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Property Is A Pyramid-selling Scam (shock!)


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http://commentisfree.guardian.co.uk/carole..._confusion.html

Albion come to great confusion

The property market is nothing but a pyramid-selling scam, with the last in losing out. If house prices are falling, so much the better

Carole Cadwalladr

April 15, 2008 11:00 AM

Crisis? What credit crisis? You'd think from a week of headlines involving words like "doom", "panic", "collapse" and "plunge" that it's bad news that house prices might just finally fall.

But for whom exactly? Not for anybody wanting to buy a bigger house - if the price of your two-bedder drops, the price of a three-bedder will fall even more. And most certainly not for the first-time buyers. Last week, I read piece after piece on the misery that the squeeze on mortgages was causing them. What? Are you kidding?

Almost exactly a year ago, I reported on the residents of Albion Drive, a street in East London which I picked at random, to see how house price hyper-inflation had affected their lives. There were the winners, like Alan Rossiter, who'd bought his house for £9,300 back in 1977 and who, when I told him that it was probably worth £800,000, nearly fell off his chair.

And then there were losers, like 29-year-old Jodie Banaszkiewicz who was renting an ex-local authority flat with a friend, who scrupulously saved a portion of her income every month, but, earning less than £30,000 a year working for a record company, couldn't see any way that she'd ever be able to afford to buy.

Rosemary Stott, a film lecturer, whose house like the others on the street had risen 30% in value between 2006 and 2007 compared it to living in the Weimar republic. The rate of increase was such that it had distorted the value of everything; another householder, I met, who didn't want to be named, pointed out that in the last year, his house had earned approximately five times as much as he had. He earned £35,000 by working from 8.30am-6pm five days a week; he'd have still "earned" £150,000 if he'd just sat on his sofa.

The British property market is one of the greatest pyramid selling schemes the world has ever seen. And it depends on gulling those coming in at the bottom to borrow ever-increasing amounts of money to enrich those at the top. As Martin Weale, the director of the National Institute of Social and Economic Research, told me, it is a process of state-sanctioned and endorsed inter-generational robbery; a form of wealth redistribution against the young towards the old.

The money that people are said to have "made" on their properties - this wasn't free cash that fell off the money tree; it was earned by first-time buyers, or at least, they pledged it in promissory notes, debts, to earn over the course of a lifetime. Britain is going to be living with the consequences of these debts for decades yet to come. This is very far from free money.

On Albion Drive, the only young people I found who'd been able to buy had been lucky enough to have be gifted £125,000 deposit on a one-bedroom, £265,000 flat by their parents. But then, as they told me, "house prices don't go down in London."

Hmm. Well, let's see, shall we? Hackney, where Albion Drive is situated, is one of three London boroughs identified by Experian today as being most likely to experience negative equity. Anecdotally, London already is: a three-bedroom house I looked at last year now has its near-neighbour on the market - only, it's £80,000 cheaper.

House price hyper-inflation has distorted almost every aspect of society. And the prospect of Gordon Brown convening an emergency session to put it back on track is political expediency of the worst order, a reinforcement of the status quo to keep the rich (those with property) rich, and the poor (those without, the young, the not yet born) poor. A mechanism for restricting social mobility and ensuring that the worst-off in society stay worst-off.

It was the posters on housepricecrash.co.uk who, when discussing my original article, pointed out something I missed. A 12-year-old boy told me that prices wouldn't go down - which as one of the posters said, is about the closest you can find to the apocryphal "tip from a shoeshine boy": the moment that signals to investors that the market has passed its peak, that the bubble will shortly burst.

Forget Gordon Brown, the mortgage providers, the estate agents, without you - us, actually, because - oh, I can't go into it now, but I do have a vested interest here (I, too, am one of the great dispossessed) - the pyramid will collapse. Without us coming in at the bottom, there is no "market"; we're the crucial link in the chain, the suppliers of the cash; ATMs to anybody older, cleverer, luckier than us - who didn't leave the country, or have a gap in their career, or experience a relationship breakdown; who bought earlier.

Even the people in the £2m houses, selling to people in the £1m houses, selling to the ones in the £800,000 houses, finally depend on somebody's decision (ours) to take on a mortgage - or not - on a one-bedroom, £185,00, ex-local authority flat on a bad estate. This is E8's very cheapest property for sale, and it still requires a mortgage of five times London's average wage of £35,000.

Just say no. The confidence trick is over. First-time buyers unite. You have nothing to lose but the prospect of a mortgage on a multiple of five times your income on a property that tomorrow might be worth a lot less. For the first time in a decade, it's the young, the landless, the renters, Kirsty Allsop's basket cases, one and all, who have the power to influence what happens next. Feel the force. And use it wisely.

Nice to see HPC views being supported. Pity it's only in the comment section and not in the main paper - yet.

People have just started posting comments on the page too.

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Oh dear, I'm so excited today I've done NO WORK. Thanks for posting this up. Go and COMMENT on it. This is truly our moment to inform the national debate. A first-time buyers strike has to be the way forward. If we can make this roll then we have a movement. Come on people! I really think this is our time.

(Note to self: might be getting a bit carried away...)

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Even the people in the £2m houses, selling to people in the £1m houses, selling to the ones in the £800,000 houses, finally depend on somebody's decision (ours) to take on a mortgage - or not - on a one-bedroom, £185,00, ex-local authority flat on a bad estate. This is E8's very cheapest property for sale, and it still requires a mortgage of five times London's average wage of £35,000.

10/10. Regardless of how much the existing participants want to keep playing, no new entrants means game over. The housing market isn't just supported by new entrants, it *is* new entrants.

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Love the Star Wars reference too.

Lucas, taking his cues from Benjamin Franklin, meant Star Wars, among other things, to serve as a warning to every citizen to fulfil their civic duties and remain vigilant against corruption, the failure to do so would wring catastrophe.

Lucas saw the machiavellian deviousness of Richard Nixon, in who's adminstration both Dick Cheney and Donald Rumseld served, as the blueprint for corruption needed in his Star Wars plot. Given that both Cheney and Rumsfled served in Bush's adminstration unsurprisingly lead some commentators, light heartedly to ask if Bush is a Sith Lord.

Those that think Nixon was a one off should think again. Sociopaths and pyschopaths like him pervade every level of society and they pervert it for their own ends.

This was what Franklin was warning us against. This is what the Jedi were meant to counter.

While we couldn't stop the bubble forming, this site has served its purpose in uniting citizens concerned by its emergence.

Were Franklin alive today, I do not doubt he would express disappointment at our erstwhile failure to create formal national and international institutions here on the net, out of the control of politicians and vested interests, to enable every citizen wherever they are in the world to report behaviour that risks our liberty, opportunity, wealth, freedom and equality.

I just checked. The domain name civicduty.org has been taken but that can be fixed I'm sure.

Edited by nmarks
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People still fall for these, recent ones include things like "women empowering women"

Someone should update the wikipedia entry to include the UK Housing Market.

PyramidSchemeMS.jpg

Edited by mikelivingstone
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I love the bit about the show shine boy (12 year old kid in guardian article), this comes from pre-Wall St Crash. A financier was having his shoes shined close to Wall St in 1929 and the shoe shine boy was saying "you should get into Stocks" at that point the financier knew it was time to get out. A few weeks later it was history.

I think this has been mentioned a few times on this site.

Watching the TV program last night "Flat Broke" if you saw the Inside Track Seminar it was all babyboomers, how may will have to sell up their own residential properties to cover their losses on this BTL fiasco .

Yes its different this time we didn't have such a speculator market last time as we did this time the BUY TO LOOSE (BTL Market , also we didn't a have as much personal debt as we did last time. Personal debt this time around equates to an average mortgage last time around. It won't be as easy to consolidate that debt with your mortgage now. It may be 6% on your house mortagge but its 15% or more on your personal debt which is a mortgage in itself . Make sure it was a nice holiday you had in the Maldives, the Land Cruiser and Plasma TV etc

I recommend potential FTBs just sit back and watch the show about to unfurl :lol::lol:

Edited by joey
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Well I must admit that I don't feel so confident. We've had so many false dawns in the past that I think it's still premature to call it. Which is why I think this idea of a first-time buyer's strike is genius. Nobody else? Is there anything we can do to help it on its way?

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I love the bit about the show shine boy (12 year old kid in guardian article), this comes from pre-Wall St Crash. A financier was having his shoes shined close to Wall St in 1929 and the shoe shine boy was saying "you should get into Stocks" at that point the financier knew it was time to get out. A few weeks later it was history.

I wonder which unwitting poster it was, unaware that his post would be immortalised in the Guardian, helped this journalist to see the light.

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http://commentisfree.guardian.co.uk/carole..._confusion.html

spot on. just today i was thinking to myself that all the press coverage on property price falls conveys a morbid picture of doom and gloom while property price falls will actually benefit far more people than it will hurt. property price falls need to be actively reported by the mainstream media in a positive light.

the hpc website also has an inaccurate reputation of being filled with people who have been priced out and unable to step on and 'benefit' from the property boom. that is factually incorrect as i am a property owner (2 bed flat in putney, mortgage paid) but want to buy a four bed house and am waiting (albeit impatiently) for the correction/crash. i contacted our mortgage broker last week just to find out if i would indeed be able to get the mortgage i was considering and was assured that on our incomes and considering our cash savings, my husband and i would have no problem obtaining the required credit. yet, i am unwilling to buy for a million pounds what may be worth £800K by the end of next year. availability of credit is not the only issue, buyers are stepping away for fear of buying at an inflated price.

lastly, and i will probably not make any friends by saying this, estate agents have been (and are being) wrongly maligned. if they sold as many properties as they could at as high a price as they could possibly achieve, they were only doing their job - that is what they were paid to do, they are instructed by the sellers. estate agents cannot inflate prices without the ability and willingness of buyers to spend their cash, buyers who perhaps misguidedly bought in to the 'shortage of properties & never-ending demand' theory. many people confuse desire with demand - everyone would like to live in a mansion, that can be counted as demand only if they are able and willing to pay for the privilege. i believe that estate agents could help accelerate the price crash/correction with the right about of encouragement and positive re-enforcement. prices are only trickling down (atleast in putney) but volume is collapsing. it is in the interest of the estate agents for prices to correct quickly so that volumes can pick up. hpc'ers and estate agents should become friends.

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Yes! But add that to the Guardian's comment site.

I love this site but I think it's a mistake to hang out here agreeing with each other. I'm leaving messages on the Daily Mail's boards, the Telegraph's etc etc. We have to move this discussion out into the mainstream and keep it there. I am personally trying to push this article up the Guardian's league boards because then it goes onto the front page. If it goes onto the front page, more people will read it. The more people who read it, the more chance we have of this thing actually coming true!

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Yes! But add that to the Guardian's comment site.

I love this site but I think it's a mistake to hang out here agreeing with each other. I'm leaving messages on the Daily Mail's boards, the Telegraph's etc etc. We have to move this discussion out into the mainstream and keep it there. I am personally trying to push this article up the Guardian's league boards because then it goes onto the front page. If it goes onto the front page, more people will read it. The more people who read it, the more chance we have of this thing actually coming true!

Your right, keep the comments coming and give all the papers something to read that isnt all bullsh!t.

I try and reply to articles all the time and over the last few months more and more seem to be flying the flag.

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