Meralti
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Posts posted by Meralti
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Delusion index revisited:
Record monthly falls on the Rightmove index. I wonder how big an impact London is having on this index. Rightmove is a seriously flawed index as discussed above but it's a good indicator of sentiment and confidence. No news coverage of these figures on mainstream sources yet.
Despite this they are forecasting a rising market next year as the headline to this report!
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Sorry, I'm probably being a bit thick here, but what is going to support rising wages across the board?
It won't happen. The point of any devaluation would be to make the UK more competative. Halving the value of Sterling but doubling wages across the board would not achieve that objective. Sterling may devalue but no wage spiral would result from this, wages could rise eventually but certainly not immediately.
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London prices begin their long awaited decline.
Prices are broadly flat-lining but now falling in London.
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If you read the link you'll see I've calculated the Arithmetic Mean for sold properties (dat from land Registry). While not perfect that's far closer to the Rightmove calculation. Comparing Rightmove Average Asking prices with my calcuated Average Sold prices shows they are close to each other. (Look at the second chart).
There is not Delusion. People are paying what is being asked give or take a few %.
An rather odd conclusion. I think a better comparison would be between the Land registry's final sold prices calculated using the geometric mean and the geometric mean of the Rightmove series. The RM index would then need to be adjusted backwards in time to take account of the time lack of the LR series.
As I stated RM tracks initial asking prices and takes no account of subsequent reductions or even whether a property sells or not. A property can easily be listed at a 50% premium and never sell. THe RM index would still count this datum as valid for the index. This and the fact RM uses the arthimetic mean is why the index is always much higher.
I've seen houses listed at £500k and reduced to 475 to 450 to 425 to 400 and still sit unsold for over a year. RM will count the initial 500k as valid data. This property will never have reached the LR numbers.
If it is possible to get hold of the RM data series it would be worth calucating the GM and from that calcuating the ration with the LR. You would then be comparing apples with apples and not allowing a few statistic outiers to skew the index. This would be a true delusion index. I would expect this to be around 15 -20 % higher than the LR number giving a ratio of 1.15 to 1.2.
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Hi Meralti
Please read my initial link as it gives a summary of all the indices. The Geometric Mean is the Land Registry which then bolts repeat sales regression on top.
The difference between Rightmove and Haliwide/LR does not give a reasonable indication. For example, add a big sale to the dataset and the Arithmetic Mean will move quite a bit where the Geometric Mean will hardly move. That destroys the link between Rightmove and Land Registry. Another example, the HaliWide measures a standard house which has nothing to do with Averages which destroys the link between HaliWide and Land Registry.
If you read the link you'll see I've calculated the Arithmetic Mean for sold properties (dat from land Registry). While not perfect that's far closer to the Rightmove calculation. Comparing Rightmove Average Asking prices with my calcuated Average Sold prices shows they are close to each other. (Look at the second chart).
There is not Delusion. People are paying what is being asked give or take a few %.
But I see asking prices falling. Rightmove takes no account of that.
For example, add a big sale to the dataset and the Arithmetic Mean will move quite a bit where the Geometric Mean will hardly move.
Thats why it's a poor index. It's also why it is higher. A relatively few very highly priced properties skews the index upwards, which doesn't reflect the behaviour of the majority. The geometric mean was invented to get round this problem.
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BTW, why do you think Rightmove's index is now at such a fat premium to other indicies?
Rightmove tracks initial asking prices only (when a property is first put on the market). It uses a simple arithmetic mean and takes no account of subsequent reductions in prices. The other track either actual sold prices or mortgage agreements (so take account of any reduction in price needed to make a deal) and some (cannot remember which) use a geometric mean that take more account of the long right hand tail of house price distribution - so tend to be lower.
The difference between rightmove and halliwide/LR gives a reasonable indication of the reduction from initial asking needed to sell the property. However, because of the different statistical methods used by rightmove it probably isn't that actuate but is indicative.
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House prices in Britain were 0.6 percent higher than in September, Nationwide said, though they were still 0.9 percent lower than in October 2011.
/ http://uk.reuters.co...E8A00AB20121101
Actually, the NSA data are up xx%
Non-Seasonally Adjusted comes in at 0.1% for October. So pretty much flat. The seasonal adjustment is based on past sales data that is largely irrelevant in an environment of minimum 60% LTV mortagages with the traditional 1st time buyer having almost disappeared.
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Yep, right smack bang in the middle of one of the biggest recessions ever, the number of people in employment is just a percent or so off the most ever in history, which was recorded at the top of maybe the biggest boom in history. All in all, not so bad then.
Now I'm not defending current policies (actually I have moved a little towards the left on this now), or the data, (indeed, I was rather surprised, again, considering), but I still think it could be a whole lot worse.
Also, until those that lose their jobs are forced to sell (forbearance in full effect at present), it aint gonna effect the prices of houses much (as has been the case, so far).
As for the CML figures, that'll be the Olympics/autumn/bad-weather/global-wierding-effect etc.
The number of self-employed people increased by 35,000 to reach 4.20 million. the number of unpaid family workers (people who work in a family business who do not receive a formal wage or salary but benefit from the profits of that business) increased by 2,000 to reach 112,000. The number of people on government supported training and employment programmes increased by 13,000 on the quarter to reach 158,000″
Which, if you add them up, comes to a round 50,000.
Self-employment and “government supported training and employment programmes” would seem have been behind much of the recent fall in unemployment. There doesn't appear to be any data on how much these new self-employed people are earning and they may have just switched from Job Seekers Allowance to Working Tax Credits. Few will be earning enough to reach the magical sum of 35 hours a week at minimum wage. This will be the required earnings threshold for self-employed people when Universal Credit begins next year. Unfortunately no current statistics for Working Tax Credits exist.
Time to look behind the hype and headlines.
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Oh, and btw mortgage lending has fallen off a cliff http://www.independe...gh-8216447.html>
Mortgage lending was “disappointingly lacklustre” in September, sliding by 10% compared with the previous month when borrowing for home buyers reached a two-year high, lenders said today.
The Council of Mortgage Lenders (CML) said lending totalled £11.6 billion last month, which is also 15% lower than a year ago, despite a recent boost to the availability of mortgage deals.
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A more sober look at the statistics reveals something rather less sanguine. Comparing June-August 2007 and June-August 2012:
- the number of people in full-time employment fell by 355,000
- the number of people in part-time employment increased by 724,000
- the number of unemployed people increased by 883,000
- the number of economically inactive people, aged from 16 to 64, fell by 112,000
- Household population aged 16+ increased by 1.853 million seasonally adjusted over the period
- The number of people in employment has not been higher since comparable records began in 1971, the employment rate of 71.3 per cent, for those aged from 16 to 64, is lower than the pre-recession peak of 73.0 per cent recorded for March to May 2008.
- the number of people in full-time employment fell by 355,000
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Hi Meralit,
What do you think about a BTL as a pension instead?
I ran an example some time back (hoping for someone to show me my error, as it actually got me considering the idea), but it got no responses (that's not to say it was correct).
Obviously there will be a deposit to consider, but even after that, it seems that you are left with an asset and also an income.
IMO you need to consider the following:
1. Size of the deposit - the lower the LTV the better, but this incurs an opportunity cost
2. Type of mortgage - it must be repayment for your scenario to work. If you're IO you're relying on rising prices.
3. Future rises in mortgage rates
4. Voids
5. Bad tenants, general hassle
6. The unpaid time you will spend managing the property
7. Taxes on income, but more importantly future taxes. I'm pretty sure that R&C will come after landowners eventually, they are currently under taxed and cannot move their assets.
8. Potential nominal falls when QE eventually fails.
9. Real value falls due to inflation
10. Owning an asset you cannot defend when QE eventually fails and the local constabulary are no longer being paid.
11 Changes in tenancy law giving renters more rights, the law is weighted in favour of landlords at the moment.
If you already own a BTL and have a 100% repayment mortgage and it's making money I would keep it. If its on IO then I would be looking to sell. Personally I wouldn't invest in BTL for a few years yet.
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Meralti
If nominal asset prices are being held in place through monetary policy and looks likely to continue, then they are the fundamentals in play at this momemt in time that I am interested in. The Buy to let brigade or I should say the smart players are not in it for the rental yield but capital gains made.If you see an opportunity in todays environment go for it but make sure you always know your prices.
As a side note. The big players are making Mayfair their target at the moment. On a £sqft compared to say Knightsbridge it offers them value for money. The Local Authority are in favour of conversion of many of the office buildings back to residential. These office blocks are selling for less than residental units when compared on a £sqft basis.
There may well be opportunities to make good returns in certain areas. What you're talking talking about is developing existing buildings for resale as residential flats, which is a different game to buying completed property units - and it's different outside of central London.
The monetary policy is likely to continue as is; but it is, and likely to continue to have, a steadily decreasing effect. The effect per £ of QE is less for every round, this is clearly the case and well documented actually. Simply drawing a straight line into the future is the same stupid mistake that was made all the way up to the crunch.
I maintain that nominal rises outside of central London are unlikely. If prices do not fall nominally (ie QE continues to work to maintain them) then real prices will be eroded slowly by inflation, making property a bad bet for anything other than a PPR.
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Since August yes, vey much so I have been a bull. I was a bull last year for London only and traded some Au for property and have since resold taking profits. Speculated yes to a degree yet but am now looking outside London for prime areas, The ripple effect will take hold.
Hmmm, there appears to have been a pre-olympic games peak. I've seen asking prices falling. Achieved London prices are also reported as falling.
We had this story trotted out 4 years ago just before the major falls. Hmmm. A slide of a few percentage points and that turns everything bullish again.
The fundamentals for Brits are still rubbish - in fact worse that 4 years ago IMO. Monetary policy is still holding up prices, nothing else.
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I am now a Bull.
This thread needs to be changed now. Fundamentals may have said otherwise but you can not fight the FED BofE ECB, unless you are Peter Pan and can wait a long time. It took 80 years for the USSR to collapse. Can you wait that long
As a forum sharing investments, we need to start looking at residential property in a different light especially against gold.
My own private view is to leverage up and if you have precious metals as a hedge then may be you will be in a favourable position to settle the outsatnding debt very quickly.
Your thoughts
I think you've been a bull for a while, right. That said you make a reasonable point, but only as far as a PPR is concerned not because property has suddenly become a good opportunity, in fact it is still a very bad bet as an investment. Buying somewhere to live for you and family is a different matter entirely.
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Where's the Sense in this ?
The market is slowing down, so add to supply ??
[[i see lots of vague plans and absolutely no concrete action.]
/see:
Tinker around the edges; attempt to protect the margins for builders, keeping them afloat and people employed in construction. They help their friends in the industry and can present themselves as taking action to mitigate a crisis in the media. I.e. manage perceptions and help people who helped you.
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Stumbled on a couple of interesting tweets from Ed Conway. It looks like UK rental demand is falling of a cliff:
https://twitter.com/EdConwaySky/status/233848222832021505/photo/1
Understatement from RICS: "tenant demand +4, a little down from +15 last time, but still indicative of positive growth"https://twitter.com/EdConwaySky/status/233844891300528130/photo/1
UK rental demand for flats has dropped to the lowest level since comparable records began in 2000 (RICS)The original Rics report is found here. As usual a overall bullish message not really born out by the data.
Any one got anecdotal evidence of an increase of flats for sale in London and surrounding?
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Didn't one of the big builders triple H1 profits and reinstate the dividend?
The market is not collapsing, and in such an environment builders can find a way to make money. BDEV is probably a much better - but smaller - company than it was in 2006/2007. Disproves the inflationists' argument that you need ever rising prices to make profits.
Builders are being tax-payer subsidized by schemes like home-buy. It's presented as helping people step onto the ladder but it's really about maintaining the builders cash flow.
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Yes I see BDEV and many of the builders are up at 2 and a half year highs.
What can we tell from this TN?
Edit to say I think it's a bit strange too, as everything else points to a fall over the coming months.
Perhaps the correlation has been weakened. Theres been so much interference in the housing market, what with lender forbearance and low interest rates, and stocks have been supported with QE just look what happened last autumn when there was almost a crash. They QEed and bingo back up they went.
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However, whilst things are obviously not good, I don't think we should all just put up our hands and give up (not that you are saying this).
I got slated here once for suggesting things were nowhere near as bad today as they were in the 70's, but I'll say it again, they're not, not by a long way.
It was horrific back then, the country was ripping itself apart - IMF bailouts, open battles on the streets (with hard working family men, not just ar**hole kids like now), electrical blackouts all the time, 3 day weeks, unions Vs state etc, hell there was nearly a coup! - and practically everyone went into that crisis period relatively poor.
Couldn't resist this one.
Recession may be even worse than the 1970s with figures set to show the economy shrank for third quarter in a row -
Just re-read and saw the link! FFS!
What I see a possible solution to the mess the world is in today.
I’m all for getting higher rewards for working hard, but no single person should be able to amass anything like some of these, it’s obscene.
Tax these ignorant ba**ads, and tax them hard (in fact, even a small amount would solve s**t loads of problems).
Time for a global tax agreement aimed at these super rich. When individuals are wealthier (and seemingly more powerful) than nation states, it's time to do something and bring them back to reality.
This is absolutely astounding, I knew there was a lot of super rich in the world, but FFS, this is beyond belief!
Makes the case for higher taxes for the rich (and the introduction of a minimum tax rate that MUST be paid, before the accountants start playing their games) pretty indisputable IMHO. I've said many times before, "just how many millions does one person need"? I should have been saying "just how many billions does one person need"!
More here (where they point out the figures do NOT include their assets like gold, property etc etc) FFS!
This should probably have a thread of it's own Meralti.
I intend to start one but want it to be broader than just this incident.
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Thanks for the info Meralti, I know what you mean about info on public boards etc, I edited mine down a bit (although I didn't think I was being emotional, I would have used angry faces if I had been
).No I'm not a secret BTL'er (sometimes wish I had been 15 years ago mind
) and think that is another sector that needs serious reform/regulation (more rights for tenants etc). Totally agree about bad governance etc, but I still believe many go into politics for the right reasons, just the system no longer enables anyone but the top few to dictate policy and the rest have then to adhere to it, if they want to keep/advance their career that is. Also seems that this trait is learnt from a young age, as if you don't follow the party line from your first internship, you aint getting anywhere in politics.
This is a big part of the problem too, and I think all those wishing to stand for election should have at least 5 years real work experience, NOT gained in politics.
I used to be totally capitalist (strange really, considering my past) but the older I get, TBH, the more I'm thinking it is so skewed to the 1% that a little bit more socialism wouldn't hurt (not too much mind
). I would happily accept a reduction in living standards if the quality of life improved.
Like if health and education services etc improved massively and job security was reintroduced with the goal (dream perhaps) of full employment again, like there used to be.
You know, before it somehow became acceptable to have millions and millions of people not working
Actually that does make me emotional/angry 
How the f*k did that happen?Anyway, moving on.....I'd be interested about hearing you views from your experiences abroad. i.e. what are the best (and worst) bits about the systems in the countries you worked in when abroad?
I don't think socialism is the answer - haven't we been there and seen it fail. I think the problem is lack of capitalism - the rules aren't being applied to those in the protected groups and the those outside are being hung out to dry. There comes a time when the parasite has to cut out. If we'd let the banks fail in 2008/2009 we would be in this mess.
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Seems that you've done OK for yourself over the years, mind if I ask how did you do it?
John, no, I don't mind but I'll limit what I publish on a public discussion board and be a little less emotional.
Grew up in Northern England, rural location but close enough to the the old industial heartland to have seen the effects of the deindustrialisation in the 80s first hand and have that influence my outlook regarding employment/career/pre-80s jobs for life culture/welfare a lot.
Was made redundant from my first real job, after about a year, in the last real recession (early 90s) moved to Europe and lived and worked there for 6/7 years, learned languages had relationships (with girls). This influenced me a lot regarding attitudes to work/employment/governmental models (welfarism and entitlement) and politics. Moved back to UK at end of the 90's to do a Masters degree (old industrial city), full grants were still available then, I got one of last I think.
Since then worked in the South East. Wife stays a home most of the time - this suits us while the kids are still young.
I think this country is badly and at it's core, dishonestly, governed; and has been for several decades but it got a lot worse under Bliar/Brown - the majority are being sold down the river.
Specifically: Badly governed for a few decades, dishonestly since Bliar/Brown
I suspect this includes both of us (unless you're a secret BTL investor, then you'll slot nicely into the protected group). When I have time to be I get quite annoyed about it.
BTW, many countries in Europe are in worse state.
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Ignoring the uncalled for "calm down"
, yes there are many problems today, and I have acknowledged that many times. I have also stated many times that the finance industry needs to be sorted "ASAP".The generational point is interesting.
Someone leaving school (university) say in 1992 would never have experienced a recession, indeed, things improved year on year all the way to 2007-8, so for them the situation today seems really bad (they had a bloody good run mind).
However, for people leaving school in the mid 70's to early 80's, this is nowhere near as bad as it has been before.
Moreover, for people leaving school in 1940, then this is a breeze etc etc.
I guess it’s all relative.
(PS Rose tinted view!
If my friends & family heard me described like that they'd p**s themselves laughing. They call me Dr Doom! Only on GEI (or HPC) could I ever be considered an optimist )Perhaps the reason you seem so sanguine about this is that you're one of the generation that has benefited.
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I disagree. It's VERY bad out there - it's just the socio-economic composition of those suffering from the recession has changed.
In past downturns it was old industries that were phased out - this affected mostly older, blue collar workers. Now the brunt is falling on the young generation. Many loaded up with debt from worthless college degrees and have no real skills that our workforce needs, cannot barely afford a room to rent, yet alone dream of buying a house.
This is actually a trend that started well before the HPC and financial crisis, and it everything to do with the Britain slowly becoming less and less competitive in the world.
Worth a listen: http://www.bbc.co.uk/programmes/b01jqhly
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That's correct. Previous downturns hit older workers. Much of the current younger generation in the UK are pretty much being screwed over. It may have been bad in the early 80's but the young then didn't have debt and by the end of that decade there were real employment prospects.
). 
Actually that does make me emotional/angry 
How the f*k did that happen?
, yes there are many problems today, and I have acknowledged that many times. I have also stated many times that the finance industry needs to be sorted "ASAP".
UK House prices: News & Views
in NEWS Commentary, 2021 & Beyond
Posted
Historically Rightmove has been a reasonable leading indication of major shifts. What it really tracks is seller expectation (and EA influence there upon) when first marketing. It is a very poor indicator of actual selling prices.
B.T.W I still haven't seen any direct coverage of these falls. They are only mentioned in the context of next years predicated rises.