Property Prices Rising Again

[chump]

I don't disagree with what is posted above ,but let me qualify it. Some markets of which property is one are strongly mean reverting. Why ? because they respond to the base fundamentals ...net disposal income v property price v availability & cost of credit v employement levels etc...
So after a period of extreme outperformance the PROBABILITY of a reversion to mean increases. The reversion might take a number of different routes from outright crash to outright stagnation and of course any mixture of the two. The route is pretty immaterial because it's only ever known with hindsight. What you know with anticipation is that the returns from property will diminish as the excesses are worked out. You then have to decide do you retain a position in property (most will anyway if only because of the equity in their personal property) and if so to what scale. For me this decision is made based upon what alternative investments are also under consideration.
For example , inflation is running about 4 to 5% at the moment (don't argue with me on this as I am not interested) , current returns on property + their trend must be weighed and should be adjusted to identify the real rate of return. This can be then looked at against other alternative investments for the same timeframe.
The questions are never as simple as people would like them to be...will property keep going up , will it crash etc etc .."will it " , let's predict/forecast it ...absolute nonsense ... property could continue to go up and still constitute either a loss in real terms ,or simply a los in terms of alternative investments foregone ...these are the issues to consider if you don't wish to be part of the underperforming herd.

 

[Atilla]

Seems the UK Property Market is finally losing steam,prices down in December.

UK Dec house prices down 1.0 pct vs Nov; up 9.9 pct yr-on-yr - Halifax UPDATE
(Updating with analyst comment)
LONDON (AFX) - The UK housing market faltered slightly in December, according to HBOS (LSE: HBOS.L - news) unit Halifax.
In its monthly survey of house prices, Halifax said prices fell 1.0 pct in December from the previous month for a 9.9 pct annual rise, taking the average price to 186,035 stg.
The latest figures are below expectations of rises of 1.0 pct and 10.2 pct respectively.
On a quarter-on-quarter basis, house prices rose 4.2 pct in the last three months of the year compared with the third quarter.
Commenting on the figures, Martin Ellis, Halifax chief economist, said: 'House prices fell by 1 pct in December, but it remains too early to conclude that this indicates a genuine slowdown in the housing market. Overall, prices in the final quarter of 2006 were 4.2 pct higher than in the previous quarter, marking the strongest quarterly rise since the second quarter of 2004.'
Continued economic growth, rising employment and an ongoing lack of supply will continue to drive up house prices over the coming months while higher interest rates, greater pressure on household finances and subdued real earnings growth will constrain demand. House prices are predicted to increase by 4 pct in 2007, Halifax said.
In Greater London, the average price increased to 287,176 stg by the end of the year, taking it above the inheritance tax threshold of 285,000 for the first time.
The month-on-month fall in house prices in December reported by the Halifax contrasts markedly with the 1.2 pct increase reported by the equivalent survey from Nationwide building society.
'However, it needs to be borne in mind that house prices can be volatile on a month-to-month basis and the December reading may well primarily be just a correction after the Halifax had previously reported house prices rising in a 1.2-1.8 pct range in each of the previous four months,' said Howard Archer at Global Insight.
'At this stage therefore, we would not read too much into the December drop in house prices reported by the Halifax,' he added.
Archer believes, however, that the fall in house prices reported by Halifax may provide some mild comfort to the Bank of England, although the bank is still likely to be perturbed by the overall indications of ongoing strength in the housing market.

In any price calculations there is always a supply and demand factor + speculation.

People live longer,
People live separate lives longer before marrying.
Divorce is on the increase.
Not sure of the net migration of popullation into the UK but I think it may be positive.
People are investing in second homes as a pension.
Hence demand is high.

Fundamentals say there is a housing shortage in the UK. Green belt rules means land is short in supply and expensive. Housing stock is inelastic in supply and responds to demand with long time lags.

Finally, coupled with flooding risk thus the removal from the supply of some at least 5% stock as a rough estimate (somebody may know accurately the exact figure from risk of flooding) and the net result is continued house price increase in my opinion.

I would also agree that a large % of personal finances are precarious just like our eco system at the mo. That's life eh?

 

[chump]

The answer to the question I got by pm is not that secretive it can't be posted here.

What makes a market...money ....what destroys the returns from that market ..too much money.
With regard to property the amount of public interest and moneyflow generated in recent years is of itself a sufficient signal to tell me that there are preferred investments elsewhere.
Part of the behavioural cycle I am referring to is this ...as abnormal returns become increasingly transparent they bring moneyflow based on recency...that is players who are only looking at the very recent trend who then extrapolate those returns forwards ...caught in a market where their expectations fail to materialise they are subject to the shock of being 'wrong' which can result in being shaken out ,or locked in which applies to the mass public. At that same time players working on imminency of a change to their longrun returns are extracting their money and sending it elsewhere ... the result is as mentioned in my previous post.

 

[laptop1]

People live longer, People live separate lives Divorce,migration They say this to fool you. The banks are controlling the information and the way we think, not your high street banks they don't even know what's going on, it's people higher up. They want higher prices, they will get higher prices, they want lower prices they will get lower prices. They have a plan in place that we cant see, till its to late.

Something in the world will upset the housing market, whether its natural or man made, its about cycles call it natural cycles if you like, if it makes you feel better, anyway its out of our control.

All this don't affect most, only the one who have bought houses just before 2003. Such as the first time buyers, people re-mortgaging to improve their houses and buy a nice new car and book an expesive holiday all on the never never.These pepeol ignore interest cycles and my favourite the buy to let people who think they are mr big shots with one or two houses they be hit first and the rest will follow, Its only a matter of time.

 

[chump]

Something in the world will upset the housing market, whether its natural or man made" ..well I've just had a fantastic home-made stew with lentils etc etc ...so I think you can put your money on the "natural"

 

[Atilla]

People live longer, People live separate lives Divorce,migration They say this to fool you. The banks are controlling the information and the way we think, not your high street banks they don't even know what's going on, it's people higher up. They want higher prices, they will get higher prices, they want lower prices they will get lower prices. They have a plan in place that we cant see, till its to late.

Something in the world will upset the housing market, whether its natural or man made, its about cycles call it natural cycles if you like, if it makes you feel better, anyway its out of our control.

All this don't affect most, only the one who have bought houses just before 2003. Such as the first time buyers, people re-mortgaging to improve their houses and buy a nice new car and book an expesive holiday all on the never never.These pepeol ignore interest cycles and my favourite the buy to let people who think they are mr big shots with one or two houses they be hit first and the rest will follow, Its only a matter of time.

Sounds like an anarchist theory of the price mechanism. Let me guess you spray your hair red blue and white too. Just kidding...

On a serious note house prices affect ALL owners. There is a wealth effect. I think it was Paul Samuelson who said that a persons wealth is like a bath tub full of water. The flow of water is the expenditure. Bigger the volume of water (wealth) greater the flow of water (expenditure).

Floods will impact 5 million people in the UK - 2 million properties.

http://www.environment-agency.gov.uk/subjects/flood/?lang=_e Very interesting site.

Banks do not control the weather. You dismiss lots of facts and go chasing a wild idea.

I've read HSBC might regret it's investment in the US with the fall of the $. Banks are ran by humans like you and I. The only question mark I have about house prices is purchasing power of people to meet mortgage payments. Where is it all coming from? Debt - the Banks? One big flood and all our money and sins will be washed away.

All I can say to people out there is make sure you have a good dingy in your shed at the back of your garden. Maybe throw some lentils in there for propulsion if you want to see the world as an after thought.

 

[laptop1]

Atilla

It was French political who started anarchist society,so enough said.

My view is, central banks are controlled not by elected governments not peole like you and I, they are largely by PRIVATE INTERESTS from the world of commercial banking

In Britain today, notes and coins now account for only 3% of our total money supply, down from 50% in 1948....The remaining 97% is supplied and regulated as credit - personal and business loans, mortgages, overdrafts etc. provided by commercial banks and financial institutions - on which INTEREST is payable. This pattern is repeated across the globe

Remember 1987. Before the October crash public were arguing about the fact that the market will not give an inch on the down side. Finally when the crash came, the brokers did not pick up their phones and Dow lost more than 20% in one day. Something much more serious is getting cooked here. The complacency level, the sentiment indicators and above all the fundamentals are all ready to make the market collapse big time.

 

[chump]

Laptop,
In a sense I wish I could agree with you. That our fiat based fractional banking system was some form of conspiracy by 'them' to keep the 'poor' poor and the 'rich' rich. I can't though because I don't agree with the conspiracy theory approach you suggest , I really do wish I could ,I wish they were that smart. My alternative view is not conspiracy ,but collusion based upon a mixture of political self interest and ineptitude.
Our financial systems have their roots in the times gone by where nobles and states had to raise money quickly from 'nowhere' to meet pressing crisises. Atypical of those times these excesses were dealt with by loan default following which everybody got on with the business of making money based on actual productivity. In todays terms think of Argentina of a few years ago.
The phenomena of the 20th C and today is the ongoing political 'crisis' of how to keep the mass believing that they can have more , keep more , than they actually produce and consume ! This leads to ...
Today we have the states and the banks with their economists insitu believing the answer to one idiocy is to create another one to serve the above need ...that is excess liquidity used to patch up poor economics can be simply overcome by creating more liquidity and the problem goes away at least for the political term necessary. Essentially what is happening is instead of loan default of times gone by ..a Gordon Browne phenomena takes place ...default by bleeding and insiduous inflation which spreads the pain to the herd as opposed to an outright default against the few. This is of course biased in output as the few do indeed gain more from this process and lose less cyclically when it is adjusted. This still is not a conspiracy though so much as collusion in sustaining the above-mentioned illusion.
Recessions have their place ,they are the "default mechanism" of olden times ,but today banks/economists think they can be avoided by priming the pump. All they are doing though is transmitting the effects from one sector of the population to a much wider sector. The sacrificial lamb simply has a different name. Nothing is being saved except their political and banking careers. Greenspan was the master at this ...terrible economist ,great politican....giving people what they want rather than what they need is the surest way to keep office afterall.

In fact I would say Greenspan was the Robbie Williams of Bankers......Robbie with his cheeky I'm one of you grin ..let me entertain you (even though he's not remotely "one of you")...Greenspan with his "you understood me , I must not have made myself clear" ..let me tell you a fairystory of how you are the most productive nation the world as ever seen blah blah

 

[laptop1]

Greenspan was the master at this ...terrible economist ,great politican....giving people what they want rather than what they need is the surest way to keep office afterall.

In fact I would say Greenspan was the Robbie Williams of Bankers......Robbie with his cheeky I'm one of you grin ..let me entertain you (even though he's not remotely "one of you")...Greenspan with his "you understood me , I must not have made myself clear" ..let me tell you a fairystory of how you are the most productive nation the world as ever seen blah blah

What you said above is my point. Its the same with the Bank of England. . . It was admitted by most qualified observers. In January, 1924, Reginald McKenna. . . as chairman of the board of the Midland Bank, told its stockholders: 'I am afraid the ordinary citizen will not like to be told that the banks can and do, create money. . . . And they who control the credit of the nation direct the policy of Governments and hold in the hollow of their hands the destiny of the people look his neme up on the net YOU WILL SEE FOR YOUSELF..

Bottom line, All this explains the depraved mass media and stupefying education system. I could go on, but you get the picture. We are krill at the mercy of a gigantic whale. At the very least, let's not waste energy thinking we live in a free and open society.

 

[Dentalfloss]

this thread has gone seriously off course.i dont understand these last few posts.they have got nothing to do with property prices.lets call it a day.as usual,t2w threads end up as garbage

 

[chump]

If you are referring to my posts why don't you come back in and give us the benefit of your experience in the property market . I've only been making money out of it for 30 years so I guess you can teach me lot's.

 

[laptop1]

If you are referring to my posts why don't you come back in and give us the benefit of your experience in the property market . I've only been making money out of it for 30 years so I guess you can teach me lot's.

If you look back on my posts, I said it will concern people who have bought after 2003. So you are one of the safe ones :cheesy:

All this don't affect most, only the one who have bought houses just before 2003. .

 

[laptop1]

World banks create money and control credit, they will create enough money to buy it back again, It's now pay back time for the Banks. All who borrowed on the cheap must now pay back on higher interest.

Look at it this way, Money is man's only creation meaning, making something that did not exist before.so dont tell me it cant be multiplicated.

 

[hornblower]

property prices are coming down in my part of the world
in about 18 month, 2years , we will see sensibly priced houses
but while building societys and banks , are giving out 40 year mortgages prices will remai n high

for the last 20years I have only bought property at auctions, you save 30% to 50% on the retail price
as a friend of mine says , we are buying at wholsale prices, not retail
retail is for mug punters

Rothchild said do not buy (shares) and propertys untill there is blood on the streets

one of my kids , says that friend of theres , there mortgage has gone up close to £100 per month over the last few months , and it is starting to hurt

 

[Atilla]

property prices are coming down in my part of the world
in about 18 month, 2years , we will see sensibly priced houses
but while building societys and banks , are giving out 40 year mortgages prices will remai n high

for the last 20years I have only bought property at auctions, you save 30% to 50% on the retail price
as a friend of mine says , we are buying at wholsale prices, not retail
retail is for mug punters

Rothchild said do not buy (shares) and propertys untill there is blood on the streets

one of my kids , says that friend of theres , there mortgage has gone up close to £100 per month over the last few months , and it is starting to hurt

Where is your part of the world Hornblower?

Are there any risks in buying auction property?

Are you a developer?

 

[hornblower]

Where is your part of the world Hornblower?

Are there any risks in buying auction property?

Are you a developer?

East Yorkshire

yes lots , when the hammer falls its yours , there is no going back
you need a walk aroung survey befor you buy ,
and you need to to know how much its going to cost to fix it up
and what it will be worth when you have done it
and if you are gonig to rent it out , what the return will be

am I a developer ? no

 

[neil]

Maybe rate hikes in the UK will push down house prices in France where house prices are already dropping.

 

[chump]

Neil,
One french site I look at regularly has now double the props for sale it had 6 months ago.
Offer them their air fare home and see if you get a taker ! It's going to be the same old story , subtract the considerable transaction costs (inc taxation) and most of the people trying to sell now who bought in the last 3 years will end up 'flat' at best. Some 'boom' ..LOL

Posters,
Auctions in the UK are 'different' to some countries. In some countries auctions account for the majority of the sales made whereas in the UK it's still niche stuff attracting property that will not ,or cannot be sold through the mainstream agency based market. That is , needs lot's of redevelopment , tenanted , poor area and sucks , seller needs a 'certain' date to realise funds etc etc . In other words it's there for a good reason !
All of this means that in general auctions attract mainly property which is unsuited to the mass market for a reason. In times when property is still thought of as somewhere to live for the majority this affords a buying premium. This is the same premium that Ben Graham labels as a Margin of Safety ...that is 30% + below market ..only a chump could not then make money from it , or at least be at low capital risk.
Unfortunately when we get to times such as we have had and still have where property is still in the public focus this edge is much harder to find. Auction rooms are crowded by people who now think they are prop magnates ,people who don't have much of a clue as to where their buying ceiling should be and who all to often bid too high and completely undermine the reason for buying at auction only with hindsight do these people get wise and know their limitations. Likewise when mainstream sales are 'fine' if not bouyant then the calibre of property at auction falls off. Logic really , if a prop can be sold mainstream , the selling costs are lower and the sale price generally is higher. So in 'good' times you get chumps packing out auctions bidding on a lower quality of product ..needless to say this is really not the enviroment you want if you are to make the best returns from buying at auction.
One warning if buying at auction ,never buy until you have had the legal pack and had a good look at it . You may find yourself buying 'more' than you bargained for.
In 'bad' times I've bought without even getting out of my car ...once i got a hell of shock ,thought I had bought a 2 bed house etc and went in to find 4 beds etc ...now that's when auctions really make you money ,even a chump can do it.

 

[hornblower]

,even a chump can do it.
thats the best under statement i have read in a long time

 

[Atilla]

East Yorkshire

yes lots , when the hammer falls its yours , there is no going back
you need a walk aroung survey befor you buy ,
and you need to to know how much its going to cost to fix it up
and what it will be worth when you have done it
and if you are gonig to rent it out , what the return will be

am I a developer ? no

Thank you for your reply. Although I trade shares and SB (which are risky) I would find parting with cash at an auction very high risk. Perhaps if I was younger with the money I now have???

One of my friends from IBM took redundancy, sold his London house and went up North with his family+children - and purchased three properties back in late 90s. One to live in and two to do up and rent. What a smart move with the benefit of hindsight.

I'd guess making money out of developing now is much more difficult than in the last 10 years or so as house price increases are a maybe rather than certainty.