FAO of the SN housing market doom mongers...
#151
Inflation is caused by two things governments printing more money(lowering interest rates) or M4 money supply. And the cost of material goods commodities, fuel, Housing, public sector wages.
By my taking pretty much all of the above except public sector wages are spinning out of control. In 2002 when the government started lowering rates before the climate was completely different
By my taking pretty much all of the above except public sector wages are spinning out of control. In 2002 when the government started lowering rates before the climate was completely different
I didn't ask about inflation - I asked about 'stagflation' - Which is basically inflation caused by recession - as the economy stagnates or recedes, people will spend less. Retailers/producers increase prices to maintain margin, but can't give pay rises for the same reason - people have less money in real terms, so spend less...retailers/producers increase prices to stay profitable or close down. Unemployment rises, people have less to spend etc etc etc. Left unchecked on a national level it would eventually mean the national currency would be worthless and the vast majority of people would be unemployed. On an international level it would eventually lead to a complete crash of the global economy, with people having to revert to grow their own food or die. You don't usually get periods of low interest rates, high inflation and recession at the same time, but this looks like it could be the one. Raising interest rates continually over the next 4-5 years would be a surefire way of ensuring that it happens
#152
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Regarding Stagflation..... the last figures showedUK economy was growing at 2.1%there's not much stagnation in that?
#154
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I hear you Mitchy260, but Aberdeen is a special case and follows the oil industry, my oil shares are taking a hammering, I wonder what might happen to Aberdeen? These price rises in Scotland in my area are simply not that dramatic, it has barely moved and we had to slash our price and fix it for it to sell in Oct 2006.
A 3700 sq ft 5 bed house I was in the process of buying (but it fell through and I'm now very pleased it did) went up from £247k in 2003 to £415k in 2006. Why can't it go back to nearer 2003 levels? It got pumped up because of credit not because of fundamentals. In the early 1990s Scotland prices didn't move much, but they hadn't grown in the earlier years like England. This time they've not grown quite as much as England but are still way higher than trend - > ripe for correction IMHO.
A 3700 sq ft 5 bed house I was in the process of buying (but it fell through and I'm now very pleased it did) went up from £247k in 2003 to £415k in 2006. Why can't it go back to nearer 2003 levels? It got pumped up because of credit not because of fundamentals. In the early 1990s Scotland prices didn't move much, but they hadn't grown in the earlier years like England. This time they've not grown quite as much as England but are still way higher than trend - > ripe for correction IMHO.
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Bit more to rent and "only" 4 beds, has been hanging around in the rental ads for a while. Looks nice though. Commuting distance from Edinburgh.
house to rent in Torryburn House, Dunfermline, Fife - 4 bedrooms, 3 reception rooms, 2 bathrooms | Primelocation
house to rent in Torryburn House, Dunfermline, Fife - 4 bedrooms, 3 reception rooms, 2 bathrooms | Primelocation
#157
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And we have a huge Polish community where I live, still lots of jobs about though.
#158
Bottom line is,we all used to be able to -borrow the money- to buy the houses -to fuel the rises-to borrow and buy again-to fuel the rises etc etc
The man earning £25k can't get silly money now on a mortgage so if none of us earn enough to borrow enough shouldn't house prices have to sort of come back in line with incomes until they catch up with the runaway train house market?
Actually.I'm starting not to care.None of it adds up which is what I suspect is what we are all about to find out
The man earning £25k can't get silly money now on a mortgage so if none of us earn enough to borrow enough shouldn't house prices have to sort of come back in line with incomes until they catch up with the runaway train house market?
Actually.I'm starting not to care.None of it adds up which is what I suspect is what we are all about to find out
#159
Erm - That was last year. I am talking about the possibility of it happening in the future. It isn't a certainty, but increasing interest rates for the next 5 years would make it a certainty
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fast bloke, where do you see inflation and interest rates in the coming months/years? Do you think a recession is likely and will suppress inflation, risking asset price collapse? Do you think we are likely to have wage inflation and stagnant asset prices? Is there a way through this to preserve the currency, keep inflation low, stop asset price collapse and allow growth to continue?
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Well I'm with George Soros in all of this - he's seems to have his finger on the pulse
Incidentally I was doing a lot of work with Total in Aberdeen last year. The general concenus was that Aberdeen had 15 years of the oil boom to go....
Incidentally I was doing a lot of work with Total in Aberdeen last year. The general concenus was that Aberdeen had 15 years of the oil boom to go....
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It's going to be interesting to see how much lower UK interest rates go though. The BoE in theory can't slash them too drastically because of increasing inflation, but they are clearly going to go down.
I've just taken advantage of some of the excellent fixed rate bonds on offer at the moment with the expectation that rates will fall, and the best deals will disappear!
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But there are more than enough people who can afford the prices and this is enough to keep the market buoyant. Those trying to get on the housing market now are at the biggest disadvantage ever but its not going to change the market. The proof for me is seeing new developments in my region selling and there still being high demand for resale properties.
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I don't think anyone doubts demand - it's whether the banks will lend the money that will dictate prices.
The banks are hurting badly at the moment and that's before the rest of US sub prime hits and the potential collapse of the US bond market, which is looking increasingly likely. If the banks have to make good on the potential short fall from the bond market (which could be in the tens of billions), then they are going to pull their collective belts in even tighter - they may have no choice considering how many US banks have sort foreign investment in recent months to prop up their balance sheets.
This all has a knock effect to the financial markets in the UK because so much of this debt has been repackaged and sold to banks around the world. And that will affect their ability to lend money to potential home buyers. We're in a bear market now and confidence is low.
George Soros' comments yesterday were quite interesting. His opinion was that the US was actually coming out of a 60 year cycle that has effectively been fueled by cheap credit and the reliance that the US had the biggest and most powerful economy in the world and could therefore pretty much dictate global economic policy. While that still may be true, it won't remain that way for much longer - the rise of China and India will see to that.
So there are a lot of changes to come - Soros reckons that the US is already in the recession and his opinion was that the UK will follow.
The banks are hurting badly at the moment and that's before the rest of US sub prime hits and the potential collapse of the US bond market, which is looking increasingly likely. If the banks have to make good on the potential short fall from the bond market (which could be in the tens of billions), then they are going to pull their collective belts in even tighter - they may have no choice considering how many US banks have sort foreign investment in recent months to prop up their balance sheets.
This all has a knock effect to the financial markets in the UK because so much of this debt has been repackaged and sold to banks around the world. And that will affect their ability to lend money to potential home buyers. We're in a bear market now and confidence is low.
George Soros' comments yesterday were quite interesting. His opinion was that the US was actually coming out of a 60 year cycle that has effectively been fueled by cheap credit and the reliance that the US had the biggest and most powerful economy in the world and could therefore pretty much dictate global economic policy. While that still may be true, it won't remain that way for much longer - the rise of China and India will see to that.
So there are a lot of changes to come - Soros reckons that the US is already in the recession and his opinion was that the UK will follow.
#167
#168
Average Aberdeen House Price Now Over 200k (from The Herald )
However you missed out the bigger headline
''Overall, however, the average price rose by 26% to £202,479 over the year''
A 26% yearly rise in 2007 doesn't show signs of a crashing market, although i see over the last quarter they have stagnated/dropped slightly.Should pick up agin though i would imagine, as its still a lot cheaper than a lot of other places in the UK
This article dated mid november 07 showing pices in the north are still rising..
BBC NEWS | Scotland | North house prices rise fastest
''The report by Lloyds TSB showed Aberdeen leading the market, with prices rising by 34% in the past 12 months and 4% in the past quarter''
34% in the bbc article, 26% in the herald article. Still evidence enough that Scottish property is booming i think
Maybe a slowdown, but realistically a crash north of the border i doubt will happen. Well fingers crossed anyway
To all you Londoners.......Sell now, move to a much bigger house in Aberdeen and earn a fortune working in and around the oil industry
Last edited by Mitchy260; 25 January 2008 at 09:00 AM.
#169
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The most important point as well with those figures is that 4% drop is included with a 26% rise overall so at one point they had risen 30%. Hardly a drop in value over the year by dropping 4% especially when its the 4th quarter that saw that 4% drop when less people move house anyway with Christmas approaching.
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I'm more interested in the change since the credit crunch, not what happened in the early part of 2007! I didn't miss it, I selected the part I thought was important and backed up my view The biggest rises in any bubble are always just before it pops.
I refuse to value the price I am willing to pay for a house based on what everyone else is prepared to pay. I will value it based on the rental it returns and the multiple of local earnings. I will hardly cry into my cornflakes every morning saving a fortune on rent vs owning. If house prices never again reflect a fair multiple of their rent then I'll never buy one again.
The same arguments are trotted out by every participant in bubbles. In the same way that perhaps Petem95 and pslewis have been forecasting a house price crash for a bit long now - and maybe I will still be banging on about it waiting for it to happen. More likely I'll be saying it is a good time to buy property
Mitchy and Bravo, do you deny that house prices move in cycles and that they tend to undershoot on the downside after years of increases? Or is it "different this time"?
I refuse to value the price I am willing to pay for a house based on what everyone else is prepared to pay. I will value it based on the rental it returns and the multiple of local earnings. I will hardly cry into my cornflakes every morning saving a fortune on rent vs owning. If house prices never again reflect a fair multiple of their rent then I'll never buy one again.
The same arguments are trotted out by every participant in bubbles. In the same way that perhaps Petem95 and pslewis have been forecasting a house price crash for a bit long now - and maybe I will still be banging on about it waiting for it to happen. More likely I'll be saying it is a good time to buy property
Mitchy and Bravo, do you deny that house prices move in cycles and that they tend to undershoot on the downside after years of increases? Or is it "different this time"?
Last edited by john banks; 25 January 2008 at 09:13 AM.
#171
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John I agree it does go in circles but the downturn is always far shorter and less aggressive than it ever is on the up turn and increasing prices. You only have to look at the last crash, it was catastrophic at the time but then look how it all recovered and shot up again. This is how it is always going to be unless the demand for property is reduced and the only way that is going to happen is with less population and more houses on the market.
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The last crash did happen in a higher inflation environment, so that eroded the debts quicker though. Looking at house prices corrected for inflation, prices were about the same in 1995 as they were in 1985 with the peak at 1989-1990.
IF 2007 is the peak this time, then in 2012, is it even possible that the prices corrected for inflation will be the same as they were in 2002?
IF 2007 is the peak this time, then in 2012, is it even possible that the prices corrected for inflation will be the same as they were in 2002?
#173
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Fat chance. A drop is more than possible, quite happily to say it could happen any time soon but tbh, I cant see them dropping to 2002 price levels IMO, too much of a gap IMO
#174
I firmly believe it is different this time to the 90's crash.
It is not uncommon to be living at home until aged 30-35 nowadays. Back in the 90's it will have been significantly lower than this. These young professionals are just waiting on a 'crash' to flood the market and as a consequence in doing so, this will push prices back up. I can see a see saw pattern.
Inheritance gains are also playing a major role in keeping the bottom tier running. Back in the 90's it would have been very uncommon to be left £100-200k in a will. Today it seems the norm.
Stagnation perhaps, significant drops, i very much doubt it.
Perhaps estate agents need better education into valuing a property correctly 1 example, the tv show Relocation, relocation, relocation last night showed a £200k spread in valuation between 3 different agents.
Who knows what will happen, we are all only playing a guessing game.
2008 will indeed be very interesting
It is not uncommon to be living at home until aged 30-35 nowadays. Back in the 90's it will have been significantly lower than this. These young professionals are just waiting on a 'crash' to flood the market and as a consequence in doing so, this will push prices back up. I can see a see saw pattern.
Inheritance gains are also playing a major role in keeping the bottom tier running. Back in the 90's it would have been very uncommon to be left £100-200k in a will. Today it seems the norm.
Stagnation perhaps, significant drops, i very much doubt it.
Perhaps estate agents need better education into valuing a property correctly 1 example, the tv show Relocation, relocation, relocation last night showed a £200k spread in valuation between 3 different agents.
Who knows what will happen, we are all only playing a guessing game.
2008 will indeed be very interesting
Last edited by Mitchy260; 25 January 2008 at 10:24 AM.
#175
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I've seen people here talking about a collapse in the US bond market and banks having to make good shortfalls. I don't understand this. I thought the government offered bonds (they want to borrow money) with certain terms and conditions. Investors either choose to use these products or not.
How does this result in a collapse, and how can it cost banks money?
How does this result in a collapse, and how can it cost banks money?
#176
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Why will they buy if the prices are dropping regularly? It isn't like the stock market where buying opportunities can appear very quickly. Once sentiment changes and a bear grizzles the market these hordes of FTBs with pent up demand might not be so keen to dive in? Even if they are where will they get the income multiple and high LTV mortgages that are required to support anything like the present market prices? Will they still buy when they can rent for much less when they are seeing capital depreciation as well?
#177
I've seen people here talking about a collapse in the US bond market and banks having to make good shortfalls. I don't understand this. I thought the government offered bonds (they want to borrow money) with certain terms and conditions. Investors either choose to use these products or not.
How does this result in a collapse, and how can it cost banks money?
How does this result in a collapse, and how can it cost banks money?
Is it more plugging of wounds ?
#178
The question is John..
If markets dont crash and you decide to keep renting for better quality of home/lifestyle, will you still be comfortable paying rental after retirement? You of course dont need to answer that but that is what you should be asking yourself.
Rental is obviously paid until you meet your end, mortgage typical 15-25 years.
Also if you do buy when property falls, there is surely going to be a downsizing or a shock to the system when your rental £££ comes no where near the mortgage required for a similar house. Your own house prime example. Would it be the case for downsizing significantly?
I would suspect most people on here being able to afford the £875 you pay for your country mansion but probably only a very small portion of them being able to afford the mortgage that would be required for it.
If your prediction is right then upto you. I bought my house to live in, if it crashes, i wont particularly care as i plan on living in my home for far longer than a couple of years
If markets dont crash and you decide to keep renting for better quality of home/lifestyle, will you still be comfortable paying rental after retirement? You of course dont need to answer that but that is what you should be asking yourself.
Rental is obviously paid until you meet your end, mortgage typical 15-25 years.
Also if you do buy when property falls, there is surely going to be a downsizing or a shock to the system when your rental £££ comes no where near the mortgage required for a similar house. Your own house prime example. Would it be the case for downsizing significantly?
I would suspect most people on here being able to afford the £875 you pay for your country mansion but probably only a very small portion of them being able to afford the mortgage that would be required for it.
If your prediction is right then upto you. I bought my house to live in, if it crashes, i wont particularly care as i plan on living in my home for far longer than a couple of years
Last edited by Mitchy260; 25 January 2008 at 11:21 AM.
#179
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If the difference between rent and mortgage continues then I'll save up more than enough in the meantime to have a fund that will pay for the rent. I find it very difficult to believe that another investment with a much lower PE ratio will not outperform housing in capital growth, and that is already the case in income terms from a humble savings account.
If the rent and the mortgage costs converge then that is a signal to buy.
Either way I win
If the rent and the mortgage costs converge then that is a signal to buy.
Either way I win
Last edited by john banks; 25 January 2008 at 12:24 PM.
#180
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Most of you are looking at this from an investors point of view, but most ordinary folk will buy a house when they are ready and can afford it, very few people will watch the market and gamble on prices dropping significantly, I know I've never done that myself.
And you lot also forget, although prices are silly in a lot of areas there is still affordable housing elsewhere - a neighbouring town to us has decent terraced housing for around the £65-75k mark, my sister bought one last year and it is very nice.
And you lot also forget, although prices are silly in a lot of areas there is still affordable housing elsewhere - a neighbouring town to us has decent terraced housing for around the £65-75k mark, my sister bought one last year and it is very nice.