Singing Pig

Why does everyone associate living frugally doesnt = living life? On a good salary, my standard of living is far higher than  someone on a marginally lower wage.  Reason being is I am debt free.   my wife and I could get sacked tomorrow and live for 4 years before we would have to find another job, now thats freedom!  Living life has far more to do with what you do with your time rather than how much you spend IMO.

"A couple of years of stagnation after that"..... Ha ha ha!! Yeah, with continued real house price falls...

 If you look at UK price to earnings during the last crash, you will see that prices fell from a high of 5 down to a low of three, and stayed there for a long long time. (until 2000).  So, for the last crash, if you had bought a property during the peak of the boom, your investment would not have realised any profit vs your wage growth until 2003.  We are now at 5.65 and in deep dwang.

This is why so many thought that this crash would have happened far earlier, as P/E were comparable to te 90's boom even back in 2003. IRs were lower, but that doesnt mean they will be forever.  Even they were not cynical enough to realise what would happen next.  Of course, LAbour told us all to expect low inflation for ever and ever, we got up to our eyeballs in debt and will now pay the price. No-one can predict low inflation for the next 5 years, never mind the next 25, the typical term for a UK mortgage.  Anyone still bold enough to front the "low inflation, low unemployment, stable economy" arguement I have ringing in my ears after hearing it so many times over the past 2 years?   http://www.ft.com/cms/s/0/c0d7ac50-276e-11dd-b7cb-000077b07658.html?nclick_check=1 Thought not.  It was all an illusion, at our long term expense.

In other words, you could have saved from Q2 1989 all the way through to Q2 2001 and not lost a single penny, as wage inflation was matching HPI.  In fact, if you were saving, you were making a fortune compared to house price rises.  This scenario, of course will not happen this time, as we have far less bargaining power with the global economy.  The banks this time will dictate UK housing market values, as money gets tighter and tighter, as liquidity dries up, IRs (in terms of LIBOR, again alomst at its recent high even with liquidity schemes, and I hear RBSs Rights issue is not going well at all...) will carry on upward and LTVs will drop significantly.  the only result? falling house prices.  I have said 25% is the lowest NET drop I can envisage, after wage growth, I expect that figure to be more like 30-35%.  If I hang on as long as possible, saving every penny I have, I meet the banks liquidity requirements, look like a very low risk investment for them and benefit from lower house prices. Win Win Win.  But people are simply not willing to go to the effort of saving a 50% mortgage these days , they want it now instead.  I say chill dude, get saving, you wont regret it later in life.

And as for those that are refusing to sell, go to www.propertysnake.co.uk  and type in your postcode.  There are PLENTY of people dropping prices, the ones that arent are too stupid to realise what is about to happen,those poor souls are what is commonly known as the Denial Phase.  Fear and capitulation are still to come for them, as I have said, 10-12 years is a long time to put your life on hold (certainly longer than the 6-7 years for which I will have been saving, except mine is certainly not on hold!)  Onward and Downward!

The Halifax and Nationwide are a y/y last 12 months % price change propaganda are they not?

The most important figure right now is mortgage approvals - a leading indicator.  If these are running about half last year then this is a very simple conclusion for UK housing.

Talk about a spanner in the works.

I predict a slow, falling property market over the next couple of years.  Beyond that would be conjecture.

Also don't forget those second and third round effects.  People remortgaging from 4.5% to 6.5% is a big increase.  Then retail sales are down. and the circle continues.  It's all bad news.

With LIBOR higher, banks looking for more retail savers, and the savings accounts offering almost 7%, it is clear where your capital should be right now.  6 month bonds are good - long enough for higher rate, short enough to get out in case of provider collapse.

And don't forget gold, as inflation is a killer right now, and currencies are being inflated away.....

Looks as if what I have been saying on here for the past 2 years has gone mainstream.....

http://www.propertyweek.com/story.asp?sectioncode=38&storycode=3114156&c=3

Investor’s chronicle, with Lord Oakeshott

Six weeks ago Britain’s housing market seized up. A trading statement from Persimmon, Britain’s biggest housebuilder, said the number of mortgages granted in March was the lowest since 1975.

Turnover has been falling since the autumn, as the credit crunch bit and the long agony of Northern Rock exposed the excesses of our mortgage lenders. In October I told the House of Lords how I was still being offered a 127% Together Mortgage by Northern Rock, even after its £25bn taxpayers’ bail-out. It took four months more before these loans were pulled.

After a house party as wild as Britain’s over the past few years, the hangover will really hurt. At the end of any speculative boom, turnover slows right down as buyers run out of cash and confidence. The bigger the boom, the more reluctant people are to believe it’s over and bite the bullet when they need to sell.

But when the credit tap is turned off in a market that has risen way above its fundamental values, the only questions are: how far house prices will fall and for how long they will go on falling?

Negative equity

House prices are about 30% above their long-term rising trend of affordability. But when sentiment turns as sharply as it has in recent weeks, and as forced sales loom in the buy-to-let market, prices can undershoot sustainable values on the downside just as easily as they raced ahead during the boom.

The government says this housing depression will be different from the early 1990s’. Yes, that’s right: it will be worse.

Between 1988 and 1993 the Halifax House Price Index fell by 24% – 40% in real terms – and two million householders were in negative equity. But the concentration of risky high loan-to-value subprime mortgages among lower-income families this time around means that, on stockbroker Panmure Gordon’s estimates, a 20% house price fall would push three and a half million families into negative equity.

The other big difference will be tens, if not hundreds, of thousands of forced sales in what City cynics call the ‘buy-to-bet’ market.

Unemployment has only just started rising and is unlikely to reach early-1990s levels, but household debt is far worse – 40% of British households have negative monthly cashflows.

The sooner we get the inevitable fall in house prices over with, the better. It’s pointless for the government to try to prop up a market in freefall. By expanding shared-equity schemes before the market has stabilised, it will only lock overstretched buyers into overpriced homes.

Instead it should restart our stagnant social and rented housebuilding programme, using spare private sector housebuilding capacity and stopping massive job losses in construction.

In addition, lenders, insurers and the City must work together to develop a safer standard mortgage product to protect first-time buyers.

House prices have fallen by 40% in real terms twice since I bought my first house – in the mid-1970s and the early 1990s. The market is overdue for a similar fall.

Industry professionals around the country know we are already well on the way down.

The published house price indices will show year-on-year house price falls by late summer. The futures market is pricing in a 12.5% fall in the Halifax index over the next year and 20% over the next three years.

Gordon Brown, Alistair Darling and Caroline Flint must stop their three monkeys act – seeing, hearing and speaking no evil. Once they come out of denial, we can work to make housing in Britain sustainable, stable and, above all, affordable.

A home is a place to live, not a way to bet. That’s a lesson we must never again forget.

mbga9pgf3:

Looks as if what I have been saying on here for the past 2 years has gone mainstream.....

Yes, but I have got George Soros on my side...

http://business.timesonline.co.uk/tol/busi...icle3997518.ece

George Soros: The economy’s doomed

From The Sunday Times - May 25, 2008

Excerpts:

George Soros, the financier who predicted the credit crunch, tells John-Paul Flintoff there is even more pain to come
‘It’s like a Greek tragedy,” says George Soros, with a smile playing around his lips. “You can see the trouble coming and you can’t avoid it.”

...“I think it’s going to be pretty bad,” he confirms. “You have a housing bubble in the UK. Household debts are higher than in the US. The banking and financial industry is much bigger as a proportion of the economy in this country, and that’s been badly affected. Also, taxation of foreigners has come at the wrong time, so there is a small exodus. You face higher prices for food and energy, and the budget allows little room for fiscal growth.”

Is there any hope? “The decline is likely to be more gradual than in the US, but longer-term.”

He’s still smiling. “I don’t think the government is going to be able to prevent the trouble”

mbga9pgf3:

Yes, but I have got George Soros on my side...

http://business.timesonline.co.uk/tol/busi...icle3997518.eceGeorge Soros: The economy’s doomedFrom The Sunday Times - May 25, 2008Excerpts: George Soros, the financier who predicted the credit crunch, tells John-Paul Flintoff there is even more pain to come‘It’s like a Greek tragedy,” says George Soros, with a smile playing around his lips. “You can see the trouble coming and you can’t avoid it.”...“I think it’s going to be pretty bad,” he confirms. “You have a housing bubble in the UK. Household debts are higher than in the US. The banking and financial industry is much bigger as a proportion of the economy in this country, and that’s been badly affected. Also, taxation of foreigners has come at the wrong time, so there is a small exodus. You face higher prices for food and energy, and the budget allows little room for fiscal growth.” Is there any hope? “The decline is likely to be more gradual than in the US, but longer-term.” He’s still smiling. “I don’t think the government is going to be able to prevent the trouble”