The Next Nail in the Coffin

economic

cells wrote: »

yes I think its fair to say that I think fate/chance determines our future to a much larger extent than anything else.

I used to think more like yourself when I was younger. only now when I look back I remember many many times where a road taken differently would certainly have meant I was in a different place even a different person than what I am.


Edit: Actually fate is a wrong world as it means predetermined. I dont think events are predetermined I think everyone has a huge number of variations so much so that if you lived your life over a thousand times you would likely be in 1000 different places

thanks cells - you and i think very much alike both on luck and on property.

i like to think im a pretty smart guy (went to a top uni, work in banking, earn 100k (haha) ) but even then i really do think luck has a far greater impact on ones success in life then anything else. of course one needs to make choices to try gain success but whether those choices become good choices is where luck plays a large part.

Jack_Johnson_the_acorn

economic wrote: »

thanks cells - you and i think very much alike both on luck and on property.

i like to think im a pretty smart guy (went to a top uni, work in banking, earn 100k (haha) ) but even then i really do think luck has a far greater impact on ones success in life then anything else. of course one needs to make choices to try gain success but whether those choices become good choices is where luck plays a large part.

Yet you choose not to use the "Caps lk" key after full stops.

That makes a horrible reading experience for everyone else.

wotsthat

chucknorris wrote: »

If that is what you think, we are so different, we might as well come from different planets. I think that luck plays a part in our lives, but then how we decide to deal with what hand we have been dealt determines our future, but you seem to think that fate determines our future.

I'd replace fate with chance.

Warren Buffet said he didn't mind being taxed because it's only a tax on money he gained by luck. What he meant was if he'd been born in Bangladesh into a poverty stricken family then being able to calculate future earnings and compare to current prices would have been a skill he'd never find out he had.

Most of us win the lottery every day. If we were born here then we already had a better chance of survival, our mothers probably survived to look after us, we got immunised, went through one of the best education systems in the world etc. We can even drive to work and back with an excellent chance of getting home at the end of the day.

Most people's skills involve little more than having chosen to drink when led to water. The frustration is so many choose to bum water off the rest of us when there's a well stRing them in the face.

mwpt

economic wrote: »

well i wonder why all of you would be wary of me. would be at least good to know more about why that is.

Because humans are good at spotting patterns and using intuition (sometimes), even in the face of obfuscation. I detect something familiar about your posting style, and for a low post count you seem quite familiar with the workings here, and you seemed to head straight to targeting chuck. It took me quite a long time to learn who was who here, whereas you seem to have got to grips with it rather quickly.

mwpt

cells wrote: »

Did they not QE or Slash rates or 'other measures' in stoke on trent? So why did prices not go up there or the half of the uk where prices are lower now than a decade ago??

I've answered this multiple times. The answer of course is the same as your answer for London, demand. Why are similar houses priced at £100k and £300k in the 50 miles around Stoke? Some people desire to live there in certain areas. I've always said, without demand, credit will do nothing to prices, but in the presence of high demand, cheap credit increases purchasing power and pushes up prices. You know this because you run a leveraged business and you will be fully aware that your costs fall as credit price decreases. Which means either profits rise continuously, or competition for the yields pushes asset prices up. And we know the latter to be true.

In any case, yes, demand drives prices higher, but maintaining the same demand and reverse back to 2008 and don't QE, don't slash rates, the situation would have been different for leveraged property owners.

cells

mwpt wrote: »

I've answered this multiple times. The answer of course is the same as your answer for London, demand. Why are similar houses priced at £100k and £300k in the 50 miles around Stoke? Some people desire to live there in certain areas. I've always said, without demand, credit will do nothing to prices, but in the presence of high demand, cheap credit increases purchasing power and pushes up prices. You know this because you run a leveraged business and you will be fully aware that your costs fall as credit price decreases. Which means either profits rise continuously, or competition for the yields pushes asset prices up. And we know the latter to be true.

In any case, yes, demand drives prices higher, but maintaining the same demand and reverse back to 2008 and don't QE, don't slash rates, the situation would have been different for leveraged property owners.

levered property owners as you call them did well before QE

The largest gains in prices in London was from April 1999 - April 2000 where in a single year prices went up 29% (according to the land registry) How do you explain that?

There are also periods where the base rate increased but so did prices. From 2003-2007 the base rate went from 3.5% to 5.75% yet London property prices still boomed. How do you explain that?


As I keep saying. Demand is the biggest factor not interest rates not QE


If you think London prices are too high and an overall negative, do you not see yourself to blame at all? A foreigner who came to London and bought a house. You are gilt free not to blame it was them darn buy to letters right? not demand from the 100,000 who want to come to London each and every year? personally I dont think high prices in London are a big net negative so I welcome you to London but if you think high prices in London are a big net negative you must accept that the biggest reasons for it is your good self and the other 100,000 a year who come to London. The second reason is the inability or unwillingness of London to build the 50-60k homes a year it needs.

I've always said, without demand, credit will do nothing to prices

seriously?

?

so your theory is that with strong demand, if credit available is low then prices will not go up?

what about London, may 2009 - may 2010 during the height of the credit crunch. Prices went up 13%.

mwpt

cells wrote: »

levered property owners as you call them did well before QE

The largest gains in prices in London was from April 1999 - April 2000 where in a single year prices went up 29% (according to the land registry) How do you explain that?

There are also periods where the base rate increased but so did prices. From 2003-2007 the base rate went from 3.5% to 5.75% yet London property prices still boomed. How do you explain that?

125% mortgages, mortgage rates not following BOE rates upward (margins compressed), demand very strong so that any negative price pressure by rates didn't feature.

As I keep saying. Demand is the biggest factor not interest rates not QE

Demand is the biggest factor. Rates play a part. If rates were at 6% still and no QE, my guess is prices would be about 15-20% lower, perhaps more, in London and SE. We need to allow borrowers to fail if they over-extend.

If you think London prices are too high and an overall negative, do you not see yourself to blame at all? A foreigner who came to London and bought a house.

This is getting a little personal (and patronising) so I'd appreciate if you could leave that out. I accept that demand is the biggest driver, that hasn't been my argument. My argument is that credit plays a very large part in effective demand.

so your theory is that with strong demand, if credit available is low then prices will not go up?

Prices will go up as long as demand exceeds supply and the ability to pay extra is there. There is obviously a ceiling to what people can pay. You still misrepresent my argument.

I created a whole separate thread for exactly this topic so we didn't pollute other threads. We went round in circles there too. You keep avoiding answering my questions and thinking you're proving me wrong by saying "look how cheap this area is". I don't accept this argument.

cells

mwpt wrote: »

125% mortgages, mortgage rates not following BOE rates upward (margins compressed), demand very strong so that any negative price pressure by rates didn't feature.

So demand was the biggest factor not the existence of mortgages.

Demand is the biggest factor.

yes it is

If rates were at 6% still and no QE, my guess is prices would be about 15-20% lower, perhaps more,

If the BOE did not do QE its very likely that rates would have fallen anyway. Rates have fallen globally for virtually all countries (as they were pretty much since 1990 so its not new).

So I dont think there is merit in the game "if rates were X".
I do agree that 'if mortgage rates were' 6% then its likely the price increases would have been a bit more modest. But even saying that there are counters to that in the form of 6% real rates would only be in place if the economy was undergoing a huge boom so who knows what prices would be like if rates were 6% and GDP growth was 5% a a year over the last 5 years rather than the 0-2% we experienced?

in London and SE. We need to allow borrowers to fail if they over-extend.

There is no 'we need to allow'. Borrowers borrow from banks and if the banks decide x y or z then its their decision. If the banks want to repo or allow concessions to those landlords who cant meet cashflow its upto them. It shouldn't be a decision to force repossession 'we need to'

Also there is little evidence that borrowers did over extend be that in the 2005-2007 period before the crash or the period since.

This is getting a little personal (and patronising) so I'd appreciate if you could leave that out.

My apologies I was teasing

cells

When I think of BTL I think its reasonable to think of it as a collection of people who have savings wanting to invest it somewhere in a safe way to earn a return.

imagine 10 x £10k depositors.
They hand it to a landlord who takes that and adds his own £50k and buys a BTL for £150k. The landlord takes the biggest risk He also works the hardest and pays the most taxes

Clearly in normal times the landlord should make the biggest gains as he takes the biggest risk and invests the most time and capital.

Depositors dont go directly to landlords they go through a bank which acts as a middleman


To expect interest rates to bankrupt the landlord is silly.
Imagine you were one of the deposits with £10k invested into this landlord. Would you A: accept a lower interest or B: Push for 6-7-8% interest and have him liquidate causing you to take an unknown haircut on your £10k?

Clearly the sane depositors would much rather take a period of 2-3% interest rates on their £10k than push for 6-8% and see a unknown haircut on the £10k

You can substitute landlord for home-buyer in this


The governments of the world slashed rates not to save one or the other. It was what both sides of the coin would have wanted. borrowers as a whole cannot default the system as a whole cannot default its in no ones interest.

Crashy_Time

http://www.standard.co.uk/business/fears-over-luxury-property-bubble-spread-to-city-as-flat-prices-slashed-a3220056.html


Love the cranes in the picture, so ironic. (Yes, I know they have gone up a million % since Christmas and 30% is a "drop in the ocean", but sentiment is everything in this market, every little helps!)