For Merryn Fans

[BufferBear Bitcoin Bull]

http://business.timesonline.co.uk/tol/busi...icle3644957.ece

From The Sunday Times March 30, 2008

On the home straight: Merryn on money

I HAVE been writing here for years now about all the horrors that are finally coming to light – the end of the credit bubble, recession in America and so on. But the thing that I have focused on probably the most has been the housing bubble. I called its end rather too early (March, 2004!) but I can’t imagine that there are many people left who would still insist – as they have for the past five years – that the sharp rise in prices across Britain has not actually represented a bubble.

Until recently I was constantly told that the fundamentals of the housing market were strong thanks to the fact that supply for property was low and demand was strong, which made it nigh on impossible for prices to fall.

My endlessly repeated reply was to say that demand is not economic demand unless it is backed up by having the money to pay for the thing you demand.

We all want houses, of course we do, but if we can’t afford to pay for them, our wants can’t support a market.

I want a detached villa on the edge of Regent’s Park, (really badly, as it happens) but there’s no point factoring that into an analysis of the future price of detached villas on the edge of Regent’s Park. For one simple reason – I don’t have £25m to buy one with.

Now if I could get someone to lend me £25m (and if I was fool enough to take it) that would be a different matter.

My point? That the price of houses is not about the supply of houses and the demand for them in general, but about the supply of and demand for credit. You can only push the price of something up if you can – and if you want to – get the money together to do so.

So why are house prices falling now? Not because all of a sudden the average Englishman has decided he’d rather live in a caravan than in a four-bedroom executive home, but because house prices are well beyond the reach of prudent lending levels and the banks, paralysed by their new-found recognition of risk, will no longer lend at anything beyond cautious levels.

Got a 20% deposit and want to borrow three times your salary? Then you’re probably alright – albeit at a higher rate than you might have paid 12 months ago.

Got no deposit and want to borrow five times your income? Back to your caravan you go. According to mform.co.uk, a mortgage calculator, six months ago 22 lenders offered 100% mortgages. Today just a handful do – and they charge typical fees of more than £5,000, suggesting they aren’t all that crazy about people taking them out!

House prices got to their current levels – more than five times average earnings, according to Halifax – because lenders were prepared to provide the cash for it to happen. Now they won’t.

The result? Fewer and fewer buyers – and a rising climate of fear. New loans for homebuyers fell to 50,300 in January, the lowest level for nine years. And that is how property bubbles come to an end. Well, actually it is how all bubbles come to an end.

Easy money encourages borrowing which in turn pushes up the price of whichever asset the financial world has decreed to be a dead cert. Then some change in the environment calls a halt to the lending and the whole thing comes tumbling down.

You can already see the pain out there. In February, 64% more chartered surveyors reported price falls than rises in their areas, making the state of the property market on this measure nearly as horrible as it was in June 1990.

Repossessions are rising. Property investment clubs are shutting down – one of the biggest and once most persuasive, Inside Track, said it will be doing no more of its overhyped educational seminars after the end of this month.

And I am getting letters from people who have lost their shirts on the property market and have no idea what to do. I have had one from a small businessman who tells me he is down £200,000 thanks to his involvement with one club and consequent “investments” in the US and the UK property markets. And the really bad news is that things are likely to get worse before they get any better.

For starters, the credit crunch means mortgage rates are going to have to go up. James Ferguson of Pali International, a broker, points out it costs some of the big UK banks something up to two percentage points more than the risk-free rate (the rate on long-term government bonds) to borrow money on their own account for five years – so 6% plus.

Add their margins into that and it suggests they should be charging about 8% to lend it to you in the form of a five-year fixed-rate mortgage. Right now they aren’t doing that. At some point, though, they’ll all have to put up their rates if they want to make any money at all – reality can’t be ignored forever.

And as rates go up, buy-to-let investors who might just be breaking even will find it is costing them more and more to hold on to their depreciating investments every month. So they will sell. So will many of the people who have been on very low fixes for the past few years and find they can’t afford a remortgage.

And so will many other people who find that with house prices flat or falling, the effort of making monthly repyments just no longer feels worth it. How far will prices fall before all this plays out? I have no idea, but I do know I won’t be in the market for a house for a few years yet.

This is my last column for The Sunday Times. I’ve really enjoyed writing here, but I have decided to spend more time with my family. I am very grateful to all of those who have read my endless predictions of the end of the financial world, and particularly to those who have written in to me with their own thoughts on the markets. My final advice? Hang on to your gold for a bit longer and, for heaven’s sake, don’t buy any houses.

Merryn Somerset Webb is a former stockbroker and now editor of Money Week. Her views are personal and investors should always seek professional advice

Link now working.

Edited March 29, 2008 by Buffer Bear

[dude wheres my house]

Pity its his last article in the times.

Nothing new at all for the people that read this forum (i assume the Merrin is one of these too)

might give a few people a shock over their museli tommorow though.

[narco]

My final advice? Hang on to your gold for a bit longer and, for heaven’s sake, don’t buy any houses.

Sounds like good advice to me.

[cyprinus]

Pity its his last article in the times.

Nothing new at all for the people that read this forum (i assume the Merrin is one of these too)

might give a few people a shock over their museli tommorow though.

His???

[BufferBear Bitcoin Bull]

Pity its his last article in the times.

Nothing new at all for the people that read this forum (i assume the Merrin is one of these too)

might give a few people a shock over their museli tommorow though.

His???

If you are into women, you will be pleased to know the MSW is in fact a very attractive woman. This comes from a woman who is into men (not just my husband )

Edited March 29, 2008 by Buffer Bear

[The Masked Tulip]

Come on Merryn, get the stockings, high heels and suspenders out. You know that is what 'serious' journos have to do these days. Get the right kit on then get the kit of in a photo shoot for the rags.

At the very least get some short skirt and boots like Steffie Flanders or give a hint of boob like various other newsreaders.

I have drunk the most awful Ozzie red wine from M&S this evening - burra something. Gosh, it is gross IMPO. Was going to take itg back tomorrow but it was all I have in the house and I need to try and sleep when the clocks go forward. Yuck!

Right, what did Merryn say?

[The Masked Tulip]

If you are into women, you will be pleased to know the MSW is in fact a very attractive woman. This comes from a woman who is into men (not just my husband )

Right, what are we supposed to make of that - are you into twosomes, threesomes and moresomes? A HPC roasting? I often think that good looking bisexual women have the best of both worlds in our Western society. Don't rule it out BB.

Right, no more sex talk as I need to read this article of Merryns.

[BufferBear Bitcoin Bull]

Come on Merryn, get the stockings, high heels and suspenders out. You know that is what 'serious' journos have to do these days. Get the right kit on then get the kit of in a photo shoot for the rags.

At the very least get some short skirt and boots like Steffie Flanders or give a hint of boob like various other newsreaders.

I have drunk the most awful Ozzie red wine from M&S this evening - burra something. Gosh, it is gross IMPO. Was going to take itg back tomorrow but it was all I have in the house and I need to try and sleep when the clocks go forward. Yuck!

Right, what did Merryn say?

It may have tasted awful but it has clearly done the trick

Right, what are we supposed to make of that - are you into twosomes, threesomes and moresomes? A HPC roasting? I often think that good looking bisexual women have the best of both worlds in our Western society. Don't rule it out BB.

Right, no more sex talk as I need to read this article of Merryns.

No, I just mean that although I am married, I still find other man very attractive. This is allowed is it not???

Edited March 29, 2008 by Buffer Bear

[The Masked Tulip]

It may have tasted awful but it has clearly done the trick

No, I just mean that although I am married, I still find other man very attractive. This is allowed is it not???

Yes, of course it is. God, I find women's bodies so attractive. God's greatest creation. Pity many women do not realise this. I think most women have no comprehension just how much pleasure Men get from looking at shapely women. Not porn - just admiring the curves, the lines, ... Feck, that wine is gross... Only bought it because M&S was out of the decent South African stuff.

Merryn's article is OK but it is, IMPO, still too wordy and complicated for even your average Sunday Times reader to comprehend. This sort of article now needs to be repeated in the Mail and the red tops... and written in simpler, plainer English with simple facts that will get home to Middle UK.

[BufferBear Bitcoin Bull]

Wow, you sobered up of the course of a few paragraphs. Amazing..or is it the crap you consumed?

[The Masked Tulip]

Wow, you sobered up of the course of a few paragraphs. Amazing..or is it the crap you consumed?

It's the crap. I am full of it alas. Burra Brook merlot from M&S - IMPO a most disgusting... I don't know what to call it. It is one of those wines that gives you a headache after half a glass which is not a good sign.

[headmelter]

Pity its his last article in the times.

Nothing new at all for the people that read this forum (i assume the Merrin is one of these too)

might give a few people a shock over their museli tommorow though.

Is 'he' not a bird?

Edit. Baby crying delayed posting.

Edited March 29, 2008 by headmelter

[headmelter]

Oh BTW I think Merryn will have the pages of the Times pebble dashed with museli in the morning. She's right on the money.