Pyramid Comment

This journal takes an alternative view on current affairs and other subjects. The approach is likely to be contentious and is arguably speculative. The content of any article is also a reminder of the status of those affairs at that date. All comments have been disabled. Any and all unsolicited or unauthorised links are absolutely disavowed.

Wednesday, February 18, 2009

Property Upmarket

The scenario is either bizarre or just peculiar when property is involved. To encourage buying, nearly everything else is sold by undercutting through Clearance or Sale or something. Even cars have selling schemes (but exercise care, though). Except property. Depending on where you position yourself as the purchaser or vendor or agent or lender, the attitude to property will shift markedly. The motivation on the potential to make money will probably account for the attitude.

Winners And Losers
Virtual Money

  • Any potential purchaser will attempt to acquire the highest return for the sale of property. This is common sense, but depending on the urgency (or not) to sell could affect the purchase price of a second or third-hand property.
  • The vendor who needs to relocate will almost certainly have to choose between their immediate future and accept losses through negative equity as the value of their property drops. The original lender won't be worried by negative equity, only the property (estate) agent if movement in property slows as potential buyers sit it out and wait. Commissions could dry up.
  • Estate agents have an obvious reason to want house prices to increase. Fixed commission (%age) is greater the more the selling price. And all for doing nothing extra to justify it. Commission on 'arranging' a mortgage will be higher the amount that is advanced. The property market is a captive one, in that the increase in the number of houses is much less than, say, the production of a car. New cars flood the market with second hand cars and the choice is that much greater. The price of such a vehicle will decrease, but the purchase price of a second or third-hand house will almost certainly increase. They are more available than the (scarce) new house. Repossession favours the availability by flooding the market with others' misfortune.
Property recycling

  • Any lender will gain as the higher the buying price, the more the amount to be advanced. The greater the amount lent then the potential interest repayment will be that much greater, especially if the period of the repayment schedule is extended. Interest increases for doing nothing. It just accrues. The more borrowed, the more interest attached payable over a longer period. The banks will soon revert to their old ways once the delaying tactic has run its course. Purchasers (of anything) need to borrow money. This drums up business in the longer term as borrowers will be more compliant and prepared to pay more to acquire a loan. The strategy is quite predictable. And elementary. The banks can afford to play the waiting game especially since taxpayers' (theoretical) money has been used to return to the potential taxpaying borrower with attached cost overheads. For doing absolutely nothing, except creating the financial meltdown in the first place. Incredibly cynical and very crude.
  • The time is not ideal, so the waiting period must happen to create the increased desperation to borrow (entering a longterm contract to buy a property). Banks buying up any loan debt will collect the interest. This all went pear-shape before and it will happen again (déjà vu) within the next few decades as the up-and-coming new very unaware generation is exposed to the same market forces. The next generation produces a cyclical regeneration of tired old ideas. But, if they worked once, they'll work again. The conditioning that coaches the potential new and current generations to buy property continues as though it's the reason for living.
Buy your own home and get yourself
locked into the system

  • Government building plan announcements have gone very quiet. The population continues to 'explode' upon the Earth, but more properties become available as repossessions continue. Where do these ex-owners go?