Buying A House

[simon]

I certainly don't want to get into an argument here but I can see a couple of potential inconsistencies in some of what you have written:

 

On one hand, for example, you said that "nobody saw the implosion of tech stocks in 2000". And yet, presumably, you did. Or else why else would you have laughed?

 

Also - I think that you would probably want to agree that there is a difference between worthless shares and property. A property (even perhaps over valued at some particular moment relative to other factors) is intrinsically more valuable than a worthless share in a stupid idea. People are not going to stop needing places to live and there are ever more people. Unless or until we go into space, property almost anywhere on earth will still be useful.

 

And another thing. I'd like to challenge the often repeated notion that the majority of new building is poorly constructed. Having now owned various properties I can say for certain that the new blocks of flats are likely to be a very much better bet than many of the quickly built Victoria boarding houses etc which they often replace. Much of the stuff which has been replaced had reached the useful end. And those purpose buit studio flats provide people with an affordable foot on the ladder.

 

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 poorly constructed, 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 so they won't start worrying about it until its too late.

 

Maybe its the calm before the storm .....................

[Juan Kerr]

Also - I think that you would probably want to agree that there is a difference between worthless shares and property. A property (even perhaps over valued) is intrinsically more valuable than a worthless share in a stupid idea.

 

I'm certainly not in the market for an argument - in the past I'd agree with you. Now in a block of 30 apartments an individual unit is ten a penny. If every buy to let invertor wants out your one of 30 people fighting to find a buyer and the only way you do that is undercutting on price. Not as worthless as a burned share but in order to sell you first have to find a buyer. If nobody wants to buy its no different - plus with property your stuck insuring it, and maintaining it even if you can't get rid of it, and you get less choosy on tennants who might wreck the place. In a slump property is a pain in the arse.

 

Every asset has a value. You may not be able to unlock that value fully in a poor market but even a burned company has assets that are of value. If you hold onto a share for long enough it will come back round so no difference here. All markets are cyclical.

[Slim]

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.

 

See, you'e contradicting yourself and making yourself look silly. Nobody saw these things coming, yet your certain there'll be a crash. I'm not denying a crash could happen, but banking on one is lunacy. People have been telling me house prices are going to crash for the last 5-8 years, and it's not happened. You simply dont know, and saying it's a dead cert is foolish at this stage.

[Juan Kerr]

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.

 

See, you'e contradicting yourself and making yourself look silly. Nobody saw these things coming, yet your certain there'll be a crash. I'm not denying a crash could happen, but banking on one is lunacy. People have been telling me house prices are going to crash for the last 5-8 years, and it's not happened. You simply dont know, and saying it's a dead cert is foolish at this stage.

 

Logic dictates that the longer a trend progresses, and the longer it moves forward in an upward pattern, the more likely it is that some anomaly or aberation will occur at some point. That anomaly will be unpredictable, and may be mild or extreme as it will be the result of forces or factors that will be unforseen.

 

I'm not telling you what to do.

 

You probably think I'm talking shite. That is fine by me.

 

(I said there will be an anomaly at some point as things cannot go up forever. I am trying to point out that the housing market is just that. A market. Its currently in favour. It may not always be. But it will always be a market which relies on buyers and sellers to survive)

[Slim]

Agree with everything you say there. But I'm replying to folks who are saying "I'm not going to buy, theres going to be a crash and I'm going to buy then".

[Juan Kerr]

Agree with everything you say there. But I'm replying to folks who are saying "I'm not going to buy, theres going to be a crash and I'm going to buy then".

 

I'd agree with them. But they will never predict when the crash will be (other than it will be when employment statistics start rising).

[púca]

Feck it. I'll just bankrupt myself. I don't care. What else can I do? I've got a mortgage, no job, no prospect of a job and the bank want my house back - take it, but also take the debt remaining on it. By the sounds of things in the 5(?) years it'll take me to get solvent again, I'll be able to buy the feckin' thing back cheaper anyway!

[Roger Smelly]

Slim you are very single minded why all i was saying is the guy i did work with is planning to buy when he retires which will be in spain if you must know.

 

But if the @nus does drop out of the market he will buy here before he retires, he is playing the waiting game.

 

As for saying there will not be a crash how have you come about that view?

 

I think all things point to it.

 

1. Kids leaving school are unable to get on the ladder so they will fall into the rental trap

 

2. Records numbers of people signing on the lists for public housing.

 

3. More and more cheap labour coming to the island thus reducing wages of the locals.

 

I could probably go on and on.

 

Just look what has happened in germany since the wall dropped, Germany was flooded with cheap labour, unemployment has gone up wages came down and the property prices fell

 

Why do you think you don't see the germans over here for TT as you did in the early 90's

 

I am not beating a drum saying "the end is nigh" but what i am saying is that we have record debt and an economy floating along on the banks and loan houses money.

 

The intrest rates have been rising and if they continue then who knows what will happen, but for someone to say something like it won't happen or will not be allowed to happen is tempting fate just a bit ?

[Slim]

Slim you are very single minded why all i was saying is the guy i did work with is planning to buy when he retires which will be in spain if you must know.

 

Um, I'm the only one who's not being single minded! I'm saying nobody can be certain of a crash.

 

As for saying there will not be a crash how have you come about that view?

I didn't say there will not be a crash, I'm just not banking on one.

 

I think all things point to it.

1. Kids leaving school are unable to get on the ladder so they will fall into the rental trap

2. Records numbers of people signing on the lists for public housing.

3. More and more cheap labour coming to the island thus reducing wages of the locals.

I could probably go on and on.

 

Please do!

 

1) Kids renting, how does that influence prices? Prices will drop when theres nobody to buy, the market doesn't care who buys. If theres rental income to be had, investors will buy, there's still value.

 

2) Record people signing on for housing? How does that change the price of private housing? Explain that one to me please.

 

3) Cheap labour? but if the prices are so high, where will this cheap labour live?

 

Just look what has happened in germany since the wall dropped, Germany was flooded with cheap labour, unemployment has gone up wages came down and the property prices fell

Why do you think you don't see the germans over here for TT as you did in the early 90's

 

You're suggesting the economic effects of the unification of Germany are somehow a model for the UK property market?

[Gladys]

Not an expert, but I suspect the only real crasher of the property market is a substantial decrease in the number of people wanting to live here. In old parlance, ' a run on the property market'.

 

The factors Roger counted were factors linked to a very bouyant market widening the divide, not a crash.

[Albert Tatlock]

 

 

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[Tugger]

It's not population growth as such, is it? I thought it was more the growth in the number of HOUSEHOLDS (i.e. there are more two household families than was once the case, people's elderly parents move in with them less and less, kids move out before they're married, etc etc)

[Slim]

It's all very well arguing the case for a crash, but if you read up on it, very few people who really know about this stuff think a crash is likely, the talk is of a slowdown, a levelling off, maybe a modest downwards correction, and then continued growth in future once earnings catch up a bit with prices.

I've been watching the doom-mongers say there's definitely positively going to be a crash for fucking years, and it's never happened, and every year it doesn't happen they all say, "Ahhh yes that just means it'll be even worse when it does happen, which will be this year."

 

Exactly, there's very few experts predicting a crash, even the ones without a vested interest. The people you see doomongering are the ones who have a desire to see a crash, the people who don't own property.

 

If interest rates were rock bottom and house prices were stalling, there'd be signs of a problem, but interest rates are currently going up, and while it's slowing down, there's still house price inflation even with these rises. That's not a market showing signs of problems.

 

1) Everyone needs somewhere to live

2) Population growth is outstripping the growth in the housing stock

3) Banks and potential homeowners are finding all sorts of ways to raise the cash to buy

 

4) Unemployment is low & the economy is strong. There's record bonus payments this year for many people

5) Interest rates are rising not dropping

 

You've hit the nail on the head with the first two though, provided there's a demand and a constrained stock, the price will continue to rise.

[Cambon]

The crash will not start in the housing market it will be in people's personal finance.

 

For example, the interest free period on credit cards has only been possible because of low interest rates. Credit card "loaned" money is someone elses savings that has been getting zip all interest ove the past few years. As rates rise savings investors want to see a return. So far credit card companies have put up monthly interest rates but are still trying to offer interest free periods. That is sure to end soon. Another half point on the base rate and the screws will really start to tighten.

 

As for house price crashes, they will not halve or anything, but around 1990 they lost 30-40%. My own house at the time went from £70k to £50k over about a year, then stayed at that level (give or take £5k) for about 5 years. It then doubled and fell back a bit, stayed static for 5 or 6 years. It has now doubled again, but not fallen back yet, but it will, I am certain of that.

[slinkydevil]

The crash will not start in the housing market it will be in people's personal finance.

 

It's the oldies fault: http://news.bbc.co.uk/1/hi/business/6361295.stm