MSE News: House price rise predicted by MoneySavers

sabretoothtigger

b) when interest rates are at an historic low, because they'll only go up.

get a fixed rate

julieq

nearlynew wrote: »

What, you mean your "keeping my cash as cash" comment?

That's not an explanation, it's a kop out.

If BTL is producing such good yields and you are "not afraid of debt" as you put it, then why would you not buy?

You are indeed a frustrated BTL wannabe.

I rest my case your honour and have nothing more to add.

Because BTL would tie up all my capital, and to pay school fees I need access to £20K+ a year, no excuses, no pack drill. Putting capital into a BTL investment wouldn't make that much money annually. So it's off the list. Sorry. There are plenty of good investments I don't choose to do at any particular point for one reason and another. What I do is my business, it meets my priorities, and that's the end of it.

As I said before the pack went off into a howling frenzy in my absence (while I was flying to the US on business as it happens, I'll fill you in on how conditions are here later in the week), I'm not a frustrated anything. I've made enough money to own a house outright and have plenty of cash on top; I have a great job and a very satisfying life. I don't have any debt. I certainly don't need advice on investments from frustrated wanabee homeowners.

Oh, and I'm a lot funnier than Mewbie too. Go to the old style board and ask them about the 12 days of Christmas thread.

julieq

Scrudge wrote: »

But the principal is not protected - that's the key thing. So basically you are saying that if house prices stay the same then you will make 7.5%. But what if they fall 20-30% ?

If houses return to current levels within say 7 years, the 7.5% is profit, like it would be if a bond returned the capital. Prices can actually drop in the short term, the risk analysis is based on the period within which they return to the level at which you invested. The nice thing is that basically you're hedged against inflation too, because if there is inflation the value of the asset is highly likely to rise with it.

So on a very conservative set of assumptions, it's a decent investment.

tommy75

:rotfl::rotfl::rotfl::rotfl::rotfl:

Everybody Happy.

sabretoothtigger

But what if they fall 20-30% ?

what somethings worth and what you can get for it is two different things. If the price falls the house isnt worth any less then it always was.

Its obviously a personal issue because the worth is probably personal, if we're talking speculation and business investment then its not really the same, part of this is what the banks fell foul of I think

Could be your talking about two different games hence the disagreement

LizzieS_2

There's me thinking people actually bought houses as they wanted to somewhere to live with a future (as opposed to tomorrow) return on their investment.

Before anyone slates me, yes I have lived in negative equity before (previous recessions) and pulled through it.

julieq

There's certainly a risk house prices may fall 20-30% over the term of an investment in a BTL, say 7 years.

So what is that risk? I'd venture to suggest that from the CURRENT point, it's insignificantly tiny. That makes BTL a good investment for those with cash, which is one reason why house prices are steady or rising. What else have you got? Savings rates are depressed, and the stock markets are stupidly volatile.

Most people don't understand risk, because they don't try to quantify it. When you quantify risk, even in relative terms, you can determine whether any given investment is worthwhile.

That's why incidentally I criticise the bears for using hyperbole rather than numbers - they talk about "fundamentals" but they never discuss at what point a fundamental economic measure makes a return not worth the risk by setting a limit on it. It is not, Carol, an ad hominem attack to point out that this is what the bears are doing, it is pointing out a structural flaw in their arguments.

OK, so rising unemployment may brake the demand for housing. At what point does that happen? 10% of the workforce? 10% aged between 30 and 50? 20%? Mewbie was very quick to ask for a "rightmove" pricing when assessing rental yields, so surely you should be similarly bounding your measures of "fundamentals" instead of just stating that they imply one thing or another.

And of course being categorised in another thread as a "yummy mummy" is patronising and sexist, it's also pathetic and cowardly to say that in a thread I wasn't active in. Mewbie has apologized for his remarks (which is genuinely appreciated), so let's hope that that sort of thing gets stamped out. But it's always easier to post that sort of comment than to argue a position which is not being borne out by objective reality, which I guess is why it's being done. It's also very easy to suggest that someone is humourless (I'm not) on the basis of a detailed argument on serious points.

And Graham, I would happily debate trend lines with you until doomsday, except that you fold back into a kind of dogged reductionism and it becomes a war of rather pointless attrition. An exponential trend line on a long term average does NOT move significantly because of a short term bubble. That is why they are used. BUT that isn't the point anyway, the point is that the famous HPC graph has a long term trend calculated in EXACTLY the same way, including a stonking bubble of its own.

Your point as far as you expressed it was that the boom had moved the line on the real price graph and so it's "real" position was lower. In fact the "real" line on the HPC graph should also be lower by the same argument (but not significantly so in any case).

Therefore comparing like for like we are back to trend and whatever the merits or lack thereof of the HPC graph, it is not predicting a bull trap. There may well be a fall in prices, I was predicting 2 years of falls personally, but that doesn't imply anything in particular. It just says that the HPC graph is not an infallible oracle for predicting the future. Because if we had an infallible oracle for predicting the future we would all be rich.

And I am not a bull. How on earth can I be called a bull when I've been suggesting all this year that I expect to see prices fall? Where are my vested interests exactly? I am in fact a moderate with strongly contrarian tendencies, if I see a herd running in one direction I'll take a strong look at what they're running from. It is a false dichotomy to say that if you're not a bear you have to be a bull.

julieq

joguest wrote: »

Doomed I tell ye.

Really good time to buy a house:

a) when the ratio of the value to earnings is low relative to the mean
...[SNIP]

and

b) when interest rates are high, because they're more likely to come down

Bad time to buy a house:

a) when the ratio of the value to earnings is well above mean

and

b) when interest rates are at an historic low, because they'll only go up.

No, this is an oversimplification.

The prices of anything are a function of supply and demand, and of their income bearing potential.

Take computers as an example. 50 years ago, computers were unaffordable. There was a mean price/earnings ratio then, that ratio has decreased over time as the supply as increased. The income potential of a computer has reduced - you can't lease spare time now. They've become commoditised.

Affordability changes over time. And of course many of the previous ratios were calculated over a period where mortgage rates were far higher, in the essentially inflationary periods of the 1970s and 1980s so that in pure cash as a proportion of take home pay things are "more affordable".

Houses are in relatively short supply, and people are in competition for them both to live in and to rent out for profit. That will tend to boost prices. As Hamish points out this isn't a theoretical idea, in the worst credit squeeze since 1982 prices have been rising strongly for most of the year.

As for interest rates, say BOE were at 4%. By your argument it would neither be a good nor a bad idea to buy a house, because they could go up or down. At present BOE rates are at 0.5% so yes, they can only go up. But if they go up in a range of 0.5-2.0% over 10 years, is it then a bad or a good time to buy? And anyway mortgage rates aren't at BOE rates, they're at a higher rate which competition is starting to force down. Actually the level of rates is irrelevant, it's the likelihood of changes one way or another that's important.

joguest wrote: »

Not difficult is it, unless you think, like julieq, that if economic forces don't force prices down (which of course they will) then the electorate in a liberal democracy will be quite happy to go back to the feudal age with the landed gentry and the serfs being happy knowing their place.

[and UNSNIP]

(which they always follow despite julieq's misunderstanding of the difference between consumer and wage inflation and the fact that she dismisses actual stats and then says nobody is presenting any figures whilst she herself presents none).

What do you do for a living julieq - are you a lawyer? - are you tony blair in disguise? All words and no substance.

Doomed, doomed, doomed, etc.

And this is a rather pointless personal attack, which given the other points were argued rationally is disappointing.

I do give numbers where numbers are needed, but given I have basically only two assertions: (1) things aren't as bad as the neo-millenarians claim, and (2) BTL is a reasonable investment at the moment under basically conservative assumptions, I don't need many. Where I've made predictions I've generally been right, but I don't make a lot of them.

As a bear, to be convincing in the idea that there will be big quantifiable falls by a given date, you have to say which of the fundamentals have what weighted effect given that so far your predictions have been miles out.

I didn't say that it was a good thing to return to a feudal system of rental, I pointed out that that was what we had come from and that property owning isn't a right, it's an expectation coming from essentially the last 25 years. It's certainly not impossible we'll return to that point, and it's hardly unthinkable in a capitalist society because that's historically the norm. Which you claim we always revert to.

For wage inflation, I've said that I see stagnation because the prospect of wage inflation is low. I drew a distinction between wage inflation and consumer inflation several times, and I've pointed out that without wage inflation there can't be inflation on discretionary spending and so there would be a less than healthy general economy and risk of deflation. So the likelihood is that rates would remain low. If you can't sell imported goods, the demand is lower than the supply and the price is deflated (this is incidentally the situation in China where goods sell for a fraction of their Western price levels, it's a major headache to anyone doing business there)

And these economic forces of yours don't appear to be doing much at the moment. Following a sharp step downwards after the near collapse of the banking system, house prices are rising now. Much more strongly than I would have predicted incidentally.

baileysbattlebus

julieq wrote: »

I am in fact a moderate with strongly contrarian tendencies, if I see a herd running in one direction I'll take a strong look at what they're running from. It is a false dichotomy to say that if you're not a bear you have to be a bull.

The position you state about sums me up too (maybe without the contrarian tendencies though), I was accused recently of defending "the Wilsons" on another thread - I wasn't. I was just putting forward a different point of view to the majority. Not necessarily a view I hold - just different.

I put it down to the career I had (Industrial Engineer) where you had to be dispassionate, analytical and logical and able to look at every angle, whether it be for financial justification or business planning. Always having to look at the bigger picture and not things in isolation.

OH keeps telling me I would call black white for the sake of an argument - it's not true. I am just used to looking at more than one side of a problem and at home will put the other sides of a problem / argument quite strongly. Whether it's my view or not. It makes for an interesting discussion - heated but interesting. The trouble is, in the end, I often have to tell him that I actually agree with him................. and have done all along.

I tend not to do that so much here - I have deleted more replies than I have posted - for obvious reasons.

I enjoy your posts, I also enjoy Hamish's posts and those of many others - I may not agree with them - it would be funny old world if everyone thought the same.

b0rker

julieq wrote: »

That's why incidentally I criticise the bears for using hyperbole rather than numbers - they talk about "fundamentals" but they never discuss at what point a fundamental economic measure makes a return not worth the risk by setting a limit on it. It is not, Carol, an ad hominem attack to point out that this is what the bears are doing, it is pointing out a structural flaw in their arguments.

Will you marry me?