Comments on: House price crash?

By: Bazman

Bazman — Sat, 22 Mar 2008 19:59:30 +0000

Chris lives in my part of the world. There has been a big spike in house prices, immigrants from abroad and the amount of work around in the last ten years. The locals have had a shock around here in many ways. More realistic house prices is the next Take a look at this site for your own area. http://propertysnake.co.uk/

By: K.Donitz

K.Donitz — Fri, 21 Mar 2008 15:48:46 +0000

Socialists have acheived their final aim.
Is the House Price crash a redistribution of wealth?

A simple five step plan:

Sell Council houses at 60% of open market value i.e. a state handout of 40% of open market value.

Allow the occupants to borrow, borrow, borrow from Secondary Banks advertising on day time television. The 40% state equity handout to be used as security for these loans.

The occupants spend, spend, spend on plasma screens, new kitchens, weddings abroad, Elizabeth Duke Jewllery.

The occupants fail to make repayments, cannot obtain any more credit due to crunch and hand in the keys to be repossessed. Rehoused by the Local authority who sold them their original house.

Bank shares/stockmarket collapse along with pension fund values and property values. The Middle Class taxpayer has a devalued pension and a devalued house.

Their wealth reduced to pay for all those wonderful days of joy for those considered needy enough to qualify.

By: Michael Taylor

Michael Taylor — Fri, 21 Mar 2008 14:00:15 +0000

Generally, the onset of property market crashes start with transaction volumes falling – people being unprepared to sell at what seems to them the 'wrong' price, and people being unprepared to buy at the 'wrong' price. This is almost always the pattern, even in traditionally highly liquid/speculative markets such as Hong Kong. Same thing here. For what it's worth, I sold a flat in York a couple of months ago, slashing the price hard when it became clear I'd just missed the top. Now I feel extremely smug about it (which, I suppose, is why I'm posting).

By: Robert

Robert — Fri, 21 Mar 2008 13:41:41 +0000

John , sadly looks as though you are in the minority here. Not that it means you are wrong, though I think you are! Sterling weakening, the government printing money and accepting weak collateral does not add up to deflation in my book. Staglation is here, as the late lamented Nils Taube, the UK's version of Warren Buffet was quoted as saying recently he saw our current situation as a cross between 1987 and th early 70's, when th emarket disintegrated. Great minds think alike!

By: freedom to prosper

freedom to prosper — Thu, 20 Mar 2008 22:49:15 +0000

You can call it what you like but in 12 months time asking prices will be 20% lower and they still won't be selling. Building firms are going bust leaving their creditors to argue over the rusty wheel barrow and broken cement mixer. All the unsold city flats will be bought by Housing Associations and filled with "Not Rights" and the Banks and Building Societies won't bother repossessing as they don't want streets of empty houses. I've published this hundreds of times but a 10% deposit and three times ONE salary and we wouldn't have this boom bust cycle AND we would have real money to spend and create real jobs.

By: Chris

Chris — Thu, 20 Mar 2008 15:13:26 +0000

Unfortunately property prices are likely to crash at some point as recent prices have been so far in excess of any kind of rational valuation model. _Gross_ rental yields are around half the cost of capital at current borrowing rates for a lot of residential property – landlords aren't going to subsidise tennants for ever.

Latest property auction in Cambridge: http://www.cheffins.co.uk/catalogue/propertyaucti…
3 sold, 8 unsold. Maybe things have already moved…

By: Janey

Janey — Thu, 20 Mar 2008 13:03:25 +0000

"Meanwhile, it is difficult to see how we can become alarmed by inflation against the current background." So you don't do the supermarket shopping then, John? And you expect your income to rise sharply to meet that and other increases such as council tax?

Reply: NO – PLEASE READ WHAT I SAID I AGREED CURRENT INFLATION IS HIGH AND ABOVE THE GOVERNMENTS FIGURES. I JUST DO NOT SEE HOW INFLATION CAN BE A PROBLEM A YEAR OUT GIVEN THE STATE OF THE MONEY MARKETS

By: Michael Taylor

Michael Taylor — Thu, 20 Mar 2008 12:17:48 +0000

John, Where do you think this deflation is going to come from? It is unlikely that the populations of China and India are suddenly going to reconsider their consumption of stuff, so demand for the stuff that makes stuff – ie commodities – looks underpinned. Cheap Chinese exports? Hardly – raw materials, prices, wages and expectations are all rising there, and they are being able to pass on some of the impact of the falling dollar in their export prices. And that's before they revalue! Imports generally? Well, I doubt that sterling's got much more in the tank – what happens when it starts to sink? Food prices? Check out the possible impact of the UG99 new wheat rusk virus.

Deflation will happen only if, quite simply, there isn't enough money out there to support rising prices. But in the immediate future and the medium term, the US Fed, and soon the Bank of England, will be printing the stuff like there's no tomorrow. (Because if they don't, quite possibly there will be no tomorrow). The future, I hate to say, is inflationary, because a) it's possible and b) no-one in history except the Japanese has tried for long to deflate their way out of a debt mountain.

The real message from all this is that the bull market in bonds, which has formed the backdrop to our policital economy since the early 1980s, is over. This is why derivatives desks everywhere have blown up, and it's the unwinding of those massive derivatives positions (roughly 20x official bank credit in US, Eurozone and Japan put together) which is freezing money and capital markets right now.

So you might like to spend some time with your Conservative colleagues asking them to imagine what systemically rising govt bond yields will do to their fiscal plans. Just a thought.

REPLY; THE DISINFLATION WILLL COME FROM THE SLOWING WESTERN ECONOMIES AND THE SHARP CONTRACTION IN NEW CREDIT.

By: Derek

Derek — Thu, 20 Mar 2008 06:43:22 +0000

There are no soft landings now. We now have a choice of casualty or intensive care. (SENTENCE LEFT OUT – ED)

I work in retail but do not favour interest cuts the BoE must stand firm. I think you grossly underestimate the threat of inflation over the medium to long-term. If rates go down, as I'm sure you're aware, sterling weakens. We stock 3000+ lines and they all come from abroad, predominantly China. With weaker sterling, even with a tandem decline in the $, significant inflation will have to flush through the system, beyond, already soaring, raw material costs. Any cost savings we're currently making on purchasing, via resourcing, are not being passed on to the consumer, but retained in enhanced margins to offset higher energy costs.

I don't think our export industries are sufficient to make any significant hay, from a weaker pound, unlike the US. Wage bills will be inevitably rising again later this year with the next round of minimum wage increases.

We have the choice of a short spell in casualty, big house price falls, big asset writedowns and a short period of recession. If attempts are made to wrench the M4 taps further open we'll be in intensive care.

reply; I DONT AGREE. RETAIL PRICES WILL BE UNDER DOWNWARDS PRESSURE AS THE ECONOMY SLOWS.

By: Steven_L

Steven_L — Thu, 20 Mar 2008 02:30:22 +0000

Well I think we can draw a useful analogy to the dotcom boom and bust.

The tier one and tier two internet service providers (such as AOL and France Telecom) are still going strong. The unprofitable and unfeasible websites that traded for silly money on the NASDAQ are not. Many a speculator made and lost money.

Now the big banks are still reporting healthy profits. The dodgy debt is crashing, as is the cost of insuring it. Yes, banks have lots of debt on their books in all sorts of strange forms no one understands, the banks, hedge funds and speculators with the dodgy credit products will be introduced to reality in the same way that the dotcom speculators were.

The dotcom boom coincided with a mass innovation of new ideas, some of which supply and demand approved of, some of which it shunned. It will be the same with the credit derivatives, the CDO's, the SIV's and all the other rubbish flooding the financial markets.

Today the average consumer wonders how he ever did without the internet, and thinks nothing of dotcom shares. The market will support the good developments of the consumer credit boom, which will inevitably lead to more social mobility and freedom, as did the internet. The bad bits, like the dodgy dotcome shares, will be seen for what they are.

There will be no more 125% mortgages whilst the underlying asset goes up at 15% a year anymore, but this is not a bad thing. This is a reality check.

Years from now consumers and businesses will still need banks and payment systems, they will still need to make investmenst and borrow money.

The market will have learned not to get sucked into buying dodgy debts and another boom will replace the vacuum left ny the dotcom and consumer credit booms. What this will be is anyones guess, my bet is on GM and nanotechnologies.