Tuesday, May 29, 2007

More bear

Gazing into the property crystal ball means looking as far away as China

Forecasting house prices, let alone averting a crash, is getting ever more tricky

Posted by inbreda @ 11:00 AM (2953 views)
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14 thoughts on “More bear

  • This is more of the same pattern.

    Our economy is on the wobble – IMHO.

    The things we need to make our lives comfortable – such as food, energy and consumer goods – have become externalities in our economic model.

    We are a service-based economy – so the short-term benefit to us has been to remove the costs of this production – namely captial investment in labour and technology – but also pollution. However, the long-term problem is that we do not ‘make’ anything and do not have a robust diverse economy – including mining, agriculture and manufacturing.

    Yes things have and are cheap in the short-term, but long-term this will be a problem when prices rise due to the BRIC countries Brazil, Rusiia, India and China.

    The Private Equity movement seeks to ‘rationalise’ our economic model – IMHO this means ‘off-shoring’ and reducing the home-costs of labour (wage-capping and job cuts). This is a problem for our economy – and the trend is for PE to look at service-based companies, retail, entertainment etc – that are the mainstay of our economic mix (the knowledge and cultural economy).

    We will have to look sensibly at 0% growth as a new target – bringing back the mix to our economy – more investment in infrastructure – more training – reducing waste and debt – basically a re-ordering of our society – and this will take years and decades – we will be like Japan – only worse!!!

    We have not yet hit the bad times – and we are likely to suffer before too long.

    Not a good forecast I know – and I could be wildy off target.

    But IMHO we have had short-term benefits but with long-term costs – and i’m sorry to say that it looks like the future is already here!!

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  • Two very interesting points here:

    First:

    “…Alternatively, growth and inflation may continue to be strong, leading to rates well above 6% next year and a much higher risk of an eventual hard landing…”

    And therefore we know that …

    “…For the prospective home-buyer the message is clear. Property is expensive and the cost of servicing a mortgage is rising…”

    Secondly:

    “… It’s the turning point, says Hometrack [who] warned yesterday that the housing market has reached a turning point as rising interest rates begin to bite. According to the firm, property prices across the country rose 0.6% during the month, down from the 0.7% rise recorded in April. Annual house price inflation was 6.7%, down on the previous month’s 6.8%.

    The company said there was evidence of softening demand, with the number of new buyers remaining static during the month. There is also an increase in supply, with a 6% rise in properties coming to the market , up from 5.7% in April…”

    So on the one hand we have higher interest rates (possibly up to 7.5% I predict by next year) and on the other we have more properties on the ‘market’ , static sellers and house price rises apparently only in London and Northern Ireland distorting the national average. On the other hand we have buy to letters about to have to face more taxes and also still uncomfotably high inflation.

    Any cabbies among you like to predict where this will take us?

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  • Nearly 30 – better forecast than you could have predicted!!?? – similar to one of the leading concerns by the IMF’s new chief economist –
    Overproduction can drive recession see this other parrallel version on this story:
    http://www.busrep.co.za/index.php?fSectionId=553&fArticleId=3854816

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  • sold 2 rent 1 says:

    Anyone else see the documentary last night called “Brits get rich in China”.
    It definately summed up the madness going on and how China’s stock market could double again before September.

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  • shipbuilder says:

    I’d say you’re about spot on, Nearly30.
    It won’t happen though – the money man is Britain’s god now, and the farmer, engineer and scientist are second rate – who wants to make, invent or inspire when one can simply move a few noughts on a computer screen and spend the proceeds? What a one-dimensional society we have become.

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  • Considering we import 95% of our fruit and 45% of our veg a financial or other crisis could put this country right in the brown stuff and I’m not talking about Gordon. If this was 1939 this country would last about two weeks, we have outsourced our industrial base and the service sector will be the next to go because our labour costs are to high. Added to all this is the fact that our oil & gas reserves are dwindling, it looks like were set to become a satellite province of Russia. Have a nice day.

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  • Retired Banker says:

    mrmickey-

    A pretty accurate assessment of the situation. The UK no longer has the industrial base or resources required to fight another war.

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  • …and so it goes with the ‘globalisation’ fantasy.

    We have exposed ourself to unmanageable risk in an uncertain world for the short term benefit of a small minority who will simply leave with all the cash when the party ends.

    Great Britain is stealthily being dismantatled and its society fragmented while we collectively binge on ‘funny money’ and dilude ourselves that we can all become rich simply by swapping houses with each other.

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  • The following is from HMRC ‘Share Of The Wealth – 1% of population owns 21% of wealth’

    http://www.statistics.gov.uk/cci/nugget.asp?id=2

    The wealthiest 1 per cent owned approximately a fifth of the UK’s marketable wealth in 2003. In contrast, half the population shared only 7 per cent of total wealth. The results are even more skewed if housing is excluded from the estimates, suggesting this form of wealth is more evenly distributed.

    Wealth is considerably less evenly distributed than income, and life cycle effects mean that this will almost always be so. People build up assets during the course of their working lives and then draw them down during the years of retirement, with the residue passing to others at their death.

    So – are we largely impoverished as a populus?

    The HPI has just made things a hell of a lot worse and made the rich richer etc.. and with inheritance tax – we are less likely to see any savings/assets being re-distributed through the generations – also if there is re-distribution through death – this only goes to fill the ever yawning debt whole!!???

    Basically – the rich win either way – esp in recent times and we are on a hiding to nothing!!

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  • Rocket Robbie Mtt45 says:

    Orwll

    Can you really see IR getting close to 7%!

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  • rocket robbie says:

    Orwll

    Can you really see IR getting close to 7%

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  • I can because of the inflation problem. Alternatively the BOE may have to give up their inflation policy of 2% and of course we know that Gordon the Gulper has moved the yardsticks all the time. In reality however the actual real interest rate is double what the BOE tell you as any person (inc. pensioners) will tell you.

    Oh dear, oh dear oh dear oh dear….

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  • Nearly30 is spot on, we are at a point where stagflation may possibly be a desirable prospect. Read a story over the weekend where even migrant fruit pickers are in short supply, obviously there are better places than the UK to go this year to pick strawberries. If market forces are dictating that UK firms cannot compete on wage costs then it looks like a greater percentage of our working population could be sliding towards minimum wage employment as firms who are unable to compete shed workers.

    Read up on the Japanese situation and the rise of FREETERS and with more and more of our youngsters on waste of time courses to keep them off the NEETS list then we really have something to bigger worry about that makes the housing market pale into insignificance.

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  • so many clever thoughts, should you organise new political party and defend/put forward good ideas.. I would suuport.

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