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G0ldfinger

UK House prices: News & Views

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P.S. I note HIPS will be abandoned. If that tempts a lot more speculative sellers into the market and so crowds supply, then so much the better!

Abandoning HIPS may add £500-800 of searches on to the 'up front money' needed to purchase a house.

 

This could move the demand curve back by a few months too.

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A couple of properties I have seen recently have dropped 10% of their price after not shifting within a couple of weeks. Seems like people dont want to hang around.

 

A good chance they trade in this market though from what I have been hearing....we'll see!

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A couple of properties I have seen recently have dropped 10% of their price after not shifting within a couple of weeks. Seems like people dont want to hang around.

 

A good chance they trade in this market though from what I have been hearing....we'll see!

wow, 10% off after just a couple of weeks? Perhaps these sellers are desperate? I would like to have more evidence to support that as a widespread situation.

 

Things could get interesting.

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Do you see wages being suppressed for 25 years?

 

It's important to remember that 'inflating away the debt' can happen at any point in the life of the debt. It doesn't have to happen tomorrow or next week or next year.

I know the question wasn't directed to me but I hope you don't mind if i put in my tuppence worth.

 

I think we are going to see the standard of living drop for an extended period although admittedly perhaps not for 25 years. This drop in standard of living will involve higher prices for essentials relative to your income. We are already seeing paycuts and pay freezes while I saw someone post (Wanderer?) inflation is at 4.4%. During this period there will an enormous squeeze on peoples finances with much less money available to service debt. This puts massive downward pressure on house prices at least for the next couple of years especially when priced in gold.

 

Once wages start to rise again in real terms (inflation adjusted) that will be the time to at least consider buying.

 

So yes over a 25 year span it may get inflated away but it will be far from painless particularly during the initial phases where wages are going down and inflation up.

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If I heard correctly the new cabinet are all taking a 5% pay cut as a demonstration of what is to come and that they too are "doing their bit for the deficit". Folks buying houses at current prices are taking a huge risk. All the pressure to my mind is weighing down on house prices. I understand all the reasons folks on here have given for buying now as I have a wife and child too. But really renting has been fantastic:

 

ZERO debt

 

Roof just fell in - no massive repair bill for me - catch mr landlord :)

 

Waking up each morning to see the STR fund (in gold) has made me more when I was asleep than I make working during the day.

 

Seeing G0ldfingers charts of UK houses priced in gold

 

Knowing I am not a wage slave to the banksters by giving them interest on a mortgage

 

I would only consider buying now if I were totally minted and could buy in cash and still have bullion left over. If you dont fall in to that category waiting another year could be the best move you ever make.

 

Amen to that post. I agree 100%.

 

 

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wow, 10% off after just a couple of weeks? Perhaps these sellers are desperate? I would like to have more evidence to support that as a widespread situation.

 

Things could get interesting.

 

No, IMO the aksing prices were very toppy in the first place. Prime London commuer-ville, 2007+20% ish

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I know the question wasn't directed to me but I hope you don't mind if i put in my tuppence worth.

Everyones' input is most welcome

 

I think we are going to see the standard of living drop for an extended period although admittedly perhaps not for 25 years. This drop in standard of living will involve higher prices for essentials relative to your income. We are already seeing paycuts and pay freezes while I saw someone post (Wanderer?) inflation is at 4.4%. During this period there will an enormous squeeze on peoples finances with much less money available to service debt. This puts massive downward pressure on house prices at least for the next couple of years especially when priced in gold.

 

Once wages start to rise again in real terms (inflation adjusted) that will be the time to at least consider buying.

 

So yes over a 25 year span it may get inflated away but it will be far from painless particularly during the initial phases where wages are going down and inflation up.

I agree with what you have written. Things will be tough for many people..... however, this could lead to interest rates being held low and anyone with a disposable incomes may sail through the though years.

 

In any case, you have to live somewhere and I hope everyone is sufficiently insulated from the potential of rent increases

 

EDIT: It's also worth remembering that prices are actually increasing at present.

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Inflation is going to help, if your income is being cut.

 

People who talk about "inflating away the debt" in an environment like this are "smoking something."

The debt burden only eases if rates drop, or your income rises. I dont see either of those happening

in the present environment

 

Do you see wages being suppressed for 25 years?

 

It's important to remember that 'inflating away the debt' can happen at any point in the life of the debt. It doesn't have to happen tomorrow or next week or next year.

 

No, of course not.

 

My point: we cannot get there "from here" - We have to go somewhere else first.

And that "somewhere else" will not be kind to homeowners IMHO.

 

It looks like the banks are already just beginning to close down some of the Blair/Brown era excesses:

 

Lloyds clamps down on interest-only mortgages

Lloyds will no longer offer an interest-only option on mortgages of more than £500,000, and will charge more for such loans

 

Lisa Bachelor guardian.co.uk, Thursday 13 May 2010

 

Lloyds TSB says it will be more difficult for customers to get an interest-only mortgage.

 

Lloyds Banking Group has said it will make it more difficult for customers to take out interest-only mortgages from today.

 

The government-backed bank, which sells mortgages through Halifax and Cheltenham & Gloucester, will no longer offer an interest-only option for customers borrowing more than £500,000.

 

This means a customer looking for a loan of more than £500,000 will have to pay back the entire amount on a repayment basis as the lender does not offer the option of a part-interest and part-repayment arrangement on large loans.

 

It had recently made it more expensive to take out an interest-only mortgage by charging a 0.2 percentage point premium on its standard rates.

 

Today's move, which is designed to reduce the lender's exposure to risky loans, is likely to have the greatest impact on workers in the City who typically borrow high value mortgages on an interest-only basis, with the intention of making repayments with their bonuses.

 

David Hollingworth of mortgage brokers London & Country said: "Large loan borrowers will not be pleased with this news as they will see it as a withdrawal of flexible lending rather than a more responsible approach."

 

Interest-only loans have proved popular over the past decade as millions of borrowers took them out to keep their monthly repayments down during the housing boom. Someone paying off only the interest each month on a £150,000 loan at 4% over 25 years, for example, would pay £500 a month compared to £792 a month if they also repaid part of the capital.

 

Lenders have become increasingly cautious, however, about lending on an interest-only basis. Last October the Financial Services Authority officially branded interest-only home loans as "high-risk", lumping them in with so-called liar loans and mortgages for people with dodgy credit records. It proposed that, in future, people applying for an interest-only deal would have to show they could in theory afford a more costly repayment mortgage.

 

Since then, many lenders have made it more difficult for people to take out such loans, with most reducing their maximum loan-to-values (LTVs) on interest-only lending to 75%.

 

Stringent criteria

Lloyds also announced today that is imposing more stringent criteria on all customers wanting to borrow on an interest-only basis.

 

New customers will no longer be allowed to rely on the equity in their home to repay the loan as the sale of the borrower's home, the sale of other assets or a business, and an anticipated windfall from an inheritance are no longer accepted as repayment vehicles.

 

Instead, borrowers will have to prove they have something like an Isa or endowment plan in place and the bank will want further proof that regular monthly payments are being made into such a vehicle.

 

Some lenders, such as Nationwide, do still accept the sale of the borrower's main residence as an acceptable repayment vehicle, but lending to such customers is restricted to a 66% LTV and there must be at least £150,000 of equity in the property.

 

/more: http://www.guardian.co.uk/money/2010/may/1...-only-mortgages

== ==

 

 

Squeeze the pips - make the "speculative" property owners squeal,

and the others can now be forced to have a sensible amount of equity in their homes.

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Everyones' input is most welcome

 

 

I agree with what you have written. Things will be tough for many people..... however, this could lead to interest rates being held low and anyone with a disposable incomes may sail through the though years.

 

In any case, you have to live somewhere and I hope everyone is sufficiently insulated from the potential of rent increases

 

EDIT: It's also worth remembering that prices are actually increasing at present.

Rates are already at all time lows and folks are still struggling to make their payments.

Reduced wages and higher cost of living is only going to make things worse.

A run on Sterling cannot be ruled out and that will likely spike interest rates.

Those who have a low fixed rate and who keep their jobs should be OK but they should not expect much capital gain for the reasons highlighted above.

 

Also for the highlighted reasons I just don't see how landlords can increase rent while unemployment is increasing and wages decreasing.

 

Of course you are going to see regional variation so your mileage may vary :)

 

Renting is still cheaper than buying where I am with landlords I know having to subsidise the mortgage repayments. So in effect my landlord is part paying for me to live here :) and picks up the massive repair bill for the roof :)

 

On top of that I am free to invest my STR fund which is doing pretty well. I am determined not to be a wage slave to the banksters and hope that I may be a cash buyer sometime 2011/12 or at least have a tiny mortgage. The freedom that possibility offers is too great for me to throw away any of my gold.

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Rates are already at all time lows and folks are still struggling to make their payments.

Reduced wages and higher cost of living is only going to make things worse.

....I just don't see how landlords can increase rent while unemployment is increasing and wages decreasing.

 

I agree. / But: see below

 

Be careful with your gold investments here (Tom Obrien, the top gold forecaster, has gone bearish.)

 

You might consider taking profits on 10-20% of your position.

Then, if we get a 10-20% pullback, you can buy back in cheaper

 

== ==

 

(Is this report complete nonsense?)

 

Rents rise faster than house prices

Rent rises have outpaced house price growth – to reach less than 5pc off the all-time high.

 

By Emma Wall

14 May 2010

 

Buy-to-let properties are now yielding an average of 4.8pc Photo: GETTY The average rent rose to £663 a month in April, 2.2pc higher than a year ago. The monthly increase for rent was 0.6pc, compared to just 0.4pc growth in house prices.

 

This was the third consecutive monthly raise, according to research conducted by LSL Property Services, which owns the UK's largest lettings agent network.

 

Rent is now just £25 less than it was at its peak in August 2008, meaning buy-to-let properties are now yielding an average of 4.8pc.

 

David Brown, of LSL Property Services said: "Despite the distraction of the election, the buy-to-let market has gone from strength to strength, and landlords have seen their highest rents and yields this year.

 

"The UK's political uncertainty surrounding the hung parliament – and its potential impact on the economy – will continue to depress demand for house purchase.

 

"With transactional levels subdued, the private rental sector will play an even more pivotal role in providing accommodation for hesitant buyers, and we expect tenant demand and rents to be boosted in the medium-term."

 

House price growth has dropped significantly since the beginning of the year, which saw a monthly increase to January of 2.1pc.

 

The buy-to-let market is outstripping private property significantly, with the average annual return reaching 12.8pc for landlords, resulting in an income of £19,765 in the past year- £7,115 in rent, and £12,650 in capital appreciation. Annual returns have increased for fourteen consecutive months.

 

Returns have been boosted by a decline in tenant arrears- with just 9.7pc of all rent not being paid. This was the lowest proportion since LSL began compiling figures two years ago, and a significant drop of £7m from March.

 

Mr Brown concluded: "Not only has the buy-to-let market emerged from lingering effects of the recession, but landlords are now within touching distance of the record rents they achieved before the downturn.

 

"Supply and demand imbalances have corrected, and landlords are now getting a few pounds less each per month than they did at the peak of 2008."

 

 

/see: http://www.telegraph.co.uk/finance/persona...use-prices.html

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(Is this report complete nonsense?)

 

Rents rise faster than house prices

Rent rises have outpaced house price growth – to reach less than 5pc off the all-time high.

 

By Emma Wall

14 May 2010

This report may reflect the current situation (London centric presumably). However, the government have made it perfectly clear that we are in for a world of pain. That means:

1) lower wages (cabinet have all taken a 5% pay cut and a public sector pay freeze)

2) most likely higher unemployment

3) higher cost of living

 

Against a backdrop like that the pressure on rents is downwards.

 

If my rent were to rise or I lost my job I would move my family in to my parents place. I'm fortunate in that they have a place big enough for all of us. I for one will not feed higher rent and bailout the property speculators. I also point blank refuse to be a wage slave to the banksters so no buying for me either not yet anyway.

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I agree. / But: see below

 

Be careful with your gold investments here (Tom Obrien, the top gold forecaster, has gone bearish.)

 

You might consider taking profits on 10-20% of your position.

Then, if we get a 10-20% pullback, you can buy back in cheaper

I assume profits to be taken in something other than Sterling?

At the moment I have only just built a core holding which I will not trade.

If we get a 20% pullback I will most likely go close to all in.

Once I am at that stage I might be tempted to try and move in and out with a small portion.

 

Cheers

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I agree. / But: see below

 

Be careful with your gold investments here (Tom Obrien, the top gold forecaster, has gone bearish.)

 

The Tom O'brien's gold top call interview can be seen here:

 

http://www.tfnn.com/cnbc.php

 

He thinks we are headed to $1075

 

I'm not trading this but will be buying with both hands should we hit his target.

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The Tom O'brien's gold top call interview can be seen here:

http://www.tfnn.com/cnbc.php

He thinks we are headed to $1075

I'm not trading this but will be buying with both hands should we hit his target.

 

He is selling almost all his Gold and Gold shares, expecting a "big pullback"

He may be right.

BECAUSE LIBOR IS RISING AGAIN !

 

LIBOR CHARTS

 

economagicliborus1m3m6m.gif

/source: http://www.economagic.com/libor.htm

 

View the WikInvest / Libor-3Month chart

/see: http://www.wikinvest.com/wiki/LIBOR

 

Libor since 1999 : http://www.wsjprimerate.us/libor/libor_rat...chart-graph.htm

 

1-year Libor data: http://www.moneycafe.com/library/libor.htm#chart

 

== ==

 

Anyone have Stertling libor charts?

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He is selling almost all his Gold and Gold shares, expecting a "big pullback"

He may be right.

BECAUSE LIBOR IS RISING AGAIN !

 

Tom O'Brien on CNBC

http://www.cnbc.com/id/15840232?video=1493980167&play=1

 

According to Pesavento, we could see something spectacular in the Gold complex on Monday.

 

 

Anyone have Stertling libor charts?

 

http://www.economagic.com/libor.htm#UK

ECONOMAGICLIBORUK1M3M6M12M.gif

 

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...

Once wages start to rise again in real terms (inflation adjusted) that will be the time to at least consider buying.

...

 

That's the bit I am struggling to understand. In the press you continually hear about hair cuts, redundancies and as Wander points out freezes. I monitor the average index monthly with the latest (February figures) charts here

http://retirementinvestingtoday.blogspot.c...010-update.html

 

The surprise. As Wanderer points out inflation at 4.4%. Earnings seasonally adjusted year on year up 5% and non seasonally adjusted up 5.4%. The only thing I can think of is that bankers bonuses were up on last year but surely this can't skew the data of the whole UK to this level. Where else are the increases coming from.

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http://www.citywire.co.uk/personal/-/news/...3&ea=255507

 

So... higher CPI = pressure to put up interest rates? Could this signal the turn?

Errhm why? At least in the past, the BoE has been very comfortable with real interest rates below MINUS 10%.

 

http://gold.approximity.com/since1968/Real_BoE_Base_Rate.htm

Real_BoE_Base_Rate.png

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Errhm why? At least in the past, the BoE has been very comfortable with real interest rates below MINUS 10%.

Errr... Please do excuse me. I am still learning. Seemed like a big deal since Gordon Brown's removal of mortgage interest costs in 2003 is often cited as a stoking of HPI, as it caused base interest rates* to remain artifically low, according to the "other" site.

 

*appreciate these are not the same as the "real" rates you cite above. Still learning.

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Errhm why? At least in the past, the BoE has been very comfortable with real interest rates below MINUS 10%.

Another great chart, GF !

 

After my modifications...

zzzzae.png

 

Can anyone spot a pattern here ?

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Errr... Please do excuse me. I am still learning. Seemed like a big deal since Gordon Brown's removal of mortgage interest costs in 2003 is often cited as a stoking of HPI, as it caused base interest rates* to remain artifically low, according to the "other" site.

 

*appreciate these are not the same as the "real" rates you cite above. Still learning.

Gordon didn’t remove mortgage interest from the inflation target… they were never included in the first place. Historically, the BofE/Treasury used RPIx (that’s RPI excluding mortgages)

 

Including mortgage interest in price inflation target causes a positive feedback loop.

 

Interest rates increase => mortgage prices increase => increase in RPI => interest rate increase.

 

The same is true the other way round

 

Interest rates decrease => mortgage prices decrease => decrease in RPI => interest rate decrease.

 

Gordon replaced the RPIx target with CPI…. And TBH, I don’t know if this is as big an issue as people make out.

 

As for holding down rates – globalisation held down rates more than Gordon could have. It was the cheap goods from China (etc) that held down our C/RPI

 

EDIT: there’s a lot more to this that I haven’t really touched upon for simplicity. I’m sure someone will fill in some of the missing bits later.

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Yes, the timespans of each administration are consistently wrong.

Please fix it then !

 

Raw Chart : here

 

According to Wikipedia:

 

Thatcher elected : 1979

Blair first elected : 1990

= = = = =

 

Prof. Taleb's comment on where the Global economy is now, after Mr. Brown "saved it":

 

Black swan author Nassim Taleb says the world debt problem is worse now than at the height of the credit crunch and investors should ditch equities and US Treasuries and back hard assets.

 

In an interview with Bloomberg, which you can see here, the New York University professor who made his name predicting the credit crunch, says that governments have failed to learn the lessons of the banking crisis, allowing the debt problem to morph into a new and more ‘vicious’ form.

 

‘I had detected fragility in the banking system and it is still there and we need to do something about it,’ he said. ‘We have had a couple of years since the meltdown and the risks have increased and taken a much more vicious form.’

 

He warns that economists and investors are continuing to espouse theories not backed by empirical evidence, such as the pricing of assets and risk, and says the globalisation has made events less predictable as the world has become more inter-connected.

 

Taleb brands the government bailouts of the financial system and the transferal of debt from the private to the public sector a fast-track to increasing moral hazard and is scathing about the profits made by the banks over the past year.

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Another great chart, GF !

 

After my modifications...

zzzzae.png

 

Can anyone spot a pattern here ?

Nice work really.

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