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Posted by Chatter 1
Tell me: what is the mechanism by which REAL house prices rise for the foreseeable future when REAL salaries are static?
You have truly found the fountain of all wealth.
BTW have you seen todays news of the BTL scam collapse?
Reply by Chatter 2
Its obvious that prices can only go up.
Firstly, who would ever sell a house at a loss? Faced with the option of selling at a loss or not selling at all, most people would choose the latter.
Interest rates are low and they will go lower. This is because we have a wide trade deficit and the government will want to devalue sterling. Interest rates therefore will remain low.
Unemployment is low and will continue to remain low.
Affordability is the issue. Low interest and good economy means that property is more affordable now than ever before.
For those "salaried staff", there incomes may not be going up, but they are the people that will rent the properties off us BTL professionals.
Basically, we will get rich and you "salaried staff" will slave away paying our bills.
House prices are going up!!!
Will Perry
Replay by Chatter 1
You say “Its obvious that prices can only go up.”
Wrong: As I have already pointed out Japanese house prices have fallen 60% from their peak 15 years ago. In Germany real prices are lower now than 1975. My parents house in Essex fell from £180k in 1988 and sold for £129k several years later. I know a flat in Canary Wharf which fell from £240k in 1988 and sold for £95k in the early 90s. Sydney is currently experiencing general falls of 10% and isolated falls of up to 40% at auction.
You say: “Firstly, who would ever sell a house at a loss?”
Answer: People who die, emmigrate, divorce, upward move, job relocation, bankruptcy, fear of future or further capital loss in a falling market. There are ALWAYS people who need to sell at the bottom.
You say: “Interest rates are low and they will go lower.”
Maybe, maybe not. The only thing you can be sure of is that they will not stay where they are.
Rates will be lowered if the economy stays in the sh*t. Read deflation, falling gross incomes as firms try to boost profits by squeezing payrolls. Faster falling net incomes as Gordon extends his tax grab to pay for overspending. Basically read the Japan scenario where house prices have collapsed despite zero interest rates for the last decade.
Rates will rise if the economy does well causing inflationary pressures to occur. Small increases in rates will create insolvency in over leveraged owners be they recent FTBs or over extended BTLers.
“BTL professionals” (uh sorry – amateurs) will ultimately subsidise renters as theirs capital and equity is destroyed before their eyes – exactly as happened in the early 1990s (I was a renter, my parents were owners)
You say “Basically, we will get rich and you "salaried staff" will slave away paying our bills.”
Ah! The arrogance of youth.
I got into BTL in the mid 90s, made my money and have now sold out as the returns are too low. I am still in property in the UK but at my minimum level. Meanwhile my properties in New Zealand went up by 35% last year (you check the stats). My guess is that your portfolio in North London did not manage a quarter of that growth last year.
Property is cyclical and mean reverting.
Let me leave you with a thought:
In the very long term real house prices rise with increases in real salaries. Salaries increase in reals terms by approx 2% per year. Many areas in London have seen REAL property price increases of approx 200% since the mid 1990s. Therefore in the last 10 years we have had 35 years worth of real house price growth (1.02 to the power of 35 = 200%).
35 years of growth in 10 years is rather more than our fair share wouldn’t you say?
Wanting even more is called GREED. And we know how markets punish GREED…
