70% club get it right again

Really2

macaque wrote: »

Here is a 5 bedroom house with 1.7 acres of land within easy reach of Zurich. Price - £91,973.


When it comes to property values, the Brits lost touch with reality 10 years ago. If you had told someone in 1997 that their £90k house would sell for £300k in 2007 their response would have been similar to yours. Today our economy is in a much more difficult position to that of 1997. We have falling incomes, higher taxes and rocketing unemployment. The BTL industry sustained the property bubble for a few years at the end of the boom but they are now suffering record levels of bad debts. These high debts reflect a missmatch between BTL income expectations and renters' ability to pay.

So why are people paying £300k for £90k houses? After all, we don't pay three times as much for cars or computers today. The answer is that property prices are now being valued on the cost of holding debt (which is at an all time low). This has fueled unbridled speculation. Cheap money however is a transient phenomenum.

A house price correction is essential but I also accept that a catastrophic collapse in prices would create economic mayhem. That is why the house price decline is going to be long, slow and painful. The process however has started. Prices are falling and lenders are reserving preferable rates to buyers with 40% discounts.

Whilst £90k for a modest house might not sound much to you, it is huge sum to a 30 year old on average income. If we don't get house prices back into line with our competitors, the markets will do it for us.

Why is that one so cheap when this on is 20 mins from zurich and is €820,000 or £720,000:eek:
http://www.rightmove.co.uk/overseas-property/property-14855310.html/svr/2712;jsessionid=E8002AC5D4C4EBB2C92EE5B4540497AD

chucknorris

Really2 wrote: »

Why is that one so cheap when this on is 20 mins from zurich and is €820,000 or £720,000:eek:
http://www.rightmove.co.uk/overseas-property/property-14855310.html/svr/2712;jsessionid=E8002AC5D4C4EBB2C92EE5B4540497AD

Ahh yes but isn't this one '100% guaranteed' to fall at least 70% by xmas 2010? 'Round my way' houses like this have suffered substantial falls every month

macaque_2

Chaos_A.D. wrote: »

Why do people get 'testy' when it is suggested that prices will fall ?. I own a house and couldn't give a toss if it dropped 70%, in fact I would welcome it, bankrupting a lot of speculators who sit back thinking they're getting rich for doing nothing and at the same time giving the next generation the opportunity to live without the prospect of living in 'debt slavery', their only crime being born later.

In fact if it didn't have such a drastic effect on the economy I would be very happy for the value of my house to drop from 170k down to 17k, after all, it's just a home, a roof over my head, it makes no difference if it's worth 10p or a billion pounds.

This post has been reviewed by the 70% committee and judged to be highly commended. As a result Chaos will automatically get two free tickets to this month's prize raffle draw.

Note to 70% club members
Please don't forget to buy your tickets for this month's 70% club raffle. The first prize will be a wax effigy of Harriot Harmen complete with 2000 hat pins.

nearlynew

Chaos_A.D. wrote: »

Why do people get 'testy' when it is suggested that prices will fall ?. I own a house and couldn't give a toss if it dropped 70%, in fact I would welcome it, bankrupting a lot of speculators who sit back thinking they're getting rich for doing nothing and at the same time giving the next generation the opportunity to live without the prospect of living in 'debt slavery', their only crime being born later.

In fact if it didn't have such a drastic effect on the economy I would be very happy for the value of my house to drop from 170k down to 17k, after all, it's just a home, a roof over my head, it makes no difference if it's worth 10p or a billion pounds.

HPI cheerleaders are essentially debt-junkies.


They do not realise that debt is not wealth or that inflation is theft.

chucknorris

nearlynew wrote: »

HPI cheerleaders are essentially debt-junkies.


They do not realise that debt is not wealth or that inflation is theft.

I think the problem is that some bears (probably including you judging by your amazing generalisation) and bulls (the ones with wreckless debt) do not realise that there is a massive difference between well managed and wreckless debt

StevieJ

Really2 wrote: »

Why is that one so cheap when this on is 20 mins from zurich and is €820,000 or £720,000:eek:

It must be haunted it would have to be that Exorcist one to get the price down that far

tartanterra

macaque wrote: »

If we don't get house prices back into line with our competitors, the markets will do it for us.

And how does that work then?

If you can't afford to buy a house where you work in Cornwall, then you simply buy one in Belgium do you?

Yes, I can really see that one working. Wouldn't fancy the commute though.:D

IveSeenTheLight

nearlynew wrote: »

HPI cheerleaders are essentially debt-junkies.


They do not realise that debt is not wealth or that inflation is theft.

Generally those who 'cheer hpi' are property owners.
Their debt is secured, thus not likely to increase as HPI increases.

What it may help them with is obtaining a better LTV rate;)

carolt

tartanterra wrote: »

And how does that work then?

If you can't afford to buy a house where you work in Cornwall, then you simply buy one in Belgium do you?

Yes, I can really see that one working. Wouldn't fancy the commute though.:D

I think it works in a number of ways. Some people decide to get a job in Belgium, say, and buy there, because they'd get a better quality of life there. Those nice Belgians who used to live next door move back to Belgium, because they decide the quality of life means it's not worth it living here. All the workers in Cornwall strike because they can't afford anywhere to live here so their Belgian bosses relocate the factory back to Belgium. So now those Cornish workers can't afford to buy houses at all, meaning prices go down.

etc etc.

Not sure Belgium is the best example,

macaque_2

tartanterra wrote: »

And how does that work then?
If you can't afford to buy a house where you work in Cornwall, then you simply buy one in Belgium do you?

Yes it does, more or less. But the employee moves to Belgium with the company.

High house prices ultimately have the same influence on company profits as high taxes. A family on the continent can rent a property for £600 a month that would cost £2k a month to rent in the UK. This amounts to an extra £20k a year (after taxes). For a company with 500 employees this means £10m less profit.

The high cost of UK housing used to be compensated for by a competetive tax regime and tolerable levels of red tape etc. These advantages have been wiped out over the past 10 years.

If house prices dropped by 50%, the amount of money being diverted from the wealth creating sector to financial services would drop by half. Over the long term, this would have a powerful stimulus to the econoomy.

Manufacturing jobs in cities like Manchester and Birmingham are being depleted at an alarming speed. There are many reasons for this but the exceptionally high housing costs are a material factor. When taxes and service costs consume too much of a company's profits, jobs migrate elsewhere. Sadly house price corrections only occur after the jobs have gone. That is ultimately how the markets punish high prices.