Housing Faces prolonged bear market.

nollag2006

dopester wrote: »

House prices are at preposterous levels and are going down.

Complete and utter tripe.

Take your pick from any of these, and tell me which one shows House prices falling:
http://www.houseprices.uk.net/graphs/

(Here's a clue: none of them)

HAMISH_MCTAVISH

Generali wrote: »

At the end of the year where are you?

You have paid £4,500 in interest and received £3,000 in rent and your house is now worth £102,000 so you have made a nominal £500, eg a return of 5% (500/10,000 x 100) or a real return of £200 in what looks like a nightmare scenario for an investor.

Now ok, I haven't included selling costs here so it's an unrealised profit but a paper gain is still a gain. If you hold for 20 years, the net present value of the selling costs is negligible anyway.

And even in this (pretty pessimistic) scenario, after a few years the rents increase, the subsidy is zero, and after 25 years you have a house that a renter (mostly) bought for you.

On the other end of the spectrum, talking of "real" versus nominal, we have the STR crowd.

An STR sells his 100K house. He puts the cash in the bank, and pays his rent with it. At the moment, he'd be lucky to get 3% net returns on the money in the bank, but let's pretend he can.

So his rent is 3%, (more like 6% in reality as an average, but again lets pretend), the bank pays 3% interest, and inflation is 3%.

He takes the interest, pays the rent, but at the end of year one his capital is now only worth 97K in real terms. After year two it's only worth 94.1K, after year three just 91.3K.

So after 3 years, he has seen the value of his capital decrease by almost 9%. In a not so strange coincidence, the value of property is now, three years after the crash started, 9% below peak. By the time you throw in transactional costs, and even before the forecast nominal terms gains still to come, it's probably a significant loss.

Regardless, all this real versus nominal is pointless over the short term. There's no gain to be had by bragging about real terms being flat, unless wages rise too. Otherwise, the reality is just that property got more expensive, AND so did everything else, but most peoples wages stayed the same.

Harry_Powell

StevieJ wrote: »

How do you know what the economic landscape will be like in 5-10 or 25 years?

These guys amaze me with their foresight. I don't even know what I'm doing next week, yet these guys know what the whole world will be doing for the next 10 years (or more).

They're amazing!

Emy1501

Harry_Powell wrote: »

These guys amaze me with their foresight. I don't even know what I'm doing next week, yet these guys know what the whole world will be doing for the next 10 years (or more).

They're amazing!

Does not matter what the whole world is doing. We have reached a stage where banks cannot lend above what is already being lent give or take a few %. Therefore prices in reality cannot go up in real terms. The whole banking system nearly collapsed last time it will not be allowed to happen again in our life time.

We are not going to see .5% base rates in our life time again.

nembot

Yeah, only those with bullish viewpoints are allowed to accurately predict the future.

Give me strength...

Harry_Powell

nembot wrote: »

Yeah, only those with bullish viewpoints are allowed to accurately predict the future.

Give me strength...

Where did I say anything about the accuracy of either the 'bull' gang or 'bear' gang? (i't soooo West Side story in here!!). Give me strength!

I maintain that I don't know how those guys* know what the world will do over the next decade, when I don't know what I'll be doing next week.


*meaning anyone who 'knows' what will happen over the next decade.

Harry_Powell

Emy1501 wrote: »

We are not going to see .5% base rates in our life time again.

I'll be back on tomorrow to see if this statement is true....

Emy1501

Harry_Powell wrote: »

I'll be back on tomorrow to see if this statement is true....

I notice like others you are evading the question of where real growth will come from over the next 10-15 years.

Graham_Devon

StevieJ wrote: »

How do you know what the economic landscape will be like in 5-10 or 25 years?

Harry_Powell wrote: »

Where did I say anything about the accuracy of either the 'bull' gang or 'bear' gang? (i't soooo West Side story in here!!). Give me strength!

I maintain that I don't know who those guys* know what the world will do over the next decade, when I don't know what I'll be doing next week.


*meaning anyone who 'knows' what will happen over the next decade.

Sorry!?

Harry_Powell wrote: »

Exactly.

Whether the bears like it or not, over the 40 years of home ownership property will increase. Those of us who are young now and only just getting on the ladder might look back and sigh at the huge gains made by the previous generation, but surely at the start of their housing journey the previous generation looked back at the one before and sighed?

You seemed to know what the economic landscape would be. How so?

Harry_Powell

Graham_Devon wrote: »

Sorry!?



You seemed to know what the economic landscape would be. How so?

One doesn't need to be Nostrodamus to know that houses will cost more in 40 years time than they do now. Even you're not dense enough to think that my statement is comparable with some of the amazingly specific predictions on here.

Come now Graham, don't try to play me - I know you're not that dense. I've seen through your game, remember....

Genius, absolute genius!