50% house price falls

SmarterProperty

There's been talk of a housing slump for the last 7 years as everyone expected the same boom and bust we have endured in the past. However, there has been a big difference in the availability of funding when comparing with the boom of the late 80's. Many (even most?) building societies have demutualised and become banks with the consequence (or advantage, depending on your viewpoint) or greater amounts of money being available to lend. So much so that we now have lenders willing to lend money to people with many ccj's, bad debt, unreliable income etc (ie. the sub prime market). The problem with making money available to people who have so badly managed their money in the past is that they continue to bring their mismanagement into the housing arena. They have no thought for the future and about how they will continue to pay their mortgages if interest rates rise and as such, will be prepared to pay much more for their 'dream' home. This brings about a market not driven by reality in any way, shape or form. Market forces NORMALLY inhibit or control pricing - but only when the ability to pay is truely contained. The US situation and the recent situation with Northern Rock has caused real jitters in the market with estate agents experiencing the quietest autumn for years. In addition, mortgage lenders have withdrawn a lot of products, particularly from their sub prime portfolios. So, less available money = fewer available buyers. In addition, whilst companies like Rightmove (who are incredibly unethical in how they make their reports) report price increases and are reluctant to report price reductions (attributing the September fall to HIP's - how they justify that statement I have no idea), they fail to inform the public that the actual amount of houses sold in 2007 has DROPPED by a massive 50% in many areas. So, in my view, the bubble popped some months ago.

www.mesmarterproperty.com

tr3mor

SmarterProperty wrote: »

There's been talk of a housing slump for the last 7 years...

Sounds about right.

You're not allowed links to your own site BTW.

Turnbull2000

Conrad wrote: »

Longterm you are correct to state property is by far the best investment and far superior to relying on insurance companies to provide for your future wealth. Row your own canoe and all that - plus a pension dies with you, property can be passed on.

The fallacy of this wealth-creating property ownership utopia so highly regarded by investors like yourself, is that the 'wealth' you speak of is the debt of another buyer or rental payments - in this instance from an entire generation. Sounds like a bit of a scam I must say.

SmarterProperty

Thanks for letting me know about not being allowed links, I hadn't realised

Generali

golddustmedia wrote: »

What I meant about Japan was that pretty much all men over the age of 16 were killed in the war, subsequently children who were born in the 1930's began creating demand on the Japanese economy by the 1990's where they required increasing volumes of medical and social care, for which the country was unprepared and largely had not had to provide to the aged for a period of 60 years.

It's written up in economics books as being one of the major contributing factors to the fall of the japanese economy.

IMO, the weakness of the Japanese banks along with the simple unsustainability of such high asset prices that lead to the Lost Decade.

I put together a bit of a monster post here that I've dug out.

As far as I'm concerned, that's what happened at the time (although not what's subsequently been blamed). I've got a strong interest in bubbles and one of the things I find fascinating is the change in what happened from contemporary reports to later ones.

When the current housing bubble in the UK bursts (assuming it does) you can bet all sorts of things will be blamed (Northern Rock/oil prices for example). Nobody, or at least very few, will be prepared to say, "House prices fell because they were too high"! It's too simple and people seem to prefer complicated answers to simple ones sometimes.

golddustmedia

Conrad wrote: »

Golddust I'm a property investor but I dont particularly care for price rises.

I'm it for the rent yield.

If a property increases in value £100,000 and I sell I will lose £40,000 in CHT so hardly worth the bother.

Well a major point of my posts is stating that property is a good investment long term. As I'm sure you know you're allowed a personal tax increase on property which I believe has just been raised to £9600?

Anyway, my understanding is that the property may increase in value by your allowance per year without paying tax on it when you sell. SO, if it did increase by £100k over 10 years then sure £96k of it is not touched by tax.

None the less, even with your example above you said you'd pay 40% on the profit, it would still be £60k of profit so in my mind very much worth it.

Point taken though about getting the right yield, but there are many ways to reduce the impact of tax you would pay when you sell the property. Consult an accountant for some good advice.

hgllgh

So there you go, it's not just FTB that are waiting to see how prices pan out, and the amateur BTL Brigade and current FTB that are buying or have bought recently that are ignoring the warnings are at risk

Gorgeous_George

Conrad/Golddustmedia

CGT allowances are not cumulative. You get one allowance per year when a gain is realised. There is one allowance effectively per investor per year.

From April 08 CGT will be levied at a flat rate of 18%.

If Conrad's a property investor, I'm Mary Poppins.



GG

dougs

golddustmedia wrote: »

SO, if it did increase by £100k over 10 years then sure £96k of it is not touched by tax.

that simply isn't correct! Your annual CGT allowance is not carried forward in the manner you suggest.

mr.broderick

Generali wrote: »

IMO, the weakness of the Japanese banks along with the simple unsustainability of such high asset prices that lead to the Lost Decade.

I put together a bit of a monster post here that I've dug out.

As far as I'm concerned, that's what happened at the time (although not what's subsequently been blamed). I've got a strong interest in bubbles and one of the things I find fascinating is the change in what happened from contemporary reports to later ones.

When the current housing bubble in the UK bursts (assuming it does) you can bet all sorts of things will be blamed (Northern Rock/oil prices for example). Nobody, or at least very few, will be prepared to say, "House prices fell because they were too high"! It's too simple and people seem to prefer complicated answers to simple ones sometimes.

Nice post except i disagree with the highlighted text.
House prices are high because we put them there, there is a lot of talk of prices correcting, they may well do but we will put them back up there again soon after.