How will the gridock be broken?

Malcolm.

Thrugelmir wrote: »

It took 30 years for banks globally to run their reserves down to the levels seen in 2007. To avoid another financial crash. Banks will be required to head back from the direction they came. A long slow road of gradual rebuilding. No quick fixes.

Banks can launch a rights issue to repair their capital ratios.
I consider this option a quick fix...

Thrugelmir

Malcolm. wrote: »

Banks can launch a rights issue to repair their capital ratios.
I consider this option a quick fix...

Money from where?

Investors may prefer the returns on Government bonds rather than more paper at the current time.

Malcolm.

Thrugelmir wrote: »

Money from where?

Investors may prefer the returns on Government bonds rather than more paper at the current time.

Money from the markets.

The new shares are offered at a discount to the current price and are usually underwritten to ensure full take up.

nembot

I'm going to go with 20% lower prices over the next few years, there's no need for me to justify why, because I don't care what anyone else thinks

Thrugelmir

Malcolm. wrote: »

The new shares are offered at a discount to the current price and are usually underwritten to ensure full take up.

Shares maybe sold at a discount but doesn't make them worth anymore.

If the UK banks thought they could tap the markets I'm sure they would.

Neither Lloyds or RBS are in a position to currently. As there is plenty of paper to be sold back into the market already.

Malcolm.

Thrugelmir wrote: »

Shares maybe sold at a discount but doesn't make them worth anymore.

If the UK banks thought they could tap the markets I'm sure they would.

Neither Lloyds or RBS are in a position to currently. As there is plenty of paper to be sold back into the market already.

When the new shares are issued, it dilutes the existing holding, and the share price falls.

If a bank needs to raise further capital, a rights issue will be high on the list of options to consider.

Sibley

I actually think prices will hover around what they are now. Decent houses will not drop at all because people will simply refuse to take a lower price. After all, with low interest rates they don't need to. The HPC fans are deluded thinking that homeowners are all worried now.

The news is boring and irrelevant to most homeowners. Only if you actually want or need to sell are prices important. I honestly think that 90% of people in UK see 'House price rises/ House price crash' headlines in the paper and couldn't care less. Probably rather see who Jordan's shagging on the front page.

Any ideas of a crash hinge on forced sellers and repossessions. We have always had the odd forced seller whatever the situation in the economy. With the measures in place now, the HPC gangs dream of thousands forced out of their home is the main thing that guarantees there will never be a drastic change in prices.

I used to live quite close to the Kings Hill housing estate. Last time we had all this crash hype I used to read all the doom and gloom in the papers and message boards. You could make yourself feel all depressed :eek:

I'd go to get my shopping at Kings Hill and look around. The houses are really expensive there. I used to look at all the people driving their new Audi 4x4's and all the kids in designer clothes.

I'd ask myself ' These people, are they really struggling and want to sell their house for 50%+ off peak price?'

Errr no. :rotfl:


The message boards and newspapers are just full of people wanting to get on the housing ladder at somebody else's expense.

That's the truth.

I now live in Bangkok. Do you know there has been house price crash rumors here for the last 5 years or so?

All the signs are there. The economy in the foreign countries bad etc. Prices should halve.

Have they? No.

Will they? No.

Seen it all before. People like houses. They live in them. It's not like selling a TV. It's not optional if you need one of not. You have to live somewhere. The crashers obviously want to buy.

If they can locate a cheap house good luck to them but I know it's not going to be what I'd be after.

Shakethedisease

Any ideas of a crash hinge on forced sellers and repossessions.

Still living in 2007 I see...

This gridlock unlike in previous crashes, will be broken inadvertently by the government themselves. From the bottom up, not the top down.

First there will be reduction in SMI that will hit 115,000.
Then there will be the reduction in LHA which will hit many 1000's more than that.

That in turn will cause repossesions to rise, not massively at first, but enough to cause a ripple in sentiment. And many private tenants will be asked to leave their accomodation in favour of those not receiving LHA. It's either this or many landlords will have to reduce rents. Those families/singlies that leave will find that most landlords won't accept those on LHA because the recent reductions mean they can't afford to on their BTL mortgage, the family/person won't pass the credit check ( or can't afford it) or they simply don't want the hassles of LHA tenants.

This will snowball.

I'm at a loss to see why it won't ? ( suggestions gratefully recieved ! ).

There will be a huge demand for social housing, and waiting lists will go soaring up to unprecedented levels, to the point where even B+B's and many local council's won't be able to cope any more.

The government will eventually have to intervene in order not to have children sleeping on the streets or overcrowded in houses not fit for purpose. Many evicted from private tenancies, or those for whom SMI won't cover their interest payments, will be families who have had their main breadwinner recently made redunatant after many, many years paying tax even if it was in a low-paid job. This will be unacceptable to see to the public at large.

http://england.shelter.org.uk/news/september_2011/child_poverty_to_worsen

Gridlock will be broken from the bottom. Unprecedented levels of BTL mortgages ( for investment purposes) and accidental landlords ( who can't/won't sell ) in the last few years with relatively high mortgages to pay.. coupled with an already widespread reluctance to rent to those on benefits + a cut in LHA levels and a rise in unemployment will make sure of it.

This has never been a factor in previous house price crashes, the massive amount of investment in BTL by individuals. Many of whom depend absolutely on the current status quo in the rental markets to keep afloat.
Everyone seems very happy to quote the rise the the BTL market as a major factor in the rise in house prices, but fail acknowledge that it may be one of the biggest factors in it going down too. Why wouldn't it be ? The government have just put some VERY large spanners in the works.

It all points to families without homes. And it's not a vote-winner seeing homeless young children. Especially when their dad has worked for 15 years before getting his cards, but could never afford the deposit on a house.

*sighs* knows she'll be flamed. But based post on simple logic, cause and effect.

HAMISH_MCTAVISH

Shakethedisease wrote: »

First there will be reduction in SMI that will hit 115,000.

AFAIK, the reduction in SMI takes it to slightly short of 4%, versus the current 6% or so. It means that some people will be a little bit short each month for the mortgage, but in fairness it is a lot closer to the current actual average mortgage interest cost than the current 6%, which is generous.

Lets say half of that 115,000 start accruing arrears, but even then it won't be the full amount that is accruing. The banks will continue to hold off on reposession for somewhere between 3 months and 12 months, by which time most of those people will be back in work.

The ones that aren't will be reposessed. But it's a fraction of the 115,000 you're talking about. And of course even the full 115,000 is only a 6 week supply at current transaction levels.

So maybe 1 or 2 weeks stock hit the market, staggered over a year or so.

Not enough to be material to prices.

Then there will be the reduction in LHA which will hit many 1000's more than that.

Again, the average amount for LHA reduction is just £22 a week. Of which some amount will be absorbed by landlords, on average, and some amount will be absorbed by tenants.

There will be small pockets where the squeeze on landlords is severe, like westminster, and also some pockets where rents shoot up as displaced familied rush for available housing that is currently cheaper than the LHA will pay.

The overall average impact will be minimal though. The fact is that a massive housing shortage still exists, and eventually the population will be redistributed throughout the available stock on a fairer basis.

Westminster flats will be cheaper, outer London flats more expensive. Most areas will see little change.

That in turn will cause repossesions to rise, not massively at first, but enough to cause a ripple in sentiment.

A few tens of thousands of repo spread over a year or so is simply not enough to turn sentiment on the scale required for a housing crash.

And many private tenants will be asked to leave their accomodation in favour of those not receiving LHA. It's either this or many landlords will have to reduce rents. Those families/singlies that leave will find that most landlords won't accept those on LHA because the recent reductions mean they can't afford to on their BTL mortgage, the family/person won't pass the credit check ( or can't afford it) or they simply don't want the hassles of LHA tenants.

True.

Maybe 100,000 households will be displaced into cheaper areas.

The rest will find a way to pay the rents, or landlords will compromise, because the gap just isn't that big in most cases.

This will snowball.

I'm at a loss to see why it won't ? ( suggestions gratefully recieved ! ).

I'm not sure why it would. Once the change has worked it's way through the system, it will be done.

It all points to families without homes. And it's not a vote-winner seeing homeless young children.

Which is why they won't be homeless.

If hundreds of thousands end up in B&B, then the government will back down.

Because it's cheaper to keep them in their homes than in a B&B, and letting them be homeless is not an option.

It's pretty much that simple.

des_cartes

SMI and HB cuts are taking money out of the housing market, just as the end of liar loans and restrictions on ltv and income multiples are taking money out of the housing market, just as reduced wage growth and higher food costs are taking money out of the housing market, just as higher interest rates (they cannot go down can they) will take money out of the housing market. With money coming out of the housing market, where is the money coming from to finance your predicted hpi?