Yes; the examples I gave, say 105k to 75k on the house, over 7 years, was a lot more of a loss than just the 30k. So a stagnant market also represents deflation.
However, as stated before, CV19 has caused a lot of people to stay at home while they have been paid the same money, so while getting bored and looking for something – anything – to spend money on, they have also been getting quite a bit more money due to no travelling expenses and no expensive foreign holidays. Against that, a lot of businesses and industries have been damaged or destroyed, but that doesn’t change the fact that a lot of people have done more than okay out of it. Here in the UK, GBP 40BN has been spent on track and trace alone – this money has been the equivalent of the EU-funded Spanish building boom, and a lot of people have done extremely well out of it. Then we have had tens of BN given away in “soft loans”; the UK has been doing 50k loans on which the default rate is expected to be around 50%, and that money will have gone “somewhere”. Now replicate this money printing and throwing to all the wealthy countries in Europe – they have all done it even though we don’t hear of it posted here. The end result is a lot of cash chasing assets. And the GA market is pan-European.
This has also extended to all sorts of other stuff e.g. electronic components where we have seen extensive hoarding.
But like the Spanish building boom, it will go bust, and I am sure the bust will happen in 2022.
zuutroy wrote:
I see an 80s N-reg M20J on planecheck for €170k! It does have TKS and a low time engine but that his a lot imo.
Look how many planes are there. Practically none. That is what makes these prices.
Peter wrote:
I just cannot reconcile high prices with how many people I know for whom CV19 was the last straw and they sold up and got out.
Well, look at the listings. There are none. We used to have 3-4 pages of Mooneys and 2 pages of TB20ties. Now, 4-5 planes.
Demand at the moment is by far larger than what is for sale. That is what drives prices up.
As for housing: I see no but no chance they will come down. Since I live where I live, prices have gone up between double and tripple. In our village, there are NO houses for sale. None. Those who pop up, are gone within days. We are talking 2-3 million properties here.
I see no but no chance they will come down.
A risk manager would look at the price series history and identify historical events where price volatility for the asset class exceeded certain parameters (hopefully a risk econometrician comes along and corrects this rather grotesque simplification), they would then estimate the probability of a price decline over a certain time interval.
Housing is by definition illiquid with relatively high transactional costs, and is bought using leverage. The risks on the downside were exemplified in 2008, and the expansion of the monetary base since then has only distorted the market. When the tide goes out a lot of people are currently swimming naked. Eventually mortgage rates will reflect the 5% inflation and a significant proportion of buyers will not be able to cover their mortgage. This happens regularly like clockwork in high ownership economies, less so in rental housing economies where the market is held by professional investors.
Now an aircraft which requires insurance, maintenance and hangarage to protect value, ie like a horse it eats money, can quickly go upside down (or inverted) in value in an Augenblink!
RobertL18C wrote:
Eventually mortgage rates will reflect the 5% inflation and a significant proportion of buyers will not be able to cover their mortgage
I can’t speak for Europe but virtually no buyer for years has taken a variable rate mortgage in the US housing market. I think rates won’t rise quickly regardless because government is borrowing huge amounts of money and no matter what they say they’re motivated to create inflation. Housing inflation will therefore continue as a side effect. It seems to me not a bad time to be holding real assets but on the other hand I have 85% equity in my properties so I’m not much into debt, even very low cost fixed rate debt.
RobertL18C wrote:
Now an aircraft which requires insurance, maintenance and hangarage to protect value, ie like a horse it eats money, can quickly go upside down (or inverted) in value in an Augenblink!
Re aircraft the P-51 that I posted in another thread was bought by a guy looking to park money in assets, with apparently little interest in flying or even seeing the plane. He then hires somebody else to keep it in salable condition and control monthly expenses, without much interest in collecting rent. This is apparently the trend in warbirds, and its interesting to me. P-51s are apparently “doubling in value every twelve years” (with quotation marks reflecting that this is somebody else’s opinion, not mine)
There are substantial differences between the small airplane and the real estate markets:
- Real estate (at least the majority of it – not taking about London luxury apartments) are bought mainly for the utility value. Therefore the market has a higher liquidity by nature as many people sell real estate because they have to move for another place to work (and can’t afford two houses) in addition to those who have to sell due to lack of money. Airplanes are only sold for the latter reason.
- Real estate is much more often financed by credit. And while it I true that many mortgages are not variable rate, there comes the time for renewal and this will lead to the interest rate shock. In addition to that, in many jurisdictions a bank can do kind of a “margin call” when market prices for the asset went down significantly and the mortgage amount substantially succeeds the market value of the asset.
In the end there are two types of people who sell their plane: The ones that can no longer afford it and the ones that have a better idea of what to do with their money. Currently we only see the first group of sellers on the market – and my impression is that this group is still small.
That’s clearly not correct.
zuutroy wrote:
I see an 80s N-reg M20J on planecheck for €170k! It does have TKS and a low time engine but that his a lot imo.
I know that one, yes it’s overly priced by “historical norms” but again has everything and like buying new
Realistically, one should not expect to get money back when upgrading 30 years old aircraft 
Malibuflyer wrote:
In the end there are two types of people who sell their plane: The ones that can no longer afford it and the ones that have a better idea of what to do with their money. Currently we only see the first group of sellers on the market – and my impression is that this group is still small.
We might also see some who see what kind of money their planes can fetch and simply decide that now is the time to cash in and hang up ownership. Not necessarily because they have to but because it makes sense. Never in the last decade have airplanes fetched such outrageous prices.
Malibuflyer wrote:
There are substantial differences between the small airplane and the real estate markets
What it has in common in many places is the acute shortage of merchandise, therefore driving up the prices for what is there.
In both cases, often enough if you look at properties your search comes up with zero. At any price. And the listings on the relevant platforms for airplanes are maybe 10% of what they used to be in quantity.
Mooney_Driver wrote:
What it has in common in many places is the acute shortage of merchandise, therefore driving up the prices for what is there.
There is also another element I feel at play. A bit like the current second hand car market which is also seeing a large increase in value. A lot of the total bottom end crud has gone. Parted out or sold as project. What is left, siding the UL market, is a fleet of very useable and fixable stock. As you point out there are 2 types of sellers. Those that need the money. Again I think that most of those have sellers may have dried up. Those that wish to cash in. The second is a much more fickle and intelligent group. They have the cash to upgrade where appropriate, hold out for a price, and chose their moment. The bottom feeder buyers now are in a bit of trouble. Again I know a few property developers who just cannot get stock at a viable ’’in’’ price. All the ‘do up’ housing stock in large cities has gone…. Just my 2c
There is also a third type of seller: those that can no longer fly. Either they have lost their medical, or they just don’t feel up to it any more, or they are dead. Imo they probably represent a bigger proportion than people who simple need the money.
Come to think of it there is a fourth category too: those who have decided they want to fly something different – to trade up, or something newer, or just a different type of flying. For those people inflation is less of an issue, just as it is when you decide to trade up, or even more so down, with your residence.
