Wednesday, February 25, 2009

Editor at large of Country Life talks the market up

You won't be the only one to spot a bargain when the market recovers

"It is better to buy in a declining market than a rising one". No it isn't. It is better to keep your money under the bed than in a large single highly leveraged asset that is falling in value by 1-2% a month. Also there will be no hurry when the market finally turns. In the 1990s the market fell for 3.5 years, then was flat for another three years. This time the bubble has been much larger, so the collapse and turnaround will likely take longer too.

Posted by monty032 @ 08:11 AM (1745 views)
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17 thoughts on “Editor at large of Country Life talks the market up

  • it_is_going_with_a_bang says:

    The unfortunate thing is there are plenty of people who do think exactly this and are worried about having no investment or retirement.
    Property is still seen by many to be an investment in the future. I would say this is mainly people who have alot alot of equity or full cash buyers who are sick of seeing virtually no interest in the bank.

    Having said that there are not enough of them to make a huge difference on house prices. After all there are only so many rental properties that can be viable before the market gets swamped.

    Not sure that Clive is issuing the right advice though? You can always just monitor the situation every couple of months until you feel it’s right. Buying on the way down doesn’t sound like very sound advice at all. He is infact spouting exactly the same nonsense argument that brought the whole financial market and country to it’s knees. He should be somewhat more responsible than that.

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  • Eternal Sceptic says:

    He overlooks one vital point. Until the bottom is reached, house purchase is guaranteed to lose you money. If you have no option and are buying for the long term-fine. But holding off maybe better.
    Also events are moving fast and the conventional economic models are failing. Maybe cash is king.

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  • little professor says:

    Well said monty. These rampers always claim that once prices stop falling they will suddenly start shooting upwards. There has never been a house price crash that has been immediately followed by a sharp rise.

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  • Why should prices suddenly start rising rapidly? The motors of the bubble (100%+ mortgages, unlimited credit, no lending checks, big city bonuses etc., plus those “strong fundamentals” fionualla earley always waffled on about) are probably broken for a long time to come, if not forever. The only thing the “housing market” has in its favor are low interest rates and a government that would sell the country’s soul to the devil in order to get a bit of fairly gold in there before the next election.

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  • The one newspaper that consistently seems to throw impartiality out of the window when it comes to reporting about house prices is
    THE TIMES.

    For years now, most of their reports have adopted a bullish approach.

    I remember reading an article about a year ago, [printed in the times] where they admitted that a number of their reporters are BTL ers’

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  • mark wadsworth says:

    Well said Monty.

    Whether future prices follow the pattern of the 1990s in the UK or the last twenty years in Japan is another topic. But there’ll be no suddent rebound.

    It only makes sense to buy into a falling market if prices are really, really low – like the flat I bought in 1995 for £32,000 that would have cost me £4,000 to rent – even a 5% annual fall would not have made renting cheaper than buying, if we add that £1,600 capital loss to the cost of a mortgage of £2,000-odd.

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  • I don’t think house prices can rebound under present conditions, although there is a reasonable chance that it will happen again at some point. Contrary to many views here, I do not think it is simply a matter of govt policy. The country gets the kind of govt it wants, and the electorate in this country thinks that house ownership is the Golden Goose, the sign of status, the ultimate ambition. Both Labour and Conservative govts have been the same and have encouraged house ownership in many ways. A steep drop in prices may change peoples’ view.

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  • [email protected] I agree, the Bricks and Motar on a Friday is constantly full of green shoots of housing recovery regardless of the data elsewhere in the Times. Rupert, this sours my early afternoon Bud a little..

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  • This is a very dangerous article IMO. It is encouracing people to go out and take advantage of “cheap” Northern Rock mortgages.
    Some people will actually believe this guff and are likely to go out get a large mortgage close to just about what thay can afford (as people only seem to think in monthly payments these days). Of course when interest rates start going up again at the end of 09 and into 2010, these individuals will be totally roasted when they come to switch, and we’ll see an even bigger tide of reposessions smashing over the rocks (no pun intended).

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  • The article seems to hinge on the state of the future being one of higher inflation whilst maintaining low rates, however this is unlikely after the U.S.’s low rate policy between Sep-11 and crisis point. Furthermore, the inflation may not come as the author expects (he even acknowledges he may be wrong about it to the tune of a decade of deflation) as it depends upon the way any QE occurs and how the economic agents act when creation occurs (especially the banks where the new capital is placed).

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  • Anyone wondering about the Times’ bullish take on the possibility of the ‘market upturn’ may like to read my comment on this post (#9)a few days ago. It has more than a bit of relevance.

    http://www.housepricecrash.co.uk/newsblog/2009/02/blog-forced-landlords-in-holiday-homes-21869.php

    Methink they doth protest…….

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  • letthemfall

    I disagree with you – the biggest problem at the moment is policy and history, as IIGWAB points out the one biggest problem in the UK is people still seem to think of houses as a hidden asset and the past 10 years have ground that in, if house prices were to steadily fall for the next 5 years i wonder if that would change?

    There is no shortage of housing in the Uk and there have been more built the last 10 years than ever before, given the wave of redundancies sweeping into the Uk for the next 3 or 4 years and the change of policy for mortgage regulation post credit crunch i can see house prices “Effectively falling” the next ten years, will people get caught out – by the millions, where will GB and AD be then – out of office ( and so easy for the new government to blame ) writing books and the like about how they saved the world.

    Who wants to buy a liability?

    Why are houses a “Good investment” long term >>> Because you need some where to live, out side of that they cost money to run, long term they are good but so are shares – want to invest in the FTSE at the moment?

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  • shining wit, oh I’d love you to name names! It’s the classic mania though, ain’t it? The numbers you give, if true across other professions would explain why the bubble took almost two years longer to burst than I thought it would.

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  • shining wit, are we looking at an Annie get your gun scenario ?

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  • shining wit, I love your PE quote!

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  • Obviously I can’t name names at all with regards to my previous post. I know them (and like them even though they are ‘media’ people)

    Suffice it to say that there is significant rumblings within the circles of the person I referred to within their working environement and with regards to other people I know who had previously seen the London property market as a massive piggy bank.

    I think their trouble has been to just look at percentages. When you get wrapped up in purely mathematical formulas (% for instance) you stop looking at the ACTUAL amount that is being either made or lost.

    Another acquaintance of mine has an inherited property in a swanky SW postocde of central London. A victorian 2 bed terraced house It had been in the possession of an elderly man since way before they inherited it. A releatively small 2 bedroom home that was in an extremely run down situatiopn as they didn’t do much for the gentlemen as (possibly understandably) the chap had an old fashioned ‘rent book’ which entitled him to not only ridiculously low rent (and rises) but also gave him tenancy ‘ad infinitum’ as was the case with previous rent laws (he lived their for 40 years or so). He died in about 2001/2002 and the landlord then predeeded to renovate the property, bringing it up to modern standards with a view to renting it out.

    Even though this person had the Capitol to do all the work without the need for a mortgage they decided to utilise one for the cost of all the work. This ended up being about 120k (Hard to believe but everything like that costs through the nose in the big smoke!). It is now a 3 bedroom house with 2.5 bathrooms and originally done to a nice standard. The place has been let for years now and it really hasn’t been worth as much as you would think. The property was valued in 2005 at 575k. The tenants, mostly well to do foreign students (doctors, legal people, business people) The treat the place like absolute animals. One bed (a verry good one) lasted 24 hours before being trashed. Every new ‘batch’ of tenants trash the place and it need redecorating every 1 – 2 years throughout. This property has a rental income of around £2000 a month after letting fees!

    This person has new remortgaged the property twice to supplement thier income. What should have been a gift-horse is now only just about breaking even. Any significant letting down-time is putting them closer and closer to actually being forced to sell.

    What should have been a valued asset, after bad decision making and greed, has now turned into one that is no longer earning significant income anymore! And if interest rates had stayed at 4.5% or go up there again it will start to be costing them as the cash cow no longer produces milk!

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  • Good comment Monty !

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