Buying A House

[Cambon]

Your theory is ignoring a lot of factors. Interest rates, supply of housing, disposible income, etc. You're just focusing on the price, and that's only part of the picture.

 

Not sure Slim.

 

Interest rates up 50% since mid 2003 and going up further (so we have been told), good supply of housing (not cheap though), disposable income down (due to interest rates and high level of unsecured debt), now means house prices are almost flat. In the high end of the market prices are coming down. It always starts there.

 

A funny thing happened to me yesterday, I bought a dozen red roses for my wife and they cost me £50. I suddenly thought, how ridiculous, last time I paid that for roses on St. Valentine's day was 1989 just before the crash. Food for thought.

[slinkydevil]

A funny thing happened to me yesterday, I bought a dozen red roses for my wife and they cost me £50. I suddenly thought, how ridiculous, last time I paid that for roses on St. Valentine's day was 1989 just before the crash. Food for thought.

 

What a stupid example. BTW you were ripped off they were going for like £18 a dozen in some florists.

[Slim]

Interest rates up 50% since mid 2003 and going up further (so we have been told), good supply of housing (not cheap though), disposable income down (due to interest rates and high level of unsecured debt), now means house prices are almost flat. In the high end of the market prices are coming down. It always starts there.

 

On what do you base this statement? Pretty much all indicators are that while rate of prise rising has slowed, prices are still definately rising at a very good rate

 

A funny thing happened to me yesterday, I bought a dozen red roses for my wife and they cost me £50. I suddenly thought, how ridiculous, last time I paid that for roses on St. Valentine's day was 1989 just before the crash. Food for thought.

 

Heh, what a con . I bought a single red rose for my missus, which cost me 2 quid

[Slim]

I've never said prices would crash. I would consider a correction to be a decrease in house prices relative to the basic rate of inflation - house prices are still rising well above that, so have not yet suffered a correction.

 

Oh come on, you went on about 'somethings gotta give' etc, that's eluding to a crash! Inflation is a pretty useless indicator currently, it's a damn rip off that it's being used for wage increases. The fact that house prices are going up above inflation while ignoring other factors doesn't equal an inevitable correction.

[Cambon]

What a stupid example. BTW you were ripped off they were going for like £18 a dozen in some florists.

 

Were they dead or something?

 

Being ripped off is when you don't feel you have received good value for money. The flowers themselves were not worth £50 or even £18, the effect they, and the surrounding service had for me was well worth the money.

 

The point is that in late 88, early 89, the situation across the UK was very similar to now where the level of disposable income was very high, as it is now. This was seen then in people paying ridiculously high prices for things, as they are now.

 

For example, I was recently in the US where wages and disposable income is considerably less than UK, and saw LCD TVs for sale all over the place costing little more in dollars what we pay in pounds, in other words getting on for half the price.

 

Slim, if you go into Norwich unions web site and look at fund prices, click on the property fund and read the fund managers comments (it will not let me link it - Adobe), he basically says that after a great 2005/06, returns will be good in early 2007. However, returns are a lot less certain in the latter part of the year and beyond.

 

One rose? That is a bit tight!!!

[Mr. Sausages]

A dozen red roses in Robinson's were £19.99. Which proves that the stock market will crash tomorrow.

[copycat]

just wondering what the Valentine rose infaltion rate is ? how much were a dozen last year?

[Albert Tatlock]

just wondering what the Valentine rose infaltion rate is ? how much were a dozen last year?

I bet the roses are 60ft tall in your garden - with all that bullshit.

[Roger Smelly]

Great post Albert, its exactly how i see it.

 

I worked with a guy who lost his house in the 90's due to the same things that are starting to happen now.

 

You will find a lot of people who say it will never happen are the ones who are sitting in the piles of bricks with there rosy spec's on.

 

The guy i worked with told me that he will never buy a house until he retires, he is saving his money and planning on buying when the time is right i.e when the @rses drops out of the market.

 

I can certainly see his tactics.

 

Remmember people you don't own your house or houses the banks do.

 

Don't forget the cheap labour that is coming in is basically going to cause this because most of the imagrants are saving the money and going home with it so they don't want a house in the UK

[slinkydevil]

The guy i worked with told me that he will never buy a house until he retires, he is saving his money and planning on buying when the time is right i.e when the @rses drops out of the market.

 

So he's saving for a house, of which he won't buy til he retires. But he's planning on buying when the time is right when the market drops. So if the housing market crashes this year will he retire and buy or will he buy and not retire going against his principle of never buying a house before he retires? It doesn't make sense - I think you are making it up and really don't have a friend at work.

[Mr. Sausages]

Waiting for a crash is daft. If prices go down and home owners are in negative equity then they're not going to want to sell up. That leaves houses that have been repossessed because people can't keep up with interest rates. Which means interests rates have increased, which means you'll be paying higher mortgage payments. So you might get a house slightly cheaper (not much, mind), but you'll be paying more for it. If you can move onto the property ladder, do it sooner rather than later.

[Slim]

Great post Albert, its exactly how i see it.

I worked with a guy who lost his house in the 90's due to the same things that are starting to happen now.

 

Just because it's happened before doesn't mean it's going to happen again. Look, I'm not saying a crash wont happen, I'm saying it's not definately going to happen. There's a lot resting on the property market, which makes it far more likely that interest rates will be managed such that the house price inflation will be controlled rather than any kind of crash.

 

You will find a lot of people who say it will never happen are the ones who are sitting in the piles of bricks with there rosy spec's on.

Conversely, you will find a lot of people praying for a crash are the ones who haven't bought property.

 

The guy i worked with told me that he will never buy a house until he retires, he is saving his money and planning on buying when the time is right i.e when the @rses drops out of the market.

 

It's an option certainly, but house price inflation is currently in the region of 8-10%. Bank interest at best is what, 5.5%? So he'll have to save considerably harder than if he'd just buy now even if house price inflation stays the same.

 

Remmember people you don't own your house or houses the banks do.

...until you pay your mortgage off. Your point being?

 

Don't forget the cheap labour that is coming in is basically going to cause this because most of the imagrants are saving the money and going home with it so they don't want a house in the UK

 

...which, if true, will make houses more affordable for most people, because there's less competition in the market.

 

Have you bought your own house Roger?

[Juan Kerr]

Just because it's happened before doesn't mean it's going to happen again. Look, I'm not saying a crash wont happen, I'm saying it's not definately going to happen. There's a lot resting on the property market, which makes it far more likely that interest rates will be managed such that the house price inflation will be controlled rather than any kind of crash.

 

Don't believe a word of all you hear about how things won't happen in the "Goldilock economy" we have. It will happen, and it will happen pretty soon.

 

Personal debt levels are already high, and banks are already making big provisions to cover bad debts. Personal bankrupcies are also rising. Its precarious but its still manageable in the short term as unemployment is relatively low.

 

The crunch will come when you get a double whammy of rising rates and rising unemployment. If you look at the stats employment rates are creeping up and the global outlook is not brilliant as retail sales and demand for services are falling. As cashflow to spend on goods dries up, companies feel the pinch and let people go. If they can't get re-employed they default at the same time as rate rises screw those who remain in employment who find cash even harder to lay their hands on so they spend less on non essentials. The US property market is already suffering as a result of this. Its an economic pinser movement.

 

The banks are at fault for thinking slack credit policies will keep on pushing asset prices skywards but the property bubble will burst soon enough. If your highly geared in this market you need to reconsider your position.

 

This is a reasonably succint account of why a house price crash simply can't be allowed to happen. (This is just a copy and paste, I didn't write it.)

 

Nobody can stop a crash. People do not "allow" crashes to happen or not happen. This is the real danger - the more people predict that a crash "cannot happen" the more likely it is that it will happen as nobody saw it coming.

 

Nobody saw the stockmarket crash in 1987 happening, or the one in 2001, or the Asian crisis in the 90's, or the implosion of tech stocks in 2000. A 4 year equity bear market arising from the 2001 market falls had no statistical precedent at any time in history. But it happened. Events take on a life of their own once you reach a certain point and there is sod all anyone can do about it. Just because the housing market has statistically provided solid returns over the long term does not mean that that trend has to continue. Every trend ends with an anomaly.

[simon]

Nobody saw the .... the implosion of tech stocks in 2000.

 

You've taken time writing an interesting and contentious post.

 

On this one point I can say for absolute certain that you are wrong: The .dot .com bust, the implosion of tech stocks, was widely predicted and surprised relatively few people. I doubt that anyone who didn't predict it survived with their job. because it was obvious.

 

Unlike 1987 - which was a much more complicated correction and which experts still don't agree about.

[Juan Kerr]

Nobody saw the .... the implosion of tech stocks in 2000.

 

You've taken time writing an interesting and contentious post.

 

On this one point I can say for absolute certain that you are wrong: The .dot .com bust, the implosion of tech stocks, was widely predicted and surprised relatively few people. I doubt that anyone who didn't predict it survived with their job. because it was obvious.

 

Unlike 1987 - which was a much more complicated correction and which experts still don't agree about.

 

The interesting thing about this was that it was the people on the periphary who saw it happening. I did a lot of business in London at the time and I can say that those at the centre of it really did not believe that it could happen. They were that convinced that they had created a whole new way of commerce and valuing businesses (based on nothing) that it couldn't possibly go wrong. Most of them were lucky dickheads; some got very rich, some got very, very burned. I laughed as I avoided the market.

 

Today I see property developers in the exact same position. They are that convinced that people will buy their asset at any price (as they always have) that they cannot see an alternative out there. People clamouring to buy tiny studio apartments at ridiculous prices are no different to those piling into tech stocks at the height of it all. Normally the bank would tell them that its a stupid idea, but as the banks are targetted on lending they won't start worrying about it until its too late.

 

Maybe its the calm before the storm ..................... when is a "buy to let" a "buy to late"?