The coming worldwide credit crunch

It may be of interest to more boring people such as me Chelsea Del - whatever it doesnt need a personal attack. If you think its boring dont go on the thread - besides which the worldwide credit crunch as you have already advised us is not of any concern to you, as you dont care whether your property increases in value or not - unfortunately like most mere mortals, we have mortgages to pay, less than 2 BMWs on the drive and a little concern over the bills that fall on the doormat every month - not meant as a personal attack by the way just a reminder of what you have already told us.

Glad you have better things to do - the rest of us can carry on being boring.

Regards

Patrick

Chelsea Del - I am surprised TJ hasnt been back to remark on your post - while his ideas and opinions may differ from yours, mine or anyone else's there's no need for a personal attack - he is expressing his view and is entitled to do so - by all means debate or argue with him if you disagree but to  state

 "haven't you got anything better to do with your life you are come across as very boring."

is hardly in the spirit of what this site is all about.

Blimey there's some long posts here! As my signature states, long words (and paragraphs) bother me, so I haven't really read everything posted here, but I get the general drift. Much of the debate going on is way beyond my intellectual capacity (especially in it's currently fried state in this heat). To be honest, most of my thoughts at the moment are focussed on the friend I mentioned a while back on this thread. Having never seen any point in buying a property, he now finds himself at 82 years old and alone, barely able to pay his rent, let alone any other basic expenses. If he had bought even 4 or 5 years ago for the first time, he would now be able to live reasonably comfortably on his pension for the rest of his days. One saving grace is that his healthcare is free. He is contemplating moving back to his native USA, where he could move in with a family member, but his healthcare costs may preclude this option now.

It's a sad, sad state of affairs, albeit of his own making, but also a stark reminder of the importance of planning for the future. My personal opinion is that the single most important thing is to have the security of knowing that you will always have a roof over your head, and as such, owning your own home outright as soon as you possibly can, is something that is difficult to place a purely monetary value on.

"What is slightly alarming in the above news clip is the median home costing 115,000GBP in a country where wages are in line with UKs. What is the median wage in Spain and the median houseprice I wonder."

You haven't taken into account the US$ decline.  A little over a year ago, that $230,000 was something like £174,000.  The fact that it is now only £115,000 is due more to the dollars drop.  The wages in the States are now less than those in the UK for exactly the same reason.  In 1981, I was on £22,000 or almost $50,000 pa.  In 1991, my pay has gone up to £30,000 but was still only $50,000 due to the pound crashing.  Just over a year ago, my £35,000 was only worth $42,000.  Now, my £35,000 is almost $70,000.  Just goes to show the currencly markets are the driving force here.

The main reason for the US house price crash is the number of mortgage defaulters.  The US had more "bad risk" mortgage takers than any other country.  The rising interest rates and lower dollar value has had an effect and people who mortgaged to the hilt have defaulted at the same time.  Now is a good time for Brits to buy in the States if you have the cash.  The dollar is bound to bounce back again so try not to take out a US$ mortgage as the payments will go through the roof if the dollar regains 30 or 40% of its loss in the last year.

Unfortunately, the same thing is happening, or about to happen, in the UK.  The lending of 5 or 6 times joint earnings is a disaster waiting to happen with interest rates increasing.  There has already been an increase of 30% in the number of home repossessions this year as people find they can no longer afford the repayments.  It used to be 2 and half or 3 times your income which meant you could take the brunt of increased payments but, at up to 6 times JOINT income it is hardly sustainable, especially if the partnership breaks up.

When I took out my mortgage in 1986 the repayments were almost half my pay and interest rates were in excess of 10% (albeit mortgage interest relief was given on it).    When I finished paying it off 5 years ago (9 years early) the same payments would have been only 1/10th of my pay.  As it was, by paying extra each month (simply by leaving the payments static when the interest rates went down) my mortgage repayments at the end were less than £100 per year.  Again, unfortunately, you can't do that when interest rates continue to rise. 

I think the Spanish market has almost peaked.  Buying 5 years ago would probably show a 25 to 35% profit now.  10 years probably 60% now.  I think you'll be lucky to get an increase of 10% in the next 5 years.  However, I'm buying mine as a retirement home so I won't be bothered if they go up or down as I won't be looking to sell. 

Of course, you still meet people who tell you they bought their place for 50p and it's now worth a million and a half.  Problem is, it's not real money.  You still need somewhere to live and you definitely won't get the 50p bargain nowadays.  Why invest most of your life getting the house you really want just to trade down to a tiny apartment and have money in the bank.  Quality of life vs quality of bank balance, I think.  Much prefer the house with sufficient to live on than the tiny flat so I can eat out every night.

1.  Hi TJ222,  Well I do not know to much about what is going on in America except it has a effect on our stock market which I keep an eye on as I do have a few shares.    But I am a lot older than you and I was bought up with the saying you cannot go wrong investing in Bricks and Mortar.  Which as far as we are concerned that is true.   We bought our 3 bed semi for 16thousand. It is now  worth 270thousand.  At least you finish paying a mortgage  Which has enabled us to buy an apartment in Spain.  Sometimes you have to look at the long term view.  You can get to bogged down looking at facts and figures.   But if you are young and obviously intelligent you do not need to make commitments tying yourself down at the end of the day it is up to you.  Well that is how I see it being right of wrong.   Pat

You did indeed and I at once edited my post, oh fountain of all knowledge! Nostro didnt mention the Greek theory - I think you are mixing up websites there  and dunno about the horsemen part, thats just a dream fuelled by Vodka meethinks!

Yes rentals will catch up - eventually and to buy now looking to 7-10 years for the rental market to catch up is a good basis for a purchase. Unless its a home or second home but TJ sounds too young to be settling down as yet judgin by the places he has lived in.

If you recall I think I explained the geographical location of the Costa Tropical was further from the Atlantic than we are on the CDS actually - and you should know by now that I never behave (well unless its badly) - re the little Man from the East - hmm are you talking about Mike T - hes not so little really - Nostro also said beware of Greeks bearing gifts didnt he - and werent we all meant to bludgeon each other to death about 10 years back while the four horsemen trampled all over us - personally I think we are more likely to get a straight opinion on the state of the global property market from Russell (FB) Grant than Nostrodamus -

TJ222 - gotta say I am with Georgia that property as we all know is cyclical - no matter what the market does there will be continuing influx of North Europeans to Spain wherever it might be - first to escape the climate, second to escape politicians and some of their social policies and finally to be able to sit out on your terrace for 48 weeks of the year enjoying a glass of wine and fresh air - instead of being cooped up inside with Corrie, Eastenders and Escape to the Sun (or some other mindless drivel) - sorry for the rant but got a bugbear about soaps and "escape" programmes. Quality of life is what most of us are seeking and if you are selective about your property then you should be able to find a reasonable deal somewhere - eventually rental demands wil outstrip mortgage payments I suspect through natural inflation - guess you just need to be right place right time and willing to grasp an opportunity - they are out there. 

Beware the little yellow man fro the east - that was one of Nostos prophecies - I think he meant cheap shoes though!

Smiley - behave - you told me off about one of my saturday postings so you get what you deserve!

HI tj222,

I have read your posts with great interest and you are obviously very intelligent and have a great knowledge of the markets.

Being an Agent myself we try to follow the up's and down's of  property price fluctuation.

In the last 18 years i have worked within an industry that has relied heavily on market forces fuelled by speculation and greed and and watched the fear effect the lows.

Generally every market climbs,levels,falls so on and so forth,this is usually driven by analysts in the city predicting the next step.

There are so many differing opinions regarding the Spanish Housing Market at the moment it is difficult to know who to beleive.

What i always bare in mind is that i do not think anybody really knows what will happen!

If there is anyone out there with a bloodline to Nostradamus then please step forward.

Spain for sure is not as attractive as it was for an investor in previous years to say the least.

Spain will always attract people here as residents because of what it is,as the UK continues it's social demise i predict that the exodus will continue.

There are still alot of people out there that would swap 2 points on the FTSE for a better quality of life.

People can be in danger of over analyzing a situation,maybe this sounds flippant but at night when i am sitting on my terrace watching the sun set the price my house will fetch in an open market is far from my mind.

I hope you find what you are looking for in Spain,but i fear if you do not base it on the spiritual more than the financial at the moment you may miss the point

Regards

Georgia

Boys boys boys! - If you read the remiander of the postitng, I think you will find it is in Costa Tropical!!

Could be about fight for up there - to be sure you wouldnt get that price here front lione, although in Calahonda you would!

TJ222 - I agree with your posting, renting is currenly much cheaper than buying but yes over time the rental will increase with inflation and so to be owning outright after 25 years would be the way to go.

Hi Derek

Thanks for the reply. In my example I have just used an interest only calculation, so at the end of the day you would still owe the original motgage, so you would not really own the property, the bank would. However its a valid point that in 25Yrs you would only have to pay the original purchase price, rather than some inflated price as of then.

The point about hols is a valid one, but only if you want to go to the same place each year, and of course you would still have to pay the mortgage for these weeks as no chance of renting.

I suppose I was trying to make the point that the ratio between the cost of renting long term and the cost of ownership has got way out of line, indicating that property is not good value historically and still very expensive.

In my example of renting versus buying, additionaly I have no risk renting, but I think over the next few years stand a very good chance of taking a thumping great capital loss, if I had to move for any reason. I might in fact be stuck with a property I cannot shift at any price, like so many I see on the internet.

I think if you have retired to Spain to live there and enjoy the lifestyle, then the thing that is really important is the all the good things that go with owning your own home, and finance, if you can afford it, is very much secondary.

I am youngish and transient, having lived in Thailand for the last few years and spent the year before that traveling the world having quit the UK, job etc.

Anyway Derek I wish you and your family every good luck with your time in Spain, its an enviable lifestyle for sure if you can plan it right.