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I think you are correct they are the catalyst that has made people make the final decision in otherwords the last straw.
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I think the house price slump started due to the introduction of HIPs.
LOL!! Classic! Is that what caused the US housing slump too, and maybe in Spain as well?
Nothing to do with the fact that prices had got so stupid that hardly any First Time Buyers could get a mortgage (even with 125% at 6x earnings), nothing to do with subprime lending and removal of said 125% mortgages either I suppose?
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No nothing,it might effect first time buyers but 80% of the market is is by people who already have mortgages and are simply transfering them or don't need them at all, the american subprime was slightly different if you care to go a little deeper I agree it has affected the UK but other reasons have added to the ceasure of this market the main culprit being an inept Government.
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HIPs have reduced the supply of property onto the market, but the reasons for the current down-turn are entirely down to the banks/building socities and their inept policies:
125% mortgages and 6 or 7 multiple earnings could never last, and should never have been offered in the first place. It could only ever end in tears.
Before buying mortgage books (not all US-based), a bit of due dilligence wouldn't have gone amiss.
Now the banks have got us into this position, they are laughing because they just increase rates/charges/both until they have got their money back.
I remember the good old days when you could only get a mortgage after you had saved with the building society for a while, and had a proven track record. Even then you were lucky to get a 75% loan. A return to such policies would make for a far more harmonious society and more affordable house prices. But reduced profits for the banks.
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I remember the good old days when you could only get a mortgage after you had saved with the building society for a while and had a proven track record. Even then you were lucky to get a 75% loan. A return to such policies would make for a far more harmonious society and more affordable house prices. But reduced profits for the banks.
All well and good if there were any council houses left for those who couldn't get a mortgage, like there were in the good old days.
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council houses have been replaced by housing association houses for one reason only
and that is to keep the public sector borrowing requirement figure down
housing associations can borrow money to improve their housing stock and it does not show in the figures as government debt, as it would if a council borrowed exactly the same money for the same reason
in the same way we have PFI hospitals etc
its just moving the burden to state revenue spend rather than state capital spend
its a way of spending more while meeting the commitments to the international bankers
it is of course a nonsense, it is still state spending
and state sponsered wastelands of housing are bad either way, they get bad schools, and the kids have more kids in order to jump the waiting list and so it goes on, and the govt gives them bigger handouts to "cut down on child poverty" which often goes on extra beer and fags
it is all a nonsense
improve the schools and give the next generation the skills to get decent paid jobs is the only long term answer to "child poverty"
we dont need more state funded housing, we already have too many folk dependant on the state
we do need better security of tenure for folk in privately rented accomodation
and we do actually need a housing price crash, cos we are an uncompetitive nation internationally with house prices as they are (even though theyve dropped a little recently)
now of course house prices drop radically = many housing associations loans from the banks look shakey = govt will have to bail them out = more public sector borrowing = international financial community will stop lending money as easily to HMG = deep do do
saw a nice car outside (car link)
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Now the banks have got us into this position they are laughing because they just increase rates/charges/both until they have got their money back.
Too right. And they are laughing even more because the top guys get to keep their multimillion pound bonuses, the taxpayer has little choice but to bail them out (through measures like the Special Liquidity Scheme) and then to cap it all a gullible public blames the government who are left trying to sort out the mess. You couldn't make it up.
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the taxpayer has little choice but to bail them out
No, NuLab decided to bail out Northern Rock to save the Party from a roasting in its own backyard in the North. Those Banks that could not survive should have been allowed to go to the wall. But then NuLab would have been exposed as the architects of the failure.
and then to cap it all a gullible public
Now they are the gullible public. Before they were the taxpayer bailing the bank out.
blames the government who are left trying to sort out the mess.
Rightly so. The blame lies with NuLab who were happy to ride on the mirage of the "economic miracle" of Gordon Brown's policies [ all the growth was on the back of a "gullible public" believing they were rich because gordon said so, and they could see their house prices were rising to prove it ]. NuLab are now desperately trying to blame international factors for the problems, but were happy to take the credit in boom times. NuLab have not learnt the lesson to let the markets sort out their own mess - witness the pathetic attempt to kick-start the housing market with the one year freeze on Stamp Duty for properties in the £125k to £175k range. [care to guess what will happen in 11 months time when the 12 months is about to expire? ]
The failure of NuLab in the whole fiasco can be analysed in depth, and has rightly it has been done on Financial web sites where it belongs, rather than here on a Motoring site. So I shall leave this discussion there.
You certainly couldn't make it up ! ;-)
Edited by jbif on 05/09/2008 at 18:31
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I remember the good old days when you could only get a mortgage after you had saved with the building society for a while and had a proven track record. Even then you were lucky to get a 75% loan. A return to such policies would make for a far more harmonious society and more affordable house prices. But reduced profits for the banks.
Indeed. It was intense lobbying by the banks '79-'81 that led to the deregulation of the mortgage market in '82. Thatcher was a willing supporter (remember the 'property owning democracy') because she thought that house owners would be more likely to vote conservative and was keen to push up property ownership figures.
Social housing availability declined sharply in the 1980's because of the Right To Buy scheme (introduced in 1980) and hundreds of thousands of council houses were sold. Councils were not allowed to spend the proceeds on housing, so social housing availability declined sharply, especially in areas where house prices were high (mainly the SE).
The are enjoying the legacy of these measures today.
We have a housing slump not because of HIPs, but because a classic asset price bubble is rapidly deflating. The buy-to-let market kept the bubble inflated long after it would have naturally slowed as first time buyers dropped out. Let's not forget the developers either, who rushed up blocks of luxury apartments (overpriced small cheaply built flats) and underestimated the intelligence of buyers.
To return to the OP's point about August sales, you have to remember that in recent years August has only represented about 3-4% of annual sales. So the comparison is a bit of non-story. The media has been quick to seize on it as part of the current 'end of the world economy' season they are running with. Septembers figures will be much more relevant.
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LOL!! Classic! Is that what caused the US housing slump too, and maybe in Spain as well?
LOL. ROTFLMAO.
US housing - plenty of cheap land, loads of Government backed loans from Freddie Mac and Fannie Mae.
Spanish Housing: Loads of flats and apartments built, a lot depending on Brits buying abroad, but then the £ to Euro rates went against the Brits as well as Spanish Local authorities confiscating/demolishing "illegally" built homes sent the Brits packing.
UK housing - NuLab encouraging housebuilders to build millions of new homes to satisfy demand due to millions of EU migrants causing demand. Gordon Brown announcing that buy-to-let would be allowed to be tax-free in SIPPs pensions. Then killing the plan it with just a few weeks notice. Followed by introduction of HIPs. Just the catalyst that led to the tipping point for a collapse in the market.
As I said, plot the events on a chart and see the correlation for yourself.
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ep and labour policies have led to too many of the wrong kinds of housing being built, too many of types folk dont really want to buy
too many flats
too many without parking
etc
the market reacts the only way it knows and values drop
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As I said plot the events on a chart and see the correlation for yourself.
Correlation is not the same as causality.
A common mistake my friend, In fact you could probably 'prove' that the announcement of higher VED caused the housing slump!
The housing market in a number of countries is in downturn. This is mainly due to the amount of cheap credit that has been sloshing around the globe encouraging property bubbles - that's now come to an abrupt halt and burst the bubble. I agree that the demand from BTL has been an issue in ramping up prices, but the matter of SIPP was minor and very short lived. As to the government 'encouraging' housebuilders, well, from where I stand they need precious little encouragement, they were throwing up apartments like there was no tomorrow.
Blaming HIPs is the face of all the other factors is nonsense. The housing market went into slump because first time buyers simply can't get the funding unless they have a substantial deposit (10%+) which most just don't have. No funding = no buyers.
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Correlation is not the same as causality.
"Correlation is not causation but it sure is a hint."
Edward Rolf Tufte [ Professor Emeritus of statistics, information design, interface design and political economy at Yale University ]
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Several UK banks are technically bankrupt. Apparently the 50 bill that the Govt has loaned on the cheap to them has been quietly quadrupled to 200 billion so great the demand has been from the banks to remain liquid.
Worrying, these loans are due to be called in on Oct 31 so we are close to seeing the continuation of the banking crisis. It is not over by a long shot. In fact, it is just begining.
When UK house prices have fallen by an average of 50 or 60 percent within the next 2 - 3 years and we enter into a prolonged period of deflation like Japan started in 1990 the price of everything else will come down. Cars will plummet in value also dramatically.
People are in denial about how serious things are now but, heck, they were in 1929 also.
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tawse
Although I concur with your analysis of the fast-approaching depression and the fact that the SLS closes on 20/10; I understood the banks have "up to" 3 yrs to repay the £200B liquidity secured through it's provisions - and it will have to be superceded by another, similar, "facility?"
Japan 1990 is perhaps the best model for this crisis, in all but scale; there being not a lot of difference between "sub-prime" and "Yakusa" loans - and they're still in it.
My prediction is that modal house prices will fall 20% this year, 25% next, then stay generally flat for about 18 months, before beginning to edge up again as supply-and-demand forces unwilling buyers to re-enter the bottom of market.
That's assuming that Barclays doesn't fold and the resulting cascade of panic leads to a full breakdown of all the fragile supporting structures of our society. [November may be a bit fraught...]
And then, just as you think things can't get any worse, there's always the risk of bird flu - it may be currently ignored, but it definitely hasn't gone away.....
Edited by Screwloose on 05/09/2008 at 22:30
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Just heard on local news that Bentley are going on to a short week. Not surprising given current circs but very bad news for this area. Huge percentage of locals work for them.
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Bentley are going on to a short week
...and which new VED band do all their cars fall into?
Did nobody in Whitehall check to see what sort of cars Britain builds now?
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"...and which new VED band do all their cars fall into?"
Yeh if I had over £115k to spend on a car, finding the £400+ for road tax might put me off ;-)
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Rich people hate giving any away to the Government... and the first year is nearer £1000.
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Screwloose, check out Moneyweek.co.uk - by all accounts at least one major investment bank is close to going bust and quite a few British High Street banks are, if they are not already technically bankrupt, are sailing close to the Wind. The banks have only till September to repay the money loaned but, of course, in recent weeks there has been much talk of it being extended, the Government creating a new scheme, etc, etc, because the cold reality is that the banks do not have the money.
It is a Faustian pact now between the banks and the Government so the Government will do something, mainly to save their own skins as it appears difficult to hammer into their heads just how screwed we all are, because if they don't create the illusion of a bail-out then the illusion that the UK banks are still solvent will be broken and it will be like Germany in the 1920s.
You know that 25, 50 and 100 year rule where Government secrets are locked away and 50 years later we learn a small fraction of the truth behind Edward & Mrs. Simpson or Lord Halifax wanting to be nice to Hitler... Well, a few weeks ago it was decided that the money lent to the banks, what banks it was lent to and how much would remain secret FOREVER. Not even in a 100 years will the secret be revealed so precarious is considered the positions of the UK banks.
But it is all the banks - Germans, Spanish, US, the World over. They all got involved in this orgy of debt and easy credit and the result, apart from a handful of people becoming very wealthy, is that the World is now on the brink of a crisis that will make the Wall Street Crash look small-play. Even if banks wanted to lend silly amounts of mortgages again they can't because they are barely solvent.
House prices will not stop at 45% falls. We will end up like Japan where house prices ended up falling by 90%. If you had told people in Japan in 1990 that house prices would have fallen 90% you would have been laughed out of the room - not today. The same is happening here now and we are going to enter into a global deflationary environment which will simply break millions of people. It is tragic.
Every bubble in history has ended up with the bust being bigger than the rise. This one will not be any different. I just don't know whether to stay in cash or go for gold.
As for cars - secondhand prices will plummet in ways that will shock people in the next year simply because the car makers will have to reduce new prices dramatically in order to get any business. Already, fleets have apparently stopped buying and only an idiot private buyer would buy a new car bearing in mind depreciation. Watch the 0% deals become cash back deals - isn't Citroen already doing this - and the likes of Ford flogging off more and more pre-reg jobs at car supermarkets. Then, eventually, the car makers will begin reducing new car prices by thousands as deflation rears its ugly head.
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I'm glad that my house is paid for and my car is worth buttons, I don't envy those who are still making their way up in the world.
The stupidity of Gordon Brown is shown quite clearly in his belief that abolishing stamp duty on properties up to £175,000 will do anything to halt the slump in house prices. It will do exactly the opposite, as anything now on the market at between 175 and 185 will become unsellable unless the owners drop the price to the magic figure., and that will have a knock on effect all the way up the ladder until you get to the price bracket where money is no object.
We are going to pay a heavy price for Gordon's squandering of the proceeds from an economy that was already thriving before he took office. History will judge him to be one of the biggest disasters ever to hold the reins of the nations finances.
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But how could the Govt. actually have done much different in the preceding 10 years? The crisis has been caused primarily by an asset bubble - and worldwide at that. What particular actions could UK plc have done to stop it? Raise interest rates to 10% in 2000 to squash HPI - but what else would be squashed collaterally if it had been? It's a moot point though, interest rates are set by the BoE according to the inflationary/deflationary cycle, not to control specific asset class prices.
I would hazard that the best place for wealth just now is in cash money - but spread as widely as possible (in £30-oddK chunks spread between different bank licences). It's ironic that a widely spread share portfolio is always safer than too highly focused investments - the same's now true of money in banks & other deposit holders.
The great 'benefit' of deflation is that your money is worth more & more as time goes on. I wouldn't worry too much about car depreciation though - yes, you may lose notional money, but if prices continue to fall (or depreciate relative to cash) your next new car purchase is a much smaller step.
I've lost a good chunk on bank shares, I'm only cheered by the fact that my cash is increasing in (real) value as asset prices decline. Give it about 5-6 years before prices stabilise & overall national wealth starts to increase again.
Edited by woodbines on 06/09/2008 at 00:43
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Just over a year ago a guy phoned into a London talk show ( James O'Brian LBC). He said he worked in the city and went on to describe a lot of the financial problems that have come about up to now. He referred to the U.S. sub prime saga before it was reported here and the impending UK banking problems, though he didn't name any of the financial institutions he felt were going to go to the wall. Warning of a DEPRESSION, not a recession.Both here and in the U.S.
The host showed some concern, but this guys words stuck in my mind and it seems to be rolling out as he said.The shadowy figures in the financial institutions must have seen this coming and surely know what is round the corner for all of us.
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Moneyweek mag was warning about all of this 3 or 4 years ago and they have got it pretty spot on so far. Alas, what they think is about to happen next is very worrying indeed.
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tawse,
"Alas, what they think is about to happen next is very worrying indeed."
I'm interested to know what it is you know.
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tawse "Alas what they think is about to happen next is very worrying indeed." I'm interested to know what it is you know
Go to Moneyweek's website and read the articles from their numerous pundits and writers. Very worrying.
Basically the global banking system is bust. It is hard for most of us to get our heads around that - only a few who were alive in 1929 can perhaps understand this as it happened then too - as some of these banks were once worth billions and billions... but billions and billions is nothing compared to the trillions of debt that these banks are now owed by the likes of you, me and all the other mugs who spent, spent, spent on easy credit and easy mortgages.
(Well, not me because I am a tight sod and I, thankfully, thought the housing market was a bubble bak in 2001. Hopefully not you either.)
.*********
It is pretty hard to live a life when virtually all your salary is going on your mortgage which is 8 or 10 times your income so you live on bread and water... or you live on more credit. People can do that for so long but eventually they have to pay back all they have borrowed. Heck, you can go to any town in the UK now and it is full of 30K plus cars. In the past few years walking into a car showroom and being interested in something for about 10K resulted in the salesmen not wanting to you - why waste time with you when there were plenty of mugs ready to MEW themselves up to their eyebrows for a big 4x4 costing 30K, 40K or even more!
Alas, the day of pay-back had to come eventually and it is now here. If you owe the bank 1,000 pounds it is your problem. Owe them a few hundred thousands on a vastly over-priced property and it is their problem. Millions of people owing the same and the banks can go bust. Then there is all the credit card debt on top of the housing debt.
If you want to know what is going to happen then google Fred Harrison. He has some articles over on Moneyweek but he wrote a book a few years back detailing the boom and the subsequent bust and, worryingly, he has been 100% percent right in his predictions so far. Worringly because he predicts a global depression in 2010! Have a read of 'Boom, Bust: House Prices, Banking and the Depression of 2010'
I have no association with Moneyweek but I strongly suggest anyone who is concerned about the coming years to have a frequent read of it.
The bottom line is spread your money around numerous non-related banks and keep an eye on whether we are heading for deflation or inflation? That is the trillion dollar question.
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Heck, you can go to any town in the UK now and it is full of 30K plus cars
Why it is only UK people are so inclined to buy newer cars? Just been to Switzerland and it was full of 10+ year old cars. IIRC, Swiss people are among the richest in the world!
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tawse
I find Reuter's Saft the best informed and most lucid commentator. A link might be thought improper; but a search for his name on Reuter's site will show how perceptive he was - even a full year ago.
I saw this coming and liquidated my house in late '06. While it's nice to have the bank ring up every month and beg you to leave your brass with them - I'm, like yourself, wondering how safe banks now are. [Tell someone in '07 that the Bear would fall...]
Gold is already at $1000oz, [have you noticed what 700 tons would now be worth Gordon?] so are rough diamonds the way to go - or would first-cut heroin be a safer hedge for the deposit box; after all, people are still going to want something to take their minds off the dire world in which they're about to find themselves trapped?
I think the 30 and 100yr rule only applies to Government documents; [don't knock it, I was glad to be notified recently that certain files had already been embargoed under the 100...] so, as notionally independent, maybe BoE dealings are now exempt?
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Mrs P persuaded me to sell the Beemer last October - I was dubious - but she was bang on the money, she also persuaded me to pay off the mortgage quick a few years ago and take a loan as opposed to paying cash for the Skoda. Astute is a good word for her foresight.
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Why is paying loan interest rated a good idea though? Unless you can edge a differential in saving/borrowing (e.g. getting a 0% deal & getting 5% on your savings etc.) i can't see the benefit - other than you may have had a fantastic investment opportunity that offset loan costs which required the cash.
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The deal/rate she negotiated for me as well as maintaining a current credit rating - essential she says. She (says) that whilst negotiating she noticed a certain hunger in the guy's eyes - we ended up with a remarkable deal. Paying a lower sticker price than we would have by paying cash - she reckons that in all we were around 1.5% better off leaving savings in tact. Not a big saving on a 6000 pound loan - but better than a poke in the eye etc. Its a bit of sport for her.
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PU
Rare lady you've got there....
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Yes, it make sense. I'll be negotiating on a new vehicle (BMW bike) soon, hopefully. Any chance the good lady can sort out the math for me too? ;)
Edited by woodbines on 06/09/2008 at 01:06
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I'll be negotiating on a new vehicle (BMW bike) soon
My only suggestion is, wait a while.
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New dealer opening up in Chester soon Woodbines - She's available to negotiate the prices for Birthdays, Weddings and Bar mitzvahs
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A 'proper' Motorrad dealer? That would be handy - for me, the nearest 3 all need trips through/into Liverpool, Manchester or Birmingham - a hassle when serious tyre-kicking is required. Thanks for the offer - but I'm too old for Bar Mitzvahs & birthdays(!) - Weddings... I'll keep you posted.
NC - Do you see any particular reason for delaying a bike purchase ( over & above the general economic context & prevaling sentiment)? Bikes, oddly enough, are treated quite benignly in BIK & VAT terms (VAT is reclaimable on purchase) - my plan is to renew acquaintance with the latest boxer twin in touring form & 'sell' my company car to myself. The BIK for my current motor is nearly a quarter of its actual (latest trade-in) value & I estimate the BIK for a smart R1200RT would be about £300p.a. (on a 50/50 business/pleasure split).
cheers
woodbines
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I have the address somewhere - I was up north once when the Bike was due for a service and MoT and I used Bluebell in Crewe (excellent by the way) I was mailed by them a few weeks ago to say that a firm in Chester was taking on their Motorrad business. I'll post the address details later.
Edited by Pugugly on 06/09/2008 at 12:19
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I found the details, thanks PU, from your clues. It's new (not yet functioning) site is chester-motorrad.co.uk - I've got a telno as well & i'll contact them soon to check out opening dates etc. (they're not answering currently)
Edited by woodbines on 06/09/2008 at 12:42
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My son was saying their local LandRover outlet are not taking 4x4 as trade-ins.
Auction and you get the price towards your new LR.
Price Reduction in today's papers.
Nissan Murano ( there is a new model shortly) - £10K off making it £19999 for a new 3.5 ltr V6.
I know old models are reduced to clear but this seems a good deal if you have access to a cheap petrol pump (your employer's maybe) Lot of car for £20K!
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Nissan Murano ( there is a new model shortly) - £10K off making it £19999 for a new 3.5 ltr V6.
The 2009 model is $26K in the US - OK, it's not quite the same spec but at £20K Nissan will still be making money.
I wonder when we'll get to see US style personal leasing where they can lease things like BMW 328i for $300/mth?
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