“House Price Crash” (HPC) Website Mentality

hahaha lol so true. that site is full of psychos. i dont know whether a crash is coming or not and I dont care but they act like it’s set in stone.

I’m an active poster on the HPC forum. I personally think a crash is coming and well due but I completely agree with what your sketches are illustrating. A lot of the people on there act like 12yr olds.

p.s I dont think you’re very popular over there right now lol

I’m also a member of this HPC, but I have found that the members get seriously aggressive sometimes

What I don’t understand is how the members who are actually seeking good advice cope with all the stone throwing??!!

Yeah, extremely aggressive and rude. Sad part is that the majority of them are grown adults. It’s just strange.

Well, people looking for advice either join them in bitterness, or don’t go back, unfortunately.

I’m sure a lot of the members know a lot of useful information. But if you want advice about buying, forget about it. If you want advice about selling, I’m sure they’ll be ace

HPC tend to keep a few pet bulls, as long as they don’t have any reasonable ideas and are kept for comic effect. It’s the ones who express doubts about a crash in any reasonable, persuasive way that get banned.

I’d heard before that HPC moderators ban people who don’t comply with their teachings. I thought it was paranoid nonsense (like much of the other stuff on there). Then I was banned myself. GHPC has many of the more reasonable posters from HPC (many of whom were banned from HPC for expressing doubts about the gospel). It’s a much happier place if you want to actually discuss rather than mutually masturbate.

I have been looking at the HPC site as well.

Regardless of the many children in there, it is a good source fof negative stories. I have a BLT and am relying on capital appreciation. I am new to this site, but want some advice on selling.

I want to know if some text I saw is true or not (please note that I have not edited it)….

Population:

Population density (persons per square km) in the UK is around 250 and that of Japan is 339. The population there was still growing in 1990…the year in which house prices started falling for the next 15 years—they added lots of people over their boom period and during the decline. (n.b. Japan has even less workable land because of earthquake zones and mountains.)

UK UK
Year Population
1990 57.27m
1995 57.96m
2000 58.87m
2005 60.24m
2010 61.52m
Source: United Nations.

Japan Japan
Year Population
1980 116.81m
1985 120.84m
1990 123.54m
1995 125.47m
2000 127.03m
2005 127.90m
2010 127.76m
Source: United Nations.

Hong Kong has a population density of 6,407 and Singapore 6,369 (Singapore in particular has traditionally had large numbers of foreign workers entering). They both saw a decade of price falls, although unlike Japan this was more related to the Asian financial crisis of 1997-98 (but population density did not provide a guaranteed rise in house prices as many would suggest is the case in the UK).

Interest rates:

Unemployment in Japan in 1990 was around 3% (lower than ours), while short term interest rates (higher than policy rates) were at close to current money market rates in the UK. The increased payments, in Japan, owing to higher interest rates, were of a similar magnitude in Japan, as they are in the UK now.

Japanese money market rates

1987 4.2
1988 4.5
1989 5.4
1990 7.7
1991 7.4
1992 4.5
1993 3.0

UK inter-bank lending rate

Jun-03 3.57
Sep-03 3.5
Dec-03 3.86
Mar-04 4.11
Jun-04 4.51
Sep-04 4.85
Dec-04 4.82
Mar-05 4.85
Jun-05 4.83
Sep-05 4.55
Dec-05 4.56
Mar-06 4.53
Jun-06 4.64
Sep-06 4.85
Dec-06 5.17
Mar-07 5.49
Jun-07 5.72
Sep-07 6.29

UK and US, current numbers:

Current US and UK data:

US official rates: 4.75%
UK official rates: 5.75%

US unemployment rate: 4.7%
UK unemployment rate: 5.4%

The US, in other words, has lower interest rates and lower unemployment.

This is a cross-country comparison using data that according to estate agents would have meant none of these other markets should have collapsed. This is liquidity driven and liquidity is gone. Of course each country is unique (there were other things going on in Japan’s case up to 1990, for example, but the point is that the arguments (immigration: population, lack of land for housing, low unemployment and low interest rates)) being used by housing bulls failed to help any of the other countries when bubbles came to bursting and liquidity declined.

Comments appreciated. My property is in London and I bought in 2004.

p.s. what is GHPC?

[…] those unsure what i’m talking about, you can see the first installment here, “House Price Crash” (HPC) Website Mentality and get a brief introduction to what HPC is all […]

This site is great. It seems to be laughing at the HPC site. That site does have some bitter first time buyers, but it also has lots of people who look at pure statistics and relevant economic theories e.g. the credit cycle and figures discussing the liquidity versus real demand argument, based on bodies of work going back a century. From what I can see here, everything is based more on HOPE(based on exactly the kind of thing that was said in the 1980s about lack of land etc)…interesting as that is what the other site is accused of.

Even more interesting is the text I found not being allowed on the site, even though all it gave was facts. Was one of the other comments here about HPC not allowing people on if they did not have the same views?

Sorry, Rij, your previous comment went into my spam folder. I only just dug it out- it should be visble on this page now.

Rij,

Thanks for posting that information, it’s very interesting. I’ve read something similar to it before.

To be honest, I couldn’t tell you if what you posted was true or not. I don’t look at foreign economies. The complications with comparing economies are that different factors affect different economies. For example, if interest rates dropped significantly in the UK and the USA, the effects wouldn’t necessarily be the same.

I base the UK economy purely on past trends with in the UK, because I think that gives us the best representation of what affects what. The last crash was primarily based on high interest rates and low unemployment, both of which are still relatively low in comparison.

The crashes in those countries you mentioned are only looking at population, unemployment and interest rates. There are so many other factors that come into play these days.

Before the UK crash in 1990, there were 7 years of continued price increases in the property market, the same as we have witnessed in the last seven years. So, with these sorts of comparisons, it is unsurprising that many people are predicting another price crash very soon.

However, there are some fundamental differences between 2007 and 1990, which I think should prevent a repeat performance.

Inflation does not pose such a large threat to property investment in today’s market. The internet has meant that the economy is much more efficient and that cost reductions and increased competition mean that we are less susceptible to inflation.

There is much more access to financing these days. Getting hold of finance from banks and specialist lenders has become extremely easy. During the period immediately before the 1990 crash, purchasers could only borrow three times their salary; today it is possible to borrow as much as seven times one’s salary. And 100% mortgages were unheard of.

Today’s buy to let market is much more influential than during the 1980s. High net worth individuals and ever increasing city bonuses, as well as a poorly performing pension schemes, have ensured that the buy to let market remains healthy so that the bottom of the market does not falter and drop to the extent that was commonly seen during the 1990 crash.

Not only is the buy to let market holding up the bottom end of the property market, but the lenders are also becoming much more competitive in an attempt to ensure that this market remains strong.

Despite all of the possible warning signs, it seems that there are some key differences between our current state and the state of other countries and our own previous crash.

Of course, I don’t doubt the possibility of a crash. I’m just highlighting how times have changed since those crashes. I think there needs to be a correction, so the cost of living is back inline with the rate of salary.

Thanks for such a comprehensive reply. I like a debate (I need to get out more as this is now almost a hobby) and it was quite disheartening to see my point of discussion being filed away, so it is nice to see that it has been looked at.

That set of data did make me pause for thought, as the trends/numbers ring true to me from my days of studying International Economics, and I have checked that the interest rate and population numbers were correct. The areas I agree with in that set of data is that house prices can fall regardless of there being high population growth, low unemployment and interest rates, and a lack of land.

I think I agree with your points regarding the difference between the UK in 1990 and now. I was not old enough to know much about what happened in 1990 so I do not know when the crash started, so I would be interested in know the unemployment timings….according to the ONS, in March 1987 unemployment was 10.9% and it fell gradually to 6.9% in May 1990 but then rose to 9% by August 1991. I thought the crash started from 1989 and deepened in 1990 i.e. is the causality unemployment followed falling prices and not the other way around? This compares with unemployment rising from 4.7% in 2004 to 5.4% currently. The other thing of concern is that I have read that repossessions are occurring regardless of the low unemployment. A year ago I read that repossessions require a major rise in unemployment.

Based on what you say, we are all in agreement, that is, that liquidity conditions are the main difference. But this is where my problem arises. The BLT house is valued on paper at least at £300,000. It was £230,000 in 2004. The rent almost covers the new mortgage payments.

However, the problem is that I cannot see house prices going up any more in this area for at least three years precisely because liquidity conditions are going into reverse. Assuming a 6% (even if the central bank reduces rates by 50 points next year it looks like lenders will not follow) interest rate, if a BLT person were to buy the house they would be paying well above the rental income in mortgage payments, with no sign of capital appreciation to offset this. In 2004 buying made sense as the credit cycle had some time to go, so there was no doubt that there would be a capital appreciation. The 10% deposit has now grown by a factor of 3 and (minor) income losses only started after re-mortgaging, so that leveraging worked. Overall, the buying decision made sense at the time but why would a BLTer buy the property now.

At the same time, I have been told that FTBers have an average income of less than £30,000 in London. They would then need 10% deposit and still a mortgage of 9 times their income. I cannot therefore see anyone being able to afford to buy the house anytime soon.

Both groups of potential buyers do not have the ability to buy at anywhere near the levels even currently being suggested. If confidence goes down even further there will be no capital upside (and increasingly possible, a fall), while paying £100 per month for mortgage payments over the rent (the area has so many rental flats that it is not easy to raise the price).

Related to the above and what you said, lending criteria has improved as banks started using affordability analysis. Leading on from that, if house prices are now 3 times higher than in 1990, then interest rates have to reach just 5% to hit the same wall…income growth has not been incredible over the last 10 years and effective mortgage rates are at least 5.5%.

In addition to lenders seemingly ignoring the Bank of England even if it does cut rates next year, my concern is that inflation is not dead. The issue is how far China will now be exporting inflation. Services inflation has been roaring for years and it represents over half our inflation basket, but this was offset by goods deflation because of a shift in the global goods supply curve. If services inflation remains at trend and good prices are even just stable, we will have high inflation, as China now seems to be causing an upward shift in the global goods demand curve. It is no longer possible to grow company profits through outsourcing/ cost cutting, so to maintain profits prices must rise (input costs have been rising for a long time). Also, food and commodity prices in general will remain high.

My assumptions are that the Japan example shows the four supports mentioned (low interest rates, rising population, lack of land and low unemployment) do not guarantee anything. If the economy turns for the worse, which I think is happening and inflation remains above the 2% target (still very possible), immigrants won’t get jobs here so won’t come and may leave (my area relies a lot on them). The City also looks like it is in trouble.

I agree that the liquidity issue has been the key in terms of giving access to loans, but it is precisely this pillar that I think is about to reverse as well. Given the above, I would like advice for why selling would not make sense in April (when the tax laws change). That gives £100,000 (original deposit plus equity) to put in an account to earn £5,000 net a year with no hassle or costs, and buy in two years even at the same price (I think less) but knowing that would involve paying stamp duty. No gain or loss but no hassle. This works even if prices do not fall, although no asset surge has been followed by a nice return to zero, it always undershoots the average trend line. It does not work if prices rise (and I do not think they will).

My apologies if this disjointed. I have rushed it but wanted to get it out of the way.

p.s. I figured out what GHPC is, I am not even going there, as I could spend the rest of my life getting addicted to blogs.

sorry, another p.s. when I refer to affordability it is not just nominal payments and the interest rate not going down, but also the reduction in income multiples lenders will give and the higher deposits that they require.

Hey Rij,

You could write for England..hah! Good stuff.

I believe that any old fool can buy a property and let it out, but an actual property investor can squeeze financial gains out of a property in ANY condition. In my opinion, BTL will always be a money making investment as long as people are willing to rent. The aim of the game is to make the figures stack. I notice you like to number crunch and assess economical conditions to base your concerns on, which is completely valid. But I don’t really assess the economic conditions to the level you do.

The success of your BTL very much depends on your mortgage policy. The way I’ve structured my investments are suited for the long-term. My mortgages are repayment, so my rental income is reducing my mortgage balance each month. In 15-20years my rental income would have paid off my mortgages. I just make sure the figures stack. I make sure I buy properties that are:
1) under market value
2) will bring in more rental income pcm than my monthly repayment mortgage

I’m assuming you’re on an interest-only policy, which is why you’re not sure what to do, as you’re relying purely on market value? The way I’ve invested, I don’t have to rely on market value. What I’m doing can be done by any BTL investor, so I think it’s still very possible to come out on top for investors if they find the right property and handle their mortgages correctly. People tend to forget that property investment is an ongoing venture. It’s not as cut and dry as buying a property and getting tenants in, and relying on automatic success. Remortgaging and constantly revising your mortgage policy is vital if you want to maximize profits.

In your situation, it depends if you’re in it for the longterm. If you’re looking for a short term reward, then sell during April. If you want a long term return, then I suggest sticking to it. Past trends have shown that property values double in the period of 10years, and that’s even with crashes occurring. You do have options and that’s your luxury. I initially purchased a property with the intentions of short term investment, so I got an interest-only mortgage. After a year, I decided I wanted to keep the property for long-term rewards, so I invested a further 10k into the property which enabled me to change my interest-only mortgage into a repayment mortgage with the luxury of having the rent cover the mortgage payments (since repayment monthly payments are significantly more). Consequently I’m no longer relying on the property value to increase, but my tenant to make her payments. You have plenty of options that can make the BTL venture successful. You just need to decide between short/long term.

Take this for example:
If you buy a 150k property, and put down a 15k deposit, and have a interest rate of 6%, your monthly interest would be £675. On a 150k property, you should be able to get £750pcm (if you find a decent enough property- which is possible- I did).

If the rate increases to 8%, interest would be £900pcm. Basing it on that (a bad situation of high interest rates), you’ll pay roughly £150 each month out of your pocket.

Over 20 years, you’ll end up paying £36,000 out of your own pocket and your property would have more than doubled in value (going by past trends). So let’s assume it’s worth £300k.

Your initial investment of 15k, and your investment of 36k over 20 years totals to 51k.

Your personal profit would be approximately 250k over 20 years! And I took into consideration worst possible scenarios. In the long-term, you should end up on top. So it does depend on how you make the figures work for you.

Would you agree with that?

I agree that FTBers in London are going to struggle. But they can easily invest successfully in BTL in other parts of the country where property is with in price range, and rent in London. That way at least they’re on the ladder.

The problem with many people and companies in property and reliant on property is their vested interest taints their views regarding economic data which has been showing we were leading up to an adjustment for the last eighteen months when the sale of new build apartments began stalling in certain areas. In August 2007 the triple “A” rated poisoned wrapped bonds were revealed and it was evident the down breeze was due to turn into a storm.

Within many companies anyone who voiced downturn concerns would have been termed “negative” for facing the truth. That is why I find a forum like HPC healthy as everyone can stand and deliver their view points. Anyone banned would normally have been involved in insulting, racist or other bad behaviour which can be reported to the moderators who seem to take action fairly quickly.

I am an owner occupier and came through the ‘88-’95 adjustment. In fact I traded down to get rid of my mortgage in ‘88 anticipating the turmoil.

If you have a view stand by it, bear or bull. That is what like to see.

Looks like the market is defintely crashing now, higher rates, bigger deposits required, lower rental income, oversupply, larger arrangement fees.
Save yourselves!!!
SELL UP NOW!!!!

oooopppps….

too late.

Ha, ha so funny. It’s very true that a lot of the HPC crowd are immature, lazy little tw@ats who missed out due to their own stupidity. Now they can’t wait to see other people suffer because of it. We all know these sort of spiteful people, they usually vote Labour, muwhahaha.

Have to say though that here are also some very good people on the site as well. They tend to be older though and to have already achieved success.

Yeah, I think the name of the site gave it away for me. Once you call your site House Price Crash it doesn’t exactly leave much room for movement. Let’s start a ‘there is no god’ website and see who turns up on that….

HPC is a forum i frequently read and as a first-time buyer i do generally want the “crash”. I can see where you are coming from though as some of the views and opinions on there can be a bit extreme. I think you will find the majority are “sell to renters” rather than first time buyers.

This is an amusing article written by someone who has not really read the HPC website. Yes, there are a few extremists but they often tend to be the ones who claim no crash will occur. They come on and make claims to that effect, they then refuse to answer questions and justify themselves on the basis of (often) flawed arguements. To enter any discussion with one justification and an unwillingness (inability) to listen to counter arguements is just asking for people to think you are an idiot.

There are several good references each day in the media regarding the current slip in house prices, I think people are brutal with their words and yes some people are rude.

However the grpahs, media links etc are well worth the look, after all you don’t need to click on forum.

p.s. most internet forums are fill with rude people.

Wake up and smell the coffee. The ballon has been inflated by cheap credit nothing else. No cheap credit no HPI. No HPI equals recession.

Talk about the HPC being full of obsessives everyone here is fixated with BTL as the only way to make money. Remember any geared investment has risk.

Hang on - isn’t this site vilifying housepricecrash.co.uk in exactly the same way as you accuse them of?

Hmmm.

Either way, the site is redundant. The UK is already in the midst of a housing price crash - which really wasn’t that surprising - when prices go up its because of immigration, island, sound economic fundamentals, but when prices go down it’s because htere’s no more cheap credit.

Hmmm.

I to post on this site and find some of the financail information interesting. I think that the majority of people on the site are dead set on a crash but to be perfectly honest I feel it is not if but when. I also think that people who have a lot invested in the property market get pretty heated when confronted somebody who thinks the market is going to fall. But just for fun if anybody out there thinks there will not be a downturn in property prices in the next decade then I would love a wager with them, a big one.

For prices of any commodity to continue rising, there has, of course, to be a demand. But that demand can only be met by people with sufficient funds, so once the price goes beyond their means and/or the supply of credit dries up, so does the price stop rising. Then, think the potential buyers, I’ll wait until the price falls to my level. Simple, isn’t it?
There is still, naturally, a demand for property, but the funds are no longer available, so that the prices will have to fall until they reach affordability again. With some properties being at six or seven times annual salaries against a historical three times, there is only one way for prices at the moment.
I have NO axe to grind, and I do not want to see any innocents suffer, but basic economic logic says that down is currently the only direction.
I had never heard of the HPC site, so just had a quick look and find that most people there are talking the same logic.
Sell NOW - if you can!

Erm, reading through the posts on this website, you could easily reverse the positions. Is there going to be a crash? I dont care. Will you “investors” loose money as you have no clue what you are doing? Yeah. “But it is different this time” - Quote from the dot com/stock market/previous house price/tulip booms.

****ing hilarious, really cheered me up! I think you’re in the wrong job. There are quite a few morons on HPC (you can work out who they are) but then again there are quite a few people who actually know what they are talking about. I hope there won’t be a crash but when you look at it logically there seems no alternative but some form of ’substantial’ correction.

Bring it on HPC. Forum WAR!!!Propertyinvestmentproject.co.uk vs. housepricecrash.co.uk

“This is a normal 1-on-1 conversation:
Person 1: Hey, mate, I’m a Christian.
Person 2: That’s cool. I don’t believe in Reglion myself, but I’m open to all teachings…
Person 1: Good stuff. So, what you up to?”

You think that’s a normal conversation? I can assure you mate, it isn’t. I laugh at people who believe in superstition and then politely inform them that they were clearly brainwashed by their parents from a early age. Anyone who doesn’t believe in religion would not say “I’m open to all teachings”. That would be stupid.

Its kind of ironic that a comment on here says that 1990 and now have lots of differences like greater availability to credit and low inflation.. what a difference a few months make..

First Direct seem to be joining the HPC bandwagon!!! ;o)

Great cartoons though.. Some of those on HPC site are total nutters I have been banned twice but I keep going back because despite being nuts there is a lot of truth on that site!

I see you admit you don’t remember the last crash. I do, and this is much much worse.

And inflation which you say is less this time and so will save us? It was inflation that saved the last housing crash from looking worse, and in the 70s it hid it altogether. A lack of inflation will keep pthe debt around for many years to come, while wages stagnate and fall.

Still, there is no point telling people this. They have to experience it for themselves.

Good luck with your web site. See you on the other side in about 6 years.

Let’s be honest though, for all their crudeness, the HPC guys appear to have been right. It looks like the UK property market is following the US over the cliff. There is very little good news coming out, and you get the feeling from the media that the consensus view is now that property is likely to fall in price significantly for months, if not years.

I think you over exaggerate greatly, but there are some people at HPC who are frustrated at their inability to buy because of an overboiling market. When house prices are at massive multiples of salary, I can imagine that non home owners feel a little despairing.

The strength of your reaction to this though (producing a cartoon) shows that you are rather frustrated with the increasing evidence that the market is massively overheated and going down.

If you can’t prove them wrong… discredit them… I’ve found HPC news board to be a great place to view the unwinding financial crisis

well, you know going to HPC and making a statement of how the market is not gonna turn is a bit like going to vegsource.com and asking for a recipe for Boeuf Bourgignon.
You’re bound to get flamed since the group has this opinion as the basis for being a group.

[…] that goes by the alias Inbreda. Errmmmmm…. not sure of the accuracy of your web page here: House Price Crash (HPC) Website Mentality given the fact that it is not actually possible to post those words on HPC, and although it may […]