Sunday, October 10, 2010

Which seems more likely?

This can't go on: house prices must drop or wages must rise.

Jeremy Grantham, veteran fund manager, warns that he has only ever seen two bubbles that have failed to deflate. How much longer can the UK property market remain one of them?

Posted by little professor @ 12:53 AM (3567 views)
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16 thoughts on “Which seems more likely?

  • The problem is that our leaders will happily bankrupt the country many times over with moneyprinting schemes before letting house prices fall.

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  • Again, rising interest rates? No, economic collapse Yes!

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  • I wonder what he thinks the other bubble was…..

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  • I have heard him mention about the Australian housing bubble as well. Since that is still going strong I presume that must be his other bubble.

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  • I have heard him mention about the Australian housing bubble as well. Since that is still going strong I presume that must be his other bubble.

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  • @novice pete

    thanks for posting the vid – quite thought provoking.

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  • The article states “Data from chartered surveyors e.serv says the average loan-to-value ratio dropped in September to 57.2%”.
    No one in their right mind (apart from a big fool) would buy a property now. The only way is down.

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  • NP @ 2 . A few comments:

    Yes Faber talks of the facts that the US is at +300% of GDP in terms of debt. As for IRs , i remember 1981 because i bought some Zero Coupon Bonds – and everyone was telling me that IRs would go higher and higher.

    As for strong dollar weak prices, weak dollar strong prices -erm yep and??? I suppose you have to watch the whole thing to be fair.However wouldnt it be strange if we were near a dollar low and the dollar started to rise now?? hmmmm how could that happen?

    Eventually he is probably right re the printing but that aint a done deal.

    Lastly never trust a man with a ponytail!!

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  • markj69 str05 says:

    I think you might find that avg’ salaries for the working & mid-working classes, may actually drop in the near future!

    However all those about to loose their jobs (Which is happening right now), may influence avg’ salary calc’s upwards if the majority of people loosing their jobs are being paid less than avg’ salary. They’ll probably be forced to get a part-time, temporary job, just to keep the unemployment figures down.

    I guess the bankers and politicians could always give themselves huge pay rises and bonus’ to keep avg’ salaries high. At least the ‘house price to earnings ratio’ will not be seen to increase further from the unrealistic 5.6x it is now at. And i’m sure the long term avg’ is between 3.5 and 4. It’s only been at 4 since the unrealisticly high levels of recent years!

    ‘…the numbers imply that the value of an average house would have to fall 25% tomorrow to get back to the long-term average instantly.’

    – And that does not account for an over-shoot. Poss’ down to 3 or 3.5 times avg’ salary?

    We’re all [email protected]@ked. Incompetence and negligence, and still no change. I might just follow my Brother to NZ. This country sucks.

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  • See you later mark, close the door quietly on your way out please.

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  • @9 – The NZ property market is not in any better state than the UK!

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  • markj69 str05 says:

    Well, i’m sorry but i’m just a little bit fed up with waiting for the so called inevitable.

    There’s no way things are going to return to normal. And what I mean by normal is say 3.5x earnings/propery ratio; Houses being bought as homes and not investments (Regulation required); Sensible lending; Sensible IR’s; No other external influences (QE).

    So many people have been allowed to borrow so much money from the future. We can’t now sustain the current market. There will be no equilibrium for decades. Deflating the debt, and inflating earnings is not going to happen for a long long time.

    It’s obvious those in control (Whoever they are), are not going to allow teh market to correct naturally. I actually wonder if there is an underlying scheme to price the proles out of the market, and bleed them dry for ever.

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  • The article was very good except the last sentence which stated most homeowners would be upset about it .

    I’m not upset for myself but for a relative who bought at the peak .

    Once a bubble has formed it is too late and in the case of housing innevitable that a lot of innocent people will get hurt .

    I’m making 17% less than 3 years ago and expect my income to remain at this rate or decline for the rest of my working life . Don’t know anyone in the private sector getting the 2% increases talked about in the article .

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  • Topper Harley says:

    Wierd how any housing market the British touch (so add Australia, NZ to the list) turns bubblicious.

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  • mark wadsworth says:

    Markj69: “I actually wonder if there is an underlying scheme to price the proles out of the market, and bleed them dry for ever.”

    Yup. That’s what the Home-Owner-Ist elite (bankers, politicians, large landowners) are trying to achieve (and are achieving most admirably – the level of homeownership is down from 72% to 69% over the last ten years or so). I think that it is gradually dawning on the footsoldiers of Home-Owner-Ism (actual homeowners who have been bribed with ever rising house prices) that their paper gain is worth far less than the extra real cash terms mortgage burden that their adult children or grandchildren will have to take on, and thus that each family (looking at all generations together) is actually worse off. And that’s before we factor in the damage done to the economy from the financial recession.

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  • mark wadsworth: their [sic homeowners]paper gain is worth far less than the extra real cash terms mortgage burden that their adult children or grandchildren will have to take on, and thus that each family (looking at all generations together) is actually worse off. And that’s before we factor in the damage done to the economy from the financial recession.

    Well said Mark, this sums this whole fiasco up in one sentence – the nation’s wealth is tied up in bricks and mortar, this wealth (AKA non-liquid debt) is only going to shrink as we either double-dip/continue to drop and the jobless count rises…

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