Saturday, December 1, 2007

Property bubble – stagnation or burst?

Question of the Week: should I sell my house now?

Anne Ashworth repeating the unsupported assertion that this time the bubble will stagnate, not burst

Posted by monty032 @ 12:32 PM (949 views)
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10 thoughts on “Property bubble – stagnation or burst?

  • “No respected commentator currently believes there will be a repeat of the crash of the late 1980s”

    Apart from the chief economist of the HSBC!

    Oh and all the majority HPC bloggers, who obviously know more about economics than you do, Miss thicky wicky Anne Ashworth!

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  • Don’t worry you will loose money any way. It just depends how much.

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  • Peter Rollings at least gives us some words of wisdom. A precis is that a nice house will be worth more than a not so nice house. So now we know.

    Anne Ashworth needs to realise that percentage data is of little value. She states that “values” are 7% higher than a year ago, but we have seen a small decrease of late. Many people have MEWED and borrowed against the supposed value of the house and are maxed out. As soon as the value falls, by even a small fraction of a percent, then the real value has fallen.
    This is happening and consequently, the crash is underway.

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  • She writes “Many amateur landlords are long-term investors and not over-extended”. Typical of the weak, meaningless statements in this article. It’s equivalent to “Many Americans are not fighting in Iraq”.

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  • Unlike Anne Ashworth, I do know something about the mathematics of bubbles. I am a Doctor of Finance and am writing a paper about bubbles in the stock market (or would be if I weren’t currently working six days a week to keep up with the teaching load). “Rational speculative bubbles” (Google it) do not need an outside cause to collapse. Rational agents join in the bubble to get the ever-increasing returns, even though everyone can see the ever-increasing risk. In Warren Buffett’s memorable analogy, everyone enjoys the ball so much that they all plan to leave a few seconds before midnight, although the clock in the ballroom has no hands. Eventually the bubble collapses entirely from internal causes, because the returns can’t go up forever.

    The current property market fits the standard description of a bubble as a runaway asset price unsupported by fundamentals. For example, when my landlord’s two-year special deal with Barratt runs out next May, he will have to choose between selling the house and suffering a five-figure capital loss, or starting to pay interest at or near the SVR, which will be roughly twice what I pay him in rent.

    Uninformed property market commentators keep on repeating that the property bubble will end in stagnation, not a crash. Sustained repetition will not make it come true

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  • tyrellcorporation says:

    Also, where is the historical precident of markets simply stagnating after such a prolonged inflationary period? there aren’t any. Markets are dynamic and don’t really stagnate for more than a few months before the pedulum swings either way again – it’s all wishful thinking. The Goldilocks scenario is absurd IMHO.

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  • Ihopeitgoeswithabang says:

    Have u seen the comments lol
    “for a moment I actually thought this was meant to be a serious article but now I realise I must have clicked into the joke section…..”
    “Since even the recent HSBC property report indicates a 30% correction level, I’d disagree with the reporter that economists aren’t sticking their necks out with such predictions”

    Anne Ashworth probably owns several BTL properties that she is worried about. Hence the vested interest. Serious journalist no lomger – if ever.
    Potential member or at least a donor to the labour party though I would think – ticks all the right boxes.

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  • Lukeskywalker says:

    Monty – You may find “Critical Mass – How one thing leads to another” by Philip Ball, a compelling read.

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  • the northerner living in oz says:

    I have found this site very informative over the last few weeks.

    I will stay away from sites like these for a while it is beginning to make me depressed.

    Good bye for now.

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  • I’d like to see the FSA investigate the vested interests of Ms Ashworth in a similar manner to the alleged Mirror insider trading jouranlist(s).

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