Moneyweek: Why this housing crash could be worse than the 1990s

HAMISH_MCTAVISH

Afriend wrote: »

I have a theory that most of the bears are secretly buy to let landlords.

Nah. They're not that smart.

They are professional victims in most cases.... You know the kind, they spend all their time whining about how they've been hard done by instead of just getting on with life and bettering their situation.

They spread the bad news to encourage price falls so they may expand their empire.
Or perhaps I've been reading too many Asheron conspiracy theories.

They are misguided enough to believe that posting on a web forum can impact prices.

Truly deluded.

The recovery will continue no matter how much they moan about it.

Generali

HAMISH_MCTAVISH wrote: »

There are 22 million privately owned houses, and only 11 million mortgages.

Of the 11 million mortgages only 5 million have LTV's of more than 50%......

So technically, banks only own around a third of the UK's housing stock.

The bank doesn't own the house if you have a mortgage. You own the house and have a loan secured against it.

The bank owns the house, I believe, if you have an Islamic mortgage as that is a form of hire purchase (ie you rent the house from the bank for a certain period and if you keep up the payments for the entirety of that period the bank gives you the house).

The BoE may well keep base rates very low for a very long period of time. However, if the BoE decides not to continue with QE, the Gilt yield is going to be a much more important factor in deciding mortgage rates as if the bank wants to lend money in a low risk way they can either lend it on a low-ish LTV mortgage or to the Government. Why lend at 5% on a mortgage with some risk if you can lend it to the Government at no risk?

HAMISH_MCTAVISH

Generali wrote: »

The bank doesn't own the house if you have a mortgage. You own the house and have a loan secured against it.

Yes I am aware of that.

I was merely pointing out the true state of LTV's to the "renting from the bank " crowd....

The BoE may well keep base rates very low for a very long period of time. However, if the BoE decides not to continue with QE, the Gilt yield is going to be a much more important factor in deciding mortgage rates as if the bank wants to lend money in a low risk way they can either lend it on a low-ish LTV mortgage or to the Government. Why lend at 5% on a mortgage with some risk if you can lend it to the Government at no risk?

If the government need to pay 5% to borrow money, the risk is huge...

HAMISH_MCTAVISH

fc123 wrote: »

OK..I think I have worked it out.
HM...Have you ever considered altering your writing style a teeny tiny bit somtimes? Only say this as I read your posts now with a fierce scottish accent and and said with a grin...they work better then and the point isn't lost.

:rotfl:

Sorry to burst your bubble, but I don't have much of a Scottish accent.... Spent much of my childhood in Public Schools here and overseas. Liverd internationally for years as well.

The accent is best described as a strange mix between Toff and Aberdonian with some influences from just about everywhere.

Although the grin isn't too far off most of the time.:D

Just saying as it may work for you...a few niceties sprinkled in between the points you are trying to make? Why not give it a go? I'm not being rude or anything but sometimes, the written word can come over differently to spoken.

Yes I've tried being nice..... Too much effort to keep up for long.

WYSIWYG

I've found it works well in life, and have no plans to change now.

Generali

HAMISH_MCTAVISH wrote: »

If the government need to pay 5% to borrow money, the risk is huge...

According to the DMO, between April 1998 (the start of their records) and Dec 2007 (prior to the credit crunch), short Gilt yields averaged 4.95% and they exceeded 5% in 49 of those 118 months.

In other words, even in these times of low interest rates, the Government commonly pays more than 5% to borrow money.

dopester

fc123 wrote: »

I hate to say it, and I agree HP are insane in some places (but then they always were..I could never work out who could afford a 3 bed town house in Fulham even 25 years ago) but low IR and the lower prices for stuff are feeding higher house prices.

I always said deflation (totally banged on about it didn't I) - and did so a long time before BoE began to cut interest rates.

Low interest rate policy is an obvious defensive mechanism used by central banks to try and combat deflation (think Japan over two decades where savers got very little or no interest on their savings).

There are hidden deflationary forces working behind the scenes. Where you might see current conditions lasting with house prices rising and seeing a mini-boom lasting into the future... with low interest rates / low supply / low transaction numbers ect... I see deflation forcing reality upon the UK economy in the near future.. and on house values, whether people like it or not.

Generali

dopester wrote: »

I always said deflation (totally banged on about it didn't I) - and did so a long time before BoE began to cut interest rates.

Low interest rate policy is an obvious defensive mechanism used by central banks to try and combat deflation (think Japan over two decades where savers got very little or no interest on their savings).

There are hidden deflationary forces working behind the scenes. Where you might see current conditions lasting with house prices rising and seeing a mini-boom lasting into the future... with low interest rates / low supply / low transaction numbers ect... I see deflation forcing reality upon the UK economy in the near future.. and on house values, whether people like it or not.

I don't think deflation is a certainty as it does depend on policy responses but it is a definite risk IMO.

dopester

HAMISH_MCTAVISH wrote: »

I rather suspect ownership percentages have now peaked.... But ownership numbers will continue to increase, meaning houses will only be afforded by an ever wealthier percentage of society.

HAMISH_MCTAVISH wrote: »

They are misguided enough to believe that posting on a web forum can impact prices.

Truly deluded.

The recovery will continue no matter how much they moan about it.

Yes. There are deluded people here who think their postings influence events and the direction of house prices. :rolleyes:

Worse still, their projections look likely to see them proved very wrong and badly hurt with a great deal of their wealth or debt-obligations in real estate.

Including that Julieq or whatever their name is, with their perpetual HPI theories and no major crashes inbetween which can wipe out those who expect values to remain high.

I'm not claiming my posts 'impact prices' Hamish (unlike yours maybe?) but will offer alternative views to yours, which would include: Urgently build up your cash positions, sell off antiques and other valuables whilst you can still get good money for them, and STR.

dopester

HAMISH_MCTAVISH wrote: »

Then the average household income of the top 70% of earners (likely house buyers) is most likely right around 60K.

60K households are not uncommon at all.

That's a lorry driver and a senior secretary, !!!!!!.....

Or a pair of 35 year old teachers, not exactly renowned for being highly paid....

And lets not forget, in most of the parts of the country where incomes are lower, houses are too.

You can buy a 2 or 3 bed terrace for less than 120K within a 45 minute drive of major cities in at least 65% of the UK, and a lot less in some areas.

That would only require a joint income of 40K to stay WELL WITHIN conservative lending standards......

Lorry drivers and senior secretaries of the UK, you can rejoice... Hamish reckons it's safe and a good idea for you to go buy a house at these price levels today.

Teachers add a few more BTLs to your portfolios and take advantage of the 2007 dip in prices before the mini-boom resumes in full.

Hamish.. all of these positions are in my view going to take a total kicking with further job cuts, pay-cuts and fierce competition for remaining jobs.

It might be just £120K for a house (dive) in some areas... where your "little £40K joint-earners" can buy without stretching themselves too much. It doesn't mean the value can't fall significantly from that "tiny" £120K of value amount as deflation kicks in.

Yes they might not be badly hurt in the meantime if they pay off much of the £120K with current salary expectations before the worse hits... but they'll still be left with a house worth a lot less than £120K if things work out as I expect them to.

dopester

fc123 wrote: »

I know what you mean..but all the self cert stuff....the CIH is a much bigger part of the economy than the Govt know about. It does feed through though.

I don't doubt CIH jobs and people doing 'foreigners' does feed through, especially during the boom.

(Personally I tend to avoid anyone offering to do a job or sell something CIH or do a 'foreigner' for many a reason - including on principles - as I try to get a value trader who is legit, and like a receipt.. as to me I've got better chance of seeking a remedy if something goes wrong.)

The CIH / foreigner part of the economy will definitely continue. Even if HMRC seeks to close down on it. Yet what the CIH economy charges for it's services or products is directly linked to circumstances in the wider economy. The CIH economy is not immune to lower demand and having to cut it's own prices whatsoever.

Can you list some further CIH type jobs which you think do well? I've checked London Cleaners and £9ph seems to be a rate proper cleaning companies charge (not CIH types) + extra for cleaning products. Around here the post-offices and newsagents are filling up with cards for people offering services as cleaners and ironing your shirts, but on the other side I only see lower demand.

Many service sector companies begin to be hard hit when increasing number of people have their circumstances change and money gets tighter. More people become inclined to do their own cleaning and ironing, and not pay someone else £9ph to do it.