House Price Crash Discussion Thread

Turnbull2000

Your first point is interesting Generali, though you'd hope surely public sector schemes will be curtailed at some point to restore balance with private sector. Labour missed an opportunity a few years back and bottled it.

Generali

Turnbull2000 wrote: »

Your first point is interesting Generali, though you'd hope surely public sector schemes will be curtailed at some point to restore balance with private sector. Labour missed an opportunity a few years back and bottled it.

They'll have to be one way or another. That's the thing with socialism. You either say, "Hey, we can't afford to throw more and more money at the largely unproductive state sector" and vote for someone) like Thatcher (UK) / Reagan (US) / Merkel (Germany) / Howard (Aus) / Sarkozy (???France) or you keep chucking money into this bottomless pit until you run out (eg the Soviet Union, Italy in a few years (?), UK in the 70s).

Either we vote against socialism or it destroys us and we have to give it up.

EdInvestor

Generali wrote: »

IMO, if the 'demographic timebomb' can be delayed then the problems should clear up of their own accord. The biggest problem we face with soon to be retirees is that they've been promised incredibly generous pensions..

Other than the top end of the public sector, that's not the case.Our state pensions are very low by world standards, made possible by the fact that we have a substantial privare funded pension system which will pay for itself.

It is true that the upcoming generation of pensioners will be the richest ever but what this means is that they will make a considerable contribution to the economy through the investment of their savings and their consumption spending.

Rather than being a burden, in fact they will add to economic growth. Even now, at an average 'pension income' of around 14k, most pensioners are paying tax. The fears of young people are not justified.

pickledpink

bluejake wrote: »

And the house price inflation bubble is not unique to the United Kingdom. Like all bubbles the optimists believe this time it is different. This time the normal rules of economics don't apply. There may be a shortage of housing in London and the South East but this inflation has happened everywhere.
In Wigan house prices have maybe tripled in the last 5 years. Has there been a flood of immigrants? Has the population increased dramatically? No.
Have we now got lots of empty new build flats owned by landlords in London?Yes.

Ummm.......lots of empty new build flats in London?!...I don't think so! Not where I live anyway! Whereabours in London are you?:D

Generali

EdInvestor wrote: »

Other than the top end of the public sector, that's not the case.Our state pensions are very low by world standards, made possible by the fact that we have a substantial privare funded pension system which will pay for itself.

It is true that the upcoming generation of pensioners will be the richest ever but what this means is that they will make a considerable contribution to the economy through the investment of their savings and their consumption spending.

Rather than being a burden, in fact they will add to economic growth. Even now, at an average 'pension income' of around 14k, most pensioners are paying tax. The fears of young people are not justified.

The biggest problem I can see with Baby Boomers retiring is that for the large part, the funded pensions are funded with assets that will need to be sold - the income that will be required to pay the pension hasn't yet been secured.

That implies to me that equity and riskier bond prices fall as an aging population moves their savings towards less risky sources of income (eg Government bonds). My guess is that the same thing is going to put downward pressure on houses in the longer term too - there will be a lot of people in the South East that have a house that is bigger than they 'need' and a smaller pension than they 'want'. What do you do? Sell the 3 bed semi in Ruislip for half a million quid and move to a 2 bed terrace in Lincoln or even beggar off to the sun and free up £400k tax free. It beats working in B&Q until you're 90!

Lotus-eater

Interesting report by Nationwide, re different towns HPI.

Sheffield and Birmingham have already seen a real decline in prices this year.
http://www.nationwide.co.uk/hpi/historical/M_S_2007.pdf

Edit.... That would be LAST year then

bluejake

pickledpink wrote: »

Ummm.......lots of empty new build flats in London?!...I don't think so! Not where I live anyway! Whereabours in London are you?:D

Try reading it again,

'In Wigan house prices have maybe tripled in the last 5 years. Has there been a flood of immigrants? Has the population increased dramatically? No. Have we now got lots of empty new build flats owned by landlords in London?Yes.'

We have lots of empty new build flats in Wigan and surrounding areas owned by speculators in London and elsewhere. There has not been a large flood of immigration or population change yet prices have maybe tripled. It is a bubble and will go the way of other bubbles.

brit1234

With all the new builds coming onto the market who is going to buy them at their prices. The mortgage lenders are now wise to the fraudulent transactions that have gone on before and not lending to investors. The lenders who would such as Paragon, [SIZE=-1]Edeus and such like have run out of money, laying off staff and the verge of going broke. These new build have been solely aimed at investors and not first time buyers, with no investors prices will tumble to what first time buyers can afford.

There is going to be plenty of empty new builds in London shortly especially west London along the A4 as well as the Olympic are in East London.:rotfl:
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EdInvestor

Generali wrote: »

The biggest problem I can see with Baby Boomers retiring is that for the large part, the funded pensions are funded with assets that will need to be sold - the income that will be required to pay the pension hasn't yet been secured.That implies to me that equity and riskier bond prices fall as an aging population moves their savings towards less risky sources of income (eg Government bonds).

Actually this is exactly what the credit crunch is all about. The whole reason for the manufacture of the CDOs etc was to satisfy demand from pension funds and life companies wanting to secure more funds in higher yielding but safer assets like bonds after the dotcom crash (as well as for future pension payments.)

Guess what, it didn't work. So the shortage of safer assets with high yields persists ( and indeed the safety aspect turned out to be total pie in the sky). The other method they tried - shifting far too much money into commercial property - didn't work either, that created a bubble which is now bursting as well.

Basically people and companies are finding out that the old model of securing pension income in bond - type assets doesn't work: and it particularly doesn't work when you are talking longer life expectancies, because of inflation. So what will happen IMHO is that younger retirees will learn to live with some risk, and remain invested in equities (particularly income producing shares) and other risk (growth) assets for much longer than in the past, because there is no alternative.

Very poor gilt yields and low interest rates are pushing this trend as well, because people object to losing all their capital for an annuity income not far off what they can get in the bank.Watch for more focus on dividends in overseas markets - Bush recently lifted tax on them and more Asian companies are now offering a decent divi, because there's so much demand for income nowadays - especially in Japan, first to have a babyboomer wave (the so-called carry trade is another invention like the credit crunch, aimed at getting higher yields).

My guess is that the same thing is going to put downward pressure on houses in the longer term too - there will be a lot of people in the South East that have a house that is bigger than they 'need' and a smaller pension than they 'want'. What do you do? Sell the 3 bed semi in Ruislip for half a million quid and move to a 2 bed terrace in Lincoln or even beggar off to the sun and free up £400k tax free.

Some people will feel that downsizing from one big property to 2 smaller ones - a PPR here or overseas, plus an income earning BTL to top up the pension (and keep a foothold in the UK in case they want to come back) makes a lot of sense. BTL is another chapter in the story of the hunt for stable retirement income and long term capital growth.

People retiring at 60 these days are looking at living potentially another 30 years, almost a full working lifetime. It doesn't make much sense to call a halt to all potential investment growth when you've got that sort of long haul in prospect.

In general we may need to throw all preconceived ideas about retirement out of the window when it comes to babyboomers - they do have a tendency to "break the mould" .A good thing perhaps, as one doubts there's much about the current retirement arrangements that couldn't be improved.

Generali

EdInvestor wrote: »

In general we may need to throw all preconceived ideas about retirement out of the window when it comes to babyboomers - they do have a tendency to "break the mould" .A good thing perhaps, as one doubts there's much about the current retirement arrangements that couldn't be improved.

I certainly agree with you there. I think the idea of retiring entirely at 60 must be almost redunadant - it's not possible for someone on an average salary to save enough during the course of 30 years to live for 30 years (for most people anyway) and it's unreasonable to expect someone else to pay for it.

I suspect what we'll see (and what I plan to do) is a gradual shift from about a person's mid-50s to their mid-70s from working to being retired.