Credit deflation and the reflation cycle to come (part 3)

[Xtal]

Just listened to the latest Palisades Gold interview with Rick Rule , one of my favourite people to listen to.

Covers geopolitics , investing psychology and sentiment and the 40 year cycle change on top of the usual metals/commodity discussion.

Well worth a listen.

 

[Loki]

4 minutes ago, Chewing Grass said:

@sancho panza bugger me Vauxhall Movano's are crap, turn one into a horse limo and its kerching £27K for a 8 year old one with 75K on the motor.

A very gentle 75k at least, but knowing horsey folk, probably on the factory fill of oil 

[sancho panza]

12 hours ago, Barnsey said:

https://www.theguardian.com/money/2022/may/30/average-uk-house-price-tops-250000-but-market-starting-to-slow

The housing market is “still much busier than pre-pandemic norms”, but signs are emerging that a slowdown is coming, Zoopla said.

It said that since the second half of April, around one in 20 properties have had price reductions of 5% or more – an increase from one in 22 properties during the previous month.

Sellers were also waiting slightly longer typically to achieve a sale. Outside London, the average time between a three-bedroom house being listed for sale and a sale agreed rose from 16 days in March to 18 days in April. In London, this average figure increased from 17 days in March to 21 days in April.

Key snippet there, early days but London market slowing much faster.

#affordability 

cc @Pip321

There's more nuance than jsut price reductions,as per previous post in reply to @Bobthebuilder.Just googled cheapest postcode and here's a couple.The interesting difference to SW3 is that the ratio of SSTC to for sale is much much higher

TS1 transactions 10 per month=> 47 for sale and 129 SSTC= 4.7 motnhs or 12.9 months depending which figure you use

DL4 10 transactions per month=> 49 for sale & 75 SSTC= 4.9 months or 7.5

https://www.propertyreporter.co.uk/property/where-are-the-nations-most-affordable-postcodes.html

 

[sancho panza]

10 hours ago, Democorruptcy said:

I still think we could do something with Imputed Labour. People should book how much in labour payments they have reduced GDP by, so we can add it back on. It's only similar to imputed rent that's never paid. 

You aren't knocking off the opportunity cost of that £500. The stuff you have bought might go up a few pounds but you are missing the dividends and capital gain you could have got investing it.

The mind really boggles doesn't it as to where the ONS/BoE/Polcitical elite could take that idea and blow GDP sky high,we'll never have a recession again

1) imputed taxi fares where ONS attaches a notional value to journeys you make in your own car instead of using a taxi

2) imputed shagging where ONS attaches a value to the rumpy you enjoy as opposed to using a paid for service provider.............

....etc etc etc

[RJT1979]

1 hour ago, Chewing Grass said:

This will be a good one to watch as well, horseboxes and trailers, 20K for a knackered old ford one.

Currently 940 Horseboxes and 240 Trailers.

Remember you need a decent gas-guzzly motor to pull one tonne of horsemeat around.

https://www.horsemart.co.uk/horseboxes-and-trailers.php

Keep an eye on glue prices

[snaga]

3 minutes ago, RJT1979 said:

Keep an eye on glue prices

and budget burgers.

[Alifelessbinary]

13 hours ago, Animal Spirits said:

What happens when I want to sell my Pocket home?

You can only sell to people who meet the eligibility criteria applicable to the development (as you did when you bought your Pocket home): this will usually mean that they have to live or work in the borough and they cannot own any other property. Pocket will be able to guide you through the process when the time comes. You will not be able to sell until you have owned the property for at least one year.

 

How long will this restriction last, sub letting is also restricted but that depends on how effectively it's enforced...

 

https://www.pocketliving.com/buying/faqs

This is also a scam so that pocket living can reduce the amount of affordable homes they deliver on site. I’ve actually visit one of their sites in North London. The product is actually very good and well designed, however you can’t hide the fact that the flats are extremely compact.

There business model is to increase density and use the fact that the flats are cheap to circumnavigate affordable thresholds thus increasing profitability. They then brand themselves as a socially conscious developer who is helping deliver affordable homes to the locals. This is all driven by profit, but quite a few Councils lap it up. I’ve seen worst business models.

[Yadda yadda yadda]

2 hours ago, sancho panza said:

2) imputed shagging where ONS attaches a value to the rumpy you enjoy as opposed to using a paid for service provider.............

They would have to request photographs so the assessor can calculate a value.

[Loki]

22 minutes ago, Yadda yadda yadda said:

They would have to request photographs so the assessor can calculate a value.

There would be vigorous digit action

[DurhamBorn]

Ok,iv road mapped UK house prices by cross marketing them from my inflation work and with likely interest rates.Im seeing base rate hitting 3.25% next year.One year out from here i see down 6%,down 16%ish inflation adjusted,then another 4% down,10% with inflation,so a real 26% fall over two years.The 2% increase with 5% inflation so 29% down,then another 15% off (inflation adjusted) to end the cycle,so 44% down inflation adjusted.

To stop this would need a lot more props from government.Housing benefit increases would lower the falls.

Out of interest i did a quick look at construction costs.There is a point on my roadmap where you cant build houses at a profit.The housebuilders could be Fubar.

[Loki]

2 minutes ago, DurhamBorn said:

Ok,iv road mapped UK house prices by cross marketing them from my inflation work and with likely interest rates.Im seeing base rate hitting 3.25% next year.One year out from here i see down 6%,down 16%ish inflation adjusted,then another 4% down,10% with inflation,so a real 26% fall over two years.The 2% increase with 5% inflation so 29% down,then another 15% off (inflation adjusted) to end the cycle,so 44% down inflation adjusted.

To stop this would need a lot more props from government.Housing benefit increases would lower the falls.

Out of interest i did a quick look at construction costs.There is a point on my roadmap where you cant build houses at a profit.The housebuilders could be Fubar.

Amazing. Thanks!

[Sasquatch]

7 minutes ago, DurhamBorn said:

Ok,iv road mapped UK house prices by cross marketing them from my inflation work and with likely interest rates.Im seeing base rate hitting 3.25% next year.One year out from here i see down 6%,down 16%ish inflation adjusted,then another 4% down,10% with inflation,so a real 26% fall over two years.The 2% increase with 5% inflation so 29% down,then another 15% off (inflation adjusted) to end the cycle,so 44% down inflation adjusted.

To stop this would need a lot more props from government.Housing benefit increases would lower the falls.

Out of interest i did a quick look at construction costs.There is a point on my roadmap where you cant build houses at a profit.The housebuilders could be Fubar.

 

I was speaking to an architect colleague/friend today whilst on site. The Greta approved new Building Regs coming in this July look like they will make house building more difficult and more expensive. Couldn't have come at a worse time.

[DurhamBorn]

4 minutes ago, Sasquatch said:

 

I was speaking to an architect colleague/friend today whilst on site. The Greta approved new Building Regs coming in this July look like they will make house building more difficult and more expensive. Couldn't have come at a worse time.

On my roadmaps i project out,but assume things wont change as the cycle runs.So on houses i project build cost as likely inflation linked.As the time moves on id adjust as more data comes in.I wont do much on houses because doing a roadmap well takes a lot of work and im not really bothered about what houses do and im more interested in other areas,but its interesting that without changes its likely although there will be big demand building houses will be loss making.

In my work its those sort of things where id make my big money.For instance that call would say to me that people are going to live more in one house than they do now.

[wherebee]

51 minutes ago, DurhamBorn said:

Ok,iv road mapped UK house prices by cross marketing them from my inflation work and with likely interest rates.Im seeing base rate hitting 3.25% next year.One year out from here i see down 6%,down 16%ish inflation adjusted,then another 4% down,10% with inflation,so a real 26% fall over two years.The 2% increase with 5% inflation so 29% down,then another 15% off (inflation adjusted) to end the cycle,so 44% down inflation adjusted.

To stop this would need a lot more props from government.Housing benefit increases would lower the falls.

Out of interest i did a quick look at construction costs.There is a point on my roadmap where you cant build houses at a profit.The housebuilders could be Fubar.

if housebuilding becomes unprofitable (as is happening right now in australia) due to credit squeeze, materials squeeze, and depression impact, plus inflation, then the remaining stock of GOOD houses keeps value.  However, that rules out a huge amount of current UK stock.

[sancho panza]

Just had a quick look and it's looks like the lonley red candle stick on the right hand side is lonely no more.

Obviously,I wouldn't trade this signal in close time but something appears to eb happening the to dollar.

This is the stuff of BK rollovers imho

Decl: postioned to benefit from a weaker DXY

Weeklies joins regular thread friend Dailies in having two or more red candlesticks running consecutively

edit to add some fromLyn ALden,bold mine.

'However, now that the market may be pricing in peak Fed tightening, we are starting to see some cracks in dollar strength. The dollar index is among the most overbought it has been on the weekly and monthly charts, and is starting to show signs of reversal just when rates also touched what it is at least a local peak.

[sancho panza]

asa a corrolary to the above,iirc thread leader @DurhamBorn or another senior basement dweller called a trading bottom in cable a few days back.two lonely red candlesticks on DXY are two green candlesticks here

[WICAO]

3 hours ago, DurhamBorn said:

Ok,iv road mapped UK house prices by cross marketing them from my inflation work and with likely interest rates.Im seeing base rate hitting 3.25% next year.One year out from here i see down 6%,down 16%ish inflation adjusted,then another 4% down,10% with inflation,so a real 26% fall over two years.The 2% increase with 5% inflation so 29% down,then another 15% off (inflation adjusted) to end the cycle,so 44% down inflation adjusted.

To stop this would need a lot more props from government.Housing benefit increases would lower the falls.

Out of interest i did a quick look at construction costs.There is a point on my roadmap where you cant build houses at a profit.The housebuilders could be Fubar.

So props it is then.  I wonder what the next wheeze will be.

[tank]

53 minutes ago, WICAO said:

So props it is then.  I wonder what the next wheeze will be.

Immigration.

We're out of the EU now and Covid is over, so they can ramp it to stratospheric levels.

~1m net in the last 12 months, ~2m net next year. Don't put it past them. They will do anything, absolutely anything, to prop up house prices. 

[ashestoashes]

4 hours ago, sancho panza said:

asa a corrolary to the above,iirc thread leader @DurhamBorn or another senior basement dweller called a trading bottom in cable a few days back.two lonely red candlesticks on DXY are two green candlesticks here

news warning of increased volatility and weakness in the pound in the future

[WICAO]

https://www.abc.net.au/news/2022-05-31/about-to-get-harder-to-get-a-big-home-loan/101112904

The Australian banking regulator, APRA, warning some institutions to cut back on risky loans.  In response:

• ANZ reduce debt to income levels from 9x to 7.5x
• NAB reduce debt to income levels from 9x to 8x

Good to see everyone being super vigilant  

[Yadda yadda yadda]

56 minutes ago, ashestoashes said:

news warning of increased volatility and weakness in the pound in the future

Was that quoting the banks mentioned further up thread? Could easily be an attempt to get people to sell their pounds before they go up in value.

[Yadda yadda yadda]

6 hours ago, DurhamBorn said:

Ok,iv road mapped UK house prices by cross marketing them from my inflation work and with likely interest rates.Im seeing base rate hitting 3.25% next year.One year out from here i see down 6%,down 16%ish inflation adjusted,then another 4% down,10% with inflation,so a real 26% fall over two years.The 2% increase with 5% inflation so 29% down,then another 15% off (inflation adjusted) to end the cycle,so 44% down inflation adjusted.

To stop this would need a lot more props from government.Housing benefit increases would lower the falls.

Out of interest i did a quick look at construction costs.There is a point on my roadmap where you cant build houses at a profit.The housebuilders could be Fubar.

Good stuff, thanks. Where do you see base rates going after next year? Is 3.25% a likely medium term peak or would they continue climbing in 2024?

[Alifelessbinary]

7 hours ago, DurhamBorn said:

On my roadmaps i project out,but assume things wont change as the cycle runs.So on houses i project build cost as likely inflation linked.As the time moves on id adjust as more data comes in.I wont do much on houses because doing a roadmap well takes a lot of work and im not really bothered about what houses do and im more interested in other areas,but its interesting that without changes its likely although there will be big demand building houses will be loss making.

In my work its those sort of things where id make my big money.For instance that call would say to me that people are going to live more in one house than they do now.

This is where Home England and GLA are already stepping in to plug the gap. I’ve heard of schemes in London where the grant has been over £40k per flat (infrastructure, affordable housing grant ect…) While I completely disagree with the constant meddling in the market no government can allow the housing industry to shutdown, as they need a constant stream of projects to retain the skill base. Considering how important home owners are to the Conservatives voting base they are doing a terrible job of maintains housing construction.

Rapid labour and material inflation is already causing havoc for contractors throughout the U.K. I’m not sure what props the government has for housing, especially when affordable housing and sustainable requirements are making developers land bank sites or look for alternative uses. We’ll certainly see a few house builders struggle especially those who have forgotten their financial history.

Where conventional house building fails I wouldn’t be surprised to see a bigger push towards Private Rented Sector (PRS). Companies like Grainger are already seeing good returns in this area and might be able to arbitrage long term returns to snap up distressed assets. Minimum lot size is 100 units, but the sweet spot is 200-400 to ensure efficient management services. 

They’ll still be money to made in residential property, however developers will be careful to shield themselves from price fluctuations. I can already see a shift from unconditional deals to promotion agreement, or subject to planning arrangements. 

It’s an interesting situation where we have huge demand for housing, with limited supplies, however prices mean that most of the demand can’t afford to buy. In the short term I can see all of the COVID price rises being reversed, we’ll then need to watch government action to assess if things will become worst. Most people don’t understand the difference between nominal and real price changes, so the government will try to keep nominal prices flat where possible to avoid a panic in the electorate.
 

 

 

 

[Democorruptcy]

11 hours ago, sancho panza said:

The mind really boggles doesn't it as to where the ONS/BoE/Polcitical elite could take that idea and blow GDP sky high,we'll never have a recession again

1) imputed taxi fares where ONS attaches a notional value to journeys you make in your own car instead of using a taxi

2) imputed shagging where ONS attaches a value to the rumpy you enjoy as opposed to using a paid for service provider.............

....etc etc etc

The BoE are supposed to have been scratching their heads for years about why productivity is low. My Imputed Labour has nailed it for them hasn't it? People like @DurhamBornare a classic example. He could be working full time and more productive but instead he's claiming bennies and not working, those on tax credits might just have reduced hours. The missing part of the puzzle though is that he's stealing the productivity of others, by having more time to do labour without paying someone else to do it. He's done his own fence, cut his own tree etc. if someone is working full time they might have got a man in, their productivity would be in the system and added to GDP.

 

[Barnsey]

22 minutes ago, Alifelessbinary said:

 They’ll still be money to made in residential property, however developers will be careful to shield themselves from price fluctuations. I can already see a shift from unconditional deals to promotion agreement, or subject to planning arrangements. 

It’s an interesting situation where we have huge demand for housing, with limited supplies, however prices mean that most of the demand can’t afford to buy. In the short term I can see all of the COVID price rises being reversed, we’ll then need to watch government action to assess if things will become worst. Most people don’t understand the difference between nominal and real price changes, so the government will try to keep nominal prices flat where possible to avoid a panic in the electorate.

Certainly the less is more model of housebuilding is prospering right now, there's a prefab development of what I would call "micro homes" popping up next to Beeston Station, fascinating to see the pace at which the trucks have offloaded them and now looking almost ready. Shared ownership of course. Must be 2 beds. Development on the other side looks to be HA rentals only.

When I first saw the former railway land being cleared, assumed it was for a small warehouse or something, crazy just how many homes can be squeezed into these plots now. 

https://ilkehomes.co.uk/2021/03/ilke-homes-partners-with-emh-group-to-deliver-42-affordable-homes-on-former-network-rail-land/