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UK Property - The former HPC addicts' thread

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Quite a nice chart, with the major indices

http://img139.imageshack.us/img139/261/hpimar07we7.png

 

The uptrend is well-shown. Plus the brief dip in 2005 to Unchanged

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A Headline to remember :: as being one from a Market Top perhaps??

 

1518399dy5.jpg

 

.. or should we believe this headline:

 

1518405yf4.jpg

 

read the second line in the first Headline:

"Prices to Soar even faster in Rush to Sell

before Labour's £700 home pack comes in"

 

What?

Prices soar in "rush to sell". Wow. Some editor at the Daily Express,

has found a way to invert the law of Supply and Demand - impressive stuff !

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IR's likely up next month and again, 6% is being talked about in the media. It may not happen, but it's all bad news for the people below.

 

"Record numbers of homebuyers are taking out interest-only mortgages.

 

Latest figures from the Council of Mortgage Lenders (CML) show more than one in four borrowers has an interest-only mortgage, while one in five first-time buyers chooses this route.

 

The attraction is that monthly payments are lower on interest-only loans compared with repayment mortgages."

 

http://www.thisismoney.co.uk/mortgages/mor...p;in_page_id=58

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I am close to escaping, and yes - I'm beginning to feel like it will be just in time. (Read more on my selling progress here... http://www.greenenergyinvestors.com/index....mp;#entry17625)

 

I'm getting very tempted to call summer 2007 as the likely top in UK prices (I have NOT called a top yet, despite being a long-term bear) but want to see the BoE come good on the FX market's expectations of at least 2 more 0.25% rises first. Then I really think it's game over. Sterling will eventually start to fall, keeping inflation high and rates up, even as the market stalls and sentiment turns.

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You could be right, but we will need to see how sentiment and prices develop,

and whether or not the BofE will lose it nerve again

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Thanks to Rikki for this link:

http://www.housepricecrash.co.uk/pdf/abn-a...13-apr-2007.pdf

 

I thought this posting should be carried here also...

 

The article makes some excellent points, and so does their chart

ukvsushpife4.gif

...It confirms what I long believed, the UK market is even more overvalued, and more dangerous than the US.

And when it turns, it will likely create more pain.

 

Here's what ABN-Amro had to say:

 

"The greater degree of overvaluation makes UK housing more vulnerable to a correction than the US. It could also have more significant implications for the wider economy. Owing to the lack of land and inelastic supply, the burden of adjustment would fall on prices rather than quantities… In regions where land is more abundant, such as the US, the adjustment comes through quantities (ie construction output). A fall in UK house prices would depress household wealth, hurting consumer spending. It could also leave the banking sector exposed. If Sterling then collapses, the Bank of England could find itself unable to respond."

 

TROUBLE on the way for UK property owners, it would seem.

And the US problems may prove just a smaller warnming of what is coming to the British Isles.

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Home ownership now stands at 70%, but in 1914 that figure was 10.1%. Private rental accounted for everything else. That, of course, partly represented another very English fact, the sheer amount of land owned by a few very rich individuals. So Will Hutton, economist and chief executive of the Work Foundation, can argue: "What we've seen is the democratisation of home ownership, and we cannot and should not turn that clock back." But if home ownership has, over the past century, resulted in increased social mobility it is now, paradoxically, contributing to increasing class immobility and polarisation, often even a kind of negative mobility: more young people have to live at home, face longer commutes, more debt, no pensions, or are being forced to leave areas where their families have lived for generations, with all the social disintegration that entails. Unprecedentedly high - and still rising - house prices are unravelling the fabric of people's lives, and trapping them in a status system more intractable than ever before.

 

...more: http://money.guardian.co.uk/houseprices/st...2072225,00.html

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And the banks are beginning to run scared of what is going to happen on IR's. They don't want you to know that, but would the Nationwide be giving up its 25 year fixed rate after just 5 weeks, because it was just too popular, if they were confident on the future direction of IR's?

 

---------------------------------

 

The first 25-year fixed rate mortgage offered by a major building society will be scrapped today, just five weeks after its launch.

 

The Nationwide's 5.63% deal proved too popular with borrowers who have seen the bank rate rise three times since since last summer.

 

The rate now stands at 5.25% and economists say another rise next week is 'a cast iron certainty' as the Bank of England tries to rein in soaring inflation.

 

Britain's third-biggest lender, said yesterday that its deal had proved 'very popular' although it refused to say how many buyers had taken it up.

 

http://www.thisismoney.co.uk/mortgages/mor..._id=58&ct=5

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Home ownership now stands at 70%, but in 1914 that figure was 10.1%. Private rental accounted for everything else. That, of course, partly represented another very English fact, the sheer amount of land owned by a few very rich individuals. So Will Hutton, economist and chief executive of the Work Foundation, can argue: "What we've seen is the democratisation of home ownership, and we cannot and should not turn that clock back." But if home ownership has, over the past century, resulted in increased social mobility it is now, paradoxically, contributing to increasing class immobility and polarisation, often even a kind of negative mobility: more young people have to live at home, face longer commutes, more debt, no pensions, or are being forced to leave areas where their families have lived for generations, with all the social disintegration that entails. Unprecedentedly high - and still rising - house prices are unravelling the fabric of people's lives, and trapping them in a status system more intractable than ever before.

 

...more: http://money.guardian.co.uk/houseprices/st...2072225,00.html

 

but how many own 100% of equity in their property and can they say that they truly own their homes? In 1914, credit would have been practically non-existent to the vast majority of the population. This is where, for me, the whole system seems to break down.

 

All of this debt is man-hours owed, and ultimately must be repaid, defaulted on, or inflated out of existence. The former seems unlikely, or at best will be a long time coming and break many. The other two options will result in lasting pain.

 

TLM

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The article makes some excellent points, and so does their chart

ukvsushpife4.gif

 

Those graphs bring it all home, when I was a teenager in the 90's I worked on a market stall, my boss redirected his profits into BTL and he had a rule that if the property was more than 10x the yearly rent he wouldn't touch it. A return to yeilds like that seem almost unimaginable now.

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If this is what 5.5% does, just think what will happen if it has to go over 6%.

 

Rate rise 'to leave millions in financial difficulty'

 

By Matthew Plowright

May 09 2007

 

An interest rate rise this month would leave millions of Brits struggling to meet their mortgage repayments and lead to a major cutback in consumer spending, a new report has warned.

 

According to research by CanvasseOpinion on behalf of credit report service CreditExpert.co.uk, more than half (56%) of British adults with a mortgage fear that the cost of their mortgage will rise substantially should the Bank of England, as expected, announce an interest rate rise tomorrow.

 

Consequently, almost one in five say they will have to dip into savings or investments to keep up with mortgage repayments.

 

http://money.uk.msn.com/specials/interest_...umentid=4856150

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According to research by CanvasseOpinion on behalf of credit report service CreditExpert.co.uk, more than half (56%) of British adults with a mortgage fear that the cost of their mortgage will rise substantially should the Bank of England, as expected, announce an interest rate rise tomorrow.

 

Consequently, almost one in five say they will have to dip into savings or investments to keep up with mortgage repayments.

 

#"Slaves to their debts"#

on the ladder, will be: on the cross

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(from the article): http://money.guardian.co.uk/houseprices/st...2078280,00.html

 

his 12-year-old son butts in: 'With all the new developments going on around here, and with the Tube coming, prices aren't going to go down.'

 

I'll say that again. He's 12.

= =

 

Can you get any closer to a "tip from the shoeshine boy" than that?

 

When he's 17, and talking about how it is dangerous to buy property because it puts people into slavery to debt. When he spouts that - it may be the time to buy

= =

 

I read this:

I ask him a final question about what the government could do, if anything, and he launches into a tirade: 'I am very disturbed by the large distribution of wealth that has happened against the young. And particularly against the young who don't have any relatives with property to leave them money. An entire social class is being created that is being denied access to property, and I think it's disgraceful that it's been presided over by a government that claimed to be acting to end social exclusion.

 

...and i see red, thinking:

 

Fools, idiots, dumbkopfs, don't you see the huge multi-year massive glut of property that is being created by all this reckless "investing" behaviour? If any of these foolish toads think they are going to shift the consequences of their stupid buying back onto a society of more responsible people, they will have a big learning experience. Those now refusing to play this game, and going to fight their efforts tooth and nail. There will be blood on the streets when prices crash, and the debt-enslaved bay for mercy.

 

pillory-stocks.jpg. .stocks.jpg

 

Perhaps they will bring back the stocks, and put the real villains into them. That would be Estate Agents, Mortgage Lenders, Property Porn TV makers (and Allan Greenspan and Gordon Brown). Some of us will be circulating amongs the crowds, passing out free rotten tomatoes.

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FT podcast on BTL

FT: Is BTL still a good investment?

Interesting but very biased. I am also posting other more balanced FT links in a comment.

 

http://podcast.ft.com/?section=finance

 

(havent heard it yet)

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(from the article): http://money.guardian.co.uk/houseprices/st...2078280,00.html

 

his 12-year-old son butts in: 'With all the new developments going on around here, and with the Tube coming, prices aren't going to go down.'

 

I'll say that again. He's 12.

= =

 

Can you get any closer to a "tip from the shoeshine boy" than that?

 

I'm not sure I agree with this.

 

I can remember advising my mother to buy property aged seven and again aged 12 and both times she acted on it and it has proved to have been excellent advice that means she will live comfortably in her retirement.

 

Moreover, one of the journos from the independent got kids from his five year old's class to tip stocks - which they did with reasoning like 'MacDonalds, cos their burgers are really nice', or 'British Airways cos the lady on the plane was really nice' - and their tips outperformed the tips of all the papers' tipsters, except one (Midas, I think)

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i suppose the occasional shoeshine boy or cabdriver does become millionaire through stock speculation.

 

the point is that once a market view is very widely shared, it is hard to make money from it- and easy to lose

 

= =

 

(here's the sometimes-thick David Smith, being thick with this comment in yesterday's Sunday Times):

http://business.timesonline.co.uk/tol/busi...icle1844550.ece

 

"the fact that the Bank stopped hiking, or its single rate cut in August 2005, or both, stimulated the market, giving us today’s phase of the boom. The Bank almost brought the housing market down to earth but did not quite follow through, a bit like the allies and their failure to get Saddam Hussein in the first Gulf war.

 

If I’m right that a housing slowdown is in the air, then what we will see in the coming months is a sharp slowdown in house-price inflation, in direct response to the interest-rate hikes we have seen, and in prospect.

 

The difference between now and then is that global pressures for the Bank to cut rates are hard to see. The Bank has presided over high house-price inflation in order to meet its target for consumer price inflation. The boot is on the other foot. Because that target is paramount it will not mind, within reason, what happens to house prices to achieve it.

 

Does that mean a house-price crash? Not in my view. House-price crashes are rare in Britain and have never occurred in the absence of recession"

 

Let me repeat that: "House-price crashes ... have never occurred in the absence of recession"

Duh. Let's consider the reality:

House price crashes trigger recessions- so no wonder they go together. Smith has the horse on the wrong side of the cart

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Is David Smith talking about the official version of what a recession should look like? I thought Gordon Brown, with the help of the ONS, had banished such thoughts with a mix of slight of hand and Merlin the wizard at the BoE waving his wand, now you see it, now you don't.

 

Meanwhile, back on planet earth and reality;

 

"The effects of higher borrowing costs are beginning to take their toll on lending, according to the latest data on the mortgage market.

 

Figures released today by the British Bankers’ Association (BBA) reveal that the number of mortgage approvals fell by 14 per cent last month and analysts expect this weakening to continue throughout the year.

 

Interest rates have gone up by one percentage point since last August but consumers have been more resilient than many economists had expected. The housing market remains buoyant, with prices having risen by 10.9 per cent over the last year, according to Halifax. High street spending has also been strong.

 

However, over recent weeks evidence has emerged suggesting that higher interest rates are beginning to bite. The BBA figures, which revealed that 170,000 mortgages were approved in April, down from 198,000 in March, follow a survey from the Royal Institute for Chartered Surveyors, which found that new buyer enquiries have fallen for the fifth consecutive month. This will filter through to the housing market over the coming months, with many property analysts predicting that the rate of growth will fall to around 5 per cent by the end of the year. But if interest rates rise again, the impact on the property market could be more severe."

 

http://business.timesonline.co.uk/tol/busi...icle1854838.ece

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