Wednesday, Nov 04, 2009

How long can it go on for

The Times: House prices go up again, but fears grow that economy cannot sustain rise

Hopefully not another thread of 80 youcopy posts coming, it would be interesting to see where we think (in the real world, not the Armageddon world) the next months will go - and why. I can see the tidal wave of insolvencies getting hold and the laying off of staff growing to eventually swamp all these green shoots.

Posted by growler @ 07:36 AM (1432 views)
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19 Comments

1. paul said...

Best take some more guidance from the Zimbabwean Central Bank and print more moohney!

Wednesday, November 4, 2009 07:55AM Report Comment
 

2. crunchy said...

"fears grow that economy cannot sustain rise."

Growler, spot the delibrate mistake in that sentence.

Strange wave action before the numchucks hit and the big rent book is issued.

Be prepared to wait for quiet some time untill they are ready for you to sign it..

Wednesday, November 4, 2009 09:04AM Report Comment
 

3. it_is_going_with_a_bang said...

House prices have a rise when interest rates are still at an emergency unrealistic low - not exactly suprising if it were true - that is the whole point of the policy. I still find it odd that the price of the most expensive purchase of your life "going up" is cheered on considered fantastic news by the population as a whole.

Fuel protests, food price protests. poll tax riots all over fairly small amounts of money in comparison to stuffing people in the future with a lifetime of debt to buy a property to basically live in. All anyone considers nowadays with mortgages is the interest rate and not actually how much it will cost to pay it all back.

Wednesday, November 4, 2009 09:07AM Report Comment
 

4. growler said...

@3 ; it's going...

at the end of the day, UK culture says that you need your "own" house, and it's good news when that house goes up in value. People out of the market (like me since June 2007) look forward to falling prices - but we're a VERY small minority. Everyone else makes a statement about house prices based on subjectivism. Either they live in one they own, or they earn money from them. Simply put, if you're a diary farmer, higher milk prices are good. And if I end up buying in a couple of years, I challenge myself not to express the basic of all human traits.

You can see from the wavering bears on here that it's a tough challenge to be fully objective. Of houses, I'd challenge anyone to say that they are - including me.

Wednesday, November 4, 2009 09:42AM Report Comment
 

5. brownsters_billions said...

I think again it comes down to the difference between living in a house, and 'investing' in one. If you plan to live in one, then in 25 years you'll pay it off (assuming you don't go interest only, but that's another story), and you'll own your house, and it really doesn't matter what you paid or what it's worth.

If you 'invest' in property, then you assume that it should rise in value and future generations should pay more to live here than you do, which is neither fair nor sustainable.

Wednesday, November 4, 2009 09:55AM Report Comment
 

6. crunchy said...

5. brownsters_billions said...If you 'invest' in property, then you assume that it should rise in value and future generations should pay more to live here than you do, which is neither fair nor sustainable.

The banks make nothing from property when handed down through generations one way or another.

What a shame then, that people have to sell to fund a pitiful pension????

Wednesday, November 4, 2009 10:17AM Report Comment
 

7. growler said...

@5 Brownster. Trouble is - and that's my point - it is a false dichotemy. I challenge the majority of Brits who live in a house they own in the UK to say "it's only a house to live in, what's all the fuss about?". EVERYONE buys because they think it's a good deal. NOONE buys because they think in 25 years it doesn't matter what it cost or what it's worth.

I'm a serious bear HPC-er - and am pretty confident from my view in long-term industry - that we will see more property price falls

Wednesday, November 4, 2009 10:17AM Report Comment
 

8. brownsters_billions said...

@7 growler said "EVERYONE buys because they think it's a good deal."

I'm about to buy and I don't think it's because it's a good deal. I just want somewhere nice to live and start a family. In 5/10 years when we look to move, we'll of paid a chunk off, and I genuinely think because of inflation and the general attitude to house prices in the country, the house will be the same price we paid for it (of course, in 'real' terms it will be worth less, but who cares if I've lived there for an eight of my life?)

Wednesday, November 4, 2009 10:23AM Report Comment
 

9. happy mondays said...

it_is_going_with_a_bang said...
All anyone considers nowadays with mortgages is the interest rate and not actually how much it will cost to pay it all back.

Yes, i find it hard to believe, people still get upto there eyeballs in debt, because of a low interest rate...
People are Crazy..

Wednesday, November 4, 2009 10:29AM Report Comment
 

10. crunchy said...

Over their heads, happy mondays.

Wednesday, November 4, 2009 10:32AM Report Comment
 

11. brownsters_billions said...

@10 crunchy

We could take the mortgage at 12% interest rates. Is it over my head?

I have no sympathy for people who get into trouble based on calculations at a low interest rate, but how many people really believe that interest rates aren't going to rise? Not everyone is THAT stupid.

Wednesday, November 4, 2009 10:39AM Report Comment
 

12. cynicalsoothsayer said...

Maybe the house price falls won't occur until the economy turns and people need to move to be nearer to the new job created by the upturn?
Otherwise they're going to sit tight and not put their house on the market?

Wednesday, November 4, 2009 10:55AM Report Comment
 

13. crunchy said...

11. brownsters_billions said...Not everyone is THAT stupid.

I remain out on that one. I think you have timed buying about right (in this late stage). I think in the future one will need around 80% cash if

not the total sum. For cash buyers and current homeowners this will not pose a future problem as long as they can afford interest rate

fluctuations/employment gaps. However, for the FTBer I feel it will be a case of finding the most stable and permanent place to rent.

I think that the banks, rather than selling on will slowly move into the renting of their property stock. This may be intergrated also with the

government or indepentent housing Assiocations. Why? There is too much money to be lost in a crash of any real magnitude.

This is global now. I will leave some other reasons out. If anybody does not like this that's just tough. It's my opinion.

Wednesday, November 4, 2009 11:16AM Report Comment
 

14. growler said...

@8 Brownster.

But this is the weird thing... where I am from (originally - been here for 35 years) people are quity happy to start families regardless if they rent or buy? Houses are generally bought at a much later age with a 50% deposit - when people know they won't move house again. There ain't no house price boom there - consequently this is no crash either.

If interest rates are going to rise, so are savings rates. I also agree with Cynicalsoothsayer: unless you have to, there's no incentive to move now.

As to the maths: Right now, what I pay in rent is less than what I'd have to pay if I bought it interest only. I might as well pay the agent money than the bank and save all those nice bills like new boiler, washing machine, decorating, solictors, tax etc.

The capital proportion would have to rise a whole lot more for the maths to work out. Since that isn't likely in most scenarios, there really is no sensible reason to buy.

Wednesday, November 4, 2009 11:18AM Report Comment
 

15. brownsters_billions said...

@14. growler "there really is no sensible reason to buy"

Ah yes, but only if you look at the maths, and nothing else. Looking at the maths alone is probably what got us into this mess in the first place...

Wednesday, November 4, 2009 11:25AM Report Comment
 

16. growler said...

:-) Brownster....

(spock voice) which proves that illogic defines house purchase (/spock voice)

And I also think that had people really have looked at the maths (rather than the utopia of an perpetually properperous and painless purchase), we would NOT be in the mess we are.

And the reason that people didn't: It's amazing what you can believe if your livelihood depends on it.

Wednesday, November 4, 2009 12:05PM Report Comment
 

17. stillthinking said...

But the choice isn'tj just between buying a house or renting/saving. Both of these over the last two years have been chronically unsuccessful policies. Either you lose out as a saver in a devalued currency, or you lose out on a house price valuation(maybe offset by sterling debt value going down).

Wealth has been lost in the UK by both groups.

Once you get over the mental hurdle of renting/home "ownership" and that is out of the way, surely the decision of where to maintain possibly increase savings becomes a lot broader than simply a rent purchase decision on housing i.e. given the UK economy, political attitudes to sound money, I think the decision is whether or not the UK going forward provides an environment that offers the ability to save.
The people who have really cleaned up are those who got out of housing and also got out of sterling, and looking at particularly sterling being below purchasing power parity for our fairly nearby neighbours, the consensus is currently that the UK is no longer a good bet for the future.

A better choice, possibility anyway, it seems to me, would be to rent, get out of your company pension scheme if possible by asking to take your employer top up as salary, and save elsewhere just until things have calmed down and the possibility of a UK Iceland in 2010 has gone. Be cautious. For example, it is not even clear yet whether Labour will lose the next election, what the bank losses actually are, whether there will be a gilt strike. If you don't know, steer entirely clear basically. Having said that it is entirely possible that sterling is oversold and will come back. But anyway it isn't just houses and renting.

Wednesday, November 4, 2009 12:19PM Report Comment
 

18. house said...

'14, Growler,
I am a house owner but you are spot on.I understand the maths.
If a house is worth £400000 and you can invest on a 5 year bond today at 5%, you would earn £20000 Gross and Net of £16000.
If you can rent something for say £900 per month, the annual plus is £5200.
What many people think is that there will be capital appreciation. I personally cannot see any appreciation from the peak of 2007 for the next 10 years.

Wednesday, November 4, 2009 03:04PM Report Comment
 

19. crunchy said...

Was it something I said.

Love it, Love it, love it!!!!

This means that what I have writen today must be very close to the knuckle. NICE.

Wednesday, November 4, 2009 11:03PM Report Comment
 

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