LAND REGISTRY data finally shows FALLS in House Prices

phlash

brasso wrote: »

I appreciate the detailed post, and to be honest, there is too much there to respond to everything, so just a couple of points if I may...

You make the point about repayment vehicles etc. I agree with the general implication that people need a strategy to pay off the capital, but the bald statistics don't tell us enough. These people may not have a repayment vehicle taken out as part of the deal (e.g. an endowment), but that doesn't mean that some/many have no plan whatsoever. They may have an inheritance coming to them. They may be in the early stages of a career in the professions that will start to pay them much more. They may just want to take a year or two as a breather before taking out a repayment mortgage. Etc, etc. If you're saying that some people will be taking out these mortgages without any forward thinking then I agree. They are probably just relying on capital appreciation. And it has to be said that almost all the people taking out I/O mortgages without a repayment plan since the mid-90s will have done exceedingly well with this outlook. In Leeds, where I lived for a while, I nearly bought a house in 1997 for £25K. Current price? About £125K. I don't approve of this sort of gamble, but most people have got away with it, like it or not.

Also, the figures you quote don't tell us enough about what sort of buyers these are. The only I/O buyer I know (that I'm aware of) is a developer who takes out a mortgage, adds value to the house in some way and sells again.

As for the 2004-07 fixed rate example, of course I take your point. These people have to find an extra £100 a month or so. Annoying for sure, but not
crippling for most of us. If we didn't have that extra £100 on our current budget then we'd have to change our spending. If that means taking a cheaper holiday or not eating out twice a month, then tough !!!!!!, that's the way it goes. Sometimes we have to make unpleasant financial decisions, but that's life. Most people will have created significant equity in that time, as you point out.

Yes I agree, some people will keep bumbling on without ever thinking how they're going to repay the capital even in a time of HP stagnation or falling HPs. What can I say? There are some foolish people in the world. If they can't/won't manage their finances even moderately well then what can we do? It's their problem and they'll eventually suffer the consequences.

I take your point about the statistics, that you cannot tell whether people have their own repayment vehicle or not.
Being of FTB age, I know anecdotally alot of people desperate to get on the 'housing ladder'. The stats show 1 in 5 FTB's are taking out interest only mortgages with no repayment vehicle up from 1 in 10 only a couple of years ago. The important question is, is this increase due to FTB's becoming wise to alternative repayment vehicles and therefore opting for IO mortgages. OR is it that house prices have become that much more unobtainable that they have had to do it because of affordability issues?
With the BBC posting figures like average earnings have increased 92% in the last decade and house prices 204%, I doubt the answer to the question above is that FTB's are becoming more savvy to other investment vehicles. The latter seems more plausible, logical and in line with what I can see around me.

brasso

dannyboycey wrote: »

Don't patronise me. "Learnt that you were wrong"?

??

Yes, you'd have learnt that you're wrong.

You could have said "the market was hanging by a thread" because we all know you're using a metaphor.

If you say "the market was literally hanging by a thread" you mean that you are NOT being metaphorical. That's the point. I mean this literally = I do not mean this metaphorically.

You mean that there was, literally, a physical thread, and dangling from the end of it was, literally, some market.

OK?

brasso

phlash wrote: »

I take your point about the statistics, that you cannot tell whether people have their own repayment vehicle or not.
Being of FTB age, I know anecdotally alot of people desperate to get on the 'housing ladder'. The stats show 1 in 5 FTB's are taking out interest only mortgages with no repayment vehicle up from 1 in 10 only a couple of years ago. The important question is, is this increase due to FTB's becoming wise to alternative repayment vehicles and therefore opting for IO mortgages. OR is it that house prices have become that much more unobtainable that they have had to do it because of affordability issues?
With the BBC posting figures like average earnings have increased 92% in the last decade and house prices 204%, I doubt the answer to the question above is that FTB's are becoming more savvy to other investment vehicles. The latter seems more plausible, logical and in line with what I can see around me.

You're right that this is a plausible explanation for the rise of people in that position.

Oh damn, we're starting to agree.

phlash

brasso wrote: »

You're right that this is a plausible explanation for the rise of people in that position.

Oh damn, we're starting to agree.

I love it when a plan comes together!:beer:

dannyboycey

brasso wrote: »

??

Yes, you'd have learnt that you're wrong.

You could have said "the market was hanging by a thread" because we all know you're using a metaphor.

If you say "the market was literally hanging by a thread" you mean that you are NOT being metaphorical. That's the point. I mean this literally = I do not mean this metaphorically.

You mean that there was, literally, a physical thread, and dangling from the end of it was, literally, some market.

OK?

!!!!!!!! No. Not OK. The word literally is as subjective as the word 'was'! I can see "I am hitting my head against a brick wall", or should I not say that because 'I am' implies that I am actually hitting my head against a physical brick wall?

You may want to read this. You may learn something. Your arguments about the English language stem from the basic rules as tought in good primary schools. If you care to delve a little deeper, you will find that it is, in fact, you, not I, that are incorrect.

Back on topic though, IO mortgages work very well for BTL's, not just for capital gains tax issues but because they allow you to maximise rental income. They are however, much more susceptical to external forces on the market as they offer no security blanket for IR rises. This is why I believe we are seeing the beginnings of a mass-exodus in the buy to let market, which will ultimately lead to long-term downturn in prices.

Not until we see YoY negative figures from the Land Registry will the media turn bear, and call a crash / correction. Until then, we can spin figures by saying 'prices in x region are up on last year, and hence still rising' despite them actually falling pretty sharply in some areas. In real terms they are dropping, but by the time we se YoY negative, it will be too late for many. This is why it's so important to take media reports with a pich of salt. They don't want top appear with egg on their faces and will not call the downturn until the YoY negatives appear. We have seen in the US, that this can take 12 months or so from the first quarterly negatives, which in the UK were Q1 2007. Hindsight is a wonderful thing, but being prepared is a lot more useful. I believe that the first quarter of 2007 will be seen as 'the start of the HPC'. Watch this space.

Hereward

dannyboycey wrote: »

!!!!!!!! No. Not OK. The word literally is as subjective as the word 'was'! I can see "I am hitting my head against a brick wall", or should I not say that because 'I am' implies that I am actually hitting my head against a physical brick wall?

You may want to read this. You may learn something. Your arguments about the English language stem from the basic rules as tought in good primary schools. If you care to delve a little deeper, you will find that it is, in fact, you, not I, that are incorrect.

Keeping the thread off topic for a moment longer. The Oxford English dictionary states (http://www.askoxford.com/concise_oed/literally?view=uk):

literally


• adverb 1 in a literal manner or sense. 2 [SIZE=-1]informal[/SIZE] used for emphasis (rather than to suggest literal truth).

therefore, your sentance could be interpreted both ways. As most people would interpret it in the first insatnce, the majority of people would assume that you were not using a metaphor.

brasso

dannyboycey wrote: »

!!!!!!!! No. Not OK. The word literally is as subjective as the word 'was'! I can see "I am hitting my head against a brick wall", or should I not say that because 'I am' implies that I am actually hitting my head against a physical brick wall?

You may want to read this. You may learn something. Your arguments about the English language stem from the basic rules as tought in good primary schools. If you care to delve a little deeper, you will find that it is, in fact, you, not I, that are incorrect.

Danny, it's you who are confused. Please, just listen for a moment.

I know exactly what a metaphor means.

If you said you were "hitting your head against a brick wall" I would intuitively know that you were being metaphorical.

If you said to me: "I'm literally hitting my head against a brick wall" then you are explicitly telling me that you are not being metaphorical. You are telling me that you are actually bashing your head -- that thing at the top of your neck -- against a physical wall made of bricks.

"Literally" means "Not metaphorically".

Repeat after me:

"Literally" means "Not metaphorically"

Once more:

"Literally" means "Not metaphorically"

There.

:T

dannyboycey

brasso wrote: »

There.

:T

:rolleyes: I see you're giving yourself a warm hand at the end of the post. No confusion in my mind what that implies.

brasso

dannyboycey wrote: »

Not until we see YoY negative figures from the Land Registry will the media turn bear, and call a crash / correction. Until then, we can spin figures by saying 'prices in x region are up on last year, and hence still rising' despite them actually falling pretty sharply in some areas. In real terms they are dropping, but by the time we se YoY negative, it will be too late for many. This is why it's so important to take media reports with a pich of salt. They don't want top appear with egg on their faces and will not call the downturn until the YoY negatives appear. We have seen in the US, that this can take 12 months or so from the first quarterly negatives, which in the UK were Q1 2007. Hindsight is a wonderful thing, but being prepared is a lot more useful. I believe that the first quarter of 2007 will be seen as 'the start of the HPC'. Watch this space.

I don't understand this thing about "calling" a crash or "calling" a downturn, as if these were official arbiters. Who exactly? One newspaper? All newspapers? One controversial columnist? Or a leading article? Are some taken more seriously than others? Where are these rules written down?

You raise a good question though, about how we define these things. Personally, I think a decline of 20%, even in real terms, over a 5 year period isn't a crash. It's a decline in prices. A decline of 20% over 3 months is a crash. I sometimes see people talk about a "crash" as a gradual drop over several years. To the economist, this isn't a crash.

We don't say that prices of PCs have crashed since 1990. We just say they've gone down.

dannyboycey

Hereward wrote: »

the majority of people would assume that you were not using a metaphor.

What? That the housing market is actually some kind of tangible physical object swinging from a bit of nylon? I honestly don't think people are that thick. Whether you believe using the word 'literally' within a metaphor is right or wrong, I'd have thought the fact that it was actually a metaphor as opposed to a materialistic truism was patently obvious.