Banks, Housing, Foreign Properties, Buy-To-Let, Reposessions etc.

Everyone under the sun seems to be having their say on the “Banking Crisis” and its subsequent knock-on in housing. I know that I have been saying it (it’ll all end in tears) for a couple of years now but if you say it for long enough it’s bound to happen eventually. What is the root cause? GREED, GREED and MORE GREED writ large and SHOUTED from the highest point. Lets look at a few more subtle underlying causes. Me, subtle, you might think that, I couldn’t possibly comment.

1. IRRESPONSIBLE LENDERS

At one time not so long ago the market was awash with money to lend and lenders were fighting amongst themselves to take on new customers.

It ain’t rocket science, but if you pay anyone commission for selling ‘products’ they will sell them come hell or high water to keep their jobs even if they are inappropriate to the needs of the buyer (as with higher mortgages than can be afforded).

Where do you think the TV adverts got their idea for prattish bankers promoting foregn call centres and free bubble lights from? Real people in the financial services sector unfortunately. I've met some of them.

Bring back the old style bank managers and staff (without sales targets) I say.
Let them handle all a customers accounts (private and company) so that they get the full picture and don't risk their investors money

Maybe introducing a strict Risk Assessment processes would help? But would some of these executives (who pick up massive bonuses for failing) know what Risk Assessment is?

Time was (when you got tax relief on the interest) you had to justify what you wanted loan money for (and some extensions didn’t always qualify).

Now it seems that some folk are extending their mortgages for additional houses, new cars (4X4’s), replacing perfectly good kitchens and bathrooms, multiple holidays, school fees, designer handbags and Jimmy Choo shoes. The world’s gone mad.

A house should primarily be a home and not an investment. If it makes money and allows you to buy bigger and better then fine, but that should be a secondary consideration. Chances are however that any increase in equity on the one you want to sell (after you’ve extended) is matched or outstripped by the cost of the one you want to buy (especially after paying stamp duty etc.)

2. BLAME IT ON MAGGIE
Maggie’s ‘right-to-buy’ and the sell-off of council houses gave everyone (even those not equipped to handle ownership of a major asset) the delusion that they were just “as good” as everyone else even if they were broke, unemployed, poorly educated, without ambition or lacking any determination to succeed. YES I agree that even these individuals MUST have the same rights and MUST be given the same respect as everyone else but sorry NO everyone isn’t equal and, at times, the unable MUST be protected from themselves.

3. BUY TO LET
The buy-to-let market was always a potential house of cards, it didn’t need a genius to see that but programmes such as the housing ladder and homes under the hammer fuelled the belief that anyone could become a property developer and make loadsa money overnight. Sorry, it doesn’t happen that way except for the very few visionaries who got in before the masses and then got out quick. Everyone else should stop thinking about get-rich-quick ideas, get a proper job and pay income tax instead of picking up benefit handouts.

Now there is a glut of properties and repossessions (especially flats) in what used to be areas where no one with realistically achievable aspirations for a better life would choose to live (like London Docklands, Ipswich Waterfront, Manchester, Liverpool and Leeds). Gun and drug culture is rife in all these places and no amount of trendy cafes and bars will make them ideal for fnormal' families.

However, wherever someone looses money someone else spots an opportunity to make it. There may be bargains to be had in a few months time especially if you don’t have anything to sell, have money available and can move quickly based on solid research and due diligence.

4. FOREIGN PROPERTY

The Spanish property boom is, in my opinion (and that’s worth as much as anyone elses) well and truly over. There’s a glut of new ones let alone older ones. Not much appears to be selling even at supposedly knock down prices. I am told by those suffering that service charges are increasing at a rate of knots (but the standard of service received doesn’t seem to keep pace.)

Why did / do folk want to go there?

The booze used to be cheaper (not any longer.)
Fags were cheap (especially if you went over the border into Gib).
Villas and apartments were cheaper than a similar property (if you could find one) near a beach in the UK.

Yes I appreciate that the weather can be wonderful.
Yes air travel was cheap (but for how much longer?)

Air travel, even if you go first or club class, (which isn’t cheap) is an even bigger hassle than it used to be with all the extra security and restrictions on baggage. I’ve seen cows and pigs transported with more care and consideration than I’ve had in Easyjet and Ryannair Cattle class.

Let’s face it, most of the folks who bought with the objective of renting out their villas and apartments for part of the year couldn’t really afford them in the first place. Some even took out foreign mortgages without reckoning on exchange rate costs and fluctuations (proving that a little knowledge is still a dangerous thing.)

Having seen some of the properties, the build quality was less than one might expect in the UK.
Some even look like they were thrown up by amateurs (probably failed IT consultants?.) Do you get an equivalent to an NHBC guarantee (for what little good they are) in the rest of the EU?. What’s a guarantee worth anyway if the builder, developer, agent has gone bust or simply disappeared? Even the old saying of ‘Buyer beware’ isn’t good enough in these times.
Gone is the principle of; “My word is my bond”. You just can’t trust anyone today (see recent examples of UK solicitors involved in worthless share selling boiler rooms). Land grabs and town hall corruption are another story altogether. You’d be a fool to trust UK Local Government officials. Trust the foreign Johnnys and you may be certifyable.

My rant (if that's the way you prefer to see it) is now over but I reserve the right to come back to it if Barclays, Nationwide etc. go down the tubes (is the recent bad publicity all just a traders hype and scam?).