house prices drop by over 50% and inflation out of control
house prices drop by over 30-40% and inflation very high
house prices drop by over 20-30% and inflation high
much the same as mid 1990s, not too much to worry about
Things will remain stable.
Growth will continue, its all scaremongering.
im not talking about people on the dole thats another issue. and i dont think anyone has much sympathy for those who dont want to work.. but my point is just because you've worked hard and got a well paid job, it does not mean that all hard workers will be rewarded, because thats just Bull S***. The American Dream idea just does'nt work, its impossible.Originally Posted by TheAnimus
Why don't they all get rewarded? People will only get awarded for been above average.
if you only work as hard as the people around you, you will not get to earn more.
the failing comes when access to things like education aren't available to all, or predudice is held towards people.
throw new ArgumentException (String, String, Exception)
Its false natual selection. Its not survival of the fittest, its survival of the FATTEST. which is wrong.
In fact I've tried not to say "I told you so"- but I don't see why I shouldn't? I said there was a bubble that would eventually burst, and now it has. I expected it to burst sooner than it did, but no matter- the bigger the bubble, the bigger the bust. If the bubble had burst in late 2006 when I expected it to then we would have suffered less of a recession than we are going to suffer now.
I don't pretend this point doesn't exist, nor do I disagree with it. Borrowing £100k at 7% interest is more affordable than borrowing £200k at 3.5% interest, because you only have to pay back half as much. Once house prices reach their typical equilibrium point of 3.5% average wages then houses will be affordable to anyone with a steady job and a deposit. Banks are still quite happy to lend out 3.5x your earnings on LTVs of 80% or less, they're just not doing 100% LTV loans any more.Now the simple fact is its about affordability. The VAST majority of first time buyers buy with little cash. As such what they can afford is determined by what mortgages are available. I don't see how you can pretend this point doesn't exist. This is why house prices where able to rise so much.
Now 3.5x the average income isn't enough to buy a half decent home at the moment, so of course the number of transactions has fallen through the floor, and as a result prices are beginning to drop. Once they drop back to 3.5x average earnings then houses will be affordable again.
Yes, this is a statement of the blindingly obvious. But just because they can afford to buy, doesn't mean they will, because property looks like a pretty crap investment at this moment in time. In any case, I ask again- where are all these cash rich people? There are still some in London (mainly wealthy immigrants, I suspect) buying up the big mansions, and the £700,000 terraces in Shepherds Bush etc., but in the rest of the country? In Sheffield, where j1979 wants to buy?Ok, we will try this once again. People who are cash rich, can afford to buy now. People who aren't can't.
Well, I can, even in London- but in any case most people don't live in London. There's every chance that recent immigrants might decide to go somewhere else if the economy takes a turn for the worse and they're no longer guaranteed a reasonable job. There's also every chance that the 'coming over here, taking our jobs and houses' tendency will gain momentum if unemployment increases, forcing the government to restrict immigration. Without immigration, our population would decrease.Now, assuming there is still some demand for property in 2 years time, which enless we see death/migration i cant see it tapering off (in london at least)
In any case, it's a myth that there's a shortage of houses in this country. There isn't, in fact there are around 700,000 homes lying empty.
Either the price falls to 50 grand, or it doesn't fall to 50 grand. If you can afford 50 grand for a house, then you can afford to buy if prices fall to 50 grand. You may miss out on the first house that comes along because a cash rich speculator comes along, but you will eventually find another house to buy. If lots of speculators pile in then obviously prices aren't going to fall to 50 grand are they? They're going to be bid back up again pretty sharpish.Now, this is my point which you really don't seam to be getting, enless your cash rich, if a hosue price falls to 50k from 80k you will ONLY be able to afford it if the people who where pricing you out last time, don't price you out this time. Why would that happen?
In the 90s crash there was the odd minor sucker's rally, but overall prices fell for 6 years straight. At the bottom of the market, there were not hordes of hungry speculators ready to hoover up all the best properties. In fact price rises were gentle from 1996-2000.
The people pricing FTBs out last time (I.E. from say 2001 onwards) were often leveraging existing property investments that had gone up in value. This time, for obvious reasons, that's not an option, unless, as I said, you liquidated your portfolio at the top of the market. A few people did, but not enough to make a significant difference next time around. The vast majority of BTL investors are going to get burnt to a greater or lesser extent, and the prevailing opinion on property investment will be overwhelmingly negative for a good while to come.
Because as I said, it's crap. There just aren't enough cash rich investors to prop up the market any more. There weren't that many to start with. Anyone who does hold significant cash now is not going to rubbishrubbishrubbishrubbishrubbish it all on an asset that's patently obviously depreciating in value.This is why i think preying for a house price slump is a little like cutting of ones noise to spite the face.
Now smililes asside, how can you argue against that?
If, as you say, by wishing for a house price crash I'm cutting off my nose to spite my face, then that would imply that although I can't afford a house now, when house prices drop I'm even less likely to be able to afford one. Is that, in fact, what you are trying to say?
Explain the concept of the 'Property Ladder' and how it actually helps people looking to move up? Because if you ask me, it is- again- a load of utter *******s. Yes, 30 year mortgages, or I/O mortgages, allow people to buy properties that they would otherwise be unable to afford the repayments on- but so what? That doesn't make their next purchase any more affordable. By ratcheting up the price of all property, their next home is in fact less affordable.What is a 'problem' is that people before who where poor where been given mortgages, this helped drive up the prices because more people where competeting, but in some ways helped to de-skew the playing feild. You can't begin to argue that allowing someone to choose to pay for a property over 30 years dosen't HELP them get on the ladder.
So what? When prices drop anyone with an average job and a bit of a deposit saved up will be able to afford a house without taking out a risky mortgage.Now these people will be the worst of the worst, whilst people like me who already own some property are seen as a greatly reduced risk.
Or just buy a leasehold in an established block with a decent management company?As for the fees, buy a flat, pay for searches, £700 for the property inspection report, then theres the fun of the freehold, pay for the freehold, pay for the legal transfer of the freehold pay for the investigation of the freehold company and validation of the books.
Last edited by Rave; 22-07-2008 at 05:35 PM.
Rave, what is a fair value.
How can you put a monetery value on something.
a fall in house prices, isn't going to help someone who's poorer than average, because their ability to buy will of fallen (enless they're cash rich, this as you've said is rare).
So, we have to understand the difference in prices falling, and demand falling.
Only if its the latter can someone who's poor get onto the ladder, as otherwise the price wont fall.
Now a simple way to look at the the amount of property speculators is those who bought commercial buy to let mortgages, i have no figures i can share for that. But its not that high at all. The demand for most came from people. Now yes, i'm going to just simply say "oh let the north hang" with this next bit, there is a hudge demand for housing still in nice parts of London. Rent prices have risen, and guess what, so have property prices this year, above base! Even the bottom end of the market in tower hamlets has risen.
You can't simply take falling prices, without considering ability to buy.
All i'm doing, is condeming those who wish it to happen. I'm not denying a recession, just sayign that people shouldn't use price rather than affordability, as a mesure.
throw new ArgumentException (String, String, Exception)
This bit deserves its own post.
Leasehold is often very tricky, its a gamble as such for your risk you do pay less for the property, but you also loose out on many rights. Remember the leaseholder has the right to demand you pay for new windows etc, there are people i know who hate camden concil with a passion after their ex-la buildings got hit with often insaine fees..... Small block (30 ish?) new intercom door system. £3,500 I kid you not! Larger block, new windows, this person lives on the 4th floor. Scaffolding costs etc put this to £15k....... had to go crawling to the bank for that one. As such you want to have a say in what goes on, and be very sure its a fair company. These stories are what made me insist on been freehold (and as such spend a fair bit extra). Been able to argue about the fence, having the re-painting cost only £150 / 7, make this all worth while.
or you can throw caution to the wind, and do the bare minimum, but by the time those required by the mortgage company have been done (general convayencing, inspection, leasehold investigation) and then the product fee, you're still going to be using the better part of 7.5k. Why skimp on the last 2k?
throw new ArgumentException (String, String, Exception)
Erm, maybe what someone is prepared to pay?
No, wrong. A tightening of credit reduces their ability to buy, because they can't borrow as much. Given that credit has been tightened, if house prices fall then people are more likely to be able to buy. The only way in which that will not be true is if house price falls cause a further tightening of credit- which they might, but then if you can't afford to buy anyway, so what. The credit markets will eventually free up, and house prices realistically cannot rise until they do- so buy then.a fall in house prices, isn't going to help someone who's poorer than average, because their ability to buy will of fallen (enless they're cash rich, this as you've said is rare).
Erm- what? I suggest you re-read those two sentencesSo, we have to understand the difference in prices falling, and demand falling.
Only if its the latter can someone who's poor get onto the ladder, as otherwise the price wont fall.. But anyway, I think I know what you mean.
Prices have fallen because people cannot borrow enough to pay the prices being asked for houses. Thus, the demand side of the housing market has to a large extent evaporated, hence the falling prices.
Now I daresay there's as much demand for housing as there ever was, but if people can't get the financing to buy then that's irrelevant. No proceedable buyers = falling prices. The credit tap is not going to be opened up full blast any time soon, so that situation will carry on for the time being.
During the boom times, it was, as you say, possible to buy a flat with little or no deposit. But, if prices fall, then the size of the deposit required also falls. To buy a £200k flat now at 80% LTV requires a £40K deposit, which is a heck of a lot of saving for someone (or even a couple) on an average wage. But if prices drop to £100k they've only got to save up £20K, which is far more doable. Personally I plan to have saved that up in three or four years time, which is when (coincidentally) I feel that the housing market will be reasonably close to bottoming out.
http://www.guardian.co.uk/money/2007...tolet.businessNow a simple way to look at the the amount of property speculators is those who bought commercial buy to let mortgages, i have no figures i can share for that. But its not that high at all.
About 9% in early 2007. 9% of the market is enough to cause a very significant distortion- and if 9% of demand evaporates overnight, as it pretty much has done, then you're going to get a sudden and brutal change in the direction of the market- which, er, we have done.
True.The demand for most came from people. Now yes, i'm going to just simply say "oh let the north hang" with this next bit, there is a hudge demand for housing still in nice parts of London. Rent prices have risen, and guess what, so have property prices this year, above base! Even the bottom end of the market in tower hamlets has risen.
You can condemn me all you like, but I know what's good for me and I'll wish for it all I wantAll i'm doing, is condeming those who wish it to happen. I'm not denying a recession, just sayign that people shouldn't use price rather than affordability, as a mesure..
Edit: here's a particularly cheery article:
http://www.bedlamplc.com/c2/uploads/potw%2073.pdf
J1979: how old are you?
"In a perfect world... spammers would get caught, go to jail, and share a cell with many men who have enlarged their penises, taken Viagra and are looking for a new relationship."
could you state your point of view, and why my age has anything to do with it please? BADASS
Last edited by j1979; 22-07-2008 at 10:04 PM.
So people are less able to buy, until the house price falls enough. Then they can buy again.
Again your getting bogged down in price. Its not price thats needed for profits. (ok, now your getting i work in derivatives).
Ok lets go back to this again, there are two families who want to buy, we will call them a and b. A has 20k in savings, and earns £100k per year. B has 10k in savings and earns £50k per year.
Before a credit crunch only A can afford to buy, then prices fall, but so does available credit, even thou prices half, due to the credit crunch fewer houses are been built (as they are less profiitable, coupled with a not in my backyard mentality houses are often not built on a large scale, compared to metropolis population growth.)
Now, lets pretend that A only has 10k in savings, where as B has 40k. When the credit dries up B is now able to buy, but A actually can't.
Its only now that B is able to buy, this is due to a change in affordability which skews in favour of B.
Now if house prices fall, enless demand from the richer people dries up, houses will still be out of reach despite a drop in price. I'm assuming anyone whos cash rich, is rich.
I'm not going to say anything too rude, as it would be un-professional. But you look at their performance vrs the insdustry average. Now look at their size, i've yet to work on a desk that has less money than their entire funds put together! Small company, lackluster performance, hulled below the waterline perhaps?
throw new ArgumentException (String, String, Exception)
No, but is is price that determines whether people can afford to buy, since, in theory at least, people looking to buy somewhere to live aren't looking to make a profit.
Right, so obviously if A and B are competing for the same type of house, then A is at a distinct advantage. But in practice, someone earning £100k a year is not looking to buy the same type of house as someone on 50K a year. Instead of buying a 3-bed terrace in Bromley, they're looking for a 4-bed semi or even a 5-bed detached- or they're looking for a three bed terrace in West London much closer to where they work.Ok lets go back to this again, there are two families who want to buy, we will call them a and b. A has 20k in savings, and earns £100k per year. B has 10k in savings and earns £50k per year.
Before a credit crunch only A can afford to buy, then prices fall, but so does available credit,
So what? Prices depend on simple supply and demand. If prices halve, then that would suggest that supply is exceeding demand, irrespective of how many houses are being built. As I've said already, there is little or no shortage of housing in this country. Our houses are small and crap compared to much of the rest of Europe, but there are plenty of them.even thou prices half, due to the credit crunch fewer houses are been built (as they are less profiitable, coupled with a not in my backyard mentality houses are often not built on a large scale, compared to metropolis population growth.)
Erm, what? Affordability has increased for both A and B (compared to right now, July '08 at least). The fact that A can't afford to buy in that situation is entirely due to the fact that they haven't saved up enough money despite being in a position where they should have ample spare cash to stash away.Now, lets pretend that A only has 10k in savings, where as B has 40k. When the credit dries up B is now able to buy, but A actually can't.
Its only now that B is able to buy, this is due to a change in affordability which skews in favour of B.
Well, where are all these newly minted rich people who don't yet own a house and are ready to jump into the market coming from? You seem to think that there are hordes of them lurking about ready to cruelly snatch the dream of home ownership out from under the noses of the lower middle and working classes. And I say- dream on. People earning £100k+ a year make up a tiny minority of the population, and their numbers will surely decrease in a recession since it's a booming economy that creates those kinds of jobs in the first place.Now if house prices fall, enless demand from the richer people dries up,
House prices drop when there is a shortage of buyers prepared to pay the current asking price. If house prices drop 30 or 50%, then it will be because there weren't enough people prepared to buy back into the market once it had dropped 15 or 25%. Once prices drop to a level where people can afford/are prepared to buy back in, then house prices will stop dropping.houses will still be out of reach despite a drop in price. I'm assuming anyone whos cash rich, is rich.
I say again- your theory that price drops are not good for people looking to buy a house to live in is utterly absurd, and not grounded in any kind of logic or economic reality. Clearly, price drops are very good for people like me. Maybe I'll still be too poor to buy next time the market hits the bottom, in which case I guess I'm **** out of luck- but I can't see it happening, since I now earn the median wage for the whole of London, and my area of London is relatively cheap.
One more time.
Stop focusing on price, its not price thats key its affordability.
You seem to be familiar with supply and demand.
Well if there is demand, it tapers out at what people can AFFORD to determine a PRICE.
Now, we're seeing in london very clear proof that house prices aren't falling, we can take this as evidence that demand is still high.
But this demand is effected by the credit crunch. So, the prices will have to be constrained, as people can't afford to pay as much as they could before. The prices drop because of affordability. Its not a classic bubble, because when you look at the prices people where paying in terms of mortgage repayments, they werent excessivly high. (whilst rates where low).
So we see a fall in price only because a fall in affordability, not demand? This is the key bit i'm trying to get accross.
So if your to poor to buy a property that you'd like before the crunch, you'll still be too poor afterwards. ENLESS your cash rich.
This is a really really simple premisse, as you will be outbid by the people you where outbid by before, only this time for 3x your sallary rather than 5x.
throw new ArgumentException (String, String, Exception)
Sounds to me like you are defending your right to underachieve and not better yourself. Surely against most Darwinian principles? I have no need to be 'lord of the manor' but come from a working class background in which the need for hard work was instilled. With hard work and effort comes reward. You don't get that for merely existing. You yourself have said you are not 'driven' and surely that is not something to be proud of.
A hatred of those with money is simply stronger jealousy. Perhaps if you put in more effort you would get more out?
If there was no rental market where would people live who can't afford to buy? Just because the houses would be available it does not mean that they would be affordable.
If all of humanity was like yourself we would never of thought that bashing those two stones or rubbing those two sticks together would have been a good idea. You see, 'drive' is important.
Not around too often!
It is an interesting thing that 9% of property in Britain is owned by buy-to-let speculators. As Rave said, this is enough to skew the market. It is enough to skew the market a lot as the intention of these investors is not to live in them, but to make money from the rest of the market on them.
This group of people led the charge to higher property prices facilitated by banks who were basically investing in property through them, and the government whose idiot chanceller at the time took no action to prevent the rise in house prices to unsustainable levels. Relatively simple changes in taxation on second homes would probably have avoided this crisis. Oh well. Nothing to be done now. Now that Gordon is PM it may amuse him to tax second homes, just to spite Tony, but we are already in the ****, and that won't pull us out.
The other part of the 'perfect storm' is America. The world is still heavily dependant upon American money. Oil is sold in dollars, Britain's banks hold billions (perhaps trillions) of dollar denominated bonds and the Bush regime decided to devalue the dollar. Being who they were they screwed it up big time and now America is falling faster than we are.
Britain owns a lot of dollars and the worrying crash in the USA is getting worse. America is looking down the barrel of a gun and it's going to go off, one way or another. Currently China is holding onto several trillion dollars, which is holding America's nuts out of the fire, but it is only because China worries what effect America's spiralling down the toilet would have. If (and it's a big IF) China dumps it's dollars the dollar would drop to about half it's current value sparking a global economic crisis. This may benefit China and the Middle East and possibly Russia, but it would cripple debt-heavy Britain. We just have to wait and see what those inscrutable people do once the Olympics are out of the way.
I thank my luck that I work for an international company paid in Euro and can afford to live in France most of the time. Food and petrol prices have gone up where I live, but house prices are pretty stable and if I had to sell I would get pretty much what I paid. I sympathise with my brother in law though, he owns 22 properties in the North Midlands and he's not worth 2 million quid any more.
(Thanks Evilmunky)
Eagles may soar, but weasels never get sucked into jet intakes.
I am trying to work out if you are young, naive and simply do not understand how the world works or you are older and just an idiot that thinks the world owes themself whatever they happen to want at the time.
"In a perfect world... spammers would get caught, go to jail, and share a cell with many men who have enlarged their penises, taken Viagra and are looking for a new relationship."
Please dont start me on Darwin, what ive said is im not greedy. And natural selection has nothing to do with wanting a bigger house/ faster car. I'm 100% happy with my genetics thanks. And if you read back as ive already stated im a very very hard worker. Imagination is what set Homo Sapiens apart from Homo heidelbergensis, Homo neanderthalensis not the want for more mammal meat than they could ever eat or "drive" as you call it. Sure the ability of humans to think past the her and now is what set us apart from other Apes, but the ability to capitalise on their fellow man, should only be a factor in a life or death situation. and outside of this is greed.
Humans should only take what they need, this is off topic now.
so in relation to the thread from now on please
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