Housing Market Crash post Brexit
House prices = Monopoly money?
The Housing Market is in turmoil as the value of the British pound continues to decline due to uncertainty following the vote to leave the european union. Brexit.
Although according to mainstream media, you wouldn't think so. It's like we are in some kind of alternate reality.
With former social housing (project apartments) changing hands in London for ludicrously high prices. It appears we have entered a kind of twilight zone. Where sanity and good sense have departed and left the lunatics in charge of the economy.
Everyone's a winner...aren't they?
More money chasing fewer properties is one thing. Printing trillions of bank notes can have only one effect. Inflation. And yet we do not see this?
Why? simply because house prices are not counted in the inflation figures. According to all the high street mortgage lenders. House prices are rising at 8%+ this year (2016)
It is mind boggling that these costs are not reflected in the 'cost of living' that is supposed to make up the consumer price index (CPI).
Shelter is a primary need and as such should be included in any calculation that seeks to represent objective reality. Shelter is a basic human right.
Trying to predict the future is always going to be a losing proposition, especially when we are not in possession of all the facts.
The governments on both sides of the Atlantic have printed so much money and pumped it into the bond and housing market that it is almost impossible to value anything with any degree of accuracy.
Both governments have basically taken our tax money and handed it to people in the form of 40% mortgage subsidies.
When these people default on their payments as some are bound to do. The tax payer is the one holding the debt.
From those trying to hold onto their homes, to those trying to find somewhere to live.
The system is broken and the government is doing everything it can to break it even more.
Government and their supporters want to get out of social housing and leave housing to the market.
Speculative building has worked in the past when land was more readily available but this is not the case today. Finding an affordable plot to build on is impossible.
It's astonishing to think that there are over 600,000 empty homes across the UK and London and millions more across the US.
The British government has given 40% (interest free for 5 years) loans to 67,000+ people that qualified for a mortgage. Funded by the taxpayer.
The Banks will not lend money to buy what they consider over priced properties.
The UK government has created this scheme to encourage those people that can get a mortgage, to buy properties. This scheme alone has distorted the housing market by inflating prices by 40% in London alone.
If the banks are not prepared to lend the asking price of a property then who are the government to be throwing our tax money at it.
If a property is priced at £400,000 ($568,080) and you need the 40% government loan.The real market value of the property is...£240,000.($340,848) as this is all the bank will loan against the property.
If the value of the property increases in the future then the UK government will get their 40% back plus a percentage of the increase in value.
If the property falls in value. You still owe the UK government the 40%. It's a vote winner for the Conservatives. Not a good deal for the users of this scheme or the taxpayer who is going to be left holding the bill when these new mortgagees default.
Evictions and repossessions are still at record levels but are just not making the news anymore.
The more quantitative easing measures we have the worse things get.
Some commentators have suggested that the housing market is recovering. This is a misreading of the data.
Currencies have been devalued by quantitative easing and still with no economically sensible recovery plan in sight from any government.
In June and July 2015 it was widely reported in the press and on TV news, that house prices had risen anywhere between 2% to 9% from the same period in 2014.
What they failed to mention is that 'money' is actually worth less due to quantitative easing (printing more money) and so any increase in house prices, is due to the fact that cash money has less buying power.
Even with the current housing bubble, house prices are still short of pre 2007 market crash levels. In other words. There has been no increase in real house prices for almost 8 years.
This is of course bad news for people who own property, but even worse news for people trying to buy their first home as wage increases have not kept pace with quantitative easing (printing money)
For many peoples real wages are worth considerable less now than 10 years ago. Prices on the other hand have increased on all goods and services.
Toxic Housing Market
600,000 Empty Homes
Don't forget that these house price rises, are on the back of falls of up to 50% + in house values.
A more accurate assessment would be, falling house prices are slowing down, in a small sector of the housing stock. Basically London and the south east of England is booming and huge parts of the rest of the country are experiencing a market collapse.
There are several TV auction shows that point out every day that there are plenty of houses for sale for as little as £20,000 ($28,500) and yet no one wants to buy them.
Factoid: There are 600,000 empty homes in the UK alone (many in London) and millions more in the USA.
There are 1,000's of bank repossessed homes that are not available for sale. The Banks are holding back many repossessed houses from the market for one main reason. If these properties were released to the market, the whole house price system would collapse.
In 2012 the UK Chancellor of the Exchequer. Mr Osborne predicted another 8 to 10 years of rising government debt and borrowing.
Nothing has changed, except the spin doctors are on 24/7 telling us everything is great. In fact we have a faltering economy, with wage cuts and rising costs of living.
The 2013 spring budget saw us heading into a third recession or triple dip. In late April 2013 it was widely reported in the UK and US that there had been an upturn in GDP growth.
This is actually false information. It is based on raw data and doesn't take into account gross domestic income (GDI). When the final actual growth rates were factored in. It turned out to be negative.
Governments burying their heads in the sand and misleading the public is not an economic policy. Is it a good time to buy a house? Definitely not.
UK Government using tax payers money to prop up the housing market
In the longest recession since World War II now entering a third dip and still no new policies have emerged. Except one oddity.
You and everyone else will soon be able to buy a house up to the value of £600,000 and qualify for a 40% deposit, interest free loan, directly from the British Government or more accurately, the British taxpayer.
The Conservative government is using taxpayers money to fund this housing bubble and distort the market even further.
A simple question. If you can afford to pay for a £600,000 mortgage each month, do you really need a handout from the Government. What are they thinking and who is this 'deal' aimed at?
Certainly not the poor deluded first time buyer.
Quantitative easing (printing more money) has diluted currencies. It did temporarily hide the total meltdown of the housing market for a time. That time is now over.
Houses for a £1
Pouring petrol on to the conflagration that is the UK housing market. Stoke-on-Trent City Council has agreed to sell off council houses for just £1 each. Reports BBC News.
Guess what happened. No one wanted to buy them, not even for £1 as there were stings attached. You had to agree to fully renovate them at your own expense. Which could range from £30,000 to £50,000. There are still no takers.
The short answer is that we are closer to the cliff edge than any sign of a recovery. With Barclay's Bank shenanigans adding to the general public's feeling, that we are all being led up the garden path with the bankers again robbing us.
Enough is enough already. Some heads must roll. Serious jail time is warranted for these alleged fraudsters and their assets should be seized like any other common criminal.
The International Monetary Fund (IMF) has issued a report outlining the continuing downturn.
With unemployment rising fast, although you wouldn't think so, as the figures have been manipulated and distorted to such a degree, that most statistics are now meaningless.
Rural Winter Village Scene
Sell your house yourself
Job losses and insecurity are now widespread in all sectors, both public and private. Britain is still in recession, regardless of what the government is stating. It can be argued, we never came out of the last recession. Printing more money (quantitative easing) hasn't helped the public.
Spain, Ireland and the Greek housing markets are basket cases. Fewer people are taking on or are even qualifying for the massive debt, that buying a house brings. As seen by the lower mortgage approvals and acceptance of the last few months.
There are significantly more people (40%) trying to downsize, than there are people who can afford to upsize to a bigger house (25%) even if they had the cash and the will to do it.
Many people, even though they have been approved for a mortgage, are deciding that this is not the right time, to get into financial trouble, as this is what mortgage debt now represents. Gone are the days when getting a mortgage was a ticket to riches. Many are waiting to see when the housing market crashes again, and by how much.
If you have a 30% deposit and you are prepared to lose it over the next 5 to 10 years, then it may not be a bad move to be buying just now. If however you intend to stay in the house, you want to buy for the next 20 - 30 years, you may just break even. Not a very positive set of choices.
How many scandals can this Government Survive
A little history. Just when it looked like things were improving in the last quarter of 2011 another housing market crash came barreling in, on top of the one we already had.
It dashed all hopes of a recovery. Fortunately many people did not buy into this false dawn and saved themselves from huge losses.
Although house prices are tumbling in some areas by 33% and more. It is very hard for many people to accept that their house is worth so much less than they paid for it.
The longer they hang on to these properties the less they are worth. The penny is slowly dropping and we are beginning to see massive cuts in house prices some as much as 33% + all over the UK.
Where are all the Buyers?
There are no more sensible buyers, everyone knows that people are stuck in houses that are falling in value.
What few buyers are out there especially in rural area and they are offering a fraction of what the owners think their houses are worth. They also expect prices to continue down and don't want to buy a falling asset.
Property Prices are no longer the hot topic of dinner parties. Nobody wants to hear about how much money has fallen of their house. So as more people see what was once their pride and joy, depreciating in value. What are our politicians doing.
Not much is the answer. If anything they are making matters worse.
No Home no Vote
In the UK if you have no address you cannot be on the electoral role; which means technically you can't vote anyway. What politician is going to waste time on the homeless/vote-less? I'm pretty sure similar rules apply in the USA.
In the interest of balancing the hype of the banks and loan companies, that are trying to talk up the real estate market. It is dead but just hasn't been buried yet.
Why Are 'We' Paying for the PPI Scandal?
The billions of pounds, that have had to be paid back to people, that were mislead (they call it miss sold ) into buying insurance on mortgages, second mortgages, loans and credit cards by the banks.
Usually secured against their home. Is a scandal that is largely being ignored. People it seems are shell shocked by the continual revelations of more wrongdoing by these once respected institutions.
Why is the British public stuck with this multi £ billion bill. We didn't sell or profit from these policies. What is really going on, and who decided that we should pick up the tab.
Mortgages...No one wants them now
Don't believe a word
Latest News From The IMF On UK Housing Market Chaos
- IMF Survey: Household Debt Holds Back Recoveries but Restructuring Can Help
The more households accumulate debt—mortgages, personal loans, and credit card debt—during a boom, the deeper the subsequent slump in the economy and the weaker the recovery, according to new IMF research published in the April 2012 World Economic Ou
How angry are you about the housing fiasco?See results without voting
Reality Check Running Away
I don't want you to run away scared because of the subject discussed here but to listen for a couple of minutes.
It might save you a lot of pain and definitely a lot of money. I will be quite candid and state the facts as I have interpreted them over the last 30 odd years. I am a teacher of ICT and economics and have lectured occasionally on Economics since 1989'
I have seen UK house prices rise and fall over the last 30 years. They do go up and down and people have short memories.
Thankfully I managed to avoid the downswings on the housing market roller coaster during this 30 year period, by taking my own advice and ignoring what the mass media is/was pushing.
So how did we get to this state of affairs, why are we still in them and what's the solution?
The simple facts are:-
(1) Your house and other peoples houses, are and have been overpriced. But nobody cared as long as they were making money.
(2) People are in denial that their house is worth a fraction of what they paid for it. Psychologically this is disastrous for them as they literally cannot see that they must accept the price they have been offered or continue to watch their house values plummet.
(3) Homeowners don't want to hear it and realtors (estate agents in the UK) and politicians don't want to tell them as they want to talk the market up hoping that some miracle is going to happen. It won't.
(4) The value of the pound or dollar in your pocket has plummeted. See below.
That's it. That's all there is to it. Simple.
The newspapers, politicians, people with a vested interest will be bamboozling you and talking about the very complicated state of the economy; (that you may not understand) This bank has robbed more than that bank, and the government is going to crack down on these criminals. Meanwhile the public get the bill.
That is great but the money that the government gets back from these dodgy bankers does not go into your pocket to pay your mortgage. It goes to....The Government.
The next time someone is trying to sell you a house or anything else for that matter; offer them what "you" think it's worth.The one simple fact underlying the current problem is that. "something is only worth; what someone else is prepared to pay for it" Maybe you should just re-read that bit again.
If you want a simpler explanation, think about this.
If you just bought a brand new (not gold) Rolex watch (no it doesn't matter which model) and turned around and walked out of the shop. How much do you think you could sell it for?
Exactly now you're getting it. In economic terms It means that
"when prices are right; markets will clear"
It is that simple, but people can't take it in; they want more complex answers and consequently they will continue to suffer losses and pain.
Keep it real
Value Of The Pound 1989 - 2016
A Pound Is Worth?
So what is the Pound in your pocket worth today? about £0.40P
When 1960s PM Harold Wilson devalued the pound by 10% he went on TV to tell the nation.
There has been a deafening silence from UK Prime Minister David Cameron.
Lets Test Your Reasoning Skills
If a bat and ball is $1.10 and the bat is $1 more than the ball. How much is the ball?See results without voting
Answer to the Polls
If you answered I'm hacked off. Because I can't get on the housing ladder.
If you still feel the same way after reading this, then you have missed the point and need to read it again or speak to a cognitive therapist.
The answer is that the bat is a $1.05
The ball is $0.05 hence the bat is worth a whole $1.0 more than the ball.
Don't worry if you got this wrong, so did over 50% of university graduates. It's intuitive to think that the ball is $0.10.
Think about it.
The moment that we allowed our homes to be made into just another commodity, all the rules went out the window. The housing market crash is continuing, and there is no chance under the current leadership that it will recover.
The system is completely screwed up and no one wants to shift their position for obvious reasons. No one wants to lose.
Just how long will it take to completely melt down. With the inevitability of gradualness. Predicting the future is a fool's game. Deal with the here and now. Good luck.
What are your views on the housing market. Leave a comment below.
More by this Author
The equal pay acts of 1963 and 1970 should have raised pay rates for women, instead their incomes have fallen. Why is there still such an unequal distribution of pay. Are men really so shortsighted?
Comparing Oliver Cromwell and King Charles I. The English Civil War changed world history. New Model Army, Round-heads. When Absolute Monarchy met Religious fundamentalism. A recipe for revolution.
Koi fish, humble common carp bred for color and beauty, find their way into art and into the ponds of the very wealthy; the most beautiful have sold for up to $2.2 million.