Tuesday, Oct 24, 2006

Fred Harrison on BBC Radio Five Live

Radio Five Live: Boom and bust man disagrees

In contrast to our top story today we bring you news that boom & bust man economist Fred Harrison doesnt think there is a soft landing at all it will all end in tears with a damaging crash in well maybe 2010.

Posted by sold 2 rent 1 @ 07:43 PM (603 views)
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27 Comments

1. sold 2 rent 1 said...

It is looking increasingly likely that 2008 is meltdown year.

The momentum of this final phase is gathering pace.

The higher house prices go the more likely:
- Parents will subsidise their childrens house purchases
- BTLers will increase their portfolio by MEWing on previous purchases
- Groups of friends will panic and buy together

Other factors:
- Another influx of immigrants on the way to put more pressure on limited supply.
- The city bonuses are only months away.
- Government spending is increasing
- Oil price is down (albeit temporary)
- IR rising too slowly (.25% a quarter)
- Interest only mortgages (time-bomb)

Over the next 12 months the China effect that has held down inflation for so long will begin to reverse. Wages are on the increase in China, although this is negated by productivity gains of up to 20% a year. At some point productivity gains will be overtaken by wages and the prices of goods will increase. Once these price increases of Chinese goods combine with a fall in the pound, inflation will really take off (imported inflation)

I had the buyers surveyor round today. I asked him what he thought of house prices.
Worrying high was the reply.

I think many homeowners have their heads buried in the sand. I had some friends round for Sunday dinner. On asking where we were moving to, my wife told them we were going to rent as I believed in HPC. I expected a few questions such as Oh. Why is that? What I got was zip not a peep. These people are old enough to remember the last crash but they choose not to.

Tuesday, October 24, 2006 08:24PM Report Comment
 

2. Glorious Sunshine! said...

Well hello sold 2 rent 1,

You are obviously an idiot or at best a little (I mean a lot) slow...

What makes you think the average working person (politically correct not Man!) has a God given right to afford to buy a home? I know lots of people both family and friends who never had that chance. You see its not about how big a house you have its about NOT renting or as I see it buying a house for someone else!

To sell to rent means only one thing, YOU are a fool and thats why all your friends 'kept mum'. They know you are gambling in a casino you cant afford the minimum stake...

I am a home owner wanting to trade up at some point but they will never fall more than say 10% the fact they are going up at a very low annual rate is a correction. 2010 all things will be back to normal, however the house you sold WILL have a higher swing ticket on it! You will however, be 4 YEARS older!!!

Your landlord is pissing himself to the bank. All your friends are too much in SHOCK to say Boo!

I must admit, I am finding it difficult to justify working hard to pay off my massive mortgage within 10 years when I could become a beach bum surfer and let some other silly twit like you buy it for me!

I guess it all depends on where the demand is and where you live/buy. I live in a fabulous part of the SE where working people will sell body parts just to rent my home...

Unfortunately/fortunately, I would prefer to be normal and pay for my home in the traditional way.

You can look at Blair and Brown for creating a property boom. NEVER, forget Browns stollen quote...'you have never had it so good' or is he speaking for himself???


Tuesday, October 24, 2006 11:12PM Report Comment
 

3. Geneer said...

You sir are a richardo membero.

Wednesday, October 25, 2006 08:33AM Report Comment
 

4. Nick said...

I do think one of you is an idiot, just not str, how can you get get someone else to pay for your morgage when the yeild's won't let you, oh and str your now a cash buyer, that is just such a strong position to be in esp when repo's are increasing, nothing like a wad of cash at the actions, good luck str you will probably come back in too soon but if you make 50k, musn't grimble eh

Wednesday, October 25, 2006 08:52AM Report Comment
 

5. waitingfor hpc said...

Glorious Sunshine! you are what is known as a VI on this site - although i think it is good to have other views on this forum - by no sense is sold 2 rent 1 an idiot.

He is quite right. The sun shines today but how quickly the weather can turn nasty and always does... it is only a matter of time. We have had a long hot Summer but all good things come to an end.

Rent is not dead money at all - i am rebting a house that was on the market at 320,000 for 995 per month. And putting cash in the bank increase my REAL money in SAVINGS. You can work out what a mortage would have cost on this house but well over that figure - and if prices drop 25% my landlord has lost 80,000.

So I say a crash is coming all the fiscal rules are in place and then you may want to change your site name to thunder&lightening....very very frightening!

Wednesday, October 25, 2006 09:05AM Report Comment
 

6. Steve1 said...

I for one think that the soft landing is the utopian scenario. Something unexpected always comes out to shake the confidence of markets. This Housing market is getting more like a stock exchange every month. Not just a place to live now. So many people reliant on property to make money as an alternative to usual investments of old. An outside event will be the catalyst for some brokerage to call the top of the market and mark down Property. These guys will be out of the sector ready to buy back in at lower levels.

Wednesday, October 25, 2006 09:09AM Report Comment
 

7. sovietuk said...

All these people that think a housepricecrash is not going to happen seem to think that the period 1997-2010ish is somehow different to all other periods of history. To them somehow the period 1997-2010ish has a magical economic defying quality about it. It's usually the same idiots that think there are no negative consequences to uncontrolled immigration. Some exposure to the brutal real world is needed in some quarters.

Wednesday, October 25, 2006 09:35AM Report Comment
 

8. Eddie_lomax said...

People like Glorious sunshine are just trawling for comments, but there is one big hole in your logic, you mention that house prices will never fall more than 10%, how do you know this ?

Renting is dead money true, but is a gamble that pays off royally if its done close enough to a housing crash, and while the date is unknown, a crash between now and 2010 is pretty inevitable if you take a look at the world economys resource constraints and the amount of debt placed down in a gamble that tommorow will create more growth then today.

Oil didn't go up in price due to speculation, and each day theres 85 million barrels less of it, I'd tip this to be the biggest problem we are facing, and everyday it'll just get more severe.

Wednesday, October 25, 2006 09:57AM Report Comment
 

9. jimmytennor said...

Usual comments from homeowners, which is not surprising, especially if you have bought a property at over the last few years at the peak. History ALWAYS repeats itself, and this time is no different, apart from the fact that it will hit our nation a lot harder than in the past. All the points Sold 2 Rent has mentioned point to the inevitable fact that we will see a speedy decline in prices. When you look at the Credit that our society has built over the last few years, partially due to our obsession with owning bricks and mortar, there can be no doubt that a nasty conclusion is in sight.

I am in a slightly different position to some Posters on here, in that I can afford to buy, but I am waiting (much to my partner's, and her parents, distress) until the houses we are searching for, are at a more reasonable level. I really do not want to lose money on my investment by purchasing at present. I do realise that if we stayed in a property for 10+ years, that all would be fine, as prices would rise again, but we cannot say for certain where we will be (workwise etc) over the next few years.

Wednesday, October 25, 2006 10:20AM Report Comment
 

10. indiablue19 said...

Glorious Sunshine....

There is a demarcation line between reasoned debate and slap-happy character assassination which we have generally tried to maintain on this Blog to keep our comments useful and to the point. I believe your name-calling in relation to Sold 2's post comes close to the limit.

Wednesday, October 25, 2006 10:54AM Report Comment
 

11. Steve1 said...

Housing Market now appearing more like an over bought sector during the tech boom. Someone somewhere will call the top of this market. Probably a scenario that has not been accounted for will tip it over the edge. All markets have peaks. We are in my opinion at the top, or very near the top. The unknown is how bad will it be on the otherside? Prices levelling off. Small decrease for a short period, or a severe downturn that will have long term negative effects.

Back in the mid 1980's as young man I was priced out of the market. Every Society said I did not earn enough to get a mortgage even though I had a deposit. Got on the ladder in 1991 during the carnage when buyers had all the clout. Owners pleading to find someone to sell too who was a FTB. Keys being tossed back to Estate agents. All the current deals that are now springing up were around back in the late 1980's. Group sharing. 75% sharing with lender. It all went sour very quickly after that. I dont really want a HPC as it will mean the economy is going belly up but I feel it is more likely every day.

Wednesday, October 25, 2006 10:55AM Report Comment
 

12. talking rot said...

Glorious Sunshine!

Please moderator your comments and tone. Personal insults are not for this Blog which seeks to debate house prices through intellectual rigor. Should you wish to insult some one, please go and stand on a street corner.

May I offer you a few pointers:

1. Is renting dead money. If so, is it more or less dead then interest paid on a mortgage?

2. Are the costs of maintenance to you home dead money? When the boiler blew in my rented home, I didn't pay my Landlord for a month because of the inconvenience to me and he got to pay the bill for the repairs. When the repairs weren't done to my liking, on threat of moving out, he offered to drop the rent.

3. When I get too old to care for myself, I will move into a Care Home which the Government will have to pay from day one. The grubbing Glubberment will not be able to force a sale of my home to fund my care because I won't have one. The proceeds of your home will go to fund your care.

4. The money I save by renting, 500 per month, is being paid into a tax free saving vehicle which will fund my pension. You, of course, may be in a financial position to pay the mortgage and plough a reasonable sum into a saving plan for your future pension. Many people are not and are hoping their home will be their pension. Question is, where will they live is they use their home as their pension? They might choose to sign their home over to an Equity Release Company but, have you seen the paultry annual rates which such companies pay? And you are still responsible for the maintenance!

5. The price of any asset can go up and down. May I remind you that property prices in Japan are less now then they were in 1992. I challenge you to explain why you think economic cycles within the UK no longer exist. People without jobs and people whose jobs do not pay enough to cover the mortgage, tend to loose their home. Demand for housing might be high but if no one can afford to buy, supply will always outstrip demand causing a fall in prices. It is called a Crash.

I await your explanation of why you believe economic cycles no longer effect the UK.

Wednesday, October 25, 2006 10:57AM Report Comment
 

13. Nohpc said...

waiting forhpc. Your landloard has only lost 85 thousand pounds if he has to sell. Otherwise he is still laughing all the way to the bank. He will own the property sooner or later and have paid very little for the privilidge. And as for those who have sold to rent.. fair enough if you can't handle the heat get out of the frying pan but i will eat dog poo if it proves to be a worthwhile maneovre in the longterm. Even if you save 50000 pounds what is that over 25 years?

Wednesday, October 25, 2006 11:00AM Report Comment
 

14. sold 2 rent 1 said...

Guys,

Dont get rattled by Glorious Sunshine

It is not his fault that he takes this point of view.
He is either young, nave, uneducated in basic economic theory or just following the herd mentality like 90% of the population.

What is his fault is that when given an opportunity to learn another point of view he reduces his argument to insults.

I sold my house for 4 times its value in 1994. Any investor would be happy with those returns. I admit that buying a house then had an element of fortune but selling and guessing the top of the market is a very tricky business. Maybe the top is another 10-15% away but that is irrelevant compared to the 300% gain.

Gambling in a casino you cant afford the minimum stake
My wife and I have 4 properties (2 in Turkey) in our portfolio. We will be reducing this to 1 over the next 6 months and the total profit - over 400K. That makes me a real idiot.

One of the reasons that Glorious is not alone in his point of view is that people have been predicting a crash for so long that no-one listens or takes the argument seriously any more.

There have been many economists expressing serious risk in the housing market since 2003. Some have even retracted their statements. As long as The Economist remains on my side I have full confidence of a crash.

I remember an ex-girlfriend (who was no economist) back in1997 saying after hearing prices had risen in London by 50%, I am not going to buy now but wait until the next crash. I just hope she didnt do that.

As we all know it is all about timing. It is very difficult to get a credible economist to put his head on the block and specify a year when the crash happens. It is more than their job is worth.

Wednesday, October 25, 2006 11:45AM Report Comment
 

15. sold 2 rent 1 said...

Glorious,

You must have some concerns over a crash - otherwise why would you be on this site.

I eat meat. But you don't find me stalking vegetarian blogs and insulting forum members

Wednesday, October 25, 2006 11:51AM Report Comment
 

16. sold 2 rent 1 said...

jimmytennor,

I had a similar problem with my wife about renting a couple of weeks ago.
I know the deal; many of your homeowner friends look down on renters. It really is a snobbery thing.

The solution is to keep showing her a few articles from credible sources. EG The Economist

The winning punch is to rent a house that is much better than what you would buy.
This is not too difficult as repayment mortgages are 50% more expensive then renting.

Lock yourself into a 12 month rental contract. In a years time prices should be heading south so jobsaguddun

Wednesday, October 25, 2006 12:13PM Report Comment
 

17. Ebob said...

I have been waiting for a crash since 2000. It has not happened. The government always find a way of keeping the gravy train going. I now conclude there will be NO overnight crash. There may be periods of no capital growth. But a crash is unlikely.

Monetary/fiscal policy doesn't make sense anymore, people are indebted like never before. Governments (UK/US) spend like never before. The crash hasn't happened, nor is it likley to. They keep fiddling the system, until something comes along and saves them. Like mass immigration to the UK. This lowers inflationary wage increases, so interest rates do not rise, preventing the desirable crash (a return to fundamental economics). Furthermore, these people need somewhere to live, BTL'ers will be dribbling with excitement at the prospects of peasants paying off their mortgage debts. Has anyone really asked the following serious question:

What is the cost to the UK of displacing unskilled British worked onto welfare, as a direct consequence of accession immigration.

Does anyone really give a damn, about British peasants! What about all those Brits up North that do not work, have never worked and never want to. Why does the taxpayer keep paying their welfare, whilst handing jobs over to EU peasants. What a strange government we have elected. They appear to be more concerned about the rights of foreigners than their electorate. The next general election will send current Labour politicians a strong message, they'll be given the opportunity of competing with the accession peasants for the low end jobs.

Outsourcing is controlling inflationary forces by simply shifting jobs to lower cost geographies.

Will the crash happen, I think it will be deferred perpetually, by one scam or another.

I have not invested in property at all because of teh mistaken belief that the above reasons were going to crash the market. My brother in-law owns about 80 entry level flats in Harrow, Middlesex. He rents them to peasants (British, EU, Asian, African, in fact any peasant that can pay the rent) He has been buying since 1995. He has cleared the mortgage on some of them. I can barely look him in the eye anymore, when I visit his 1.5M property in Pinner. Or when he talks of buying a 3M property in Richmond.

I am a director of a software house. Clearly I got my sums wrong and my less educated brother-in-law got his sums right, for all the wrong reasons. He could happily retire tomorrow netting approx 10M, if he chose to . He doesn't as he thinks it will last for a long time to come

Why work for a living when the peasants can make you rich!!!!

Wednesday, October 25, 2006 01:08PM Report Comment
 

18. Jimmytennor said...

Sold 2 Rent - we are indeed renting a property - which is on a month - to - month basis, so very fortunate to be able to get whenever we require...

I know the story, it was only last week when I was attempting to discuss house prices with 5 of my friends, only to be shot down in a blaze of raised voices and laughter (obviously all 5 own property, most of who purchased in the last couple of years). My only salvation was to be at one with myself, knowing that the fall will come, and when it does, I will repeat my argument from that day, glowing in the fact that the mass population don't know their arse from their elbow! NB we are all in our 30's..

Wednesday, October 25, 2006 02:45PM Report Comment
 

19. jimmytennor said...

Sold 2 Rent - we are indeed renting a property - which is on a month - to - month basis, so very fortunate to be able to get whenever we require...

I know the story, it was only last week when I was attempting to discuss house prices with 5 of my friends, only to be shot down in a blaze of raised voices and laughter (obviously all 5 own property, most of who purchased in the last couple of years). My only salvation was to be at one with myself, knowing that the fall will come, and when it does, I will repeat my argument from that day, glowing in the fact that the mass population don't know their arse from their elbow! NB we are all in our 30's..

Wednesday, October 25, 2006 02:46PM Report Comment
 

20. waitingfor hpc said...

jimmytennor ...

i too have the money to buy but am waiting and renting. I am in my 30's also .. and my GF's family all think i am crazy too....

Wednesday, October 25, 2006 03:44PM Report Comment
 

21. jimmytennor said...

wfhpc - thank God Almighty I am not the only one! I was starting to feel that I was all alone in my thinking!

Jtennor...

Wednesday, October 25, 2006 04:20PM Report Comment
 

22. kpjcomp said...

I'm also in a position to buy after selling our previous house.
My Wife, at first was very annoyed when I said I did'nt want to buy at this time. But now she's more for waiting than I am.
I just could'nt justify an extra 50K for another bedroom, I don't think it's just FTB's that can't buy at the moment!!
Were due a baby in January, and she will of course be out of work for a while. So I'm even more glad we never commited to to a huge mortgage.
Because we've not commited to any mortgage deals, were well in the Black, in fact the Interest on the savings is practically paying for our rent.
So unlike Mrs Beg, I won't be begging..:)

Wednesday, October 25, 2006 05:08PM Report Comment
 

23. talking rot said...

Just before this thread drops off the bottom of the page, I would like to add that Glorious Sunshine! has yet to accept my challenge. The ability to ignore blatant facts will not see you through this one old fruit-cake.

Wednesday, October 25, 2006 05:33PM Report Comment
 

24. K said...

bank = landlord,
Intrest rate = rent rate

if intrest rate > rent rate, renting is a good deal;
if interst < rent rate, buying is a good deal.

as simple as this.

Some house onwer with 100% mortgage does not realise the truth behind that the house is not his belongs, it belongs to bank, you just pay very high interest (in terms of rent) and maintainance for bank, also pay buiding insurence for bank. But to rent, the landlord must pay at least maintainance and buiding insurence.......so, who is sillier?

Wednesday, October 25, 2006 05:42PM Report Comment
 

25. Glorious Sunshine! said...

The reason I have not responded before is I HAVE BEEN WORKING HARD ALL DAY what have you lot been doing? Do you all work shifts or nights? Or are you all privileged and dont have to work to eat, let alone buy a house? You must be loaded to be able to afford to throw money away on rent.

BTW there is an end to a mortgage no matter how tough it gets. Rent is forever... in the last house crash the number of properties repossessed as a percentage of the total was nothing. Most people just worked their way through it...I know plenty.

What a load of rot you talk.

Remember there are plenty of individuals out there with more money than everyone (including me) on this thread put together who are buying everything up. Many are from overseas and this government is encouraging them - one you may all know has been on TV and has a hook hand! Thats why they will not fall.

Go back to your daydreams...

And remember stagnation is a correction taking inflation into account. The swing ticket price will not fall.

Wednesday, October 25, 2006 08:13PM Report Comment
 

26. Sam said...

Actually Glorious. Some misunderstandings you seem to have about,,, well a lot of things.

Firstly manners; we dont talk rot we disagree with you. Theres a difference.

Its very easy to talk about house prices continuing to go up, but you really have to think about where this expansion will come from, besides loosing lending I cannot see the economy expanding to maintain the momentum of house inflation that weve seen in the last ten years.

End to mortgages? What happens at the end of a 25 year interest only mortgage? You have to pay for the house, you used to be told to save, get and endowment or something like that. But we know what happened there dont we? these days people are so sqeezed for cash, they cannot afford to save, but people like you think that it's more important that they cannot afford to get on the property market.

Lol, yes I agree there are people who are buying everything up, these people arent form overseas while this may add to the market, its nothing compared to the private landlords becoming BTLrs. do you know who they are? Theyre the people in 2000 that bought lasminute.com shares, people who thought that pets.com was a goldmine, and never looked at a business plan, or understood what price/earnings meant. Oh for those less informed about gold rushes and the madness of crowds, who are the people who make the most during a gold rush? Its always the people who provide the tools for digging, servers for running your .com business, or lending you the money to buy that dream house.

Oh, if you know so much about property. Youd know that rent is not forever. You may call me pedantic for brining that up, but I can call you wrong.

Finally, astute investment and managing cash flow beats buying an over priced house any day of the week, any time of the year, and over some parts of the economic cycle.

Oh, stagnation. Yeah a word I hear a lot these days, any historical examples of stagnation?

Thursday, October 26, 2006 12:16PM Report Comment
 

27. C'mon Correction said...

G.S.

My rent is over 200 a month cheaper than the cost of owning (excluding capital repayment too), I've actually worked this out and not spouting things off the top of my head. So no I'm not throwing my money away, I'm actually saving ever more. Also my friend just sold his starter home for 5k less than his neighbours exact house was bought for 3 years ago !!!!!!!!!!!! So much for booming prices, eh !

You state 'the swing ticket price will never fall' as certain. Never before this has happened, prices have fallen, so you can't state that 100%

I state 'house prices go up and down in value'. This has happened many times before, so I CAN state that 100%.

Enough said my friend, your agrument is weak, weak, weak.

Thursday, October 26, 2006 06:41PM Report Comment
 

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