Is It Really Going To Happen?

[tekken]

Hello all,

First of all - sorry for the length of this post. I have been watching this forum for a while, and then later I joined. Even though I very rarely post, I find this forum to be informative, addictive and sometimes fun. Anyway, even though I "logically" believe that the HCP will come, I'm developing more and more doubts. I think things truly are different this time, for the following reasons:-

1) Pensions - everyone knows that they are under-performing and this is only going to worst. Many everyday people are now buying property instead of getting or enhancing their pensions. People believe that they have more business/investiment savvy based on reading and posting in a few forums.

2) Sentiment - People often state (like a mantra) that property overall (if you are in it for the long game) only goes up. It dips and crashes, but like a broken bone it heals - and stronger. Even if the market starts to become very weak, people will not just bail. More than ever, I think they will sit it out, gritting their teeth and take the pain as there is always a light at the end of the tunnel (but that could be the 12:20 to Coventry).

3) Hype - linked with number 2, hype has been a major player in this hyperactive (almost a 5 year old on a E tablet-like) growth in the market. Property porn (even though most of what is actually shown on tv is offer 2 or 3 years old) has people swaying and swooning to the "returns you can make on your investiment". Property as bussiness or investiment - afterall these programs show everyday people making very un-everyday people-like profits. And why show the bad when the good is so popular and getting ratings?

4) Debt - Is no longer a 4 letter word (for some it's now a sentence). Attitudes to debt has changed. I can remember debt being seen as a bad thing, and should be avoided at all costs. Now, we really do have a culture of buy it now, and will see if we can pay later. Therefore, people are willing to take on bigger mortgages and even more debt without blinking an eye. They are willing to spend more, and take greater risks - afterall they didn't have to earn it, just borrow ut.

5) Government - You would think the government would do what the Chinese government did when their housing market started to heat too quickly, they made owning multiple properties less attractive. The British government is unwilling to do the same thing as we all know, most of them are landlords. Plus the fact that the government actually believes that having a debt based GDP is good output, having a debt based economy is actually a good thing. On top of that, you get tax benefits if you own multiple properties (even though this is detremental to a growing number of not only young britons).

6) BTL'ers - These are really the thorn in the side of any wannabe homeowner. And many BTL'ers are not buying the expensive properties, they are eating up the smaller ones, the ones that the average joe/joanne (to be pc) would normally save and buy with their sensible 3x mortgage.

7) Banks - Do we ultimately blame Japan and the other banks that have for years provide a steady stream of free money? Banks are lending money at very low rates. They are manipulating/sharing/processing personal data, and then looking for ways to ensnare customers. Why do you think banks like to profile their customers - to play on potential weaknesses which mean profits for them.

8) Estate Agents - Hell's not going to be hot enough for these......... "Richard"-heads!! I don't need to describe how these individuals have screwed up this market.

9) Greed

So, with all of the above how can there be a HCP? I know debt is starting to become a serious issue. I know interest rates are going to increase. I know many, many, many more jobs are going to be lost - especially to off-shore labour (read: cattle) markets. I know that we are in a reccession. But even with all of this, the nine points above are powerful - too powerful especially 9. Most of the people in my department where I work are waiting for the prices to start dropping, to buy second and third houses. Cheap housing is a concept that is now lost forever. I mean how bad will the market have to be for people with no mortgage, a shed-load of cash to stop buying - believing that in 10 years time it could be worth potentially double?

Maybe I have missed something. I'm not expert - just confused I guess. So have I got is completely wrong, or is there some truth in the way I see things?

[BandWagon]

For many centuries, across many countries, the housing market has been cyclical.

Quite frankly it's absurd to suggest that now that we've reached the top of this cycle, the cycle has just stopped.

Of course this won't stop scores of people lining up to tell you this.

You may as well tell me that because it's summer now, we won't be having winter.

[Realistbear]

All of the reasons you state are reasons why the economy is cyclical. Markets are a two-way phenomena and they ebb and flow. The extremes come when all of the reason you cite are in place as they are the necessary ingredients for bubbles to form.

If you look back to the early sixties you see a progression in the extent of the booms and busts. Each once gets bigger and more severe. Much like the weather in Florida where they are entering 50 year cycle of more severe Hurricanes together with greater frequency.

Avoiding the hype is crucial. I find the ODPM stats the best as they are, apparently, untinged by irrelvant data such as asking prices. But best of all, IMO, is the local news paper. I examine ours every week and have noted the growth in the number of "new prices" and "unexpectedly back on the market" ads. I compare week to week and many houses are dropping their prices by 3-10k.

With people overextended generally with the largest mortgages in relation to earnings in history a slight upward tick in IR will make a comensurately larger difference to affordability. IR are gong up worldwide except here where there is no inflation! Of course there is inflation and sooner rather than later Brown is going to have to admit it or move the CPI goalsposts and that will not fix the problem in the long run.

But the largest factor, IMO, is employment. The reason prices are dropping in my area is that factories are closing. The car industry is leaving the UK for Eastern Europe. It has a huge knock-on effect in other areas of employment. The ONS state that there are more people on the dole, more out of work. The services sector is losing jobs also with recent layoffs in the insurance and banking industries that amont to thousands of jobs with a knock-on effect there also. If there is prolonged bear market in stocks and bonds tens of thousands of City workers will be looking for work and London house prices will lead the nation down once again. Retail is dying rapidly as shops close in favour of internet sales where far fewer people are needed to supply demand. Most of the stuff sold is, of course, imported from China which in turn is the reason why our deficit is now out of balance.

All in all, the cycle is turning. The good ol days of North Sea Oil and net exports has gone. The cheap credit from Asia is drying up. Jobs are going. America looks like it is headed for recession and we are their 2nd largest trading partner heavily dependent on exports and services. Repossession rates are up 300% in London over the last few years. A house price crash is inevitable and it will follow the same old tired pattern of the decades gone by--boom and then the bust. The higher the peak the lower the valley.

Patience is key. And remeber when they say its different this time it isn't. As the wise man said "there is nothing new under the sun."

[Live_in_hope]

Why should they come down if the market has maintained such good growth in the last 10 years, mortgage approvals are still not bad.

If your hoping that they are going to come down to 2000 levels forget it

I would like the housing market to fall though why will it & what will cause it, if it's high unemployment for example then how is that going to help us - we'll all be out of our jobs, interest rate rises ?? the amount of increase each time is too small & more folks are fixing for 5 years +

'Patience is key' - if I wait that long I'll be in my rocking chair with kids calling me grandad.

Would not rely on the cycle theory as it can take decades.

Whilst the government continue to let the immigrants in to take our jobs (which has artificially been keeping interest rates down) no chance

[Warwickshire Lad]

I do believe in the cyclical argument - but I can understand why many others have lost faith.

[Waiting Patiently]

I do believe in the cyclical argument - but I can understand why many others have lost faith.

You don't need "faith". This isn't a religion.

Just screen out all the sales patter and spin from the VI's and concentrate on the fundamentals and on what's really happening in the market and it will become clear that house prices are unsustainable at these levels for much longer.

[debtfree]

No, but i got a good idea what it will be like for those that buy houses now.

,

'it will be like trying to escape from a prison where everyone that SAY they know the way out, leads you back to where you started'

[barnaby]

So, with all of the above how can there be a HCP? I know debt is starting to become a serious issue. I know interest rates are going to increase. I know many, many, many more jobs are going to be lost - especially to off-shore labour (read: cattle) markets. I know that we are in a reccession. But even with all of this, the nine points above are powerful - too powerful especially 9. Most of the people in my department where I work are waiting for the prices to start dropping, to buy second and third houses. Cheap housing is a concept that is now lost forever. I mean how bad will the market have to be for people with no mortgage, a shed-load of cash to stop buying - believing that in 10 years time it could be worth potentially double?

Maybe I have missed something. I'm not expert - just confused I guess. So have I got is completely wrong, or is there some truth in the way I see things?

Other factors:

- two income households here to stay

- lack of building

- increase population

- lack of alternatives, ASTs unsuitable for long term stability so people aspire to buy when all they really want/need is permanent home

- there seem to be a huge number of people squirrelling large deposits away waiting for a HPC

- Affordability, a bedsit cost £400 for a room in an HMO - two of you that's £800 the repayment on £150k at the moment - many still see no real difference in cost because rents are high in the private sector. People don't think what if IR go up they can't remember it happening

I think there needs to be a correction, especially freeing up the BTLers eaten all the houses problem, them shedding portfolios is the best chance of a HPC not people stopping buying, however I don't think it's the same because the country and society fundamentally changed especially 2 income couples,

[The Undertaker]

1) Pensions - everyone knows that they are under-performing and this is only going to worst. Many everyday people are now buying property instead of getting or enhancing their pensions. People believe that they have more business/investiment savvy based on reading and posting in a few forums.

What happens if houses start to "under-perform", are those savy investors going to get out of property and into the "next big thing"?

2) Sentiment - People often state (like a mantra) that property overall (if you are in it for the long game) only goes up. It dips and crashes, but like a broken bone it heals - and stronger. Even if the market starts to become very weak, people will not just bail. More than ever, I think they will sit it out, gritting their teeth and take the pain as there is always a light at the end of the tunnel (but that could be the 12:20 to Coventry).

I remember in the late 90's people telling me how shares only ever go up, especially internet ones! Plus if you have lost your job, you might not be able to sit it out, the baliffs wont sit around waiting for your equity to return in 10 years. As for the investors, I agree perhaps if they own 100% of their properties they may sit it out. But those with 80% mortgages, who see interest rates rise by 30- 50% (ie about 6%) in say 2 years, might not be able to keep servicing that debt.

3) Hype - linked with number 2, hype has been a major player in this hyperactive (almost a 5 year old on a E tablet-like) growth in the market. Property porn (even though most of what is actually shown on tv is offer 2 or 3 years old) has people swaying and swooning to the "returns you can make on your investiment". Property as bussiness or investiment - afterall these programs show everyday people making very un-everyday people-like profits. And why show the bad when the good is so popular and getting ratings?

How many share related programs did you see late 90's? They were everywhere. School kids making millions etc. Now how many do you see? There will come a time when fundamentals (rising IRs and unemployment) will overtake the hype. During the early ninties it was on the news almost everyday showing people's misery as they were being kicked out of their homes, or handing their keys back to the bank. There is only so much distortion of the truth our news/propoganda channels can get away with.

4) Debt - Is no longer a 4 letter word (for some it's now a sentence). Attitudes to debt has changed. I can remember debt being seen as a bad thing, and should be avoided at all costs. Now, we really do have a culture of buy it now, and will see if we can pay later. Therefore, people are willing to take on bigger mortgages and even more debt without blinking an eye. They are willing to spend more, and take greater risks - afterall they didn't have to earn it, just borrow ut.

People's attitudes may have changed, but banks have not. If you don't pay your debt the big man with the baseball bat is still coming round to claim (a major american bank in India was recently caught sending round thugs to break debtors legs). As before this is EVEN more of a reason for a crash. You know what they say the high you go the further to fall etc.

5) Government - You would think the government would do what the Chinese government did when their housing market started to heat too quickly, they made owning multiple properties less attractive. The British government is unwilling to do the same thing as we all know, most of them are landlords. Plus the fact that the government actually believes that having a debt based GDP is good output, having a debt based economy is actually a good thing. On top of that, you get tax benefits if you own multiple properties (even though this is detremental to a growing number of not only young britons).

The Government will do all it can to keep house prices up, or rather I think it HAS done all it can. It is running out of options, plus governments change.

6) BTL'ers - These are really the thorn in the side of any wannabe homeowner. And many BTL'ers are not buying the expensive properties, they are eating up the smaller ones, the ones that the average joe/joanne (to be pc) would normally save and buy with their sensible 3x mortgage.

The more of an investment property becomes the more prices will become cyclical in nature. BTLers only 3 years ago could get yields of 10%, I remember seeing flats in london in 1998 with yields of 20%. Now what do you get 3-4%? If house prices go up these will drop even further. It wont be long before the muppets who are getting in now get burnt? But what is going to push house prices up for the BTLers with such low yields?

7) Banks - Do we ultimately blame Japan and the other banks that have for years provide a steady stream of free money? Banks are lending money at very low rates. They are manipulating/sharing/processing personal data, and then looking for ways to ensnare customers. Why do you think banks like to profile their customers - to play on potential weaknesses which mean profits for them.

My friend is buying a house currently, she has a mortgage in principle and agreed a price for the house (despite my warnings), with the rate supposed to be around 5.25%, when she went to complete the mortgage this week, they told her they couldnt do anything less than 5.99%!!!!

8) Estate Agents - Hell's not going to be hot enough for these......... "Richard"-heads!! I don't need to describe how these individuals have screwed up this market.

Tossers. Anyway, they screwed the market in the late 80's, then mid ninties many of them went out of business. Why can't it happen again?

) Greed

Anyone who works in the city will tell you, that GREED and FEAR are commonly used in city jokes etc. They are the two sentiments in investing, and fear always follows on from greed.

[Guest Cletus VanDamme]

Patience is key. And remeber when they say its different this time it isn't. As the wise man said "there is nothing new under the sun."

The internet, that's new. Enables businesses of all sizes to access a global market for free. I recently set up a small web-based business. Getting orders from all over the world. The internet could save us from a global recession possibly.

[SCUMBAG]

Other factors:

- two income households here to stay

- lack of building

- increase population

- lack of alternatives, ASTs unsuitable for long term stability so people aspire to buy when all they really want/need is permanent home

- there seem to be a huge number of people squirrelling large deposits away waiting for a HPC

- Affordability, a bedsit cost £400 for a room in an HMO - two of you that's £800 the repayment on £150k at the moment - many still see no real difference in cost because rents are high in the private sector. People don't think what if IR go up they can't remember it happening

I think there needs to be a correction, especially freeing up the BTLers eaten all the houses problem, them shedding portfolios is the best chance of a HPC not people stopping buying, however I don't think it's the same because the country and society fundamentally changed especially 2 income couples,

The social implications of 2 income households are astronomical long term. If nobody has children the country's population dries up and there is nobody to pay taxes or create more wealth. I am not convinced about the immigrant theory. The argument is that it will bring intelligent immigrants into the country but when the cost of living is lower in their own countries and their own economies are growing faster as a result of the surplus money to spend in their economy, how will coming to the UK be attractive for them? If the population isn't having children because households are 2 income then who is going to be around to buy all the houses in 25 years time?

Re: Economy has grown in the last 10 years. Yes but it's been based on debt. We should have had a recession after the stock market and dot com crashes in 2000. We borrowed our way out of it.

[benjamin]

boom bust boom bust boom bust boom bust boom bust boom bust boom bust boom bust boom bust boom bust boom bust boom bust boom bust boom bust boom ....? It's that simple.

[Charles_Darke]

2) Sentiment - People often state (like a mantra) that property overall (if you are in it for the long game) only goes up. It dips and crashes, but like a broken bone it heals - and stronger. Even if the market starts to become very weak, people will not just bail. More than ever, I think they will sit it out, gritting their teeth and take the pain as there is always a light at the end of the tunnel (but that could be the 12:20 to Coventry).

Look's like they're broadly right:

http://www.houseprices.uk.net/hpuk/house_p...1&leg_pos=0

[bob monkhouse]

I think if you look back to any inflation adjusted graphs, its plain to see the boom-bust cycle. As one poster here said 'history doesnt repeat itself, but it does rhyme'. I do believe we have reached a plateau, what concerns me is the markets current resistance.

[Guest pioneer31]

You may as well tell me that because it's summer now, we won't be having winter.

That's my favourite analogy - because it accurately demonstrates how people can't imagine things changing.

Also, it's a good analogy for blips in the market. A warm day here and there in autumn doesn't mean we're heading back to summer again.

[Saving For a Space Ship]

That's my favourite analogy - because it accurately demonstrates how people can't imagine things changing.

Also, it's a good analogy for blips in the market. A warm day here and there in autumn doesn't mean we're heading back to summer again.

Agreed, a great analogy. I was thinking things would get better in retail now the quieter period of the year is near the end and with the tourists arriving, when I was quite shocked to see the front page & story in the local Chester Chronicle newpapaper.

Chester is the 11th biggest shopping city in the UK, so looks like the slow down is upon us.

Traders warn Rows 'dying' ('Rows' are Chesters unique historic shopping streets)

http://iccheshireonline.icnetwork.co.uk/01...-name_page.html

'We were down 50% in December and January and even now trade's 20-25% down compared to last year'

'John Murphy, of Moor Hall Antiques on Watergate Row, claimed the Rows were 'in crisis', describing the situation as his worst in 13 years of trading.'

Edited July 1, 2006 by Saving For a Space Ship

[Marina]

boom bust boom bust boom bust boom bust boom bust boom bust boom bust boom bust boom bust boom bust boom bust boom bust boom bust boom bust boom ....? It's that simple.

No, you're simple.

You don't need "faith". This isn't a religion.

Just screen out all the sales patter and spin from the VI's and concentrate on the fundamentals and on what's really happening in the market and it will become clear that house prices are unsustainable at these levels for much longer.

Actually it is a religion. You have blind faith in something happening that the evidence of your own eyes ought to suggest will not happen.

It is the worst sort of fundamentalist religion - because anyone who has the temerity to disagree with you has to be treated with contempt etc.

[heather5]

Keeping the faith can be trying at times, but the more that do it, the more the likelihood of change.

What's different now is that people earning supposed decent salaries can't afford to buy - and many in this country are not as daft as it seems.

I have a range of people in my office - and there are may who do not own - some in their lates 30s with parents, some divorced and moved back in with parents - some hoping to get on the housing ladder but don't see Shared Ownership as the route out - all are sceptical of that scheme (thank goodness as that is the latest "Labour" spin) - some have bitten the bullet - and are struggling to keep things together with two full-time incomes and have kids - only two in a team of over 100+ have wives that don't work with young kids but are bumping up their income by a) family credit and clever gambolling on-line - some think they've struck gold and are sitting pretty for the rest of their lives having got together with their girlfriends recently, and then got mortgages of 7 x plus but are also feeling the pinch as a "take-away" is a night out. Then there are the recently widowed and divorced - one widowee decided to hitch asap as she realised that she could not survive financially as a single person - and three divorcees - none of whom can afford to buy although all are in their mid-50s. In fact one person is looking at doing a joint-ownership with a daughter who is 25 as the daughter won't be able to buy on her own either.

'twas never thus in previous crashes.

This society is now very, very different.

And, perhaps because we all talk about it in the office - and share stories - more than I think previous generations - about where we are financially - there is growing awareness that things have got to be changed and that the govt is talking crap when they say shared-ownership is the way to go.

When there was the threatened war ... we came out in millions - I never walked in my life in protest - and I knew no-one in the new place, London, I'd moved to, but I woke-up that day saying I don't care that I go on my own and am the only one - I'm going.

Isn't there something out there - can't someone do something of a similar nature - that gets everyone mobilised against this House Price stuff - at least to get the BTLers out of the market - or under control.

We sit here on websites, we moan and we groan, some might meet in pubs every so often - but where is the strategy?

There are people on this site from US, Asia and Europe - and yet we all sit here doing what?

Most people I come in to contact with every day are affected and well aware of what property prices are doing to their future pensions, their kids, their future kids, their own lives as singletons, and the future lives as divorcess and widowers and now increasingly - those kids hoping to inherit.

Could someone get us all sorted and get us to march? I'm sick of writing to my MP who just says they are making more homes available through shared-ownership - and that is a scum of scheme if there ever was one to inflate the market still further!

Is there a Bob Geldorf out there?

There are some really increadibly intelligent and knowledgeable people on this Forum - some with real clout - can't we get it together?

Over and out - rant done .... but I'll still dream of middle-class parents coming out in support of their kids, and everyone else in the spectrum of society - and perhaps a few Lords who's kids can't take on the house they grew up in because of inheritance tax.

Forgot to add - and in my office we have 1st, 2nd, 3rd generational "ethnic minorities" who also see it the same way.

[dubsie]

It really depends on unemployment and inflation, if both continue to rise you will see a crash....a big one. If not then people will continue to buy and property will continue to rise.

[Guest pioneer31]

No, you're simple.

Actually it is a religion. You have blind faith in something happening that the evidence of your own eyes ought to suggest will not happen.

It is the worst sort of fundamentalist religion - because anyone who has the temerity to disagree with you has to be treated with contempt etc.

would you care to label all the religious followers in the world as 'simple' too?

AFter all, they subscribe to a point of view which has no evidence to back it up

History tells us that there will be a slump. If you want to think it's different this time, then more fool you.

It'll be dark and wet by November, or shall I be a fool and say 'no, it's different this time'?

Edited July 2, 2006 by pioneer31

[Immigrant]

It'll be dark and wet by November, or shall I be a fool and say 'no, it's different this time'?

This is a false comparison and you know it.

You can apply scientific method to the changing of the seasons - you can predict they will change according to a fixed timescale and then observe evidence supporting your hypothesis.

Economists themselves will tell you that economics is not scientific in the same way. That's why they so often get things wrong.

[Waiting Patiently]

No, you're simple.

Actually it is a religion. You have blind faith in something happening that the evidence of your own eyes ought to suggest will not happen.

It is the worst sort of fundamentalist religion - because anyone who has the temerity to disagree with you has to be treated with contempt etc.

On the contrary, Marina, since you changed your tune recently and adopted the perverse view that HPI will continue indefinitely it's you who regularly comes on this board to express contempt for those who do not share your new-found "religion". Abuse and ad hominem attacks are usually a reflection of the weakness of your argument.

You seem to have fallen for the line that because a major correction has not happened yet therefore it never will. It seems that you've also swallowed the increasingly ludicrous and desperate sales talk from the PR departments of estate agents and lenders designed to sucker in more into debt slavery before the whole pyramid selling scam falls apart.

Have you bought recently ?

[Guest pioneer31]

This is a false comparison and you know it.

You can apply scientific method to the changing of the seasons - you can predict they will change according to a fixed timescale and then observe evidence supporting your hypothesis.

Economists themselves will tell you that economics is not scientific in the same way. That's why they so often get things wrong.

......but Marina is rubbishing the fact that bust follows boom. It always has done, so why is someone called an idiot for saying that it will again?

Surely, a person is 'simple' for assuming that it will be all different this time.

Marina is displaying symptoms of the all-too-common disease - 'I can't see tomorrows rain yet, therefore it will not rain.

Edited July 2, 2006 by pioneer31

[dude]

This society is now very, very different.

Society has indeed changed, and this is part of the problem. There are now many more households than ever there is even more need for more housing stock. I've said it before and I'm sure I'll say it again, the Thatcherite view that the market will sort it out has failed (unless you you're a BTLer, and even then you need to be careful) and the chickens are coming home to roost.

Thatcher hated Socialism, and her way to try to kill it was to get all those nasty council houses sold off, and then prevent any more from being built. Well well done Thatcher. You've managed to totally balls up the UK economy. Private rents are disgusting expensive, and there is no social housing any more. Nu Labour (=Thatcherism) seeks to sustain this.

The Thatcherite dream of everyone owning their own home has helped many of a particular generation to get on the housing ladder, and the greed that has come with it means many of these are happy to have the ladder pulled up after them. One day soon we can celebrate -- Thatcher will be dead. But that is not enough. Already we are hearing of the growing political pressure to do something about this housing mess; but on the other hand there is pressure in those leafy Tory areas not to give way to a loosening of the planning laws to allow more development on the Green Belt.

We wait to see which will win the day -- but it surely must be only a matter of time before the urgent pressing need for a Socialist solution (ie more council houses with controlled rents) is reintroduced.

I live in hope that Thatcherism with all its evil will soon be buried -- but I fear we will have to bury the witch first.

[sam]

For many centuries, across many countries, the housing market has been cyclical.

Quite frankly it's absurd to suggest that now that we've reached the top of this cycle, the cycle has just stopped.

Of course this won't stop scores of people lining up to tell you this.

You may as well tell me that because it's summer now, we won't be having winter.

Well quite frankly the cycle HAS reached the top and just stopped/ started to plateau.