House prices..

That graph also shows that a house price stagnation has never been achieved. All the so called experts seem to predict this so what have we done to our economy that makes it so unique nowadays?

They either rise or fall and take some considerable years to recover.
 
The graph shows that from 1992-1997, (real) house prices didnt move much. I believe this is what some experts are predicting - ie. a lull, while wages catch up a little with house prices, before another boom.
 
aardvark said:
i think what i find strange is peoples attitude to inflation and house prices.

all inflation is bad -it devalues the pound in your pocket and makes things more expensive - and yet, when it comes to houses people seem to like them to go up in price , as if its a good thing. Things getting cheaper is a good thing and houses are no different in my opinion.
In a similar way i think interest rates should be very high - it rewards savers and punishes debtors - again, the way it should be imo (if you can't afford something don't borrow to get it, work hard and save for it).

am i weird? or is it everybody else thats weird???
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It's because people want to be able to sell their house again, and ideally for more than they paid.
 
> The graph shows that from 1992-1997, (real) house prices didnt move much. I
> believe this is what some experts are predicting - ie. a lull, while wages catch
> up a little with house prices, before another boom.

What you're not seeing in that graph is that the only reason this boom has lasted so long is because banks started offloading their mortgages during the last decade. By selling off that debt, with it's "guaranteed" income stream to third parties, they created a demand for even *more* debt, helping to keep the price of borrowing low and encouraging banks to come up with ever more exotic ways in which to allow people to borrow more. After all, why worry if that's a bit risky? You're going to pass that debt on to others and wash your hands of the problem.

The people buying that debt also passed on some of the risk by insuring their CDOs. But this house of debt-cards is looking very precarious indeed at the moment. There's a reason why the ECB pumped half a *trillion* of cheap loans into the market recently... it's because central banks globally are scared witless.

We live in interesting times.

Andrew McP
 
Third Opinion said:
So 5 years of fairly static prices is the best we have achieved in over 30 years? It is also worth mentioning that that was on the back of coming out of a recession.
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Indeed 5yrs is the best we've had in a while, but at least this will allow wages to catch up a little. Also, it will allow people to save up their deposits and buy homes.

My own personal feeling is that we will see falls of round 5-10% over the next few years, before prices begin to head upwards. And 5-10% certainly isnt a crash.
 
I am not sure how many people are going to be able to afford to save with the amount taxation may need to rise.

http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=504336&in_page_id=1770

Lump that with the Northern Rock crisis which has seen the tax payer back up liabilties of around £100bn.

I get the feeling we are on a knife edge and if things go wrong we are going to be in an appalling mess.

Interesting that Citywire are advising to sell your house now.

http://www.citywire.co.uk/News/NewsArticle.aspx?VersionID=99760&NewsPage=1
 
The graph above shows that we have been in a peak/trough cycle since mass home ownership began. I would draw a line through the bottom of the troughs and you can see where its headed. Looks like at least a 40% drop, I would sell, but a) it would still be a gamble and b) we need somewhere to live.

Buts its definitely time to batten down the hatches to weather the storm.

Oh and I agree with the taxation sentiments this could be a long hard fall.
 
Slam62 said:
Looks like at least a 40% drop, ...
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Over how long do you think we will see this 40% drop?

Home ownership is too ingrained in British people's minds now. I think the rules have changed forever. The British now see home ownership as the pinnacle of wealth.

When my parents were in their 30s, they were happily living (with children) in rented accommodation. These days, a lot of people wont even start a family unless they can first afford their own home.
 
people don't seem to take inflation into account when they look at house prices - there have been many studies but the best one in particular is of one street in holland where the prices were compared over 400 years! It shows that in the long term houses only go up 0.4% above inflation - and other studies agree with this - certainly no more than 1%.
this does make houses a a good investment over the long term but not as good as people think, especially when people don't pay cash - they have to borrow and pay a large amount of interest.
of course,a lot of people have made money last several years, but only if they have sold and downgraded.

people always say ' its different this time' - they are wrong, its never different - the same mistakes happen all time throughout history because human nature never changes.

massive house price inflation is a given - the question is, what else will happen - my guess is stagflation - houses dropping at least 40% over a few years, commodity inflation shooting up, possibly as high as 20% (we are already seeing this in food). The unknown is how the banks will react to this inflation - will they try to lend themselves out of it creating more inflation, or will they stop the credit dead and consolidate their loses possibly leading to deflation. What is more important to the bank - house prices or inflation? - thats the big question. it looks like it could still go either way and i don't think the central banks or the governments have any idea how to fix this problem.
 
Rotty said:
not a chance in hell
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I remember a similar statement from my brother in law when he paid 67k for a studio flat in Bookham in 1989. 12 months later you could not sell it for 30k.

I don't think we need a history lesson on what happened next.

Never say never, remember if prices rise by 100% it only takes a fall of 50% to send you back where you started.
 
And the same for my Parents (who moved out of Slough in 1989 - and one of the most overvalued towns at the time if I remember)

They Sold their house to my uncle ( a 4 bed semi) for £102,000 - Within little over a year he had to let it go for £65,000 (along with 3 or 4 other house he had been using for buy-to-let)
 
See this from The Telegraph on the 23rd. It's a nice round up of where we are.

Crisis may make 1929 look a 'walk in the park'

Anyone suggesting we aren't facing a bust of truly epic proportions is living in cloud cuckoo land in my opinion. House prices are only one aspect of this crisis. Rotty says "not a chance in hell" of 40% drops? I say it could even be worse that that.
 
its actually starting to look a bit hairy - sterling has already fallen from 2.10 to 1.97 against the dollar - i was hoping it would be a bit slower than this so i can dump some my sterling.
 
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