I predict a very substantial fall in UK house prices in 2012 – and that will be a very good thing.
Average house prices currently stand at over 6 times average earnings. That compares to a long term average since 1945 of under 4, which charts show to be the norm.
People simply cannot afford to buy homes at six times their earnings. People living on average earnings, and paying the high rents such high property prices entail, would take ten years to save one years earnings, which would give them a deposit. They then would need five times earnings (or two and half times joint earnings for a couple) in mortgage. It is with good reason that banks will not lend at that level – it is more than people can pay.
There is a fascinating graph in this BBC report of a National Housing Federation (NHF) study last summer. It shows that the number of households under 30 living in private rented accommodation increased astonishingly, from 30 per cent to 48 per cent, in the bubble years between 1997 and 2009. That is a massive gain to a landlord class apparently very rich in assets -but the value of whose assets is strangely inflated.
This leaves ordinary people stuck in a very unpleasant position. Until last year, I was forced to live in private rented accommodation. My annual rent was about 6% of the nominal property value. I now pay substantially less than that in mortgage interest.
The NHF study predicts that current trends will continue, that the private rented sector will continue to grow, and that house prices will grow 21% over the next five years. But the NHF, who commissioned the study, are providers of rented accommodation and as usual this “academic” study uses assumptions which promote the economic interests of those who funded it.
In fact, I expect the massive decoupling of house prices from average earnings will end in 2012 or 2013 and we will see a major crash in house prices. It may not begin in 2012 – possibly it can be delayed until 2013, but I predict that by 2015 we will see house prices to earnings ratios back to four per cent. And as I see no significant increase in average earnings over that period, that means a fall in nominal house prices of over 40%.
House prices currently bear no relation to the ability of people to buy them to live in. They are like a rock balanced on an apex, requiring only a little push to crash them down. A number of pushes are coming:
– Cuts in housing benefit. The whole rush to the private rented sector has been underpinned by artificially high rents forced up by government payment of housing benefit. I am of course extremely sorry that individuals may be hurt by the implementation of these cuts. I also expect some backtracking as it dawns on MPs that the £2,800 per month does not actually go into the pocket of the Daily Mail’s Sudanese refugee family, it goes into the fat pocket of some Tory landlord. But the housing benefit cuts will reduce returns to landlords and knock house prices.
– Unemployment. The main impact of public spending cuts is yet to feed through in terms of higher unemployment – you ain’t seen nothing yet. Tories like unemployment – it reduces the costs and leverage of labour. 2012 is the year that it will really hit. By the end of 2012, repossessions will be very high. This would always spark a drop in house prices; people have not yet got their heads round what a fall it will be this time.
– Interest Rates. The key factor in balancing that house price boulder has been the lack of any high wind of interest rates. The short term outlook is for base rates to remain real terms negative (which is undeniably true yet strangely almost never said). But that will not last forever either…
The coming crash in house prices is of course going to have a huge effect on the viability of the financial sector, and will join together with sovereign bond defaults in precipitating the fall of the casino capitalists who live on our labour and have the rest of us in their lockhold. Those who saw 2011 as a global year of revolutionary change were only witnessing a tremor before the eruption. I cannot be sure that the crash will come in 2012 rather than 2013 or 2014; but I am looking forward to the new year with genuine hope that a deal of stench will be cleansed.
Mary
One day,
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Youngsters will learn words they will not understand,
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Children from India will ask: “What is hunger?”
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Children from Alabama will ask: “What is racial segregation?”
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Children in Britain will ask: “What is a roof over your
head?”
presumably bond markets are not random things but viscious mechanisms of predatory Zionist bankers.
The solution is easy- lock them up in their own money vaults in the City of London.
You might have guessed that one of the Tory boys got the job last night. Cost not stated. Nice to know that Great Britain is vibrant and open according to (*)unt
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http://conservativehome.blogs.com/parliament/2011/12/its-not-quite-guy-fawkes-but-tory-mp-mark-lancaster-plans-pyrotechnics-over-big-ben-tonight.html
2 years ago the cost was £1.6 million {http://www.whatdotheyknow.com/request/56166/response/138578/attach/html/2/11%201.doc.html}
Quite Boniface Goncourt.
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This morning we heard more of the right wing hounding and aggression, this time from the pocket pol Shapps. ‘We’ll go after them if they sub let their council house’ and ‘6,000 of council house tenants earn more than £100,000’. I do not believe the latter.
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http://www.bbc.co.uk/news/uk-16376455
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In opposition, Shapps was heavily involved in homelessness projects.
{http://en.wikipedia.org/wiki/Grant_Shapps}
@anno – is it your position that bankers are all either Jewish or supporting Jewish aims? That is racist nonsense. The problem is greed, as people here keep telling you.
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> Get yer prayer mats ready, the future of the UK is Muslim, inshallah
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More nonsense, but at least it isn’t racist. Plenty of people have said to you that your repetitive evangelism isn’t going to end in a beautiful Sharia Britain, and damn right too.
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I met a Christian writer on the train yesterday called Peter, and his poor justifications for believing in a sky god were preached to me as illogically as they come. Wonderful tautologies and circular arguments were presented thus: `God said this, and he cannot lie, so you must believe`.
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I thought of you when I spoke to Peter, and I urged him not to quit his religion, but to quit his church, so as to remove support for an institution that wishes to exert political influence over people. I am sorry he is an evangelist, for I truly believe he is spreading a harmful meme – though I take comfort in the fact he was terrible at it. I am not against religion per se – just organised religion. Yours too, as it happens – I don’t discriminate.
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He did let me know though that all non-Christian religions were fake, which was jolly kind of him. Allow me to pass that onto you, in case that persuades you to quit Islam and join a fun sing-song church thing! Peter did say being a Christian works out very well for him.
I have expected a housing crash since 1998 when prices seemed totally mental even then, but thirteen years on I seriously doubt my earlier belief. They’re not making any more land, and they’re not building enough houses . . . I think it’s impossible to call.
Could it be that the banking cartelists know that sovereign governments -or rather, the politicians they bought and paid for- will never allow the debt system to collapse, and are way ahead of everyone in knowing that ‘debt forever’ will always be more preferable to the masses than ditching the banks, fiat money, & everything that goes with it?
In that senario, anyone holding gold will see their investment wiped out when everyone realises that funny money & debt-plague are hear to stay, and that the gold hedge against capitulation was the mother of all red herrings.
In the great global casino, can anyone beat the bank?
It would take completely new political parties, outside the reach of Babylon’s banksters, to break this new peonage paradigm.
A Mew Year message from a much kinder man.
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Archbishop warns against hostility to young people
http://www.bbc.co.uk/news/uk-16373396
.A New Year message….
I did not mean kinder than you Jon. Kinder than Shapps.
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A lot of self congratulory stuff on Tory MPs twitter today. Rah Rah. What ho old boy. Well done those chaps.
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http://twitter.com/TimMontgomerie/#/lists/torymps
One of the most popular slogans in China at the moment is that there are challenges ahead, but opportunities too, sound familiar?
Trying to discover the true state of the UK economy is a daunting task, because, as in Greece, it’s incredibly difficult to get hold of much of the information required to make a proper analysis, much is being hidden by creative accounting, because the consequences of revealing the fundamental, structural, weakness at the heart of the UK economy are dire. So an elaborate charade, supported by the main political parties, pundits, the media, academics, has emerged, a consensus, that chooses to ignore harsh reality in favour of a comforting delusion, a fantasy.
The core foundation of the economy now rests opon sand, that is the dreadful fact that our financial institutions are virtually all… insolvent, or bust, weighed down by collosal loses in the great international financial casino. The giant Ponzi scheme has collapsed, yet tremendous effort and resources are being expended on denying this fundamental truth because the consequences of admitting and facing up to reality are too awful to contemplate. But for how long can one hide the truth and ignore reality?
Let the crash begin, its long overdue and necesarry, not only will some banks be scrambling to exchange their ‘volatile’ assets for other more lucrative gambles, sic, the assets and rents Government pays for properties will decrease, so will PFI’s, or will they?
Health and happiness to you all, whatever happens will happen.
Looking forward to the new revelations over Mr. Werritty, this issue, so comprehensively covered up by the whole establishment media the civil service and other countries, I hasten to add, has clouded the coalition Government. This duet was gallumping around the globe holding high level talks, foreign powers must have had an idea of what was going on.
I just dropped in to wish everyone
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Happy New Year!!
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Hey, it’s 2012, the “Mayan Long Count Year” or something, the year a load of people with, er, unusual opinions have been saying something, er, very significant is going to happen, but none of them can say quite what… Well, whatever it is, bring it on, we’ve been waiting long enough.
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Standby cue 1…
OK. Cue 1, go: House lights down, curtain up!
Happy New Year, Health and Happiness to everyone.
I could not let this go, I think people believe that everyone in the rental market is a greedy landlord (and no doubt some are), but many of the landlords/ladies are there due to lack of any pension, one of them my own brother in law. He worked long and hard for the private companies all his working life and has no pension to speak of. Who can survive on £412 (state pension). Now the government is cutting Public Sector pension rather than make provisions for the private sector. This country needs a fundamental shake up!
incidentally, In Iran the state pension is higher than UK (and cost of living lower),and you need only to contribute 15 years in order to receive it.
Writerman,
I agree with you but I think the facade is there to maintain confidence in the UK economy and hold up the City. If that there won’t be much for anybody. That’s why for many years there’s been so much illegal activity behind the scenes to shore up the City and increase UK investments abroad.
Rent should pay for equity: currently it doesn’t buy anything.
Aaagh Hangover
Happy New Year Craig.
I sketched out an estimate of the raw cost of supplying and maintaining modest modern accomodation and came up with around £5 a week per person. Physically there is some space required, some materials, some tools and labour to construct dwellings and facilities, and some maintenance is required through the buildings relatively long lifespan. But the costs of construction and maintenance which should be the major concern overall, seem a small fraction of the cost of the attached market services, financing, related taxes, whatever else..
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It seems that it should be much more costly to supply fine food for everyone than roof and walls, but i can food shop very comfortably (rather decadently) for £20-30 a week. In this day and age of technical efficiency, remarkable processes and tools, our economic arrangements seem primitively haggled together by specific ‘schools’ and overall seem selfishly contrived to impose a steep and difficult supply curve on the population. The bewildered and happless homeless, and mad housing estates at the bottom, multiple exquisite. It’s economic buggery basically.
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We must sort this out. This is a year of terrible dangers approaching, but amazing information sharing, analysis and communication forums – newly invented. I am begging sky gods and hearts, for a new renaissance of intelligence and goodwill to dissolve our economically contrived burdens. I am hoping the too many old answers and arguments will finally relent, and enough people with direct cooperative approaches to living and working can make humanity and technology start working like we could.
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Also, Im retiring ‘crab’ for being too crabby, unlike real crabs who can be mellow little scavengers. When i find something alright to add this year, ill post as “Hip”
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Time to put into practice the best of our experiences. Enough luck, good voices and best spirits all!
@ @
J
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Sorry your journey was spiked with froth from an evenjellical Christian. No need to take it out on me though. Zionism is not Judaism. It is paganism and greed wrapped up in tinsel of Christianity and twinkly paper from Mosaic Judaism. The best part is the wrapping, the inside like one those virus worms that close your computer down.
Happy Xmas to all our readers – I always wanted to say that 🙂
However it does seem a little trite to write about house prices when we are clearly in the biggest global crisis of all time, as Guest points out, which will continue, not just the financial ponzi scheme, but resource depeletion, epecially oil, and climate change bubbling along, not to mention the beating of war drums over Iran.
OK, gripe over, but I hope that this blog will continue to raise its sights in 2012. Or I might convert to mythical sky god worship – (for about fifteen seconds anyway). Ho Ho.
> Sorry your journey was spiked with froth from an evenjellical Christian.
> No need to take it out on me though.
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Not ‘taking it out’ on you at all – just pointing out the similarity between Peter the evangelical Christian, and Anno the evangelical Muslim. My point, if I have to sum up, is that whilst I respect the right for a person to enjoy his religion quietly, I don’t think you or Peter are respecting my right to enjoy my atheism/agnosticism. I don’t need saving, however much you both insist I do.
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Incidentally, you need not be sorry I met Peter. I enjoy talking to people.
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> Zionism is not Judaism
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Of course. But you said bankers were ‘Zionist’ – what did you mean by that? The kind of bankers that caused the crash are part of the elite, and so can be labelled as right-wing, or conservative (small ‘c’). They can certainly be called greedy, in the main. But by what logic can you call them Zionist, if you specifically mean that they all support Israel’s imperial ambitions to increase its borders, and to squeeze the Palestinians into ever-decreasing and non-viable lands?
Incidentally Anno – I don’t mean to say you should stop talking about religion. That’s cool – it’s just about whether you accept people’s right to reject it, that’s all.
Nick Cohen of the Observer calls for ‘Western intervention in Syria’. Just as he supported the war on Iraq and the Cast Lead attack on Gaza. See Wikipedia. Obviously gets excited by mass murder.
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http://members5.boardhost.com/medialens/thread/1325410493.html
Anybody ever heard of a Peter Reynolds, ex Saatchi Tory who fell in disgrace for some ‘discrepancies’ and is now in charge of CLEAR. His history seems to begin in 2008 and one can’t find much of where he comes from or what he did in the 70’s and 80’s.
The man is causing consternation since he took over the LCA and turned it into CLEAR, he is a rabid homophobe and has been muted to have marched with the EDL.
I suspect him to be a plant ala Mark Kennedy.
cf our housing problems to those of the poor people in India. Imagine living inside an advertising hoarding.
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[..]India’s ascent to “new world power” is both true and what Edward Bernays, the founder of public relations, called “false reality”. Despite a growth rate of 6.9 per cent and prosperity for some, more Indians than ever are living in poverty than anywhere on earth, including a third of all malnourished children. Save the Children says that every year two million infants under the age of five die.
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The facades are literal and surreal. Ram Suhavan and his family live 60 feet above a railway track. Their home is the inside of a hoarding which advertises, on one side, “exotic, exclusive” homes for the new “elite” and on the other, a gleaming car. This is in Pune, in Maharashtra state, which has “booming” Bombay and the nation’s highest suicide rate among indebted farmers.
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Most Indians live in rural villages, dependent on the land and its rhythms of subsistence. The rise of monopoly control of seed by multinationals, forcing farmers to plant cash crops such as GM cotton, has led to a quarter of a million suicides, a conservative estimate. The environmentalist Vandana Shiva describes this as “re-colonisation”. Using the 1894 Land Acquisition Act, central and state governments have forcibly dispossessed farmers and tribal peoples in order to hand their land to speculators and mining companies. [..]
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http://johnpilger.com/articles/in-the-land-of-facades-mark-the-first-signs-of-an-indian-spring
Here’s a link to Equity for Rent a post arguing that all rent payments should buy equity. It also describes a legal mechanism for making this happen.
Ingo,
That carpetbagger is intent on making millions out of supplying the stuff, hence the all out push for reforms. Check out the US experience, in Current.
‘Fat Tory land-lords’ robbing young people under 30 and ambivalence to youth unemployment are I believe part of a much greater problem. One that agent Cameron wrongly perceives as ‘the broken’ British society. Some blame the recession, yet a link between economic conditions and social unrest has existed since antiquity.
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In 2011 we witnessed young people out of control, most of them in areas that were poor by UK standards. As these young people were not stealing food out of desperation, the thefts suggested inequality, the widening gap between the haves and the have nots was the driving factor. Clearly this was part of the problem, but inequality has long been increasing which does move the pointer more towards the recent government spending cuts that by end summer 2011 savaged poor household incomes, a loss equivalent to 38% of their net income while the rich or better off lost 5%.
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Returning from his holiday in Tuscany, agent Cameron placed blame for the unrest on ‘sick communities’ or ‘poor parenting’ in welfare dependent communities. I therefore ask, has Mr Cameron shown leadership and guidance to our young people in this matter or created negativity and suspicion. For instance we know he took out a £350,000 mortgage – close to the maximum amount that can be claimed for – to buy a large house in Oxfordshire in August 2001, two months after winning his Witney seat in the General Election. By nominating it as his second home, he was able to claim for the mortgage interest payments under the now-infamous Commons’ Additional Costs Allowance (ACA).
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Just four months after securing the £350,000 mortgage, Mr Cameron paid off the £75,000 loan on his London home, taken out only six years earlier.
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There is no suggestion that he broke any rules. But mortgage experts say that if he had kept the loan on his London home and borrowed £75,000 less on the Oxfordshire property, taxpayers could have been saved more than £22,000 between 2002 and 2007.
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Cameron’s case shrunk to obscurity after other illegal and false claims by other ‘under’ politicians.
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It seems in recent years the moral compass was shifted by ‘middle-class’ looting by bankers(2008) and politicians(2009) which made it more acceptable for everyone else to ‘take’ what they wanted, when they wanted.
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To the rest of us this primary mistrust of our leaders has compounded with dubiosity and skepticism for over a decade from lies (9/11;7/7 WMD), deception (Liam Fox) and a predominance for control and power. The integrity of British government and the British establishment is, I believe at an all time low. In that respect 2012-on will certainly see a crash, more, a disintegration of self-serving society into pieces that the British people can rebuild into something more respectable.
The mortgage rates, housing prices and national finaces are all interlinked – and – this man lucidly explains how so:-
http://www.youtube.com/watch?v=qOP2V_np2c0
thanks fed up, I think he is a plant of sorts. The story of housing in britain is the ownership of land and how private owners are allowed to release land into land banks, a racket for short. private landowners, royals and the noblesse noblige release parcels of land, but never enough to still demand. At the same time some 600.000 homes stay speculatively empty, a crying shame. At present greenfield sites are still developed whilst brown field sites are held up for all sorts of reasons.
Once upon a time there should have been seven P&R sites surrounding and serving Norwich, one of them was Bixley P&R, a brilliant site which lies right next to the A47 to the south east and owned by a large landowner with connections to the royals. Whilst six sites were developed, the access corridor with the most affluent commuter traffic into the City did not get its P&R site, its was postponed and is now ‘not deemed necessarry’, prime land for industrial development, just to show one small way of influencing and changing major infrastruture plans in one’s favour.
Landoners release small parcels of land, jusdt enough to keep the market price rising, thats reason enough to long for a crash, or is it?