House Price Crash Discussion Thread

Generali

danm wrote: »

agree,

however, i'm not convinced investors will look to lock in profits. Speculators yes, but 'proper' BTL landlords do not necessarily worry about house prices (unless as you say, they have to sell).

more important to a landlord should be the yeild on the property. If people are selling owner occupied property, then this must cause an increase in demand in the rental market, rents up, yeilds up, demand for houses up.......

and so we go on.

Obvioulsy housing, like other assets follow a cycle, but i wonder if what economists would call the 'steady state equilibrium' has moved

What investors are going to do is the great imponderable in all of this. Nobody knows as we've not had BTL as a mass phenomenon before when house prices have been falling.

Given that many BTL owners are older so can less afford to take a capital hit and also that many tend to be less sophisticated investors (although not all of them by any means) my feeling is that they tend to feel Greed and Fear much more strongly than an owner occupier and so will bail if it becomes clear that house prices are on a one-way trip downwards. If BTLers were concentrating on yields they would have sold long ago.

The fact is neither you nor I know how tens of thousands of small investors are going to react to any given situation in the housing market although it's fun to guess! They may have an unwavering belief that property is always a winner in the long term. They may decide to try to bank their profits, after all (in the City truism) cash is truth, everything else is mere speculation.

John_Pierpoint

boinging wrote: »

So only downsizers (though they are probably still well protected especially as they are likley to have been in the house of 10 years +) will bit hit by HP falls outside of investors.

You have missed out the poor barstewards trapped in negative equity, unable to move and wanting to start a family.

Generali wrote: »

They may decide to try to bank their profits, after all (in the City truism) cash is truth, everything else is mere speculation.

dolce_vita wrote: »

Then get yourself some yellow, shiny, heavy, metally stuff.

What do you do with this stuff, sprinkle it on your cornflakes? Or are you working on the plausible theory that there will be a large increase in demand from the wives of the nouveau riche Indian families to add to the modest industrial demand?

Well I banked my profits in 2006, but I don't think I can trust this government with inflation, the money supply is back in the 1970's range, Ted Heath style and the pound is sliding. Welcome back to Vietnam war days. Added to that we are approaching the 18 months to the next election, the period when governments forget "prudence" and try to bribe us with our own money.

Should I buy some more inflation proofed government bonds or have they found a way of fiddling those too.

Anybody got a tip on an honest "cash" that has not yet gone up as much as "yellow, shiny, heavy, metally stuff" ?

dweeby

danm wrote: »

Agree, however, i'm not convinced investors will look to lock in profits.

Generali wrote: »

As you say damn, supply is constrained by the planning laws in this country.

It's danm, not damn! (or did he say something to upset you!)

Generali

John_Pierpoint wrote: »

You have missed out the poor barstewards trapped in negative equity, unable to move and wanting to start a family.






What do you do with this stuff, sprinkle it on your cornflakes? Or are you working on the plausible theory that there will be a large increase in demand from the wives of the nouveau riche Indian families to add to the modest industrial demand?

Well I banked my profits in 2006, but I don't think I can trust this government with inflation, the money supply is back in the 1970's range, Ted Heath style and the pound is sliding. Welcome back to Vietnam war days. Added to that we are approaching the 18 months to the next election, the period when governments forget "prudence" and try to bribe us with our own money.

Should I buy some more inflation proofed government bonds or have they found a way of fiddling those too.

Anybody got a tip on an honest "cash" that has not yet gone up as much as "yellow, shiny, heavy, metally stuff" ?

Well that's another problem entirely, what's a risk free investment?

Index linked bonds? Depends on how reliable the index is you're linked to. Gold? Not in my opinion although a 'gold bug' will tell you it's the only true money. Swiss Francs? Maybe.

I always reckon that you can't beat diversification. If I had a big pile of cash to invest (I wish!) I'd put some into various index tracking ETFs, some into Gilts, some more into other countries' bonds, especially Germany and Switzerland. I wouldn't buy commodities but I would buy companies making commodities (eg miners, oil companies, farm conglomerates if you can invest in them, never done the research). I'd also put a load of cash into Aus but that's because the Missus is an Aussie and it's probably where we'd go if it all goes breasts up in Europe.

Nenen

PasturesNew wrote: »

Cambridge slumped in the last crash.
Why should this one be any different.

e.g. I was looking at a terraced house on Newmarket Road with a friend right at the peak. Within 6 months the one next door (over twice the size) was up for sale at the same price.

e.g. I bought in 1990, sold in 1997 still 5% in negative equity.

There is no such thing as a safe place.

Oh thank you SO much for this info PasturesNew. Not only useful info but just what I hoped to hear too. I was beginning to think I was living in cloud cuckoo land! :j My colleagues cannot understand why I haven't rushed to get a 5x salary mortgage to run until I'm 75 in order to buy a tiny 3 bed terrace in a grotty are of the city. I'm fed up of their pitying looks when i tell them we are still looking! I just couldn't bear to overstretch ourselves and end up in negative equity.

Mind you, Cambridge EAs are still very optomistic. A couple of days ago we put an offer of 15% below asking price on a house that has been on the market for more than 8 months... EA told us this was far too low and wouldn't even be considered!

I'm really losing heart as our current LL is selling and if we don't find somewhere to buy soon we will have to move yet again.... perish the thought!

Nenen

Generali wrote: »

I would expect to pay for detailed analysis like that.

I did pay... I bought 'The Independent' for 80p!

Seriously, who deals in that sort of information? How much would I have to pay?

Generali

Nenen wrote: »

I did pay... I bought 'The Independent' for 80p!

Seriously, who deals in that sort of information? How much would I have to pay?

My area was banking and you pay for that sort of thing by trading - keep the commissions flowing and you get to keep the passwords to the bank's research websites.

Alternatively you can simply pay a research company or a university to answer a question for you. They'll trawl through a load of data (or commission their own if needs be) for you and come up with a report.

The hedge fund I work for has a Professor working on the advisory board for us. If we need some research clarifying then (s)he'll come up with an answer for us.

Depending on the amount of work that needs doing I'd expect to pay from a few thousand quid upwards. That rubbish research that's meant to get a company's name in the papers is expensive. You know the stuff like the 15th of Jan is the worst day of the year according to research by Dr Respected Researcher for Mega Corp. Real research costs less.

Guy_montag does research I think. He'll probably quote you by the yard or something.

There are a couple of guys on fool.co.uk that do some pretty serious research into property. Globalarbtrader is good. KoN even runs his own house price index!

Here's GAT's latest effort:

http://boards.fool.co.uk/Message.asp?mid=10884122&bid=51402&sort=whole

<OT>I think this is the thousandth post in the ghetto! Do I get a cake or something?</OT>

brit1234

Nenen wrote: »

Oh thank you SO much for this info PasturesNew. Not only useful info but just what I hoped to hear too. I was beginning to think I was living in cloud cuckoo land! :j My colleagues cannot understand why I haven't rushed to get a 5x salary mortgage to run until I'm 75 in order to buy a tiny 3 bed terrace in a grotty are of the city. I'm fed up of their pitying looks when i tell them we are still looking! I just couldn't bear to overstretch ourselves and end up in negative equity.

Mind you, Cambridge EAs are still very optimistic. A couple of days ago we put an offer of 15% below asking price on a house that has been on the market for more than 8 months... EA told us this was far too low and wouldn't even be considered!

I'm really losing heart as our current LL is selling and if we don't find somewhere to buy soon we will have to move yet again.... perish the thought!

Your better off getting another property to rent for 12 -18 months. Property prices in many individual properties have fallen massively in certain properties but in the general market they aren't far off the peak. I'm stuck in a similar situation but you just have to be patient.

Prices have risen so fast over the last few years that with the strong restrictions in Lending properties are going to fall at a quicker rate than the past. Its kind of the bigger they are the bigger they fall. The fact is the banks are going to try to protect themslelves from further bad debt. To do this they are lending like they use to IE lower amounts requiring bigger deposits and more scrutiny. As many house sales are linked to chains then there are going to be those in the chain who can't borrow enough so the chain can't exist. So prices have to come down.

In America it has been discovered that despite regular interest rate cuts it has not stopped the momentum of the falls. It is believed by certain economists there that the credit crunch and house price falls will only stop when prices reach about 3.5% salary. They call this the equilibrium level. So far they have been proven right. Next month the Fed is likely to cut by a further .5%, if this has no effect I think the equilibrium theory will show some merit. I also believe it will be the same in the UK.

I believe this crash will be worse than others due to the shear amount of debt IE equity release on buy to lets or buy home owners. These people have all their eggs in one basket and are thus are very susceptible to a downturn.

This crash will not be caused by a recession but instead likely to cause one.

The credit crunch continues as the US enters recession.

sunday_girl

Hi

I've not read all of this thread but one thing that has struck me are the comments about ex-council houses falling more than average if there is a crash/slowdown.

We have a mortgage on a 4 bed ex-council which is pretty expensive for us every month. This time last year our house was valued at approx £200k although I feel this was over-optimistic and the most comparable property in our road sold last year for only £185k (just 2k more than we paid for ours in 2004). Our o/s mortgage is approx £122k. We've been thinking of moving for various different reasons and even whether it's best to try and sell and get the equity we have out before we lose it all (if we can sell it) and rent for a while perhaps being able to buy again at a later stage. Does this sound like something worth considering or is it just not the time to make any moves at the moment?

Thanks....

Generali

sunday_girl wrote: »

Hi

I've not read all of this thread but one thing that has struck me are the comments about ex-council houses falling more than average if there is a crash/slowdown.

We have a mortgage on a 4 bed ex-council which is pretty expensive for us every month. This time last year our house was valued at approx £200k although I feel this was over-optimistic and the most comparable property in our road sold last year for only £185k (just 2k more than we paid for ours in 2004). Our o/s mortgage is approx £122k. We've been thinking of moving for various different reasons and even whether it's best to try and sell and get the equity we have out before we lose it all (if we can sell it) and rent for a while perhaps being able to buy again at a later stage. Does this sound like something worth considering or is it just not the time to make any moves at the moment?

The problem with doing this is that it's very expensive to buy and sell houses so you lose a big chuk of any gain straight away.

Another risk is that house prices go up rather than down! I think that houses are very expensive right now but nobody knows what the future will bring.

If you're looking to move, remember that the place that you buy should end up cheaper too if house prices fall.