Property market 'heading for a fall in 2008'

dealornodeal_3

Repetition is bound to creep in sooner or later.

If/When the crash comes by way of Property Crash/ Stocks & Shares crash, it will comes as no surprise to some of us. It will come as a shock to alot of people whom lose a lot. Ive seen it before like many of you, but I never suffered the consequences of it!

What we all must do when it happens is to be there for the people and advise them!

BobProperty

mystic_trev wrote: »

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/04/03/cnsavings03.xml

"The Bank's own statistics showed yesterday that mortgage equity withdrawal (MEW), in which families borrow against the value of their home, hit a two-year high in the final quarter of 2006, as households increased their borrowing to keep their finances afloat.

MEW rose to some £14.6bn, or 6.7pc of incomes - the highest level since mid-2004. Experts said households could be paying off credit card debts by increasing their mortgages"

Similar to re-arranging deck chairs on the Titanic?

dealornodeal_3

The problem is Banks and Building Societies are all too eager these days to dish out loans and mortgages to people. We all get Inundated with Junk Mail on a Monthly basis, sometimes more!

gelato_cat

7. Estate agents...

Suze

Gorgeous_George wrote: »

1. BTLers are not parasites. They are gamblers and often workaholics. Gambling that tenants will pay the agreed rent and leave the house in the agreed condition at the end of their agreed tenancy period. Many gamble that prices will rise. Without BTLers many people in short term employment or who move jobs regularly, would be unable to have a home. For my modest returns I have redecorated a 4 bedroomed house so that it could be re-let after the parasites who rented it left it it in a mess and owing rent.

2. Agree

3. Possibly but I didn't see many go out of business last time there was a price 'crash'.

4. Agree. I'd even extend it to those on fixed rates that come to an end sometime after the 'crash' starts. There only option may be to stick to their lender's SVR leading to hardship/reposession.

And I'd add:

5. Gordon Brown. Lower tax income from VAT and Stamp Duty. Obviously, this affects the whole country as taxes need to rise elsewhere to fund the shortfall.

6. All those hoping for a substantial inheritance.

With a rising population and an over generous welfare state, demand for housing will increase. ONLY higher interest rates are likely to cause a sharp fall in property prices. Higher inflation and more expensive borrowing will counter some of the joy that FTBers expect to celebrate.



GG

gelato_cat

If you buy a place for £70k and put down a deposit of £12k, that means that you've borrowed £58k, no? If you sell, you still have to pay the mortgage company what you owe them, even if you sell at a loss (=negative equity). Unless I've missed something, I can't see what investment you would "reap back"...

Suze

typeractive wrote: »

yeah - perhaps. I mean the way I look at it. If I buy a place for say £70k. It's a flat and I don't want to live there forever. Say short term - 5 years.

Now I will not have paid the whole thing in 5 years - unless I win the lottery lol. So say I put my deposit in of around 12k and start paying my mortgage. If houses plummit in value and so does the flat, then what will I lose? Not a lot really. If it devalued to an extremity of half - £35k, I still would not have paid this amount off. I could sell it and reap back the investment, and have had the opportunity to live there for say 5 years.

The thing I would lose is the opportunity make money: a profit.

BTman

RabbitMad wrote: »

I may have only scraped a B at A level maths but I can do percentages! The house may now be worth 2.65 time what it cost 11 years ago but this is not the same thing as a 265% rise.

Maths lesson: -

increase £10 by 10% and you get £11
increase £10 by 100% and you get £20
increase £10 by 200% and you get £30

so, increase 66K by 100% and you get 132K
increase 66K by 200% and you get 198K
increase 66K by 265% and you get 240K

Anyway I'm a LTB numpty who can't add up!:rotfl:

Ooops, look's like I'm the numpty on this occasion..:o
In my defense, 175K is 265% of 66K, but not a rise of 265%.

nawvernmonkee

dnwilliams wrote: »

The fall will come sooner than that. Properties are beginning to flood the market now that the gov have annnounced HIPS on 1st June. (Sellers looking to avoid the £500 cost) By the 2nd June we will see a complete flip from sellers to buyers market, compounded by rising interest rates and hey presto! falling prices. This has a very similar feel to 1988 when the market reacted to the removal of MIRAS and prices fell by as much as 35%.

Assuming this did have a big impact on the market would it not be the other way round ? Ie sellers rushing to sell are more susceptible to less favourable negotiation.

My concern lies with the recently 'reported fact' that the UK's balance of payments (ie that which we import to that which we export) is wider than it has been since 1975 and not in our favour. I am not sure what the long term indirect impact on the property market will be should this trend continue (I may be relying on my two properties later in life).

Generali

nawvernmonkee wrote: »

Assuming this did have a big impact on the market would it not be the other way round ? Ie sellers rushing to sell are more susceptible to less favourable negotiation.

You'd hope that a £500 waste of space isn't going to have an effect on the price of a £500k house. I await being proved wrong again!

nawvernmonkee wrote: »

My concern lies with the recently 'reported fact' that the UK's balance of payments (ie that which we import to that which we export) is wider than it has been since 1975 and not in our favour. I am not sure what the long term indirect impact on the property market will be should this trend continue (I may be relying on my two properties later in life).

The current account is in deficit, that is to say that the UK imports far more than it exports. As the term, balance of payments implies, the payments into and out of the country must be in balance. Thus, if the UK is importing more than it exports, it needs to bring cash into the country to pay for it. Normally, this would push down the value of the pound as pounds would be sold to buy yen, euros, Yuan etc to pay for the imports.

However, Japan has very low interest rates (currently 0.5%). The UK has interest rates of 5.25%. Some very bright people working in investment banks worked out that you can borrow money from the Japanese, lend it to the Brits and make a profit. This is called the 'carry trade'. It pushes down the value of the Yen and increases the value of the pound.

This money is being lent to hedge funds that are using the money to buy assets including 'CDOs'. CDOs are groups of mortgages that have been packaged together and sold by the bank that originally lent the money to a 3rd party. The banks then do not have the liability of the mortgages on their books so can lend more money. This, IMVHO, is what has pushed up house prices. It's been the supply of and demand for money not houses that has caused HPI.

The carry trade is very risky: it only works when exchange rates are stable as if the Yen rises (or the pound falls) between when you borrow and when you need to repay, it wipes out your profit and maybe even causes you to make a loss. As the UK current account deficit and the Yen current account surplus are putting pressure on the currencies to fall and rise respectively, this is an ever present danger. As Yen interest rates rise (as they will eventually) the UK will have to raise it's rates to support the pound.

If the UK is going to maintain an interest rate differential of 4.75% between themselves and Japan to keep the carry trade going, base rates will end up (eventually, assuming a Japanese rate of 3%) at about 7.75% meaning a SVR of about 9.75%. The alternative would be to let the carry trade fail, hand big losses to international banks and see the pound collapse. That would be inflationary so interest rates would need to rise to save the pound.

A bit complex (and dull?). I've tried to make this a simple explanation - feel free to question this.

teddyco

People say that nothing is certain in this life, but that's not really true. There is one thing that will always be certain and you can bank on it, and that is the greedy nature of mankind.

Fools rush in where angels fear to tread, and such has always been the case when investing money. In a way, human nature can be something that clever investors use to their advantage.

A man once asked J.P Getty how he made all his money and he replied "buy when no one wants it and sell when everyone does".

Everyone wants property more than anything and now is the time to sell!

BobProperty

What Generali said plus the following:
China (and others to a lesser extent) hold a lot of $ deposits. As soon as they get fed up with the US inflating the dollar by printing more of them (at about 10-12% is it?) they will want to exchange dollars for something more reliable in terms of real money (gold, real-estate, shares, €, SFr, Yen whatever). If they start selling dollars big time then either the dollar interest rate goes up to attract buyers or the dollar falls on the exchange markets and America goes into a protectionist recession (or a bit of both). Either way the "knock-on" effect on the UK will be noticeable.