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| The UK housing market: a bubble about to burst? |
The UK housing market: a bubble about to burst?
by matt spence
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#1000931
of 3278
 20 Nov 2002
03:37 PM |
It will if we keep talking ourselves into it. We must be careful. Current economic conditions are perfect for a robust property market. These conditions are set to continue with stable low interest rates, low unemployment, and strong consumer demand.
However, we are a country who love to talk ourselves into recession and if we are not careful we will make prospective buyers nervous about taking the plunge. Which in turn will help fuel a downturn. We are currently trying our hardest to kill the buy to let market with horror astories about the tough market in London. What about the rest of the UK. There are currently some excellent oportunites in the North of England etc.
Lets stay positive and encourage people to invest. Come on Britain, be positive for a change |
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To keep KIP happy
by Rob G
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#1000930
of 3278
20 Nov 2002
03:28 PM |
KIP, prices will fall.
To be honest, I can't even believe we're all still debating it.
The only question is exactly when and by how much.
My prediction?
London, starting now. 40-50% within 2 years.
SouthEast, starting March. 30-40% within 2 years.
Then East Anglia ,The Midlands, The North and finally Scotland (albeit by less). |
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Can we discuss house prices please?!?
by Knowledge is Power
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#1000928
of 3278
20 Nov 2002
03:20 PM |
Hoogstraten et al,
Perhaps your latest discussions would be better-suited discussion group?
I though this was about property prices & whether they will fall. Your recent postings contain scarcely a reference to this debate.
Have a look at my posts today. They highlight the growing fear or should I say growing realisation that a) property prices are too high, and b) the chance of a fall is rising by the day.
TO FT MONITOR:
Could you please encourage people to get back to the real debate here, rather than a dominating few trying to impress with how much or how little the know & understand. These playground antics are very poor and unwarranted.
And finally… to the person who keeps on quoting other people with little to no relationship to the aforementioned discussion topic;
HERE IS ANOTHER QUOTE YOU MAY WISH TO CONSIDER:
“We are students of words; we are shut up in schools, and colleges, and recitation rooms, for ten or fifteen years, and come out at last with a bag of wind, a memory of words, and do not know a thing”
Ralph Waldo Emerson |
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Shoe shining slappers
by Hoogstraten
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#1000927
of 3278
20 Nov 2002
03:10 PM |
Slapper, babe, I am sorry to say that your charms are fading. Surely you realise that if you pull out the same outfit every day, you are going to find it harder to get a reaction?
Economic conditions are in decline – GDP growth is falling. To put it in your terms, more curtains are being made this year than last (there are still plenty of colours to choose from, before you get flustered). The rate of increase in curtain production has just slowed. This doesn’t mean that tomorrow the shops are going to have no curtains in stock, before you start to panic.
As for me shining my own shoes, this is against my self-interested human nature (which you mention correctly remains unchanged).
Lemming or reef fish? Like beauty, it is probably in the eye of the beholder.... |
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Shoe-shine indeed!
by Slapper
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#1000926
of 3278
20 Nov 2002
02:36 PM |
Hoogstraten darling:
Why don't you shine your own shoes? Then perhaps the quote from the Straw Man will have some relevance...
You say -
"Like reef fish, the people of a more nervous disposition flit from urging strong buying of everything to panic selling of anything, when economic conditions decline...."
Thank you that confirming that economic conditions are in decline.
Thank you for confirming that human nature is unchanged, which is why markets go up AND down.
Are you are more closely related to the lemming, my sweetie, blindly rushing straight on over the cliff?? |
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My shoes need shining
by Hoogstraten
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#1000925
of 3278
20 Nov 2002
02:20 PM |
I would like to thank Revolutionary.hk for his excellent, conclusive and well researched investment advice, which is so thorough at nine lines that he is able to conclude:
“I'd say it isn't a good time to be holding stocks and buying new houses.”
This is unlikely to be a sweeping statement, coming from Revolutionary.hk. I imagine he has analysed every potential cash equity and property investment before coming to this conclusion, and has then been able to give the readers the benefit of his superior valuation methodologies. Revolutionary.hk, your selfless devotion to the investment problems of others is noted and appreciated.
I did enjoy Jack Straws comment regarding selling stocks on the basis that the shoeshine boy was recommending buying.
I saw on television footage of reef fish, where when one fish moves to the left or right, the rest of the school flit to the left or right as well! I was thinking there might be an equivalent in the financial world as well. These might be the people who a few years ago were walking to work with a copy of Dow 40,000 (or whatever the stupid book was called) tucked under their arms. Like reef fish, the people of a more nervous disposition flit from urging strong buying of everything to panic selling of anything, when economic conditions decline.... |
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...a little more for rev.hk
by Jeff Morgan
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#1000924
of 3278
20 Nov 2002
01:57 PM |
It's interesting that my adviser, in my conversation with him yesterday, related that he 'traded down' his house to get rid of his mortgage. I think he is more pessimistic than I about job prospects, which is probably right given the situation in the City compared to the business I work for.
I think equities are a 'sit tight' option at the moment and I doubt they will be doing anything useful for a year or so. That will, as you say, affect pensions as well. So pensions are unlikely to be a source of comfort for the future. That doesn't leave a lot, does it.
That said, I'm still taking a broadly sanguine view of my prospects, partly because there are no actions I can take to reduce my risk beyond those already in progress, and partly because I see those actions beginning to work. As far as retirement goes, my wife and I are both on Final Salary Schemes, but neither of us intend to stop working completely anyway - and we both can find paid things to do.
And, there's always the lottery of course.
Have a nice day, be nice to Hoogstraten. |
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rev-olting rev-ersal rev-elations rev-ised and rev-iled
by Jack Straw
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#1000923
of 3278
20 Nov 2002
01:49 PM |
Rev, I’m interested that you state,
“It isn't a good time to be holding stocks and buying new houses. Time to batten down the hatches I'd say.”
As Livermore is quoted as stating in “Stock Operator”,
“When my shoe shine boy advised me on stocks I knew it was time to close out”
Renaissances of a Stock Operator
Stocks, since you are moving off at a tangent, are at bargain prices at present. But to use a famous quote,
"A fool and his money are soon parted."
Unknown
Thus, in part, I understand your logic. Even if it is flawed.
There may well be a further drop, but as a medium to long-term option they are bargains. Since people purchase “cash equities” there is no risk, unless the company cease trading. Unfortunately this is the mistake made by part time traders, who believe they are market makers – sadly as we see with Internet boom and crash herd mentality always rules among sheep.
"Stocks are simple. All you do is buy shares in a great business for less than the business is intrinsically worth, with managers of highest integrity and ability. Then you own those shares forever." - Warren Buffett
Further people consume and that will not stop, people have to live in houses and this will not stop. The values of brands in balances sheets remain strong, even if the methods of financing the company change. You’re thoughts may “appear” prudent, but of course if we follow this logic no one would ever invest and we would watch the housing and stock markets deteriorate to zero.
True values of the company lie in the cash flows and the balance sheet, and not its stock price. This is a loophole spotted in the 80’s by Michael Milken and James Goldsmith, and always missed by chartists that follow the stock price graph. But I guess to follow my previous line there are wolves and there are sheep. Further to come more in line with you’re way of thinking baa baa baba baaaaa ba ba bababa baaaaaaaaaa – I feel you agree with that. For the rest of the audience I said the following,
“The reserve of modern assertions is sometimes pushed to extremes, in which the fear of being contradicted leads the writer to strip himself of almost all sense and meaning.”
The Great Winston Churchill.
Red Ken, has just stated that the corporation of London is looking into a shortfall of 459,000 homes, in London, over the next 12 years. Although the market in London is very high demand still exceeds supply, but I guess that information will not flow through to the peoples republic of china. But to conclude,
The greatest risk is to risk nothing at all.
- Leo Buscaglia |
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interesting data
by Knowledge is Power
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#1000922
of 3278
20 Nov 2002
01:23 PM |
to all you "house prices are fair value" belivers;
have a look at page 2 of Right Move's latest data:
http://rightmove.co.uk/p/pdf/hpi/RealTimePropertyReport20November2002.pdf
just look at average earnings to house prices over the years & the associated ratio. notice anything alarming?
For overall asking prices to be down (considering how big some of the prices rises have been in the midlands/north,) there must be one heck of a slow down happening in London & the SE.
Lets see how the reverse ripple effect kicks in from here on eh! |
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To Jeff
by rev.hk
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#1000921
of 3278
20 Nov 2002
12:48 PM |
Dear Jeff.
Thanks for your comments last night regarding Derek and the familiar tunes. I'm glad there is no bitter pill and that you aren't fooling around with over-valued equities at the moment. The website Pension News is full of horror stories and the FT's own companies section ran a lurid piece on the current state of the life insurance industry in Germany. Naturally, it doesn't make pleasant reading and you will be thrilled to know that your own pension industry in the UK has an even higher proportion of its portfolio in equities. Your old friend, the FSA has been relaxing the rules on solvency margins to keep the insurance companies from selling into a weak market and forcing up house prices even more. If fear they might have to do it another few times since there are increasing fears here in Asia that Korea is about to hit the dirt again.
I'd say it isn't a good time to be holding stocks and buying new houses. Time to batten down the hatches I'd say.
r. |
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Macroeconomics vs microeconomics
by Hoogstraten
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#1000920
of 3278
20 Nov 2002
12:10 PM |
Revolutionary.hk – you confuse microeconomics with macroeconomics. The effect of new technology might be adverse for some companies at a microeconomic level, but at the macroeconomic level there are long-term benefits for the economy as a whole.
Marx:
“Go on, get out. Last words are for fools who haven't said enough.” |
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Delude yourself if you like, but things are going to get a whole lot tougher!
by Knowledge is Power
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#1000919
of 3278
20 Nov 2002
12:04 PM |
H & other fair value belivers.
So if as you say, house prices are fair value, why have not only the International Monetary Fund, but also Mervyn King, the Bank of England's deputy governor for monetary policy committee (and the MPC too), given such grave warnings on:
1) house prices
2) house price inflation
3) re-mortgaging
4) mortgage equity withdrawl
5) consumer debt levels (particularly at the lower end of the wage market - who will be hardest hit in the comming recession)
I suggest all you "every thing is rosy" people read the articles on the link below. As yourself this; IF THERE IS NO PROBLEM IN THE HOUSING MARKET, WHY IS THE BANK OF ENGLAND SO CONCERNED?
Article 1
Article 2
Article 3
http://www.bankofengland.co.uk/mpc/mpc0211.pdf
[URL's edited by FT]
[This message was edited by Monitor_CS on 20 Nov 2002 at 01:54 PM.] |
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cheers
by rev.hk
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#1000918
of 3278
20 Nov 2002
11:25 AM |
Thank you for confirming to everyone that I have been consistent throughout this forum. Your help in highlighting the absurdity of the view that markets are fairly valued and that there will be no property collapse has been of tremendous help to the cause of the deflationists.
Thanks mate.
rev.hk |
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Conversion of a Revolutionary?
by Hoogstraten
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#1000917
of 3278
20 Nov 2002
10:51 AM |
Revolutionary.hk’s latest mail says:
“…the equity market implications of the new economy are that some companies that will be able, through increasing returns to scale, to produce enormous volumes of innovave and productivity-enhancing hardware/software products at almost zero marginal cost. This makes these companies able to command higher market multiples and in the long-run are worth a fortune since it will be fiendishly difficult to enter the market place, even with zero barriers to entry. That is what increasing economies of scale allow them to do....providing, of curse, that their finances are properly run.”
I am no big city lawyer, but this sounds to me as if this is a good thing. Lets compare this analysis with the previous Marxist based view from the rev.hk (with a quote from Marx himself for the sake of comparison):
Rev.hk:
“The internet simply increases competition since it reduces the barriers to competiton. This leads to downward pressure on margins which dramatically reduces a company's ability to make long term profits unless it has new ideas that allow it to charge monopoly profits. Those that are listed are worthless since they cannot offer long-term growth prospects and don't have any good ideas.”
Marx:
“A rise in the price of labour, as a consequence of accumulation of capital, only means, in fact, that the length and weight of the golden chain the wage-worker has already forged for himself, allow of a relaxation of the tension of it.”
Do these two views expressed by Revolutionary.hk sound like the same argument? Or has Revolutionary.hk now changed his opinion to a capitalists viewpoint, and is as a result, is no longer quite as miserable. By the way, as I said in previous commentary, I was keeping my analysis to the basics by describing perfect competition, because I made the assumption based on your comments that you a beginner when it comes to economics.
What about this quote from Revolutionary.hk in an earlier mail:
“Those listed companies that have developed the new technology have done so through massive debt accumulation that is slowly being paid, written or restructured off their balance sheets – BT is a good example of the deflationary forces at work. This is a significant drag on the economy and the equity markets. Those that use the technology as their public portal are seeing their margins squeezed dramatically since the internet is simply a device to improve competition. There are very few barriers to entry and everyone has access to the same technology.”
Do you think this statement is consistent with the new theory proposed at the top of the mail?
I think that Revolutionary.hk has completely reversed his view around, to be slightly more in accordance with my own. This view, to put it simply, is that there will be long run benefits to the economy from the technological innovations that have been created in recent years.
For the record, the inflammatory word you refer to was stupid. The fact is that your correspondence contains worse references to me – but I am not a Marxist, so do not expect everything to always be equal. |
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Huffstroppen the minimalist
by rev.hk
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#1000916
of 3278
20 Nov 2002
10:02 AM |
Rather than mistakenly feeling silly, I shall just point out a few things that my fellow professional economists, strategists and I have been trying to factor into asset market valuations for the last ten years. That you seem to have missed the whole point of my postings suggests you are far from the economics buff that you claim to be.
FACT: Perfect competition – as taught in universities - does not allow for increasing returns to scale and hence a pareto optimal solution to the general equilibrium problem is not attainable. Since that is exactly what modern technology (in particular software) is giving us, everything you have said on the subject to date is either outdated or just plain wrong.
Isn’t it funny how the purveyor of liberal capitalism doesn’t even know when the rules of the game have changed even though we are on the downward slope of the biggest equity bull and bust the world has ever seen?
H., thanks to the writings of Schumpeter and other discovery process theorists, the world of perfect competition is now only considered a special case. In the modern interpretation of capitalism, monopoly is not only accepted but is welcomed if it delivers lower prices and better products (as it does in the software industry and parts of the hardware industry). Ask yourself. How much have retail prices of computer goods fallen in the last five years since we started have massive consolidation in the industry? When you have answered this, then tell me that this is a bad deal for everyone?
That the US originally ignored the benefits of Microsoft’s path breaking innovations is a travesty and Netscape’s share price has been rightly dumped in recent years.
As I am about to explain to you for the last time, the equity market implications of the new economy are that some companies that will be able, through increasing returns to scale, to produce enormous volumes of innovative and productivity-enhancing hardware/software products at almost zero marginal cost. This makes these companies able to command higher market multiples and in the long-run are worth a fortune since it will be fiendishly difficult to enter the market place, even with zero barriers to entry. That is what increasing economies of scale allow them to do....providing, of curse, that their finances are properly run.
I’m terribly sorry H. if you just don’t get it. But your antiquated version of capitalism denies the existence of increasing returns to scale and so confines your analysis to outdated textbooks from the 1960s.
Alternatively, companies which simply take widely available technology and use it to give customers an easily replicable service will be increasingly vulnerable to takeover or closure by larger vulture companies with a larger balance sheet and franchise value. You will notice that very few of the on-line travel or retail shops are still in business. Ever thought why?
This difference is what the current equity market collapse is all about. In the days of the 90s IT bubble, venture capitalists looked at all new economy or tech companies in the same way and forgot that most would fail. The clear out that we are watching is simply the destruction of capital that was malinvested in the late 1990s when venture capitalists crassly under-priced capital for internet businesses without properly scrutinising their business plans.
In this, the Federal Reserve was roguishly compliant since it kept interest rates below the natural level that would have kept the unproductive investment from being undertaken. Sadly, the US now has an expanding I-S gap that is far from a small problem for global equity markets.
That the market is still grappling with this survivalist issue clearly suggests that there is a long way to go before indices accurately reflect the effect the new economy will have on productivity and therefore long-run GDP growth. And since history tells us that previous technology innovations took years to dramatically affect the long-run, most market players believe that the global equity markets have a lot more downside…despite the glaring fact that traditional p/e ratios and dividend yields remain way above historical norms.
H., that improved information flows benefit everyone in the log-run and capitalism with free trade is the optimal economic system was never in dispute. You made it an issue because you are incapable of having a grown up debate with anyone without resorting to evasion, smokescreens and childish insults every time someone says something you either don’t like or you don’t understand....as your most recent posting only serves to prove
r.
PS. You will notice that at no time in this forum have I been censored for using foul or inflammatory language. You have. |
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