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Financial Planner's Comments - October 2010


From a letter sent to friends by email, here are some comments on UK Property:


What’s happening to: UK PROPERTY




The above chart does not show that prices got back up to their late 2007 peak. What it shows is prices fell hard for around a year and a half then they bounced for around a year. However, the rise was much shallower than the preceding fall (down c 18%; up c 9%). Average prices topped out in early Summer at c 10% below the all-time peak of late 2007. Prices have been falling since and soon they will go negative, year-on-year. (NB. Kensington and Holland Park actual prices fell 21% January to June 2010*. So much for the myth that London is different!).


Prices will likely plummet over the next couple of years – as we said they would before Crash #1 and repeatedly since.


* Source: John D Wood (July 2010), estate agents


We said that prices would fall 40-50% over a few years. We remain on course for that forecast to be proven accurate.

== ==


We attach our Autumn 2010 updates and we hope you find them of interest, and perhaps of use.


Please remember investments can fall as well as rise, and they will!


If ever you have any queries please do not hesitate to contact us.


With kind regards

"Financial Planner"


Could this be ... ?

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Financial Planner's Comments - October 2010

"Financial Planner"

Could this be ... ?



JD's website: http://jonathandaviswm.com/home/

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House prices: will they start falling again? / 6 September 2010


Trend reversed

Low mortgage rates have undoubtedly saved many people from dire financial difficulty during the recent recession.


"People in financial distress are still not having to sell houses - it's a big difference from the recession of the early 1990s," says Martin Ellis, chief economist at the Halifax, one of the UK's biggest mortgage lenders.


He too thinks that house prices in the UK will change little in the coming year or so.


Not so Jonathan Davis, an economist and financial adviser who has for a long time been predicting a huge downturn in house prices.

In his view the rise over the last year was just a blip and we can look forward to prices falling by 30% in the next two to four years.


"The long-term trend reversed at the end of 2007," he says.


"All the reasons for the previous 15-year rise in prices have gone - easy credit, rising employment and falling interest rates.


"Rates can now only rise, credit is rationed and unemployment will rise," he warns.


/more: http://www.bbc.co.uk/news/business-11164971

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Old Comment (JUNE) about the Budget and "Unique Properties"


Emergency Budget - Hats off to wee Georgie


Posted by JD on his website / on June 23, 2010


Highlights of Osborne’s tirade against our dire level of borrowings:


+ VAT up to 20% from January – when Labour reduced to 15% for a year it made no difference so this rise will do likewise (are people really going to buy fewer TVs because of a retail price increase of £10?)

+ Capital Gains Tax rate up to maximum 28% - only 2 years’ ago it was 40% (with time of ownership relief). No big deal.

+ Annual allowance held at £10,100 and will rise by inflation for 5 years. Doesn’t affect our clients much at all (if at all) due to the tax saving wrappers we use

+ Corporation Tax rate to fall over 4 years – great for businesses large and small and for attracting international employers

+ NI incentives for start up businesses outside of London – excellent innovative idea

+ Public Sector cut 25% over 4 years – just great!



+ Staff pay fixed except low paid – brilliant

+ Income tax to come at higher income level

+ Benefits cut / altered

+ Great initiatives to help non-workers take up employment

+ Housing benefit capped

+ State pensions to rise again by earnings [or inflation or 2.5% - whichever is the higher] – brilliant

+ State pension to start from age 66 in due course

(Tories previously suggested 2016)


Practically nil extra borrowings during the year at the end of the parliament – fabulous!



Conclusions: (not necessarily in agreement with The Treasury)


+ Great for much-needed rebalancing away from London

+ Great for desperately-needed rebalancing away from Public to Private Sector

+ Higher unemployment to be expected (c 500,000)

+ House price crash continues – nowhere will be unaffected (except Buckingham Palace and Downing St (I accept they are unique! ?)


Expected to be positive for Sterling, reducing effect of imported inflation, thus keeping Bank of England rates low


FXB / BP Sterling chart added - up since June ... update



As we have said many times, now the man and woman on the street finally will know how dire is our position. Society will struggle to stay together ( :( ). Likely, there will be great unrest. Public sector staff will protest (or their union leaders will) even though it is obvious they have benefited greatly from 10 years of Brownonomics – and bankrupted us.


I cannot envisage a single one of our clients having much of a problem from all this partly due to the arrangements we have put in place for them. Millions of others however will have great difficulty. They are up to their eyeballs in either debt (which they cannot repay) or property (which is depreciating) or both. Wait till we hear ‘If only we’d known’ and ‘I agree there have to be cuts, but not round here! Our case is special.’ Well, we’ve been telling all and sundry, through the broadcast and print media and our own publications, for 5 years. If only they’d listened.


Please remember, investments can fall as well as rise. And they will!

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