|
|
| The UK housing market: a bubble about to burst? |
Jojo
by KIPPER
|
#1001482
of 3278
 11 Dec 2002
10:19 PM |
| Hey, Jojo. I thought you got banned when you went nuts last week. Good to see you back. |
|
Bitter Coffee in a Gold Rimmed Cup
by KIPPER
|
#1001481
of 3278
11 Dec 2002
10:17 PM |
Zorro,
Interesting mail, sadly not based on fact. The Euro Business magazine published its top 500 European business survey earlier this year. The UK comprised around 25% of the survey. In terms of P&L UK companies were only matched by adding Germany, France and Italy together. There is no economic issue in this country. Infact to quote Freud about negative thinking,
“Such an emotional climate, widely pervasive in most cultures but heavily institutionalized and thinly disguised in traditional India, easily give rise to a situation where the victim of abuse, encouraged to revere, even worship his abuser, can react only by an identification with him coupled with severe anxiety lest he become aware of the deeply buried but powerful hatred he has aroused. In this blind circle of negative emotions a kind of shared paranoia is generated as a result of which people begin to view the natural misfortunes of their lives as richly deserved punishment for their past aggressions and genuine hostility towards their parents and those who have come to represent them”
Zorro, or KIP, can you explain what this "shared paranoia is" with regard to the housing market?
In summary, I'll be sailing on a sea of the rich UK economy, while you communists eke out a subsistence living in the cornfields of the Ukraine.
There will be no crash this, or next year. I am yet to see KIP agree to apologise if he is wrong. Out of interest, KIP who worked in Hong Kong, has an anagram of his user id of “loser wowed peking” – Nothing about an apology there either.10% next year. |
|
Who's Cassandra now?
by zorro
|
#1001480
of 3278
11 Dec 2002
08:25 PM |
KIPPER
It has to be said that Standard & Poor only downgraded Japan fairly recently, less than a year ago (correct me someone if this is not right), ie a good ten years into the Japanese recession and at a point where it was painfully obvious to everybody that Japanese banks were in dire straights. So it could be said, that, in comparison, their warning on the UK is somewhat premature.
But S&P are a body to reckon with and there is an element of self-fullfilling prophecy about their statements, ie financial institutions tend to take heed. So while Eddie George and Mervin King's warnings have been falling on deaf ears, S&P's might have more impact.
I am not a conspiracy theorist generally, but I am a cynic and I wonder whether it is at all possible that they had been invited to make such a statement. Say, is it at all possible that Gordon Brown, who really does not want to see our interest rates go any lower and converge with the EU rates, could have had a little word in their ear, and bingo: after the S&Ps warning our rates can't go lower, hence no chance of us having a referendum on the euro, hence Gordon wins round one, while Tony is busy buying flats in Brighton. |
|
Thanks for the quotes
by JoJo
|
#1001479
of 3278
11 Dec 2002
07:27 PM |
| Nietsche had some good points to make about house prices. Thanks. |
|
"Community, Identity, Stability". Brave New World
by KIPPER
|
#1001478
of 3278
11 Dec 2002
06:22 PM |
“Oh Brave New World to have such people in it”, a famous quote by the savage in the book of the same name. If we believed the doom mongers you’d think we, in the UK, were following Zimbabwe. Sadly, this is not the case. Being the 4th largest economy in the world, and catching 2 & 3 up, this is falicy. Issues are blown up to a level that is ridiculus, there are no fundamental problems,
“if it walks like a duck & talks like a duck...”
Perhaps you have not read “The Ugly Duckling”? If it walks like a duck and talks like one it can be a swan.
London is flat lining in areas, but to say,
“As for London, Kipper have you any idea what the average wage in London is? The London market is falling as we speak. There's the bubble, there's the ripple!”
Personally I doubt if it is falling, and certainly not at the rate you suggest. If it is falling as we speak the prices would reach zero by year end. Well those sums need checking! I guess some people will be house holders, while others remain in the parental domicile. The only ripple I hear is the ripple of laughter from the expensive seats, you’ll hear it when it gets to the cheap ones,
"And that," put in the Director sententiously, "that is the secret of happiness and virtue. All conditioning aims at that: making people like their unescapable social destiny.":
Brave New World
To be presumptus as to suggest that you can follow a historic chart to identify where we are going is laughable. But I presume the chaps who closed out their investments in Microsoft when the capitalisation reached 1 million US were happy with their profits. But to quote Huxley again,
"History is bunk.":
Chartism works with waves in the ocean and stones thrown into the air. If you suggest there is a bubble, are we going back to Victorian pricing? When did this bubble start? Will we have to value housing in old money? In fact I’d theoise such negative ideas are the result of some form of education when a child, did your parents lose out in 1990?
"Till at last the child's mind is these suggestions, and the sum of the suggestions is the child's mind. And not the child's mind only. The adult's mind too-all his life long. The mind that judges and desire and decides-made up of these suggestions. But all these suggestions are our suggestions... Suggestions from the State."
Brave New World
The Uk has 4 of the largest 10 banks, this has been generated by the housing boom of the last fifty years. Investment, in this, is certainly less risky than any S&P stock investment, UK GAAP is certainly more prudent in its approach, than the US GAAP. Given fundamental business fraud/failure in the US over the last year, I’d suggest the quote below is erroneous. Further it is purely an attempt to get away from the questionable income and pension accounting within the US. Warren Buffet has long advocated “true accounting” to produce corporate “fair value”.
“S&P have put the UK on the list of countries whose banking sector is at risk, due to the overheating property market and a large mortgage indebtness of the population (at 60% of the GDP, the highest in Europe).”
Mortgages when pooled are one of the least risky investments going. If you hold a pool of 1 million mortgage policies and a fraction go south the risk is immaterial. Secondly, I wouldn’t worry too much about this, in the UK no bank has been brought down by a housing issue. Thirdly if you review the figures by the OECD and the Federal Reserve you’ll see that since the 70’s the highest increase in disposable income has been in the UK. Finally there is a premium, “insurance”, paid when mortgages are taken out on low deposits. This indemnifies the bank against risk, but still never let the truth get in the way of a good story.
"Wheels must turn steadily, but cannot turn untended. There must be men to tend them, men as steady as the wheels upon their axles, sane men, obedient men, stable in contentment."
Brave New World |
|
Hung like a Kipper
by Knowledge is Power
|
#1001477
of 3278
11 Dec 2002
05:11 PM |
if it walks like a duck & talks like a duck...
Yes, the housing market is a bubble, it's been there before, and now it's here again.
Kipper please don't tell my you belive Brown that Boom & Bust is a thing of the past!
Yes, BTL, FTB are the key. The BTL will start selling as rent yields lower, FTB will stop buying waiting for a fall.
As for London, Kipper have you any idea what the average wage in London is? The London market is falling as we speak. There's the bubble, there's the ripple!
real man, real world, don't make me laugh! |
|
Standard & Poor downgrade Britain plc
by zorro
|
#1001476
of 3278
11 Dec 2002
04:12 PM |
Read today's headline in the FT: S&P have put the UK on the list of countries whose banking sector is at risk, due to the overheating property market and a large mortgage indebtness of the population (at 60% of the GDP, the highest in Europe).
So, Hoogstraten, to quote back, 'if you owe a bank £10,000, you have a problem; if you owe a bank £1,000,000,000, the bank has a problem'. It runs along the same lines as the Uncle Stalin quote, can you tell?
By the way, have you turned into Jack Straw down under, with all those quotes? Good to hear from you again: it appears that we are all irrevocably drawn to our mortal combat, which may soon be resolved by external events. |
|
Singing in the bathtub
by KIPPER
|
#1001475
of 3278
11 Dec 2002
02:48 PM |
I presume you are predicting that the bubble in preventative medicine, caused by the discovery of penicillin, is about to burst. We will be queuing up at witch doctors for cures. You suffer from delusions; I am yet to be presented with a feasible argument to prove this so called “bubble” exists. Your best argument so far is that the FTB cannot afford to buy, and then string that along to suggest that as a result no one can afford to buy. This again falls under the area of delusional, you take average national incomes and compare to London prices. And then bring in rubbish about Australia, what nonsense. This is clearly “stuff and nonsense”, back to day care I suggest.
Rises in the future no doubt, the longer this forum goes the more I’m proved right. When we get passed your prediction date, 12 months from now, I presume you will apologise to us all? I’m predicting 10% next year, and will do the same if the market falls. |
|
Is to KIP the same as to sleep?
by KIPPER
|
#1001474
of 3278
11 Dec 2002
02:39 PM |
| Aware my man, shake your dizzy head and look at the real world. This is a world of the common man. We who live in this country, do not seek advice from people who do not. Your term of bubble is illusary. Again you appear to be suffering from money illusion, as per my previous posting. Thereis no slump on the way, you dream an impossible dream. |
|
Repsonse to - UK Housing Market
by Billybob
|
#1001473
of 3278
11 Dec 2002
02:15 PM |
I believe that the reason the boom has continued apace one must look at who is buying the properties.
For buyers you need to look at the people who have disposable funds whether lump sums or monthly amounts, that want to work their money.
To work their money in the past there has been amongst other options one of four main areas:
1 Stock Market Investment
2 Bank Deposits
3 Regional self investment in local business (set up ones own company)
4 Property
Now taking each one over the past few years we can see that people have been pulling out of the stock market in droves due to the internet crash and the uncertainty caused by global terrorism. Interest rates have been running at very low levels especially when compared to the official inflation figures so there's no return there. Setting up ones own company is generally only an option for the bold and those with a definable marketing product or service in an area that wants/needs that product or service - a choice that involves a lot of hard work and effort and contains a reasonable level of risk, one that not many wish to take up for many good reasons. So that leaves property - home ownership has been ingrained in our culture and promoted as desirable by many governments in the past thus people see it as a safe investment for which in the most part provides capital protection and growth - sure there are lean times when prices stabilise (read negative equity if you must sell in that period) but historically these times have at most lasted a few years before climbing back up.
Thus I believe there is a vast reservoir of people who are looking to work their money for whom the only current viable outlet is property. This can be evidenced by the huge increase in the buy to let market - these people are using there money to help maintain capital growth and obtain reasonable rates of return for their investment when compared to the stock market and bank interest rates presently.
This sadly helps fuel the price increases as the money pool generally isn't restricted by what a mortgage lender is willing to offer borrowers or what people can afford with their income, but is limited by the return people can get for their investment and thus prices have continued to rise despite all the negative factors as there is nothing out there better for people in general and at large to do with their surplus cash.
Looking to whether the boom will end - well that depends on I think a few factors these being firstly, will the stock market improve or will bank interest rates rise, either of these could cause a price correction as people of a more nervous disposition pull funds out and back into the banks for safety or those of a more adventurous streak heading for the stock market and the potentially higher returns there. The second major factor in whether there is a continued boom or bust, is whether the economy falls into recession or depression this could cause some significant issues to occur firstly this could trigger sufficient nervousness that people accept the low rates found in the banks and pull out secondly the rental market could face high levels of contraction as people without jobs are not able to pay rent either way people will find that the return on their investment does not outweigh the risk.
My personal opinion is that we will see a marked decrease in house price rises and a full on contraction should the economy falter further or interest rates rise. |
|
Drew
by Knowledge is Power
|
#1001472
of 3278
11 Dec 2002
01:45 PM |
Drew,
the BoE has been playing a risky game. If they tried to pop/slow the bubble by raising interest rates, then manufacturing (already on the edge of recession) would be hit. If they helped manufacturing by cutting interest rates, then the bubble would grow even bigger. Thus the BoE has left rates somwhere in the middle, whilst providing monthly warnings about an overheated housing market. Trouble is, no one (namely buyers & the lenders) has been listening.
Ultimately, the BoE is not targeted to monitor the housing market, though they have done so the the limits of their ability. So, they have tried (like the US) to keep the consumer boom running smoothly, with the hope that industry/exports will pick up as the consumer boom ends. This is looking quite unlikely.
Who's to blame for the mess - The Government. They should have brought in tighter lending legislation about 3-4 years ago. They haven't because 1) the boom has helped fill the treasuries coffers through Tax. 2) the consumer boom has helped maintain the economy. 3) They are idiots!
Why have people bought? Panic, greed, fear. Nuff said. |
|
The party's over
by Drew Hyner
|
#1001471
of 3278
11 Dec 2002
01:23 PM |
| Perhaps it's an age thing but having experienced the market correction and negative equity after the last housing boom one would have thought that the banks and borrowers alike would be acting more cautiously. If the Bank of England doesn't begin to put the brake on there is a real danger to inflation and consumer spending which could seriously damage the UK economy for the rest of the decade. I can't help feeling there's a Dot Com style crash around the corner when the market wakes up from its present "low interest rates for ever" dream. |
|
Inflation/deflation
by Stuthepooh
|
#1001470
of 3278
11 Dec 2002
01:21 PM |
Hoogy
I agree and disagree.
I agree with you that erosion of debt is paid for by debtors through higher nominal interest rates, thereofre making any erosion trivial.
However, where Martin Woolf may have a stronger argument is as follows. The early 90s saw a 40% drop in real house prices. Nominal price falls were far lower than this, thankfully producing more stability as a result. If a 40% drop in real prices occurred in a low inflation environment, nominal prices would also drop by a similar amount. As a result, there would follow a far greater number of people packing their bags and walking away from their properties as their loans far exceeded their assets. This would greatly increase selling pressure on the market and cause further price falls.
Add to this the now limited ability of lenders to chase consumers for outstanding secured debt post sale and you have a further reason for owners to walk away.
To me, it seems that a byproduct low inflation environment is increasingly volatile asset prices.
On a further negative slant, it is worth noting that Japanese house prices peaked two years after their stock market peak and have fallen ever since, despite zero interest rates. Guess where we are now in relation to our stock market peak.
Welcome back
Stuthepooh |
|
Mr Jenkins Johnson
by Knowledge is Power
|
#1001469
of 3278
11 Dec 2002
01:15 PM |
that's a good question, you're in the right place for the debate.
In this forum ib belive there are three schools of thought:
1) The housing boom has some way to go.
2) The housing boom will cool, S/E London 10-20% falls.
3) The housing boom will crash 40-70% falls.
I don't belive 1. I think 2 is more likely in the short term. I think 3 will happen if the US/UK economy falters further.
I think 3 is the most likely, & my prediction is 40-50% falls by the end of 2003. (this is a worst case scenario), although possible, I don't see deflation kicking into the US/Euro area, but it's a possibility none the less. If this happens, people have predicted 70% falls, but over what time period I can't remember.
Very amusing Eddie George trying to dismiss acountability for the housing market. Not convinced Eddie, the market has played a bigger impact on the economy than what you're making out. |
|
UK Housing Market
by Jenkins Johnson
|
#1001468
of 3278
11 Dec 2002
09:38 AM |
My main concern and confusion is why is the boom still on? Especially at a time a lot of people have lost their jobs. Salaries have not gone up and all other things like council tax, transportation etc have gone up.
When do we envisage a crash in the housing market as things are really getting out of hand now. |
|
|
