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volvos60

Is Property Now Safer Than Cash?

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Given the failure of Bear Stearns, & the likely failure of more banks on both sides of the Atlantic, the BoE & FED will now slash interest rates. This will lead to a serious risk of high inflation, thus eroding the purchasing power of any cash stash you may have. Particularly significant of you are STR of have large savings. So what to do?

Gold is in my view in it's own bubble. It also pays no interest of dividend & can be very volatile.

Equities are heading mor a big fall, most likely.

So the question is should one now consider property again, at say 20% off asking. Maybe this is why there are still a few buyers out there - are they being smart perhaps.

I have in recent years been very bearish on house prices, & still am. However, given te speed of the likely global economy implosion, does the forum think property may now be the best of a bad bunch?

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Guest muttley
Given the failure of Bear Stearns, & the likely failure of more banks on both sides of the Atlantic, the BoE & FED will now slash interest rates. This will lead to a serious risk of high inflation, thus eroding the purchasing power of any cash stash you may have. Particularly significant of you are STR of have large savings. So what to do?

Gold is in my view in it's own bubble. It also pays no interest of dividend & can be very volatile.

Equities are heading mor a big fall, most likely.

So the question is should one now consider property again, at say 20% off asking. Maybe this is why there are still a few buyers out there - are they being smart perhaps.

I have in recent years been very bearish on house prices, & still am. However, given te speed of the likely global economy implosion, does the forum think property may now be the best of a bad bunch?

You are making quite a few assumptions here.

We don't know there will be more bank failures. We certainly can't say they are "likely."

Slashing interest won't necessarily lead to inflation. It didn't in Japan.

We can't be sure that equities are "most likely" heading for a big fall. They rose by 50% during the last major recession.

Gold may, or may not be in a bubble. It certainly still has legs at the moment.

I reckon cash, shares, bonds and commodities will all outperform property in the short term. What happens after that is back to the inflation/deflation argument.

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The equity in property was propelled to its current height by the development of a mortgage securities market.

The lack of peer to peer regulation has manifested itself in widespread fraud and misappreciation of risk.

Kick the securities market away, as has happened, and property looks very Wilie E Coyote.

Property will tank much further and harder than any other asset or currency.

Things to look for are discount production capacity. Especially in emerging economies. I think only Brazil is the surefire option for real growth on a 12-18 month outlook. I say this as the commodities boom drives the domestic economy as Brazil enjoys record inward foreign investment.

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Are you in danger of repeating yourself? TROLL ALERT apt I feel :P

FM - I'm no troll. I submitted this topic & it did not appear for around an hour on the forum, so I thought the mods had not allowed it for some reason. Hence I asked the question in anothe topic as I really wanted it discussed, then it seems this topic was given clearance - hence the unintended appearance of double posting.

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But you miss out a big factor - lack of liquidity! This is one of the major factors in the credit crunch!

This means banks need peoples cash more than ever - so will offer (as we are already seeing) very attractive rates to savers (much higher than the base rates).

The cash is also insured (assuming you spread it between banks up to 35k in each), so no property is not safer than cash - cash is still the far better option.

Edited by Pete95

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You are making quite a few assumptions here.

We don't know there will be more bank failures. We certainly can't say they are "likely."

Slashing interest won't necessarily lead to inflation. It didn't in Japan.

We can't be sure that equities are "most likely" heading for a big fall. They rose by 50% during the last major recession.

Gold may, or may not be in a bubble. It certainly still has legs at the moment.

I reckon cash, shares, bonds and commodities will all outperform property in the short term. What happens after that is back to the inflation/deflation argument.

Sorry to be pedantic but it fuelled the massive asset inflation here though, through the currency carry trade... I can't see that there would be a similar "hidden" (from CPI) conduit for the flood of liquidity produced IF the same policy was adopted stumbled into here and in the US.

I agree that they are massive assumptions, and to use any of these to promote the purchase of property is quite absurd :lol:

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Without variables it's a pointless question. If you have a timeframe worked out and what you will do with the money involved then people can give opinions.

Edited by maxwell

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NR failed 6 months ago. Interest rates haven't been slashed. Saver rates have risen if anything.

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General inflation won't harm str's, as it is going to be accompanied by HP deflation.

that is a dangerously over-simplyfied thing to think.

when you buy a house the house price isn't the only thing you pay.

in a highly inflationary environment you would have big tax increases, so everything from your stamp duty to your HIPS will go up a good amount.

the general inflation in everything else will limit your ability to save lowering the amount you will have to put down.

your mortgage is going to be a lot more expensive, along with the council taxes once you've moved in.

etc etc etc.

you ALWAYS want to maximise the returns you are making, especially in a high inflation environment, otherwise you can end up holing an amount of money that does you little good, but took a lot of effort to save.

Housing, on average, got to about %50 overvalued (based on income multiples) at the peak.

actual cash under the mattress is always losing value in any inflationary environment, and would lose much faster if it picked up.

in the 70s cash lost at least half of it's value, so real cash and house prices could be on about par with a good dose of stagflation.

bonds would save you some of the value of that cash, but if the inflation rate is highly under-stated, like I think it is now, it might not save you all that much in the long run.

stocks are still highly priced historically imo, and could easily come down another %30-%40 but should then at least track inflation. but they also face a massive crash in the event of a major recession, so are riskier than commodities etc. in certain ways.

gold and other commodities might indeed be over-priced as well, I think they are, but I doubt that they will fall %50 at this point like housing, and from there on out they should at least track inflation (like housing and stocks).

in the near term, I would think index linked bonds are probably the safest until we have a better idea of how things are heading, with maybe commodities coming in after they have pulled back a bit.

2 or 3 years from now housing might come to the fore, as the largest drops hopefully will have occurred, and you will get the benefit of inflation erodes the value of your mortgage AND a much lower initial price.

all of that relies on there being at least stagflationary higher inflation.

if we deflate bonds will be pretty unbeatable.

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Purely :P in cheek, as for property with house sale volume down to what was it 51k, and in spring with lending as tight as a nats **** I will stay well away for now, each to their of of course but I see big falls ahead in the housing market.

The best investment right now though tough to call in this climate.

FM - I'm no troll. I submitted this topic & it did not appear for around an hour on the forum, so I thought the mods had not allowed it for some reason. Hence I asked the question in anothe topic as I really wanted it discussed, then it seems this topic was given clearance - hence the unintended appearance of double posting.

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So the question is should one now consider property again, at say 20% off asking. Maybe this is why there are still a few buyers out there - are they being smart perhaps.

Accepting HPC why would you want a depreciating asset denominated in a devaluing currency? The only arguments I can see are:

i. houses continue to increase in value faster than IRs

ii. you don't want to lose money in a bank failure

iii. you want somewhere to live (did you consider renting?)

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You are making quite a few assumptions here.

We don't know there will be more bank failures. We certainly can't say they are "likely."

Slashing interest won't necessarily lead to inflation. It didn't in Japan.

We can't be sure that equities are "most likely" heading for a big fall. They rose by 50% during the last major recession.

Gold may, or may not be in a bubble. It certainly still has legs at the moment.

I reckon cash, shares, bonds and commodities will all outperform property in the short term. What happens after that is back to the inflation/deflation argument.

I recall a conversation with my solicitor a few weeks prior to NR going down. He said there has never been a run on a bank and chances were there would never be one :P

Ok, it worked out for me....... I checked his insurance :lol:

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Given the failure of Bear Stearns, & the likely failure of more banks on both sides of the Atlantic, the BoE & FED will now slash interest rates. This will lead to a serious risk of high inflation, thus eroding the purchasing power of any cash stash you may have. Particularly significant of you are STR of have large savings. So what to do?

Gold is in my view in it's own bubble. It also pays no interest of dividend & can be very volatile.

Equities are heading mor a big fall, most likely.

So the question is should one now consider property again, at say 20% off asking. Maybe this is why there are still a few buyers out there - are they being smart perhaps.

I have in recent years been very bearish on house prices, & still am. However, given te speed of the likely global economy implosion, does the forum think property may now be the best of a bad bunch?

Is property safer than cash? I suspect not. I think that falls of 50% or thereabouts is on the cards for property.

Is gold safer than cash? I suspect not. The price has gone too far.

Are bank shares safer than cash? I suspect yes if you can separate the wheat from the chaff. Yields on bank shares are very good and the credit crunch is giving banks an opportunity to improve margins.

Are other shares safer than cash? Definitely (medium to long term), providing you are selective. There are growing markets all over Asia and South America. Germany is on the way back as is Japan.

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The equity in property was propelled to its current height by the development of a mortgage securities market.

The lack of peer to peer regulation has manifested itself in widespread fraud and misappreciation of risk.

Kick the securities market away, as has happened, and property looks very Wilie E Coyote.

Property will tank much further and harder than any other asset or currency.

Things to look for are discount production capacity. Especially in emerging economies. I think only Brazil is the surefire option for real growth on a 12-18 month outlook. I say this as the commodities boom drives the domestic economy as Brazil enjoys record inward foreign investment.

Before investing in Brazil DYOR

http://www.bloomberg.com/apps/news?pid=new...id=aitfi4RyILCY

Nice to see Brazil's government jumping in before a bubble forms, I wonder if they will be as quick to act on other investments?

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Before investing in Brazil DYOR

http://www.bloomberg.com/apps/news?pid=new...id=aitfi4RyILCY

Nice to see Brazil's government jumping in before a bubble forms, I wonder if they will be as quick to act on other investments?

Real smart on the part of the Brazilians I'd say. And nice to see the hot money taking a beating for once. Thanks for the link.

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I think were going to have a bit of both the government loves a balancing act, higher inflation, lower interest rates but higher borrowing costs (bigger spread to reflect the risk), andthe end of the crash houseprices will be down a little, but wages will have caught up with the current price level. Accodring to stats we are currently 30-40% overvalued, 0-15% falls, the rest in wage inflation.

Edited by moosetea

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Given the failure of Bear Stearns, & the likely failure of more banks on both sides of the Atlantic, the BoE & FED will now slash interest rates. This will lead to a serious risk of high inflation, thus eroding the purchasing power of any cash stash you may have. Particularly significant of you are STR of have large savings. So what to do?

Gold is in my view in it's own bubble. It also pays no interest of dividend & can be very volatile.

Equities are heading mor a big fall, most likely.

So the question is should one now consider property again, at say 20% off asking. Maybe this is why there are still a few buyers out there - are they being smart perhaps.

I have in recent years been very bearish on house prices, & still am. However, given te speed of the likely global economy implosion, does the forum think property may now be the best of a bad bunch?

I think you raise an interesting point. So simple answer is that a balanced portfolio is the lowest risk (and that is always the case). So a mixture of safe government backed investments (eg NS&I, maybe some premium bonds), a well diversified equity tracker (eg FTSE 100 tracker) with an emphasis on the best established companies, some property, some commodities, some cash holdings in euros and dollars. You get the idea.

However, the more interesting point is that I think it might depend on where you are in terms of acquiring your desired wealth. So, if like me, you are interested in owning a house that is better than your current abode (whether you rent or currently own), then holding property might not be such a bad idea. My reason is that what wealth I have is primarily destined to be held in three asset classes: firstly, property (a family home), secondly, around six months of salary in easy to access cash accounts (for unexpected events), and pension provision. I will likely stay in that investment pattern until I end up owning a large enough house for my family. If I then end up wealthier, then I would have to think harder.

So holding property has some merits in terms of reducing risk if all you would do with the value of your wealth is invest in property. As an example, if my house falls in value by half, then my equity is significantly reduced but the price of the next home I'd want to buy reduces also. So in some sense, the risk I care about is not over my absolute wealth, but whether my assets track well the item I wish to purchase. In my case, I want to purchase a better property, so my current property assets track it very well.

All of that is not say that I couldn't do better by speculating. If I wanted to STR (and could sell in this market) then that might lead to my being much better off. If hyperinflation breaks out, then I might do better to buy an expensive house now on a long term fixed rate and see the debt eroded. I might do better to increase my mortgage and invest the extra in shares, or gold. However, all of those routes are speculation, and in some sense have higher risk than staying in the housing market (given what I want to achieve).

As to whether any single asset class is better than any other, the answer (which will be clear in a few years time, and with the benefit of hindsight) is probably, but no one knows which one.

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Gold is in my view in it's own bubble. It also pays no interest of dividend & can be very volatile.

Equities are heading mor a big fall, most likely.

So the question is should one now consider property again, at say 20% off asking. Maybe this is why there are still a few buyers out there - are they being smart perhaps.

Do houses pay a dividend? Not really, we look for capital gains. But I don't see how you figure gold is in a bubble? It's only had a 4 fold rise in 8 years and a chunk of that is simply inflation increases. Add to this the fact that in 2000 it was at it's lowest price in 20 years and I don't see a bubble. Bubbles are obvious because everyone you talk to in the office is raving about them and queuing up at the bank to borrow money to join in.

When the papers start saying that gold can only ever go up in price I will know were in another gold bubble like the late 1970's . :lol:

I think the current drop in RE prices will lead to the classic bull-trap formation and anyone buying it now, with the global economy on the ropes and real interest rates rising , is taking a gamble.

0crash_alert_clip_image006.jpg

Edited by itzoverrover

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Guest Charlie The Tramp
The equity in property was propelled to its current height by the development of a mortgage securities market.

The lack of peer to peer regulation has manifested itself in widespread fraud and misappreciation of risk.

Kick the securities market away, as has happened, and property looks very Wilie E Coyote.

Property will tank much further and harder than any other asset or currency.

Things to look for are discount production capacity. Especially in emerging economies. I think only Brazil is the surefire option for real growth on a 12-18 month outlook. I say this as the commodities boom drives the domestic economy as Brazil enjoys record inward foreign investment.

Nice to see you back ?...! , I always enjoy your posts. <_<

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Given the failure of Bear Stearns, & the likely failure of more banks on both sides of the Atlantic, the BoE & FED will now slash interest rates. This will lead to a serious risk of high inflation, thus eroding the purchasing power of any cash stash you may have. Particularly significant of you are STR of have large savings. So what to do?

Gold is in my view in it's own bubble. It also pays no interest of dividend & can be very volatile.

Equities are heading mor a big fall, most likely.

So the question is should one now consider property again, at say 20% off asking. Maybe this is why there are still a few buyers out there - are they being smart perhaps.

I have in recent years been very bearish on house prices, & still am. However, given te speed of the likely global economy implosion, does the forum think property may now be the best of a bad bunch?

No. Put your cash in the crock. Take losing BTLers and property speculators money and feel all warm inside seeing the nationalised company paying your interest and declining huge numbers of mortgages.

Bliss.

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Guest muttley
But I don't see how you figure gold is in a bubble? It's only had a 4 fold rise in 8 years and a chunk of that is simply inflation increases.

So you might argue that property isn't in a bubble, because it's only had a three fold rise in 8 years.

I'm not saying the gold run is over, but there are many goldbugs here who are commiting the schoolboy investor error of becoming more confident the more the price of gold rises. The fact that Sandra at the office isn't talking about it yet is irrelevant, because Sandra at the office never has, or ever will invest in gold.

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I have in recent years been very bearish on house prices, & still am. However, given te speed of the likely global economy implosion, does the forum think property may now be the best of a bad bunch?

If its Uk property and its for investment then the chart on here suggests holding off until 2014 before purchasing to ride the next recovery phase.

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  • 295 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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