confused as to how you feel we have a "hold" signal of direction. The information seems to me to very much point downward still precisely because the market NEEDS people to buy in this environment (with warnings from the MPC still reverberating, with risks of further interest rate rises, with low rental yields etc).

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Oh yes you are.

That chap called me a sucker, I wasn't being rude, he plainly has no idea what a P/E is otherwise he wouldn't be looking at the rise of house prices in isolation and would be looking at their place in relation to todays income.

Over the last ten years wages have increased 50%. House prices have increased 300%. The p/e now is higher than at the peak of the last crash.

Why are you quoting the last ten years only? It's peak to peak we are talking about. I think you will find average wage has at least doubled.

If you care to read my post properly You will find that I acknowledge that P/e today is slightly higher, however the fact that real IR's are 140% cheaper more than compensates for this.

What was the point in your post? it fails to address my argument totally.

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What year are you taking as the last peak? 1989?'90?'91?

would be looking at their place in relation to todays income.

Which is higher than they have ever been before in recorded history.

It's peak to peak we are talking about.

Why?

I think you will find average wage has at least doubled.

No, it has not.

http://www.statistics.gov.uk/STATBASE/Expo...heets/D7935.xls

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This is just as I expected, no middle ground between us what so ever .

I will continue to add my injections of truth onto the forum,and state my opinions but to argue ad infinitum on a thread isn't my idea of being constructive in life.The worrying thing is you chaps look as if you'd be prepared to keep this thread going for ever. None the less thanks for the debate.

If you wish to look upon my early departure as a ''victory'' then please feel free.

I'm off to drop some keys to an agent for a few of my properties.

KOTC.

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This is just as I expected

I asked you a couple of fairly simple questions. Why the sudden departure?

I will continue to add my injections of truth

They're injections of something, but it ain't "truth".

If you wish to look upon my early departure as a ''victory'' then please feel free.

OK.

WHAT A COP-OUT! I prove that some of what KOTC has been saying is FACTUALLY incorrect, and he throws his toys out of the pram! Classic! :lol::lol::lol::lol::lol:

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The sad thing is ZZQ113 (version 2.1H?) is that you seem to think anyone cares!

The sad thing is, IS, that you take every opportunity to cuss me that you possibly can. Insecure much?

If you don't care about any of this, then why are you on the site?

Are you now imagining the tumultous applause following your winning remarks.

No.

6,300 and rising eh.

Yes, well done, you can read. What's your point? (if you have one, that is, which I doubt)

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Well I am definitely going to go and take a load of pictures of the blocks of flats round here and post them.

BTL Landlords not leaving? Wow, round here they are trying to exit in their hundreds. Every block of flats has an army of Estate Agent's signs outside them. Some For Sale, some To Let, and loads with For Sale/To Let on the same sign.

Thousands of idiots round here bought into the one-way bet argument, MEWed for a deposit and bought a flat as an investment over the last few years. Unlike other parts of the country the peak round here was hit about 2 years ago. We have already had 2 years of static/falling prices.

Now IRs have gone up 35% in the last year. Lots of these new BTL landlords are hurting and scared. Hence all the For Sale signs. If all those For Sale signs were for people looking to sell and move up the market, the market would be buoyant now. But they are not. These BTL landlords are simply increasing supply as they try to get out.

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Guest Charlie The Tramp
BTL Landlords not leaving? Wow, round here they are trying to exit in their hundreds. Every block of flats has an army of Estate Agent's signs outside them. Some For Sale, some To Let, and loads with For Sale/To Let on the same sign.

I wondered why the local EA was advertising great opportunities available for Buy To Let. Never a better time to invest for the future. :rolleyes:

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Now IRs have gone up 35% in the last year. Lots of these new BTL landlords are hurting and scared. Hence all the For Sale signs. If all those For Sale signs were for people looking to sell and move up the market, the market would be buoyant now. But they are not. These BTL landlords are simply increasing supply as they try to get out.

The sudden rush of BTLers selling up was being predicted as the trigger to a crash 2-3 years ago. That time is now upon us.

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zzg113

The only reason why I have come back to this thread is to contradict the straw man you have made of me. As I say we can talk about opinions until the cows come home, but facts are facts, or at least they were until I met you.

The link you provided for income only starts at 1993,I think you will find that 1993 was the trough, not the peak! Nationwide show the first nominal fall in 1990, here are the average wages from peak to peak ,

£13,686

£14,017

£14,312

£14,452

£14,804

£15,066

£15,327

£15,588

£15,850

£16,025

£16,201

£16,219

£16,500

£16,677

£16,819

£16,960

£16,957

£17,151

£17,291

£17,432

£17,555

£17,661

£17,837

£17,978

£18,278

£18,491

£18,668

£18,846

£19,115

£19,401

£19,687

£19,919

£19,994

£20,224

£20,383

£20,613

£20,805

£21,087

£21,350

£21,632

£21,824

£22,126

£22,480

£22,852

£23,098

£23,313

£23,510

£23,778

£24,159

£24,357

£24,519

£24,753

£24,742

£25,100

£25,194

£25,878

£25,805

£26,079

The first figure shown is Q1 1990, and the last is Q3 2004 . I think you will find that is peak to peak. If you can find me a link showing 1993 as the peak of prices , then we'll talk.

Now getting back to what I said, I said

I think you will find that average wage has at least doubled

OK it's risen 90%, pretty close for a throw away off the cuff remark. So why do you feel the need to show stats from three years sooner?

If only you had the same zest looking for a house as you do making false arguments, you'd be a true victor.

KOTC.

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