Reply to: Housing crash unlikely - Boom

[Cyberman]

Yes but that slow down has been priced in already. Shares always price in expectation. That's why it is a good time to buy. Because shares will recover before the recession ends, as the outlook brightens. That is the mistake that mayn private investors make, they wait for a bright outlook, but when that comes share prices are usually then overpriced. At the moment invetsors are in doom and gloom mode. Get in there

We're not in a technical recession yet, but we could well be within a year. Share prices will fall for the next few months as many investors require funds to pay higher mortgages etc. and will withdraw to some extent from the stock market. We are also coming up to that time of the year when the old adage 'sell in May and go away' applies to the market. September/October is historically a good time to buy so it may be worthwhile investing then, but personally I think there are really tough times ahead for borrowers and investing will be the lowest of priorities.

[BlasterBates]

Banks worldwide are reducing lending due to the liquidity shortage. This is bound to have a knock-on effect on business growth and people's spending power. This will impact on shares as profits and dividends therefore fall, causing share prices to fall also. Therefore shares at the moment are incredibly risky.

Yes but that slow down has been priced in already. Shares always price in expectation. That's why it is a good time to buy. Because shares will recover before the recession ends, as the outlook brightens. That is the mistake that mayn private investors make, they wait for a bright outlook, but when that comes share prices are usually then overpriced. At the moment invetsors are in doom and gloom mode. Get in there

[Cyberman]

Already sold actually , and now shoved into highly dubious shares. I work overseqs so it was rented and the rental market was getting difficult.

Actually shares are interesting, my worst share is about 80% down (airline) and my best share is getting about 160% in profit (mining company). All evens up though. Hardly any banks .

Interestingly the dropping of the pound is creating a lot of "pound" gains.

Banks worldwide are reducing lending due to the liquidity shortage. This is bound to have a knock-on effect on business growth and people's spending power. This will impact on shares as profits and dividends therefore fall, causing share prices to fall also. Therefore shares at the moment are incredibly risky.

[tim123]

Already sold actually , and now shoved into highly dubious shares.

I kept my sale proceeds in cash, and TBH I'm getting slightly worried about that. If one of the big banks goes down, we're in for a blood bath. Perhaps I should go out and buy a repo?

And I found the rental market quite easy, but I'm nowhere near London.

tim

[IR35 Avoider]

When did the FTSE go to 0?

The majority of stock-markets that have ever existed have gone to zero and stayed there. (Think Russia in the 19th century, as one example.)

Though I agree for this to happen in the UK now is hardly worth worrying about. It's not impossible, but it would take an event of such magnitude that the size of your portfolio will be the least of your worries.

[bogeyman]

Its a bit like going to Las Vegas and sticking your savings on red.

It's always an option - better than suicide.

[BlasterBates]

Could be me

No pain no gain.

Its a bit like going to Las Vegas and sticking your savings on red.

[bogeyman]

And live in a shoe box or pay £2000 a month rent and risk it on the stock market and currency market?

My tenant profile to a tee.

[PAH]

Or £52K profit if they'd have bought off-plan in high rise overlooking Manchester city centre.

See post #15. £52k loss more like!

[DimPrawn]

Or 51k profit if they'd not wasted any money on the emulsion.

Or £52K profit if they'd have bought off-plan in high rise overlooking Manchester city centre.

[PAH]

[QUOTE=Bagpuss;502923A world of TV programs that say you can buy a propery, slap on a bit of emulsion and sell for 50k profit..
[/QUOTE]

Or 51k profit if they'd not wasted any money on the emulsion.

[Bagpuss]

Would anyone out there like to swap their semi for my tulip bulbs? They're worth a fortune, I promise. In not, how about my South Sea shares? They can only go up. You can't lose!

Oh, what do you mean they're both worth peanuts? No such thing as a 'bubble'. Supply and demand, innit?

Please?


There is a whole generation out there from their mid 20's through to late 30's who are in for a rude awakening.. They know of property being a one way bet. A world of TV programs that say you can buy a propery, slap on a bit of emulsion and sell for 50k profit..

[BlasterBates]

Already sold actually , and now shoved into highly dubious shares. I work overseqs so it was rented and the rental market was getting difficult.

Actually shares are interesting, my worst share is about 80% down (airline) and my best share is getting about 160% in profit (mining company). All evens up though. Hardly any banks .

Interestingly the dropping of the pound is creating a lot of "pound" gains.

[PAH]

Found an article a mate was on about last night. Maybe it's a problem only found in central manchester where they've been throwing up apartment blocks for fun in recent years, but could be a signal of wider changes. Particularly for those that have bought recently and paid way over the odds for their property.

http://www.guardian.co.uk/money/2008....housingmarket

How boom quickly converted to bust
Repo man comes calling at former mill's flats bought at the height of rush for riches

With its double-height living room and views across the Pennines and Manchester's city centre, the two-bedroom apartment in a converted Victorian biscuit factory must have seemed fairly priced to Christopher Williams at £236,500.

Now, three years on, Williams's outlay for a slice of the city-living dream looks ridiculous. His flat has been repossessed and will go under the auctioneer's hammer tomorrow with a guide price of £100,000.

Welcome to Albion Mill, which has few, if any, rivals to the title of the British housing development hardest hit by the recent economic downturn. In the converted mill building itself, the repo man has struck at 28 of the 58 apartments since it opened in 2005. Eight more repossessions have taken place among the 229 apartments in the rest of the complex.

As the crisis in the banking markets swept across America and the UK with renewed ferocity last week, a viewing revealed empty flat after empty flat on sale at half their original price - evidence that investors' dreams of amassing buy-to-let fortunes have been reduced to ashes by fire sales.

"When I walk through the corridors it feels like an empty hospital," said Josh Mitchell, 19, a history student at the University of Manchester now living cheaply in palatial surroundings at Albion Mill. "The whole six months I have been here I have only seen one other person living on this floor."

Mitchell's father bought the three-bedroom flat for £170,000 after it was repossessed last year. But it is likely he has lost money on it already. The estate agent Jordan Fishwick has agreed to sell a similar-sized flat in the neighbouring block for £117,000 - £110,500 less than the original purchase price in April 2005.

But the echoing corridors of Albion Mill are emblematic of a wider downturn. Mortgage repossession orders in Manchester rose 11% to 1,035 last year and nationwide repossession orders exceeded 95,000, a level not seen since 1993.

Knight Frank estate agents estimates there has been a 15%-20% "correction" in Manchester house prices in the last six months.

The market for one- and two-bedroom flats, especially those in ritzy urban conversions, has been hardest hit by the UK's housing slowdown. While across the country prices have not shown much of a fall, the downturn is being felt in previously booming areas, particularly those that attracted large numbers of buy-to-let investors.

A report by the Royal Institution of Chartered Surveyors this month showed the first monthly drop in landlord lets since the survey began 10 years ago. The RICS report showed that buy-to-let investors, who now own 2.5m homes across Britain, are facing difficulties in financing their loans as lending dries up because of the credit crunch.

Most reports have shown recent monthly falls in UK house prices, but that still means the market is going up by about 2%-3% on an annual basis - albeit a significant slowdown from the 10%-11% price rises that have been commonplace in recent years. But the overall figures mask large regional differentials and a big variation in the price of flats and family homes. Much of the strength in the housing market has come from London and the south-east, where prices have been supported by City workers enjoying six-figure bonuses.

The Nationwide Building Society reported earlier this month that the fourth consecutive month of falling prices in February reduced the average cost of a home to £179,358. The three-month figures, which are considered to give the most accurate picture of the state of the market, showed a 1% fall in prices. Many economists are now forecasting a 5% drop in house prices this year.

At the same time, Bank of England data has shown that the number of mortgage approvals, at around 74,000, has fallen to its lowest level since 1995, highlighting the slowdown in lending.

The problems for buy-to-let investors at Albion Mill have been exacerbated by the flats' failure to attract sufficient rent to pay the mortgages. A £200,000 flat with a full mortgage would cost £1,200 a month in interest, but the rent is typically no more than £800.

"If people bought places like mine for £223,000 no wonder they are letting them be repossessed when the rental will only cover a fraction of the mortgage," said Niall, a resident since 2005, who did not wish to give his last name. "The maths didn't add up."

John Broadbent, a partner at Knight Frank's Manchester office, said mortgage valuers had added to the slump by reducing their valuations by around 10% because of nervousness caused by the credit crunch.

"The banks have lost their confidence," he said. "A lot of mortgage rates have been withdrawn, so small and medium-sized investors have struggled to borrow."

Gemma Atkinson at Reeds Rains estate agents, which sells Albion Mill's repossessed flats, said investment buyers from London and Ireland had failed to show sufficient caution.

"They'd see how much cheaper property is up here compared to London, but they didn't realise how much property there is on the market," she said.

Albion Mill resident James Cole, 24, who works at a nearby Asda, is enjoying a good-value rent in the development but said there had been problems with its upkeep. A new building next to the converted mill has a glass roof over the atrium which, Cole said, leaks. "When it rains outside it rains inside," he said.

The management company, Artisan, denied this. Its deputy chief executive, Jason Millet, said the company ran a "responsive and efficient service to deal with utility and service faults".

Millet continued: "Despite negative media coverage of the Manchester property market, there is much evidence that prices in Albion Mill are holding up well. In 2005, a typical 770sq ft two-bed apartment was selling for £126,000. Today, a similar apartment in our adjacent Vulcan Mill scheme is selling at £140,000."

However, that statement appears to be contradicted by other recent sales. At the beginning of this month, an Albion Mill flat which sold for £171,000 in December 2004 went at auction for £87,000. In February, another valued at £219,950 in June 2005 fetched a highest bid of £110,000.

"The biggest problem now," said Broadbent, "is that people don't know where the market is."

In numbers

5,500 The number of mortgages on offer in Britain has fallen to this figure in the past six months from about 13,000 previously

100% Mortgages for 100% of a home's value, or mortgages without a deposit, have been withdrawn

5% The amount by which many economists have predicted house prices in Britain will fall in 2008

[DimPrawn]

It is all about probabilities. The probability of a fall in house prices in the UK is very high; was never higher because of a Credit Crunch caused by the housing market. The probability of a rise in Equities over the next few years is very high because of the historic P/E ratios. The thing about shares is to have a spread. When did the FTSE go to 0? I don't remember, so if you reflect the index you won't lose your money. But I wouldn't recommend UK shares at the mo.. you want an international spread.

You can always think up a theoretical scenario that you lose all your money, even if you stick it under the mattress.

So you selling your home and buying Bolivian startups and living in a caravan for the next 5 years then?