Is the bubble about to burst?
Discussion
355Chris355 said:
uktrailmonster said:
But now prices are just plain stupid! I'm sure at some point the market will collapse, either because they simply go out of fashion again or are not considered to be a good investment. I always think of Warren Buffett's mantra - buy low sell high. Well this seems like buying high to me.
I think you just hit the nail on the headEdited by GT4RS on Wednesday 12th August 18:02
TokyoRich said:
Oh yippee a property market bubble thread has emerged!
I think everyone really knows that the UK property market is a bit of a bubble but as most of us own property we try to stick our heads in the ground. From my perspective:
- There is lots of cheap money around
- Interest rates are at all-time lows and have been for some time
- The UK property market is well known and easily accessible and has had a prolonged period of growth
- Demand for housing currently outstrips supply
- Changes to the UK pension system have given the grey haired brigade lots of cash to invest quickly and as a fairly risk averse group they like buy to let properties
BUT
- The UK birth rate is well below 2 which means that the domestic rate of population growth would tend to a reducing population in the long term - in the short term this is being overcompensated for by immigrants who tend to have larger families and of course themselves also lead to an increase in demand for housing. As we know there is a lot of pressure in the UK to address the immigration "crisis" which would in itself lead to a reduction in the demand for housing in cities
- Interest rates will rise, maybe this year (probably in the US this year) and given how people have stretched themselves with recent mortgages at these interest rates there will be some trouble when this happens
- Yields on buy to let properties are really terrible. People only buy now for the expected equity upside (and partly because the yield on everything is terrible at the moment), combined with the recent changes to the tax law regarding the buy to let market (which will in itself have a dampening effect on the market), any fall or even a prolonged level of stagnation will lead to people exiting the buy to let market. With rising interest rates and the changes to the tax law this could in itself be leading to a "perfect storm"
- Given the toppiness of the housing market and the risk that this could pose to the wider economy, combined with the absurd income / loan ratios currently, mortgage lenders will increasingly find themselves being pushed to provide more stringent means testing by the BOE
- There is more "fast money" in the UK market than ever before. Some of this will be gained from illegal sources and others will come from overseas investors that were looking to get their money out of the country (China / Russia in particular). Now that the pound has appreciated and London property price growth has started to fall the smart investors out there will start to think about selling. If price growth falls away all together or we start to see falling prices then - guess what - we will see overseas investors panic selling which could lead to another "perfect storm"
So I think that property investments now do not have a very certain mid / long term future. I need a house for my family and I so I bought one, but I will be putting any spare cash into my cars as when they fall in value I can still thrash them down the track / road!
I think everyone really knows that the UK property market is a bit of a bubble but as most of us own property we try to stick our heads in the ground. From my perspective:
- There is lots of cheap money around
- Interest rates are at all-time lows and have been for some time
- The UK property market is well known and easily accessible and has had a prolonged period of growth
- Demand for housing currently outstrips supply
- Changes to the UK pension system have given the grey haired brigade lots of cash to invest quickly and as a fairly risk averse group they like buy to let properties
BUT
- The UK birth rate is well below 2 which means that the domestic rate of population growth would tend to a reducing population in the long term - in the short term this is being overcompensated for by immigrants who tend to have larger families and of course themselves also lead to an increase in demand for housing. As we know there is a lot of pressure in the UK to address the immigration "crisis" which would in itself lead to a reduction in the demand for housing in cities
- Interest rates will rise, maybe this year (probably in the US this year) and given how people have stretched themselves with recent mortgages at these interest rates there will be some trouble when this happens
- Yields on buy to let properties are really terrible. People only buy now for the expected equity upside (and partly because the yield on everything is terrible at the moment), combined with the recent changes to the tax law regarding the buy to let market (which will in itself have a dampening effect on the market), any fall or even a prolonged level of stagnation will lead to people exiting the buy to let market. With rising interest rates and the changes to the tax law this could in itself be leading to a "perfect storm"
- Given the toppiness of the housing market and the risk that this could pose to the wider economy, combined with the absurd income / loan ratios currently, mortgage lenders will increasingly find themselves being pushed to provide more stringent means testing by the BOE
- There is more "fast money" in the UK market than ever before. Some of this will be gained from illegal sources and others will come from overseas investors that were looking to get their money out of the country (China / Russia in particular). Now that the pound has appreciated and London property price growth has started to fall the smart investors out there will start to think about selling. If price growth falls away all together or we start to see falling prices then - guess what - we will see overseas investors panic selling which could lead to another "perfect storm"
So I think that property investments now do not have a very certain mid / long term future. I need a house for my family and I so I bought one, but I will be putting any spare cash into my cars as when they fall in value I can still thrash them down the track / road!
^^^^^^^^ Lots of good stuff from TokyoRich. I'll add one more risk (or even two) to the pot, if I may. A significant reform to the current planning regulations which allows a far greater number of properties to be built to meet demand is a possibility. It's the only way that the UK's property issues will be solved, so a brave politician will have to bite the bullet at some point. It might not prove popular with some parts of the population but will be hugely popular with other parts who are desperate to own their own home but have no hope of getting onto that first rung at the moment.
Legislation changes can change the state of play in a very sudden way. If planning regs were to change then you wouldn't need the extra supply of new properties to be built before prices were affected - just the promise of a massive supply increase would cause the speculative money to get out ASAP.
Talking of legislation changes, another that could have a massive impact on classic car prices would be the introduction of capital gains tax on cars. This is something that could happen pretty much overnight (unlike changes to planning regs which would be signalled and much debated in advance of any significant changes). You can bet the government is currently looking at every possible source of revenue and I don't imagine that it would be a particularly unpopular tax with the general population.
kingston12 said:
No, I don't think it can carry on at anything like that pace. What I meant was that the government has artificially boosted the market with low interest rates, loose lending policy and high housing benefit.
I take your point but the Bank of England sets the base rate, the markets set the other rates and the lending policies are set by the lenders themselves (although now with oversight by the BoE), so the government only determines benefit policies and they are cutting back on the level of these in a big way now. Governments don't really have a great deal of control over house prices.coccodrillo said:
Talking of legislation changes, another that could have a massive impact on classic car prices would be the introduction of capital gains tax on cars. This is something that could happen pretty much overnight (unlike changes to planning regs which would be signalled and much debated in advance of any significant changes). You can bet the government is currently looking at every possible source of revenue and I don't imagine that it would be a particularly unpopular tax with the general population.
It's an interesting point and one that has been raised before.1)How would a capital gains tax on cars hit traders?
2)Would we all have to register every car sale with an authority?
3)What happens when a car depreciates does the govt give something back?
Not sure it would work as it would kill car values overnight and then they'd make no more than now.
As I understand it, planning already imposes only negligible restrictions on building. Builders don't build much because they don't want to tilt the supply/demand balance and so reduce prices and profits. It's classic tacit collusion or, being more generous, a bunch of big players all deciding independently to avoid pissing on their own chips just to piss also on someone else's.
Even London has loads of opportunities for new builds that go unexploited.
Even London has loads of opportunities for new builds that go unexploited.
g7jhp said:
coccodrillo said:
Talking of legislation changes, another that could have a massive impact on classic car prices would be the introduction of capital gains tax on cars. This is something that could happen pretty much overnight (unlike changes to planning regs which would be signalled and much debated in advance of any significant changes). You can bet the government is currently looking at every possible source of revenue and I don't imagine that it would be a particularly unpopular tax with the general population.
It's an interesting point and one that has been raised before.1)How would a capital gains tax on cars hit traders?
2)Would we all have to register every car sale with an authority?
3)What happens when a car depreciates does the govt give something back?
Not sure it would work as it would kill car values overnight and then they'd make no more than now.
I don't see why traders (assume you mean professional dealers rather than a private individual that trades) would avoid tax of some sort. Presumably they pay income tax on profits from selling cars at the moment. Not being in the trade myself I don't really know what their current arrangements are.
It wouldn't take much to add the sale/purchase details to the V5 re-registration process. Yes it could be open to abuse, but so could self completion of any tax return. It would require two parties willing to commit tax fraud, which I accept is quite possible but HMRC can already check into any suspicious tax transactions and I think most people abide by the law when there is a real fear of being caught.
If an investment depreciates and you suffer an actual loss (not just a paper loss) you can currently offset it against any other gains in a tax year. As most cars depreciate the gov't would probably have to exempt cars from this and could say that only gains count. So no refund/tax credit for losses. From a CGT perspective I don't see many differences from treating cars (or second cars) like a second home. Maybe like your home, your first car will be exempt.
I don't have all (or any?) of the answers to this one but I don't think that the issues are insurmountable if the government set its mind to it. Most tax laws are complicated but they still exist.
coccodrillo said:
Well it would only hit car values that increase, which is very few so wouldn't affect 'normal' cars.
I don't see why traders (assume you mean professional dealers rather than a private individual that trades) would avoid tax of some sort. Presumably they pay income tax on profits from selling cars at the moment. Not being in the trade myself I don't really know what their current arrangements are.
It wouldn't take much to add the sale/purchase details to the V5 re-registration process. Yes it could be open to abuse, but so could self completion of any tax return. It would require two parties willing to commit tax fraud, which I accept is quite possible but HMRC can already check into any suspicious tax transactions and I think most people abide by the law when there is a real fear of being caught.
If an investment depreciates and you suffer an actual loss (not just a paper loss) you can currently offset it against any other gains in a tax year. As most cars depreciate the gov't would probably have to exempt cars from this and could say that only gains count. So no refund/tax credit for losses. From a CGT perspective I don't see many differences from treating cars (or second cars) like a second home. Maybe like your home, your first car will be exempt.
I don't have all (or any?) of the answers to this one but I don't think that the issues are insurmountable if the government set its mind to it. Most tax laws are complicated but they still exist.
Good answers. I don't see why traders (assume you mean professional dealers rather than a private individual that trades) would avoid tax of some sort. Presumably they pay income tax on profits from selling cars at the moment. Not being in the trade myself I don't really know what their current arrangements are.
It wouldn't take much to add the sale/purchase details to the V5 re-registration process. Yes it could be open to abuse, but so could self completion of any tax return. It would require two parties willing to commit tax fraud, which I accept is quite possible but HMRC can already check into any suspicious tax transactions and I think most people abide by the law when there is a real fear of being caught.
If an investment depreciates and you suffer an actual loss (not just a paper loss) you can currently offset it against any other gains in a tax year. As most cars depreciate the gov't would probably have to exempt cars from this and could say that only gains count. So no refund/tax credit for losses. From a CGT perspective I don't see many differences from treating cars (or second cars) like a second home. Maybe like your home, your first car will be exempt.
I don't have all (or any?) of the answers to this one but I don't think that the issues are insurmountable if the government set its mind to it. Most tax laws are complicated but they still exist.
I'm not sure implementing the changes would be worth the relatively small number of cars that would generate capital gains tax. Obviously houses generate a relatively large figure per house so it is worthwhile.
You've also got to think who this tax would hit hardest, so I can't see it coming with the current Tory government.
ORD said:
As I understand it, planning already imposes only negligible restrictions on building. Builders don't build much because they don't want to tilt the supply/demand balance and so reduce prices and profits. It's classic tacit collusion or, being more generous, a bunch of big players all deciding independently to avoid pissing on their own chips just to piss also on someone else's.
Even London has loads of opportunities for new builds that go unexploited.
There are massive restrictions on where homes can be built, especially with regard to green belt land.Even London has loads of opportunities for new builds that go unexploited.
I really don't believe that builders hold back voluntarily so as not to 'rock the boat'. There are a surprising number of conspiracy theories in this thread! There's huge demand for housing and it would take a long, long time before they started selling them at a loss, especially when all that cheap farmland is made available for them to build on.
Chris Evans checking out !!!
http://www.dailymail.co.uk/news/article-3195023/Ne...
http://www.dailymail.co.uk/news/article-3195023/Ne...
Edited by leonardfell on Wednesday 12th August 21:56
Well I'm just please I bought a 997, thus I do not have to worry about the uncertainty of whether the value will go up or down over the next few years........a steady reduction is pretty certain I would say 😄 but I bought the car as I liked it, although that's probably a strange reason to buy a 911 these days !!
leonardfell said:
Chris Evans checking out !!!
http://www.dailymail.co.uk/news/article-3195023/Ne...
I imagine rather than checking out,he's saving up for something mega http://www.dailymail.co.uk/news/article-3195023/Ne...
Edited by leonardfell on Wednesday 12th August 21:56
leonardfell said:
Fair play, cash in on the upside. Like shares it could go higher, but equally could pop.It's certainly a signal, that a canny collector is looking to take the profit whilst it's still potentially available.
Will it spook a few other speculators?
g7jhp said:
Fair play, cash in on the upside. Like shares it could go higher, but equally could pop.
It's certainly a signal, that a canny collector is looking to take the profit whilst it's still potentially available.
Will it spook a few other speculators?
Maybe.It's certainly a signal, that a canny collector is looking to take the profit whilst it's still potentially available.
Will it spook a few other speculators?
Its all about confidence.
Did anyone invest in Chillingham Classics? http://chillinghamclassics.com/
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