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Where Has The Most Borrowing Taken Place?

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In The Privateer Newsletter, Bill Buckler wrote:

When Buying Becomes Cheap:

As can already be seen from coast to coast inside the US, housing is falling in price. Supply is enormous

and still climbing. The same situation, in principle, applies to all areas of a credit money system economy

as credit contracts. The economic areas where prices will be falling are the areas which earlier were the

greatest recipients of credit during the upswing. Since the business cycle is always a follower of the

credit cycle, it follows that the business cycle will here too follow the present downswing of the US credit

cycle. That is why a steep US economic recession is now unavoidable, regardless of any and all

“facilities” the Bernanke Fed will try to roll forward. The real issue is CAPITAL.

If we take that phrase 'The economic areas where prices will be falling are the areas which earlier were the

greatest recipients of credit during the upswing' and apply it to our housing markets, we could argue that the biggest falls are going to tak place where the most borrowing has taken place.

So BTL, for example, which has attracted speculators who are in the game to make money, has I suspect seen higher leverage or borrowing than, say, family houses where the owners were less in it to make money and more in it for a home for their family.

I suspect, thus, the greatest falls will be in BTL flats - and we are already seeing this in the recent auctions with Manchester and Nottingham city centre flats being hit particularly hard - and in low-end housing.

How leveraged, for example, is prime London property compared to low-end? Is your nice London home in Chelsea mortgaged up to the hilt , or do the owners have substantial equity in their homes?

So, apart from BTL, which we all know about, where has the most borrowing taken place? IN which areas? IN which sectors? And, by extension, where are we going to see the biggest falls?

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Well, to steal a phrase I read on here some time ago, housing as an asset class is going to be, and is, devalued across the board. You need somewhere to live but property doesn`t always go up, bricks and mortar is not always the soundest investment,you don`t need to rush to get on the ladder. These are the sayings for the new paradigm. Certain parts of London and the rest of the uk, might retain their desirability and the people wanting to live there might retain their purchasing power, but on the other hand they might not. Certain areas will always be sought after, but when this all blows over you won`t need to pay half a million to live there. Thats my prediction anyway.

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The areas where there has been no fundamental economic change, other than a prolonged period of cheap credit, will see the biggest falls. So that applies to the entire UK.

I have yet to meet one person who is materially wealthy for reasons other than the symptoms of credit expansion.

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  • 297 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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