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10 Ways Writing Articles Can Improve Your Business
Writing articles has proven time and time again to be one of the best ways to drive targeted traffic to any website. Here are ten quick tips to help you use your articles to the best of their potential. 1. Submit them to e-zines and web sites for...
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Why a House Price Crash is GOOD for your Wealth!
Hard as you may find it to believe, there are actually very good reasons why the current world-wide collapse in house prices is probably beneficial to your own personal financial health. First, let's take a look at some history, so we are all singing from the same songbook. The current house price boom has been happening for some time now, and over the last 6 years or so, in most parts of the world the cost of houses has skyrocketed. Some countries, such as the UK, have seen a trebling in the asking prices of houses, leading to a situation where first time buyers have effectively been priced out of the market in almost all areas. The reasons for this are many and varied, and the subject of intense debate, although the smart money is on a general loosening of credit partly caused by the Japanese printing money. They did this to the tune of almost 1% of the global GDP in an attempt to try and escape from chronic deflation. The short term effect of this was to prop up the ailing US Dollar. The longer term effect was to massively increase the availability of cheap credit worldwide as the de facto 'fiat' global monetary system leveraged those Yen into enough cash to stop the entire world economy sliding into a post-millenium recession.
This economic growth, of course, comes at a price. The previous 5 or 6 years of boom have been financed by the compliant home-owning consumer happily re-mortgaging regularly, and using the cash so released from their rapidly appreciating homes to purchase goods and services that would otherwise have been regarded as expensive luxuries. At some point, that cash would need to be repaid, and the gamble was that the boom would continue long enough so that rising salaries and general inflation would reduce the cost of this borrowing to manageable levels.
The tipping point appears to have been reached towards the end of summer 2004, however, far sooner than hoped for by world governments basking in the reflected glow of easy prosperity. Analysts at www.mortgagedown.com point out that in most countries, the house price boom has run out of steam and has begun the downward swing towards normality, and the consumer spending boom that accompanied it has necessarily come to a dead stop too. Across the world, realtors and estate agents bemoan the fact that sales volumes have dropped by 60% or more, and that 'something must be done' or there will be 'dire consequences'. For estate agents and a very small minority, true. But not for the majority!
What do I mean by this? Simple. For the majority of the population, a house price crash is either irrelevant, or just what the doctor ordered. Lets look at the various groups to see exactly why this is true.
The first group are the 'first time buyers'. These are a relatively small group of people who do not currently own - they rent, or live with friends and family. This group also include people who DID own, but have sold up and exited the market, converting their paper gains into hard cash. As first time buyers are priced out of the market almost everywhere, and the 'STR' group are effectively priced out by their beliefs, they have everything to gain from a substantial house price fall. It will allow them to purchase property, where they currently can not.
The second group are the long term owners. These are people who regard a house as somewhere to live - not a leveraged investment opportunity. If they bought more than 10 years or so ago, they will be sitting on massive gains that not even a huge house price crash can erode. it is likely that most of them won't even be interested - they will continue to live in their homes, and have no plans to move anytime soon. If they are planning to move, statistically they are moving UP, to a bigger, more expensive house. As the percentage falls affect all properties, a crash actually brings the 'rungs' of the housing ladder closer together, meaning that it becomes easier to trade up. If you
don't believe this, ask yourself a simple question - if the price of all property magically fell by 99.9% would you be happy? Of course - your own home may now only be worth a few bucks, but for 100 dollars you can now buy Neverland! Or Buckingham palace for a grand! So a house price crash will not affect this group.
The third group are the 'professional landlords' These 'buy to let' specialists make a living from purchasing property and renting it out to cover the mortgage. The difference between the mortgage costs and the rent is their profit. As an extra sweetener, if judged correctly, a pro landlord can sell a property and make a large capital gain, usually with good tax breaks. Anecdotal evidence collected by www.mortgagedown.com suggests a lot of selling activity from pro landlords around about 2002 to 2003, as they used good business sense to determine that property prices had climbed vertically to a point where only a crazy gambler would still hang on and 'let it ride'. The ones that exited are already in cash, and so looking forward to a crash, as it provides an opportunity to pick up new property at 'yields' that will make them instant monthly profits AND the chance for rapid capital growth sometime over the next 10 years. The ones that didn't exit are in the business for yield, and so the actual nominal price of their properties is of no real consequence to them (unless they are forced to sell up for health reasons etc). As you can plainly see, the pro landlord group WANT a crash - it's a new buying opportunity, unlike the current situation where flat or even negative yields prohibit the prudent landlord from expanding their portfolios.
Who is left? Two more groups. The fourth group is the amateur landlord, the 'BTL newbie'. Sniffing the scent of easy money, this crowd jumped onto the buy-to-let gravy train far too late in the boom, or thru inexperience or downright lack of aptitude for the game bought at ludicrous overvaluations, meaning their 'investments' had to be subsidized, and HAD to appreciate in value in order to justify the cost. Allegedly, the pro landlords sold to this group, often utilizing the service of 'Become a Property Millionaire' type seminar companies to suck in the gullible and get them to sign on the dotted line as well as contribute a few thousand for the privilege!. Anyone who bought a 'spare' property within the last 2 or 3 years falls into this group, and will be hurting badly by now. A crash will most likely wipe them out as they face decades of subsidizing tenants just for the chance to get their money back, plus all the hassle that goes with being a landlord (leaky roofs, service charges etc etc etc).
The fifth and last group are the recent first time buyers who panicked and bought within the last 2 or 3 years despite the obvious housing bubble that had already formed. Whether thru fear or greed, they jumped on board the housing train just before it derailed, and they will also get badly hurt in the crash.
This means, of course, that 3 out of 5 groups either don't care about a crash, or actively want one. As they comprise over 80% of the population, it is therefore brutally apparent that the present 'perfect storm' house price crash currently building up is, in fact, in the interests of the majority of the population! Only a small number of recent buyers with no common sense, a small pack of greedy 'wannabe landlords' and those who released insane amounts of equity from their homes to buy plasma TVs and fancy holidays will actually get hurt. Me? I'll be buying a house or 2 probably around 2006, when the yield indicates it's no longer a silly purchase. Markets always find a way to punish the most inept, and the housing market is, after all is said and done, a market.
About the Author
Peter Parsons writes house price articles for www.mortgagedown.com , the place to get advice on how to lower your mortgage
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