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

[Barnsey]

1 hour ago, Lightscribe said:

As discussed before it’s on a cliff edge for property (yes been said many times before but it’s now it never). After the stamp duty extension come April/May it’s either major government backed intervention or nothing. The last year of the stamp duty holiday skewed the upper end of the market which of course effected the national average statistics on paper only. 

BTL is dead is inflicting pain on the voids through the Covid fallout (especially in the city centres) and that’s before reduced rents and increased competition on flats and costs on fire safety measures. Two personally I know of are down £10k and £12k through voids alone last year. That’s not even taking into account when the full tax implications have been felt in addition. 

The government will have to pull negative rates and government backed mortgages out of the hat to keep it up over x8 earnings and forever moving upwards through the greatest recession in 300 years, while wages stagnate and livings costs are eaten away with inflation.

Just to provide some cautious counter balance, yes BTL is getting hit hard, but remember who's in charge. Are they really going to sacrifice their riches?

We must remember that house prices have been flat (adjusted for inflation) for the past 5 years. We're still 12% below where average prices should be given trend in price growth since 1975.

WFH and hot spot price pressures, along with inflation, will in my opinion force a steady rebalancing of house prices between regions of the UK, with @DurhamBorn probably best placed geographically.

I was in the cliff edge camp for many years, and yes you'd think the situation is primed for a house price crash. But think about who's pulling the levers, where prices are on a multi decade inflation trend basis, record low debt servicing costs, and professional property companies standing by to scoop up rental flats. We've had house construction on pause for part of the last year, a tightening construction labour market, increases in prices of construction materials on the way.

Canadian house prices up 26% in last 12 months, other countries have also seen significant price appreciation, we're in the middle somewhere on a global basis.

In summary, yes prices can go down from here, but focus on regional dynamics, those making the policy decisions, and don't turn a blind eye to where we are adjusted for inflation with both prices and mortgage rates. Now that the B word has largely been resolved, we could become an investible nation once again. Will be interesting to see how many from Hong Kong choose to buy up flats/rental properties too in our city centres.

 

 

[Yadda yadda yadda]

10 minutes ago, feed said:

I work Ford.  EV’s are there to drive a change in the business model (as well as some protectionism from future cheap ICE from China built with stolen IP).  So the change isn’t really ICE to EV.  It’s from ownership to passenger cars as a service.  Whether this is a profitable or not, remains to be seen.  But if they don’t, they're dead anyway.  

But, yes the sensible play, is based on more gas for electricity generation from the energy companies.     
 

I don't like the sound of that. I use Zipcar because I rarely need a car in London. Much better than renting a car the usual way as you're pre-approved and don't need to go to an office. It wouldn't suit anyone who uses a car more than once per week. There will be a lot of pushback against cars as a service.

[Barnsey]

 This is where things start to get tricky...

 

[Barnsey]

Just crunched the numbers on getting a lease EV. Going to be long time yet before it makes any sense. I do 20k miles a year, getting an EV would save me just hundreds a year in "fuel" costs Vs my trusty diesel Fabia, which will do 3 times the miles before I have to think about filling up.

[Chewing Grass]

11 minutes ago, Yadda yadda yadda said:

I don't like the sound of that. I use Zipcar because I rarely need a car in London. Much better than renting a car the usual way as you're pre-approved and don't need to go to an office. It wouldn't suit anyone who uses a car more than once per week. There will be a lot of pushback against cars as a service.

Absolutely no use for anyone who carries stuff around, especially dirty stuff or needs a towbar.

People will switch to Chinese electric cars, Western manufacturers are pissing into a gale.

[Barnsey]

14 minutes ago, Chewing Grass said:

Absolutely no use for anyone who carries stuff around, especially dirty stuff or needs a towbar.

People will switch to Chinese electric cars, Western manufacturers are pissing into a gale.

Yours for just £3000

https://www.thedrive.com/news/36218/this-adorable-four-seater-electric-hatchback-is-selling-like-crazy-in-china

Who needs crash protection anyway? It's the Daewoo Matiz V2 

If inflation picks up, don't be surprised if you start seeing a rush for these in the middle aisles of Aldi...

[nirvana]

there's some weird shit happening in the markets (no surprise there then) 

Oil is having a shit on the back of Saudis upping production apparently.....

These bonds are getting interesting...apparently they're dragging up Eurozone too which shouldn't be happening....

Also what happened to the markets in 2013 during this 'taper tantrum'???

hmmmmm, ummmm, arrrr, keep BTD or is danger incoming????

[harp]

1 hour ago, JMD said:

Sounds like a once in a lifetime opportunity to me. After all, no estate agent fee or stamp duty, perhaps say to him that you'll complete the sale whilst there is no stamp duty but would expect a reduction pro rata if stamp is reintroduced? Depends how eager he is to buy your house I suppose. Although I'd definitely get a couple of valuations on your own house... Then sit back (smugly?!) with you stash of cash and wait for the BK!!!

Yep. Had 3 valuations, all slightly lower than his offer. So on the face of it it looks good. We have both said we’ll skip searches to get in before the 31st March. My only concern is accepting 100k cash. Not even sure that’s legal? Market valuation for my would still be fine, so who would know? 

[feed]

28 minutes ago, Yadda yadda yadda said:

There will be a lot of pushback against cars as a service.

90% of new vehicles are bought with finance and PCH is on the increase.  Isn’t going to take much over the next 10 years to drive ownership at purchase to near zero.  Particularity if availability of finance evaporates.   
 

 

[Chewing Grass]

8 minutes ago, Barnsey said:

Who needs crash protection anyway? It's the Daewoo Matiz V2 

That car is bigger than you think or that guy is a midget sat on a cushion, the door is huge.

[Yadda yadda yadda]

2 minutes ago, feed said:

90% of new vehicles are bought with finance and PCH is on the increase.  Isn’t going to take much over the next 10 years to drive ownership at purchase to near zero.  Particularity if availability of finance evaporates.   
 

 

Long term rental is different. People would accept that. So long as it is theirs and not a sort of self-drive taxi.

[Lightscribe]

27 minutes ago, Barnsey said:

Just to provide some cautious counter balance, yes BTL is getting hit hard, but remember who's in charge. Are they really going to sacrifice their riches?

We must remember that house prices have been flat (adjusted for inflation) for the past 5 years. We're still 12% below where average prices should be given trend in price growth since 1975.

WFH and hot spot price pressures, along with inflation, will in my opinion force a steady rebalancing of house prices between regions of the UK, with @DurhamBorn probably best placed geographically.

I was in the cliff edge camp for many years, and yes you'd think the situation is primed for a house price crash. But think about who's pulling the levers, where prices are on a multi decade inflation trend basis, record low debt servicing costs, and professional property companies standing by to scoop up rental flats. We've had house construction on pause for part of the last year, a tightening construction labour market, increases in prices of construction materials on the way.

Canadian house prices up 26% in last 12 months, other countries have also seen significant price appreciation, we're in the middle somewhere on a global basis.

In summary, yes prices can go down from here, but focus on regional dynamics, those making the policy decisions, and don't turn a blind eye to where we are adjusted for inflation with both prices and mortgage rates. Now that the B word has largely been resolved, we could become an investible nation once again. Will be interesting to see how many from Hong Kong choose to buy up flats/rental properties too in our city centres.

 

 

Quite true, migration from Hong Kong could see the expensive newbuild flats in the city centres being kept on life support.

Ultimately though I think whats happened globally in regards to the property bubble has happened due to the same reasons and will unravel the same way accordingly.

Vast swathes of service/hospitality workers have disappeared from city centres and returned home. Many of those would have been renting rooms or in HMOs from BTL landlords.

BTL landlords may never get those tenants back. Working life has changed for good. Shared/reduced office space in city centres, staff part-time working from home, benefits all sides and is here to stay.

In turn the service economy demand won’t be coming back anytime soon i.e sandwich shops, cafes, office services etc.

BTL realise the gig is up, funds sell off office space portfolios, less city demand for rooms/flats, construction stops building and mothballs sites especially with spiralling material/build costs through inflation. More EU construction workers may return home with no work forthcoming. 

A rolling stone gathers no moss and the fundamentals mean that stone looks like it’s slowly starting to move.

[Chewing Grass]

4 minutes ago, feed said:

90% of new vehicles are bought with finance and PCH is on the increase.  Isn’t going to take much over the next 10 years to drive ownership at purchase to near zero.  Particularity if availability of finance evaporates.   
 

 

If finance becomes unaffordable so does PCH & PCP as they rely on cheap finance to exist.

I think I calculated on another thread that once the commercial cost of finance hits 5% the viability of PCH starts to drop like a stone.

[Yadda yadda yadda]

6 minutes ago, nirvana said:

there's some weird shit happening in the markets (no surprise there then) 

Oil is having a shit on the back of Saudis upping production apparently.....

These bonds are getting interesting...apparently they're dragging up Eurozone too which shouldn't be happening....

Also what happened to the markets in 2013 during this 'taper tantrum'???

hmmmmm, ummmm, arrrr, keep BTD or is danger incoming????

If US interest rates go up I'd expect Eurozone rates up too. Sell Euro bonds to get higher Dollar rates. At least so that the differential doesn't grow too much. Am I wrong?

What happened in 2013, do I have to get a chart out? I expect the market shit the bed.

[AWW]

5 minutes ago, Lightscribe said:

In turn the service economy demand won’t be coming back anytime soon i.e sandwich shops, cafes, office services etc.

I think the demand will just move from city centres to suburban areas. My local cafes have all been absolutely packed whenever they've been allowed to open - nobody wants to be stuck in the house all day when working remotely. Bad for the likes of Pret, good for independent businesses. How long until Prets start popping up in your local rows of 5 or 6 shops...?

 

[feed]

10 minutes ago, Yadda yadda yadda said:

Long term rental is different. People would accept that. So long as it is theirs and not a sort of self-drive taxi.

Define theirs. 

ICE is done. Ownership will be replaced cars as a service with EV’s. 
Tariffs will be put in place to ensure cheap Chinese products don’t enter the market. 

You will own nothing. 

[Lightscribe]

1 minute ago, AWW said:

I think the demand will just move from city centres to urban areas. My local cafes have all been absolutely packed whenever they've been allowed to open - nobody wants to be stuck in the house all day when working remotely. Bad for the likes of Pret, good for independent businesses. How long until Prets start popping up in your local rows of 5 or 6 shops...?

But still even if the service economy moves more local, the question still exits however with who is going to take up the swathes of in un-sellable city centre accommodation (houses hacked up into multiple HMOs etc) if there no demand. The sell off starts in the cities and it ripples out to the rest of the country IMO.

That is of course without some major government intervention.

[Chewing Grass]

2 minutes ago, feed said:

Define theirs. 

ICE is done. Ownership will be replaced cars as a service with EV’s. 
Tariffs will be put in place to ensure cheap Chinese products don’t enter the market. 

You will own nothing. 

People will not accept driving around in other peoples filth, if cars were an on demand self-drive service a bit like airbnb at this moment in time they would have to de thoroughly cleaned and deep sanitised between customers.

Might not be a viable business model going forward at the moment.

Most people will just get an electric bike.

[Alex]

Just now, Chewing Grass said:

if cars were an on demand self-drive service a bit like airbnb at this moment in time they would have to de thoroughly cleaned and deep sanitised between customers.

This model already exists in cities around the world. Here in Berlin it's quite popular, with several electric-only car providers (mostly VWs). I don't know when the cars are cleaned - maybe at night? - but it's not between customers.

[Yadda yadda yadda]

5 minutes ago, feed said:

Define theirs. 

ICE is done. Ownership will be replaced cars as a service with EV’s. 
Tariffs will be put in place to ensure cheap Chinese products don’t enter the market. 

You will own nothing. 

By theirs I mean no-one else is using it, their sole use.

The "you will own nothing" people will find that people want to own stuff more than they want to listen to people with big ideas about their own self-importance. We're heading to extreme politics, no guarantee that the likes of WEF will win.

[Yellow_Reduced_Sticker]

22 hours ago, nirvana said:

....

HEY get this, I did my first dumpster dive on Saturday courtesy of Aldi! Fecking loved it! Got some trout, a big bunch of king prawns and 2 whole chickens! AND...........one of them was already cooked!

 

I take it this is in France and legal? ...NOT that that would bother YOU!

 

 

2 hours ago, Lightscribe said:

...

The government will have to pull negative rates and government backed mortgages out of the hat to keep it up over x8 earnings and forever moving upwards through the greatest recession in 300 years, while wages stagnate and livings costs are eaten away with inflation.

 

 

I believe the goverbankment WILL decouple mortgage rates from base interest rates when they start RISING ... ie: goverbankment introduce a fixed mortgage rate of say 2.00% fixed for 30 years or something similar...

 

This may sound FAR-FETCHED but when you look what's been going on in the EVER-INCREASING madness of property since 2001 - they know full well what would happen if IR went to high single figures let alone double figures, at the end of the day, ANYTHING is possible from these keep-the-plates-spinning-crooks!

 

What does @DurhamBorn and  YOU guys think?

 

[Yadda yadda yadda]

2 minutes ago, Alex said:

This model already exists in cities around the world. Here in Berlin it's quite popular, with several electric-only car providers (mostly VWs). I don't know when the cars are cleaned - maybe at night? - but it's not between customers.

You can get them all over the UK, in urban areas, with several providers. Some electric some ICE. Popular depends on how you measure it. The cars are branded and I would say under 1% of car journeys in London. They're used by people with only the occasional need for a car, like me.

They're usually clean. Not sure when it is done. The problem is checking for damage before use, like any rental car and filling in the book if necessary. It isn't in the same ballpark as owning and I wouldn't do it if I needed a car even once per week. It would be especially unpopular with families.

[AWW]

I used several car clubs when I lived in central London. They're great until you have kids.

[Calcutta]

Self driving is the key, once letting lumps of meat loose on the road is illegal and cars drive themselves, then a little electric uber noddy car takes over. 

[feed]

55 minutes ago, Chewing Grass said:

People will not accept driving around in other peoples filth, if cars were an on demand self-drive service a bit like airbnb at this moment in time they would have to de thoroughly cleaned and deep sanitised between customers.

Might not be a viable business model going forward at the moment.

Most people will just get an electric bike.

The weight of the all of the Western automotive companies is behind EV’s and cars as a service.  In the era of stakeholder capitalism, governments do as they’re told.  Particularly when those companies employ as many people as the Autos’ do. 

And if you ever doubted the ability of the government to legislate behavioral change against all logic and reason, then the last 12 months should have changed that.  

This is going to happen, the question for this thread is how to profit from it.  

Energy companies seem to be the best play.