"oh you're far better off buying"
- Thread starter paolo
- Start date
TopCat
Putin fanboy
http://news.bbc.co.uk/1/hi/business/6288588.stm
When the firniture retailers start to lay people off, look for the empty restaurants, oh shit they are everywhere!!!!
The real pisser in all this is the tenants who will be summarily evicted when their landlord defaults on the mortgage. I think I can strip my house of boiler and all fittings inc washing machine in 30 mins though.
When the firniture retailers start to lay people off, look for the empty restaurants, oh shit they are everywhere!!!!
The real pisser in all this is the tenants who will be summarily evicted when their landlord defaults on the mortgage. I think I can strip my house of boiler and all fittings inc washing machine in 30 mins though.
Bel
velvet snout of doom
It felt like this last property boom, worse if anything. Everyone was gloating like hell over how much their properties were making each day while the rest of us thought we'd never live to see our own place.
Fortunately the crash did happen and after having had the insecurity of living in slug-ridden flats with dodgy landlords I did manage to get a place of my own. Personally I'm not that interested in what its worth because I'd only have to get somewhere else if I sold it; bottom line is, its a place to live that's reasonably secure; if secure places were still being provided in decent numbers by local authorities I doubt we'd have quite such a ridiculous situation.
I reckon its only a matter of time before the confidence begins to wane and the prices start to plummet. Beginning of 2008 is my bet...
Fortunately the crash did happen and after having had the insecurity of living in slug-ridden flats with dodgy landlords I did manage to get a place of my own. Personally I'm not that interested in what its worth because I'd only have to get somewhere else if I sold it; bottom line is, its a place to live that's reasonably secure; if secure places were still being provided in decent numbers by local authorities I doubt we'd have quite such a ridiculous situation.
I reckon its only a matter of time before the confidence begins to wane and the prices start to plummet. Beginning of 2008 is my bet...
hendo
Fish finger sandwiches
I love Topcat's analysis of the housing market which posits a 60% drop in prices followed by the rise of a right wing demagogue. We're in for a period of stagnant house prices and some misery in the job market, but there are factors working strongly against the boom + bust = fascist outlook for the UK.
Interest rates are now running at 5.75% and the Bank of England will jack them up in the autumn to 6%. But inflation has already begun to fall, and while this is a dishonest statistic which excludes housing costs, it is nevertheless the get-out the authorities need to stop increasing the pain and inducing a nasty slowdown.
Will we have a housing bust and terrifying recession as we had under Major in the early nineties? The situations are not equivalent, even though the country seems addicted to debt of all kinds, and is terribly exposed.
The eighties saw a housing boom as tax cuts and a half decent economy left people feeling cash rich and borrowing to buy their homes, which spiralled upwards in price as we're seeing today. And the decision by Nigel Lawson, Thatcher's key chancellor, to end double mortgage interest tax relief saw thousands climb on to the property ladder while they still had a chance before the measure came in. But a few months later interest rates were heading into the stratosphere - rising from 7% to 15%.
Thousands of people lost their jobs and then their homes (I met some of them and it makes me angry still), and many more faced negative equity - which in practice means being stuck where you are until inflation and economic recovery means you can move on.
So why not this time?
The decision by Gordon Brown - on Day 1 of the Labour government - to hand interest rate control to the Bank means sharp jerks on the economic steering wheel can't be made by politicians in response to falling poll numbers. It remains the best thing he's ever done. 6% will be as high as it gets. I remember a day when rates took off , rising several percent - people walked around the office I was working in saying: That's it, I've got to sell the house.
We won't be going there.
Except. As a country we've had a massive credit splurge, borrowing on masses of plastic to finance HDTVs, conservatories and the like. The saving to spend ratio is at its lowest since 1960. The BofE has to tread really carefully here it's true.
But Buy to Let people won't be throwing in the towel because something else has happened since the 1980's which means they can't. Those flats are the middle class replacement for pensions, the destruction of which is one of the less clever things Gordon Brown has presided over. They won't sell up - it would be suicidal - so no crash.
Sorry Topcat.
Interest rates are now running at 5.75% and the Bank of England will jack them up in the autumn to 6%. But inflation has already begun to fall, and while this is a dishonest statistic which excludes housing costs, it is nevertheless the get-out the authorities need to stop increasing the pain and inducing a nasty slowdown.
Will we have a housing bust and terrifying recession as we had under Major in the early nineties? The situations are not equivalent, even though the country seems addicted to debt of all kinds, and is terribly exposed.
The eighties saw a housing boom as tax cuts and a half decent economy left people feeling cash rich and borrowing to buy their homes, which spiralled upwards in price as we're seeing today. And the decision by Nigel Lawson, Thatcher's key chancellor, to end double mortgage interest tax relief saw thousands climb on to the property ladder while they still had a chance before the measure came in. But a few months later interest rates were heading into the stratosphere - rising from 7% to 15%.
Thousands of people lost their jobs and then their homes (I met some of them and it makes me angry still), and many more faced negative equity - which in practice means being stuck where you are until inflation and economic recovery means you can move on.
So why not this time?
The decision by Gordon Brown - on Day 1 of the Labour government - to hand interest rate control to the Bank means sharp jerks on the economic steering wheel can't be made by politicians in response to falling poll numbers. It remains the best thing he's ever done. 6% will be as high as it gets. I remember a day when rates took off , rising several percent - people walked around the office I was working in saying: That's it, I've got to sell the house.
We won't be going there.
Except. As a country we've had a massive credit splurge, borrowing on masses of plastic to finance HDTVs, conservatories and the like. The saving to spend ratio is at its lowest since 1960. The BofE has to tread really carefully here it's true.
But Buy to Let people won't be throwing in the towel because something else has happened since the 1980's which means they can't. Those flats are the middle class replacement for pensions, the destruction of which is one of the less clever things Gordon Brown has presided over. They won't sell up - it would be suicidal - so no crash.
Sorry Topcat.
g force
Affects Shatner's Basoon
Bel said:
Plummet? Can't see it happening. Levelling off. Definitely. Reducing? Yep that too....at least 10-15%. But plummet.....not unless the economy goes into hyper inflation and a massive recession.
Chances of that happening are slim.
And Hendo's alreayd explained the reasons far more eloquantly than me
Hmmm I think I'm going to put my faith in ABN AMRO's report and wait another year before buying:
PDF link: http://www.housepricecrash.co.uk/pdf/abn-amro-home-truths-04042007.pdf
PDF link: http://www.housepricecrash.co.uk/pdf/abn-amro-home-truths-04042007.pdf
hipipol
Peckham Wry
Hendo - good analysis
Agree with most of what you said, esp the Brown stuff, BoE independance - Good, the heavy tax on "windfall profits" for pension funds - stupid short term cash grab measure given the 30 year outlook of most big long only funds - reulting in many pension blackhole/shortfalls, making ther buy to let option more attractive.
However, the nature of most buy to let mortgages, that they re-pay interest only, not the principal means that if they get to parity with the price they paid, should there be a price downturn, factor in inflation and the opportunity cost, then they cant sell em. The whole idea is predicated on a rising market so that the capital gain on resale is the carrot - if they take a long view 15/20 years, they'll still be well in the money - any short termers as you point out risk having to dump property in a falling market, rising rates and much reduced liquidity - a recipe for a loss
I suspect the BoE is looking to do 6% this year but the short term CD/Commrcial papaer market is already factoring 6.25% in Q1 08. rates into double figures over the next 3-5 years look impossible at the moment.
One thing the BoE is not responsible for though is Sterling value which mean the Plasma screens etc will seem to get cheaper and offset the interest rates short term in the high st, however UK exports visible and service based will increase in cost which will feed back over a longer timescale resulting in a jobs market downturn.
If we also look at rising oil/energy prices, commodity prices and the rise in global protectionism I suspect a tightening of money supply over the next medium term (5 years or so) with a consequent reduction in easy funding - net result is that a large number of marginal borrowers will default - there is already leakage from the US sub-prime market into the UK at the moment.
Over that medium term a drop of around 10% in house prices is likely, though it may stretch to 15% - though in real terms this would actually be nearer 25% assuming inflation of around 2% - below what we are currently seeing.
Nope no catastrophic collapse, but is I had cash to buy now I'd hold fire for a couple or more years, the value will return (though if everyone holds fire this will be a self fullfilling prophecy as prices would drift down till they reached an acceptable level without external factors!)
An iteresting time, but no one ripe for the next Hitler to be planning world dominantion - well at least not on the back of economic meltdown
Agree with most of what you said, esp the Brown stuff, BoE independance - Good, the heavy tax on "windfall profits" for pension funds - stupid short term cash grab measure given the 30 year outlook of most big long only funds - reulting in many pension blackhole/shortfalls, making ther buy to let option more attractive.
However, the nature of most buy to let mortgages, that they re-pay interest only, not the principal means that if they get to parity with the price they paid, should there be a price downturn, factor in inflation and the opportunity cost, then they cant sell em. The whole idea is predicated on a rising market so that the capital gain on resale is the carrot - if they take a long view 15/20 years, they'll still be well in the money - any short termers as you point out risk having to dump property in a falling market, rising rates and much reduced liquidity - a recipe for a loss
I suspect the BoE is looking to do 6% this year but the short term CD/Commrcial papaer market is already factoring 6.25% in Q1 08. rates into double figures over the next 3-5 years look impossible at the moment.
One thing the BoE is not responsible for though is Sterling value which mean the Plasma screens etc will seem to get cheaper and offset the interest rates short term in the high st, however UK exports visible and service based will increase in cost which will feed back over a longer timescale resulting in a jobs market downturn.
If we also look at rising oil/energy prices, commodity prices and the rise in global protectionism I suspect a tightening of money supply over the next medium term (5 years or so) with a consequent reduction in easy funding - net result is that a large number of marginal borrowers will default - there is already leakage from the US sub-prime market into the UK at the moment.
Over that medium term a drop of around 10% in house prices is likely, though it may stretch to 15% - though in real terms this would actually be nearer 25% assuming inflation of around 2% - below what we are currently seeing.
Nope no catastrophic collapse, but is I had cash to buy now I'd hold fire for a couple or more years, the value will return (though if everyone holds fire this will be a self fullfilling prophecy as prices would drift down till they reached an acceptable level without external factors!)
An iteresting time, but no one ripe for the next Hitler to be planning world dominantion - well at least not on the back of economic meltdown
Ranu
Poster of the Weak
TopCat said:Two million mortgagees are coming to the end of their fixed price terms this summer. For them, on average, moving to a variable rate will mean an increase of 2.25%
Say bye Bye to 1.5 million buy to letters then!
If they've any sense they'll just witch lender / rate to a more affordable level.
g force
Affects Shatner's Basoon
Or to put it another way an 80% chance there won't be. It's perfectly possible, but it would need the global economy to slow down....and that doesn't seem to likely the way the BRIC nations are going.
I can see a declien for sure, but the idea prices will drop 20% overnight is fanciful.
I also tend to think analysts are idiots anyway constantly hedging their bets so at some point they can turn round and say "told you so!"
I can see a declien for sure, but the idea prices will drop 20% overnight is fanciful.
I also tend to think analysts are idiots anyway constantly hedging their bets so at some point they can turn round and say "told you so!"
Mr Retro
Beware hedgehogs
TopCat said:They will be desperate to sell and the sudden influx of a milion plus houses/flats onto the market will cause the prices to fall through the floor.
I predict a 40% plus drop in average prices in the next five years. The worst case scenario (but best for me like) is a 65% drop in prices.
My main worry is that loads of banks and building societys will be on the point of collapse, the goverment will step in to protect them and no savers wil be able to acess their cash (argentine stylee) for years.
Hence a safety deposit box for some of my savings.
Thats a load of shit.
40% - 65% deflation in house prices?
Savers unable to access their money?
quimcunx
imprimeo, lamino, distribuo
Half the people I know pay twice as much to rent a room than I pay for my mortgage. But then I got in just before everything doubled..
I'll get my coat.
Actually I rather like your argument. I might try it on people myself.
I suspect house prices wouldn't be so high if lenders didn't lend more than people can afford and you had to pay cash for buy-to-let
I'll get my coat.
Actually I rather like your argument. I might try it on people myself.
I suspect house prices wouldn't be so high if lenders didn't lend more than people can afford and you had to pay cash for buy-to-let
It's just like the late 80's all over again.
When you take into account the higher interest rates the cost of housing was even more fucking stupid then.
It all collapsed then and sooner or later the same thing will happen again. Lots of people will get financially fucked and with the even higher levels of consumer debt it'll end with a deep recession.
High demand for housing means fuck all when the prices are fucking stupid.
When you take into account the higher interest rates the cost of housing was even more fucking stupid then.
It all collapsed then and sooner or later the same thing will happen again. Lots of people will get financially fucked and with the even higher levels of consumer debt it'll end with a deep recession.
High demand for housing means fuck all when the prices are fucking stupid.
zenie said:But sometimes you are better off buying
Living somewhere which is way above your means in mortgage terms can be a bit of a problem because if you do want to buy, well you're not gonna be happy with a pokey one bedroom when you've been living the life of riley ey?
Yeah... OKAY... gah! Yah got me. Knew I should never have invited you round. Even for five minutes
There's a serious point to that though. In general (despite what some smug prospective BTL folk might perceive) rental yields are lower than their respective mortgages. It's a natural bit of economics. You can't have half of London paying more in rent than they would in a mortgage. Common sense says, why rent?
In reality, in my experience, rent has been about 30% cheaper than the mortgage for the same property. Factor in the interest (money down the drain, like rent)... it's been even stevens. So what's left? Well, the buyer gets the chance to gamble on property. The renter can choose other "investments" (but not property).
If property will beat other investments you could otherwise make on the cap repayment part, then yep, good deal. If not, rent and put the spare cash into... well, whatever your choice is. Long term savings accounts aren't very exciting. But then again, maybe it's theme park rides that are meant to be "exciting"... not financial stability
In reality, in my experience, rent has been about 30% cheaper than the mortgage for the same property. Factor in the interest (money down the drain, like rent)... it's been even stevens. So what's left? Well, the buyer gets the chance to gamble on property. The renter can choose other "investments" (but not property).
If property will beat other investments you could otherwise make on the cap repayment part, then yep, good deal. If not, rent and put the spare cash into... well, whatever your choice is. Long term savings accounts aren't very exciting. But then again, maybe it's theme park rides that are meant to be "exciting"... not financial stability
mango5
Endeavour era
Depends on why and how you were living 'way above your means', and what makes you happy at different times. Some mansion dwellers have a big plan y'know - it was good while it lasted, and now I'm in paradisezenie said:Living somewhere which is way above your means in mortgage terms can be a bit of a problem because if you do want to buy, well you're not gonna be happy with a pokey one bedroom when you've been living the life of riley ey?
>
Gavin Bl
terrible awful baaad
paolo999 said:There's a serious point to that though. In general (despite what some smug prospective BTL folk might perceive) rental yields are lower than their respective mortgages. It's a natural bit of economics. You can't have half of London paying more in rent than they would in a mortgage. Common sense says, why rent?
In reality, in my experience, rent has been about 30% cheaper than the mortgage for the same property. Factor in the interest (money down the drain, like rent)... it's been even stevens. So what's left? Well, the buyer gets the chance to gamble on property. The renter can choose other "investments" (but not property).
If property will beat other investments you could otherwise make on the cap repayment part, then yep, good deal. If not, rent and put the spare cash into... well, whatever your choice is. Long term savings accounts aren't very exciting. But then again, maybe it's theme park rides that are meant to be "exciting"... not financial stability
Agree on some of this, but also for me as a mortgaged type, fundamentally its about having house that I no longer have to pay for as I reach retirement, as opposed to having to rent forever, basically.
g force
Affects Shatner's Basoon
Aye that's sorta my position. I pay less on my mortgage than I did in rent and I was buggered if I was giving my twat of a landlord any more cash than I had too, so I started looking around at what I could afford, ie, how much I could borrow so that repayments were near that rental amount.
My bank offered to lend me £350k.....when I was on 28k a year so it's no wonder some people are going to get royally screwed by rate rises and the inevitable reduction in prices.
But 20% isn't really that much given that Nationwide etimate the average price has gone up by 11% in the last 18 months.
My bank offered to lend me £350k.....when I was on 28k a year
so it's no wonder some people are going to get royally screwed by rate rises and the inevitable reduction in prices.But 20% isn't really that much given that Nationwide etimate the average price has gone up by 11% in the last 18 months.
g force said:
Paying a mortgage is basically rent, with the benefit that the thing you've borrowed money will increase in value anyhow... BoA doom-n-gloomers withstanding...
g force said:
Yep... Based on what the value of like apartments are going for around my way, even a drop of 20% will just cancel out any gains...
Similar threads
