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Credit deflation and the reflation cycle to come (part 2)


spunko

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1 hour ago, Barnsey said:

Sorry to keep banging on about housing, but do you think I’d be mad for offering 2010 price (when current owners bought in the dip) + RPI on a house I’ve seen which has probably had an extra £20k at least spent on it? Thankfully there’s tons of new builds around at a similar price to what their asking, which I hope I can use as a bargaining chip, even though in reality they’re pretty crap, but are the mid 90s built homes much better?

Everyone has an idea of what they’re willing to pay for a house, and I still feel like a bit of a numpty for already looking before recession, but if I can get 10-15% off a house in an area that’s “only” risen just above RPI in the past decade (which seems to be the standard measure of HPI) then maybe not a disaster providing I get a long mortgage fix below 3%. VERY conflicted right now but my patience is wearing incredibly thin. On the other hand could I live with myself if I committed now and then house prices even in a non bubbly area like this dropped 25%+

Current thought process:

Really do need to be getting on with buying a house after having waited for about 3 years now, mortgage and housing market choice might seriously dwindle in recession, and by the time things stabilise and more of both come onto the market again we might already see inflation and rates ticking up? Last time around the market was flat on its arse for about 3 years with very little coming into the market? Although I don’t doubt they’ll be a little more proactive this time with all the Ponzi schemes.

Keep staring at this and thinking things aren’t as bad as before -

3E4B5B95-E199-406E-A4FD-B00D5402015F.png.62c13c6ad0c21feb49edd696814e8897.png

Lending criteria tightens considerably in a recession and we’re probably at 80% LTV right now, not the 75% and below they lend to in such times of crisis. Other half is Finnish but with settled status, could there be complications at end of transition period if we waited until next year? Also high risk of her losing her job and struggling to find alternative employment in recession (sales job), not that I’m stupid enough to overborrow of course on my single income, definitely playing it safe.

All thoughts and perspectives greatly appreciated as always!

barnsey gnna be quick here as Ive got the two little panzas watching fireman sam with me.Im in charge today.

few ideas

1) when i bought mrs p her car I picked the model she was after then looked for the ten best deals from the Kia dealers,then waited until the end of the month and emailed them all for best price.got her car for roughly 40% less than the highesdt priced.well worth identifying any time sensitive sellers.

2) worht finding the postcodes you like,check the transaction levels in the postcode on RM,then divide the amount of stock on RM by the transaction levels in the postcode.gives a decent guide as to oversupply/undersupply.I would say 6-10 months is average.Over 10 months is a buyers market etc.

3) We rent,it has some upsides with prices where they are.Has down sides too but owrth consdiering your purchase timframe ie ten years + or less.If under ten years,you want to be buying something liquid you can sell on quickly.no point buying the cheapest hosue with poor resale potential.

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image.png.454c5926a744d6aa63804528c4faf575.png

I have to say I don't think that graph is anything other than wishful thinking by an inept Building Society which pays its Directors far too much money and savers far too little!

How the F**k did they get that red line? House prices are way out of touch with real wages and are just propped up by cheap debt and HTB. If you see a load more of that coming down the line, or your wages double, buy in. If not stand well clear.

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On 12/01/2020 at 19:36, No One said:

Best buy some silver now from Estonia whilst you can. Or have some delivered to wherever you go in Europe as a holidays destination so it arrives when you are there.

Found clarification... some good news...

Looks like the 0% vat rate for silver coins etc, purchased from the EU will not change during the UK's agreed withdrawal agreement plan time frame - currently this is 31st Dec 2020 (and can even be extended up to 2-years beyond that).

https://www.avalara.com/vatlive/en/vat-news/uk-to-leave-eu-vat-regime-31-dec-20200.html

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Bobthebuilder
1 hour ago, NogintheNog said:

image.png.454c5926a744d6aa63804528c4faf575.png

I have to say I don't think that graph is anything other than wishful thinking by an inept Building Society which pays its Directors far too much money and savers far too little!

How the F**k did they get that red line? House prices are way out of touch with real wages and are just propped up by cheap debt and HTB. If you see a load more of that coming down the line, or your wages double, buy in. If not stand well clear.

I always thought the blue graph was inflation adjusted and the stupid red line trend price.

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3 hours ago, sancho panza said:

2) worht finding the postcodes you like,check the transaction levels in the postcode on RM,then divide the amount of stock on RM by the transaction levels in the postcode.gives a decent guide as to oversupply/undersupply.I would say 6-10 months is average.Over 10 months is a buyers market etc.

Great point Sancho, hadn’t really thought about this aspect much. Much to my horror, looks like there’s only about 4-6 months of stock (depending on postcode) going by the 12 month figures, so a tight market as things stand.

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Democorruptcy
5 hours ago, Barnsey said:

Sorry to keep banging on about housing, but do you think I’d be mad for offering 2010 price (when current owners bought in the dip) + RPI on a house I’ve seen which has probably had an extra £20k at least spent on it? Thankfully there’s tons of new builds around at a similar price to what their asking, which I hope I can use as a bargaining chip, even though in reality they’re pretty crap, but are the mid 90s built homes much better?

Everyone has an idea of what they’re willing to pay for a house, and I still feel like a bit of a numpty for already looking before recession, but if I can get 10-15% off a house in an area that’s “only” risen just above RPI in the past decade (which seems to be the standard measure of HPI) then maybe not a disaster providing I get a long mortgage fix below 3%. VERY conflicted right now but my patience is wearing incredibly thin. On the other hand could I live with myself if I committed now and then house prices even in a non bubbly area like this dropped 25%+

 

If it's a place you like as long term and were going to offer 10% off, try a lower offer to test the water.

I cannot see where 25%+ nominal drops are going to come from with the party of HTB securing such a large majority. After the election result I was expecting to see more sales and they have started to come through now. Some of the stuff hanging around for ages has shifted and a new on the market gone in 2 days.

Media/Estate agents will soon be pushing the Boris bounce which won't help you.

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Barnsey - As you are not buying an investment but a house to live in and develop in with your family find the best house in the best area within your budget. There is never a wrong time in life to start a family, buy a home etc. Just got on with life and enjoy it. To many people are putting their life on hold. Ignore how much something is but focus on the amount of debt you will have, how long will it take to pay off and will you be able to service the debt in the years ahead. If we are heading for an inflationary period get the best long term fixed mortgage and let the bond holder take the hit if inflation runs high. Hedge some of your debt within your ISA/SIPP with inflationary shares, gold and silver. Once a home debt free owner your perspective and out look on life changes. Wishing you and your family well 

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2 hours ago, NogintheNog said:

image.png.454c5926a744d6aa63804528c4faf575.png

I have to say I don't think that graph is anything other than wishful thinking by an inept Building Society which pays its Directors far too much money and savers far too little!

How the F**k did they get that red line? House prices are way out of touch with real wages and are just propped up by cheap debt and HTB. If you see a load more of that coming down the line, or your wages double, buy in. If not stand well clear.

You won't be surprised that Nationwide are using RPI for that red line, whereas real wage growth is measured by CPI, and even using this lower inflation figure they are still under that of the previous recession! So where I am, house prices over the past decade are about 3% above RPI, or 15% above CPI. I think 2010 was as good as it gets for house price reversion hence why I measure everything against that year.

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PatronizingGit
16 minutes ago, Barnsey said:

You won't be surprised that Nationwide are using RPI for that red line, whereas real wage growth is measured by CPI, and even using this lower inflation figure they are still under that of the previous recession! So where I am, house prices over the past decade are about 3% above RPI, or 15% above CPI. I think 2010 was as good as it gets for house price reversion hence why I measure everything against that year.

Bad though it is, that graph would be even worse on a per square foot basis...uk being the only western country where houses have 'shrunk' in recent decades.

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Bobthebuilder
49 minutes ago, Agent ZigZag said:

Barnsey - As you are not buying an investment but a house to live in and develop in with your family find the best house in the best area within your budget. There is never a wrong time in life to start a family, buy a home etc. Just got on with life and enjoy it. To many people are putting their life on hold. Ignore how much something is but focus on the amount of debt you will have, how long will it take to pay off and will you be able to service the debt in the years ahead. If we are heading for an inflationary period get the best long term fixed mortgage and let the bond holder take the hit if inflation runs high. Hedge some of your debt within your ISA/SIPP with inflationary shares, gold and silver. Once a home debt free owner your perspective and out look on life changes. Wishing you and your family well 

I have said this many times before but it is worth repeating. Most of this stupid house price inflation started in 1996, i was 26 years old, i am now 50.

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16 minutes ago, Bobthebuilder said:

I have said this many times before but it is worth repeating. Most of this stupid house price inflation started in 1996, i was 26 years old, i am now 50.

It took me a while to work out how the game was to be  played were before  I sat on my hands twiddling my thumbs thinking about work progression and such rubbish. It is inaction that wastes time rather that getting on and having a go. The eureka moment for me came in about 2000, and I started to follow the money into property and have done very well out of HPI and property as a whole from buying selling refurbishing etc. If the next cycle is inflationary and migrates to industry I might change  course in my work and follow the money again. Health & Safety Officer doing Method Statements would suit be just fine. I would even consider moving North. The market is what it is and the ability to adapt to it and make the most is what is important.

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19 minutes ago, Agent ZigZag said:

It took me a while to work out how the game was to be  played were before  I sat on my hands twiddling my thumbs thinking about work progression and such rubbish. It is inaction that wastes time rather that getting on and having a go. The eureka moment for me came in about 2000, and I started to follow the money into property and have done very well out of HPI and property as a whole from buying selling refurbishing etc. If the next cycle is inflationary and migrates to industry I might change  course in my work and follow the money again. Health & Safety Officer doing Method Statements would suit be just fine. I would even consider moving North. The market is what it is and the ability to adapt to it and make the most is what is important.

Thats very true and comes down to interest rates and where governments direct spending.Rates have come down to nothing from 1982 and the Blair/Brown government directed the printed money to tax credits,housing benefit etc that sucked money into BTL.History will show the disaster that Brown was,but our job is to try to work out how it unravels.As the pendulum swings back we have to consider only how far rates go back up (after more cutting/QE first) and where government directs the printed money this time.The politics are pointing the way,but most people arent listening.

 

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18 hours ago, DurhamBorn said:

They are following the Fed,or will be soon.They want to try to keep sterling down,they are trying to move the economy to more production over consumption.The government is getting ready to go into the bond markets for £100 billion to "invest".There is still a very real chance we see outright price deflation for a short period.That £100 billion will be followed by £500 billion more i expect along with the trillions from the Fed.

Im really hoping my oil road map at $43 is right as id really expand my holdings at that level.I still think sterling has $1.38 in site even if they cut.

What are you planning on expanding? Shares like Shell, BP etc? If the oil price drops then the share price of giant companies like Shell doesn't usually shift that much so buying in to them isn't going to get the full juicy goodness of that big drop. Any other ways to get that drop?

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TheCountOfNowhere
2 hours ago, Bobthebuilder said:

I have said this many times before but it is worth repeating. Most of this stupid house price inflation started in 1996, i was 26 years old, i am now 50.

It stopped in 2005 in large parts of the country. It collapsed in 2008.

It restarted in 2012ish in the south. The North is still lucky to be at 2007 prices.  All in all it is still down in real terms and this is with rates a 0.bugger all and HTB/FLS. 

Not to mention prime London down 20%+ in real terms in the, last 3 years 

Asking prices, driven by the South, now down 7% in 18 months. 

House prices have not gone up in a straight line since 2005, if you didn't buy before 2000 or in 2009 then you missed those boats but unless you cash out its a paper profit. Plenty people have lost on property, a friend of mine went all in on London property 3 tears ago... I found out at Christmas his could not lose gamble has sent him back several years. He 'didn't lose much'. He was acting like Billy Big baws so I'm glad he's learned a lesson. How many more in London are facing losses that they have not yet been forced to take? 

It's all about your personal circumstance, although mine is, given the area I am in, the, prices are crazy. Makes no sense to buy. Makes more sense to save, invest, retire abroad. 

All you can do is make your choice and position yourself best you can to take advantage of the collapse if/when it comes. 

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1 hour ago, Starsend said:

What are you planning on expanding? Shares like Shell, BP etc? If the oil price drops then the share price of giant companies like Shell doesn't usually shift that much so buying in to them isn't going to get the full juicy goodness of that big drop. Any other ways to get that drop?

Service companies etc.Im in a position where im not really chasing outsized gains,im simply aiming for inflation+ over the next cycle.I dont expect big oil to x times my capital,but i do think they will keep the divis growing faster than inflation,and thats my main aim.I already own some big oil stocks,but not a lot at the moment.A lot of people on this thread have different aims due to age etc.Someone 25 might be chasing higher growth,people like myself who have reached their goals to retire might be after simply preserving their capitals buying power and income from it.

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1 hour ago, TheCountOfNowhere said:

It stopped in 2005 in large parts of the country. It collapsed in 2008.

It restarted in 2012ish in the south. The North is still lucky to be at 2007 prices.  All in all it is still down in real terms and this is with rates a 0.bugger all and HTB/FLS. 

Not to mention prime London down 20%+ in real terms in the, last 3 years 

Asking prices, driven by the South, now down 7% in 18 months. 

House prices have not gone up in a straight line since 2005, if you didn't buy before 2000 or in 2009 then you missed those boats but unless you cash out its a paper profit. Plenty people have lost on property, a friend of mine went all in on London property 3 tears ago... I found out at Christmas his could not lose gamble has sent him back several years. He 'didn't lose much'. He was acting like Billy Big baws so I'm glad he's learned a lesson. How many more in London are facing losses that they have not yet been forced to take? 

It's all about your personal circumstance, although mine is, given the area I am in, the, prices are crazy. Makes no sense to buy. Makes more sense to save, invest, retire abroad. 

All you can do is make your choice and position yourself best you can to take advantage of the collapse if/when it comes. 

Are prices really that crazy in France?

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11 hours ago, Barnsey said:

Lending criteria tightens considerably in a recession and we’re probably at 80% LTV right now, not the 75% and below they lend to in such times of crisis. Other half is Finnish but with settled status, could there be complications at end of transition period if we waited until next year? Also high risk of her losing her job and struggling to find alternative employment in recession (sales job), not that I’m stupid enough to overborrow of course on my single income, definitely playing it safe.

All thoughts and perspectives greatly appreciated as always!

Hey Barnsey

Just my two pence as we bought this time last year, its worth getting all you paperwork, deposit, credit checks, electoral register, solicitor in place now as you never know what might pop up. Get it watertight and some mortgage approvals. We were tentatively looking at houses and depressed by the lack of value but then a deceased estate came up, no family, no chain and whilst the house needed alot of work, we got around 15% of the last sale in the same street with a 60% LTV. House came on the market on a Thursday, offered on Sunday then all agreed on the Monday, it was that quick and we have not seen anything close to decent value since. The sellers wanted a v quick no chain sale and we had all our paperwork together and a very good solictor that came recommended, worth every penny getting a decent solicitor.  

Prices may come down, they may never recover but we love the house and enjoying learning new skills whether that be gardening, a 2 day plastering course, brick laying or carpentry. So far replaced all the guttering, new garden brick walls and and entire replacement kitchen extension roof that I did myself in the summer. Roof cost £400 in materials instead of the quotes I had for £2-3k!! This is a probably now off topic but the biggest transfer of wealth seems to be handing your hard earned to builders for jobs you can easily do yourself with a secondhand cement mixer, a bit of common sense, decent tools, DIYnot forum and youtube! It's all do-able if you enjoy the DIY side of things and brings a whole new host of skills and reward to your life. 

Good luck

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Democorruptcy

Only just noticed an NS&I change that must have come in last year. Their Guaranteed Growth Bonds (and Guaranteed Income Bonds) used to have a 90 day interest penalty for an early withdrawal. The change:

Quote

 

If you decide to renew an existing Bond on or after 1 May 2019, you won’t be able to cash it in before the new maturity date – you’ll need to hold the Bond for the full term. 

Because this is a major change, we are also giving you the right to cancel within 30 days of renewing a Bond. 
What this change means 

Previously, we gave you access to your investment before the end of its term but charged a penalty equal to 90 days’ interest on any money you took out early. Now, once you’ve decided to renew a Bond on or after 1 May 2019, you won’t have access to your money until the Bond reaches the end of its new term. 

If you are thinking about renewing a Bond but might need access to your money before the end of the new term, you may want to consider a different account.

 https://www.nsandi.com/guaranteed-growth-bonds

 

Might be a surprise for anyone who missed it, who might need an early withdrawal?

Who knew?

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2 hours ago, Burly said:

Hey Barnsey

Just my two pence as we bought this time last year, its worth getting all you paperwork, deposit, credit checks, electoral register, solicitor in place now as you never know what might pop up. Get it watertight and some mortgage approvals. We were tentatively looking at houses and depressed by the lack of value but then a deceased estate came up, no family, no chain and whilst the house needed alot of work, we got around 15% of the last sale in the same street with a 60% LTV. House came on the market on a Thursday, offered on Sunday then all agreed on the Monday, it was that quick and we have not seen anything close to decent value since. The sellers wanted a v quick no chain sale and we had all our paperwork together and a very good solictor that came recommended, worth every penny getting a decent solicitor.  

Prices may come down, they may never recover but we love the house and enjoying learning new skills whether that be gardening, a 2 day plastering course, brick laying or carpentry. So far replaced all the guttering, new garden brick walls and and entire replacement kitchen extension roof that I did myself in the summer. Roof cost £400 in materials instead of the quotes I had for £2-3k!! This is a probably now off topic but the biggest transfer of wealth seems to be handing your hard earned to builders for jobs you can easily do yourself with a secondhand cement mixer, a bit of common sense, decent tools, DIYnot forum and youtube! It's all do-able if you enjoy the DIY side of things and brings a whole new host of skills and reward to your life. 

Good luck

Thanks Burly, we’re viewing a property at the weekend for the first time ever, already have a couple of decisions in principle. Due to recently relocating, new jobs etc, our 3 months of bank statements wouldn’t look that great at the moment so in no rush, 4 months left on the tenancy. Might already get some solicitor quotes as you suggest.

1 hour ago, Democorruptcy said:

Only just noticed an NS&I change that must have come in last year. Their Guaranteed Growth Bonds (and Guaranteed Income Bonds) used to have a 90 day interest penalty for an early withdrawal. The change:

Might be a surprise for anyone who missed it, who might need an early withdrawal?

Who knew?

Holy crap!

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7 hours ago, Bobthebuilder said:

I have said this many times before but it is worth repeating. Most of this stupid house price inflation started in 1996, i was 26 years old, i am now 50.

In Leicester house prices nearly doubled between 2000-2004.Theyre currently up about 65% since 2004.2005-2015 they barely moved.

image.png.2b030ae0548998eb53ad7dbd615f2736.png

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7 hours ago, Agent ZigZag said:

It took me a while to work out how the game was to be  played were before  I sat on my hands twiddling my thumbs thinking about work progression and such rubbish. It is inaction that wastes time rather that getting on and having a go. The eureka moment for me came in about 2000, and I started to follow the money into property and have done very well out of HPI and property as a whole from buying selling refurbishing etc. If the next cycle is inflationary and migrates to industry I might change  course in my work and follow the money again. Health & Safety Officer doing Method Statements would suit be just fine. I would even consider moving North. The market is what it is and the ability to adapt to it and make the most is what is important.

Wise words in bold Agent.The price action is the price action.

I've been wrong on hosue prices longer than anyone I know.Luckily I've been able to balance that with some decent performance in stocks pver the years.I just completely failed to get how much the govt would do to defend HPI incl HTB,FLS,ZIRP,QE etc and tried to fight the price action.

You have to adapt as you say,failure to adapt costs in a lot of ways.

I sold up,joined the govt pay roll as a hedge on my private sector activities.

 

4 hours ago, Ponty Mython said:

Are prices really that crazy in France?

I remember reading an article in the Mail about what you could get for £250k in France.Eye atering if you can afford to be away from work centres.

2 hours ago, Democorruptcy said:

Only just noticed an NS&I change that must have come in last year. Their Guaranteed Growth Bonds (and Guaranteed Income Bonds) used to have a 90 day interest penalty for an early withdrawal. The change:

Might be a surprise for anyone who missed it, who might need an early withdrawal?

Who knew?

 We use NS&I for storing cash as it's 100% guaranteed to give you your specie back.Thanks for the heads up.

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Bobthebuilder
32 minutes ago, sancho panza said:

In Leicester house prices nearly doubled between 2000-2004.Theyre currently up about 65% since 2004.2005-2015 they barely moved.

image.png.2b030ae0548998eb53ad7dbd615f2736.png

Hi SP, I know different areas of the country had bouts of inflation/deflation at different times like TCON said, but what i meant in my post is, life can pass you by while waiting for things to change.

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Bobthebuilder
2 minutes ago, Tdog said:

when for all the philosophy on offer knocking out a sprog is the only thing we're on this planet to do

Exactly what i was thinking just after making the post. Well said sir.

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Bobthebuilder
11 minutes ago, Tdog said:

I can buy one of these 2 in the coming month, one with minimal borrowing, the other with say 60k if they go for close to advertised price at auction.
https://www.rightmove.co.uk/property-for-sale/property-75699973.html One in Beverley
https://www.rightmove.co.uk/property-for-sale/property-76683292.html One in Christchurch

One hell of a gamble with ones life savings considering i know sweet FA about building structures.

They both need some work but ok, same standard as what i bought and nothing unusual in the house buying market. Cant comment on the asking prices though, been out the scene for a while so all look expensive to me. Christchurch is expensive why not look North Dorset? you get much more for your dosh up in the sticks????

Edit to add, North Dorset starts at Blandford so not to far away.

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Bobthebuilder
2 minutes ago, Tdog said:

Potential work and a motorway meaning its only a 1 hour 45 minute drive to the ex's house as thats the bribe for a 9 year old who doesn't want to move. Currently about a 4 hour drive.

If i was a selfish cunt i'd be moving to Cornwall for a laid back life as prices are not too bad.

 

If that 1hr 45 drive is towards London then try Templecombe, one of the cheapest SW areas going and a train station to boot.

Good luck.

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