Has the crash finally bugun?

m00m00

how can people claim 'most BTL'ers are in it for the long run' when most entrants into the market have piled in during the past 2-3 years, and have had nothing but capital appreciation during that time.

no one knows how these newbie BTL people will react if there is a marked decline in prices.

seraphina

Terry_Tibs wrote: »

Exactly underlines my point about people not having the foggiest.

Spreads currently predict a 72% chance on NO CHANGE dec 08 interest rates.

The bank of England has managed the current situation , each 1/4 point had a measured effect until they reached the point of slowing home growth and inflation, there is no need for them to go any further, as soon as they see the market turn they will manage it in the opposite way by reducing IR slowly to a point when value returns and prices will rise again. So on and so forth it will go all in a managed manner, devoid of crash, just a little seesaw and liquidity to keep the markets viable.

But that's just it - the BofE can't target house prices explicitly. Interest rates were not increased to control the housing market - they were increased to control inflation. Their remit is to control inflation - as defined by the CPI, which doesn't include mortgage costs! They've been lucky that rises to date have had the desired effect on the housing market, but when CPI continues to increase the BofE have no choice but to increase interest rates, and damn the effect on the housing market.

Terry_Tibs

hgllgh wrote: »

Good argument, but, you are viewing the world from a purely financial point of view. If there is one thing that the Northern Rock issue showed us, it is the herd mentality we have in the UK. Market Psychology may play a larger role than you think. You argue above that "as soon as a point is reached when value returns to the market it will start to rise", but market psychology and sentiment (as well as credit crunch etc) will decide at what level that point is reached and if things are heading down, buyer psychology will say "wait for price levels to go even lower"

But your post supports my points, the public is fical, but can swing the other way just as easily, you see herd mentality on markets every day, but by its nature it will turn to a bull market just as fast.

Anyone who thinks the property market will be driven by the lemmings that make up the general public is still viewing the market of 15 years ago, it does not exist like that anymore, its simply a calculation based on value, as soon as % returns become viable then investment money will drive it.

I'm just a trader, what do I know

guppy

Terry_Tibs wrote: »

I cant be arsed to get into a long winded debate, but suffice to say that most people do not understand the nature of the way modern finance markets work and the housing market has changed into one, this is underlined by those who base prediction on market swings over the last 30 years, there is a basic math calc between the cost of a mortgage , the rent able value of a home and the % ROI that means that whilst the interest rates are being managed we wont see another crash , what we may see in the short term is a lumpy market, short in liquidity , but as soon as the market becomes viable in regard to ROI it will stop falling as money gets moved back into property (and I dont mean private buyers).

IMHO We will see a continuing slight % correction until next spring, followed by around 3 years (max, prob more like 2) of stagnation, as soon as a point is reached when value returns to the market it will start to rise again.

Is this a long winded way of saying, "things are different this time"? Have we banished boom and bust as GB claims? Have we per chance, reached a "new paradigm"?

Bubble Psychology

guppy

Terry_Tibs wrote: »

Anyone who thinks the property market will be driven by the lemmings that make up the general public is still viewing the market of 15 years ago, it does not exist like that anymore, its simply a calculation based on value, as soon as % returns become viable then investment money will drive it.

I'm just a trader, what do I know

I'm not a HPC groupie but this is the single most ridiculous post I have ever read on any forum anywhere!

The residential property market will no longer be driven by the public?! Who else will drive it? Are three bed semis in the Midlands being traded on some kind of secret exchange in the City? Can I wake up one morning and instruct my broker to sell my whole property portfolio on that day? Can I phone up and buy a street of terraced houses in Wales because I think they are undervalued on that particular day?

For the vast majority of people a house is a home. People don't trade houses, they live in them. Even amateur BTLs don't trade properties. Some of them are still piling in now. Most people sell when they need to move, or when they can't meet the mortgage payments or when they get divorced. Logic just doesn't come in to it.

Ironically over 50 years ago serious investors did used to hold residential property, (and still do in central London), but for years the returns have been considered so bad no one bothers.

What market is it you trade in? A street market?

Terry_Tibs

Can I phone up and buy a street of terraced houses in Wales because I think they are undervalued on that particular day?

lol, so you think it will be driven by Daffydd ap Jones and his 2 bed in Pontypandy?

I would happily tell you where the market will be driven from, but seeing as you simply want to take the p1$$ I wont waste my time, but I will tell you I know of 6 different venture capital companies representing types of hedge funds who all have entry strategies based on value prediction models.

Anyway good luck with Mr & Mrs Jones's 2 bed semi driving the market it really is 1987 in your world huh

pamaris

guppy wrote: »

Is this a long winded way of saying, "things are different this time"? Have we banished boom and bust as GB claims? Have we per chance, reached a "new paradigm"?

Bubble Psychology

Interesting chart... I suppose right now we are somewhere between denial, bull trap and return to normal. Perhaps fear is beginning to play a part.

The thing that a lot of people miss is that prices must return to the mean. How can prices simply stagnate or "rise with inflation" as so many claim when they have been so high for so long? If they simply rise in line with inflation from here on out, they will still be miles away from the mean. Prices need to reach the point of equilibrium with inflation before they should be expected to rise in line with inflation.

As far as stagnation goes, prices would have to stagnate for a long time (unless we have superfast hyper wage inflation; don't see it) for them to reach equilibrium with earnings and inflation. In my area prices for a terraced home are 2.81 times more than they were in 2000. (62k to 175k). I don't know about anyone else, but our wages have risen 25% in that time (24k to 30k). For it to be comparable, either our wages should be 67k or house prices should be 77,500.

I don't care what happens to even the playing field. In all likelihood, wages and house prices will meet in the middle.

guppy

Terry_Tibs wrote: »

lol, so you think it will be driven by Daffydd ap Jones and his 2 bed in Pontypandy?

I would happily tell you where the market will be driven from, but seeing as you simply want to take the p1$$ I wont waste my time, but I will tell you I know of 6 different venture capital companies representing types of hedge funds who all have entry strategies based on value prediction models.

Anyway good luck with Mr & Mrs Jones's 2 bed semi driving the market it really is 1987 in your world huh

Ok, the average hedge fund according to the FT is $178m. Average house price, say $350k. So between the six of them, they are going to somehow acquire and manage 3050 properties. Which in itself would be a complete pain in the bum, but still a mere drop in the HPI ocean. If you know these guys, tell them there are 3000 empty flats in Thamesmead coming to auction soon

Oh, and no, its not 1987 in my world...but it is starting to feel increasingly like 1989.

WTF?_2

Terry_Tibs wrote: »

lol, so you think it will be driven by Daffydd ap Jones and his 2 bed in Pontypandy?

I would happily tell you where the market will be driven from, but seeing as you simply want to take the p1$$ I wont waste my time, but I will tell you I know of 6 different venture capital companies representing types of hedge funds who all have entry strategies based on value prediction models.

Anyway good luck with Mr & Mrs Jones's 2 bed semi driving the market it really is 1987 in your world huh

Another post where Terry alludes to being able to explain things to us uninformed - then says he doesn't want to waste his time doing it....

That act is getting a bit old now, Terry. It's pretty clear you're just engaging in a bit of trolling.

Terry_Tibs

The graph is stupid because the market does not have to return to a mean, it just needs to return to a point when it provides investment value, at which point demand kicks back in and the market will rise again.