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Will house prices crash? Poll Discussion
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Poll Started 17 July 2007: Will house prices crash? What will happen to UK house prices over the next year?
A. Increase over 20%
B. Increase 10-20%
C. Increase 5-10%
D. Increase 2-5%
E. No real change
F. Decrease 2-5%
G. Decrease 5-10%
H. Decrease 10-20% (smaller crash)
I. Decrease over 20% (crash)
J. I really have no idea
You predict house prices will DROP by 0.6% over the next year.
Almost 10,000 of you voted last week to predict what’ll happen to house prices over the next year. It’s particularly interesting because public sentiment has real impact here. While more people thought it’d rise than fall, the average result was a drop of 0.6%, as many of those who thought it would drop predicted a big fall; in fact 13% predicted a crash (a drop of 10% plus).
Martin
Note: When calculating the average we take the increase or decrease of more than 20% to be equivalent to predicting a rise or fall of 25% (as over 20% could mean 30 or 40 or 50). This has been consistently worked out this way every time the poll is run. If it was calcualted by assuming it was just a vote for 20% - the average result would be a drop of 0.3%
Last edited by MSE Martin; 24-07-2007 at 4:14 PM..
a) i shall be able to afford a house that i want to live in
b) i wont have to pay £750 a month for the next 30 years
c) i may have some cash left for my family (me, partner & 2 children to live off).
With house prices as they are, we will surely struggle to live on the single income and have a life of luxury. House prices need to reduce alot so i can afford the house that i may want to live in, and not some ex-council house going for over £90,000 when you could buy them 4 years ago for £20,000.
I think in reality we would be better off giving the job up, and going on benefits.
Choices, work for the next 30 years for nothing, or sit on my !!! for the next 30 years claiming job seekers allowance with a free house in and out of work.
At the end of the month, sometimes we feel like i am claiming benefits for the amount of cash is left..
Something is not right here...
Martin has asked me to tell you that I'm the Board Guide of the Armed Forces, Praise, Vent & Warning Boards. This means I'm a volunteer to help the boards run smoothly and I can move and change posts there. However, please do remember, board guides don't read every post.
I voted J because while I know that in the longer term prices will fall and probably fall by at least 30%, I don't want to estimate when that crash will begin.
At least 30% off (in real terms) by 2010 seems unavoidable.
a) i shall be able to afford a house that i want to live in
b) i wont have to pay £750 a month for the next 30 years
c) i may have some cash left for my family (me, partner & 2 children to live off).
With house prices as they are, we will surely struggle to live on the single income and have a life of luxury. House prices need to reduce alot so i can afford the house that i may want to live in, and not some ex-council house going for over £90,000 when you could buy them 4 years ago for £20,000.
I think in reality we would be better off giving the job up, and going on benefits.
Choices, work for the next 30 years for nothing, or sit on my !!! for the next 30 years claiming job seekers allowance with a free house in and out of work.
At the end of the month, sometimes we feel like i am claiming benefits for the amount of cash is left..
Something is not right here...
I don't think they will crash and even if they were to crash, it would not be by much and it is also likely that if they did crash, they would do so in a year or so and only fall back to what they are at today. You still can't lose if you buy today rather than tomorrow, my advice would be to move yourself out from hotspots to more affordable areas, unless you can't possibly move your job.
Here are some articles from Reuters (financial news agency) from the last few days.
I am always amazed at the general optimism of the housing market these days.
The question of course is that it depends. In the short term you probably will not see a significant rise or fall, but longer term the bubble WILL burst.
1) House prices have been rising for the last ten years. Markets NEVER continually rise without a fall
2) House prices ARE overvalued – using whatever measure you care mention (Price Vs Earning being my personal favourite)
3) Many first time buyers are now priced out of the market. This severely limits future price growth (i.e. no kick from the bottom)
4) Gordon Brown promised to increase supply of starter homes. Increased supply = decreased price (see point above)
5) Growth in the economy = growth in house prices. Don’t underestimate the link between the US economy and Britain. The US economy is in unprecedented levels of debt. Sooner or later this debt will have to be re-paid shrinking the economy. If the US economy slows so does ours. Houses become less affordable and prices fall.
6) China, India and Brazil are consuming natural resources at ever increasing levels pushing up prices. It now becomes increasingly expensive to a manufacture in these countries. It means that the prices in our stores will rise, meaning we have less money in our pockets (see point 5)
7) Interest rates are rising, partly due to 6) above. Again less money in our pockets.
8) Buy to let landlords now struggle to yield over 5% - you can get better returns in a bank account. These will be the first out of the property market.
Regrettably the world economy is top heavy and on a knife edge. One trigger (like Sept 11) in the USA is enough to trip up the economy. When it starts to topple it will crumble.
I challenge you. Search on Google for forums during the Dot Com boom in 2000 and 2001 (or any other market bubble in the last 300 years). Compare the comments then to the comments today.
“Prices will never fall below such and such level”… “X is the best bet for your pension”…. etc
Negative equity is a nasty thing...
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I voted I (over 20%) but thinking about it, the poll question is unclear.
Over the next year could mean many things. I believe that YOY HPI will be nominally negative by January 2008 although it will not be evident until a few months later.
If the poll means YOY July2008 then we are more likely to see 5-10% negative.
I wish there would be some kind of rationalising of the housing market. I'm a homeowner but I feel a real fear about what my kids' chances of ever owning a home are going to be.
On the other hand, when people say prices don't rise indefinitely I find that a bit weird too. As far as I can tell, apart from blips of relatively short duration (months, a year or two at most), house prices, like every other price, have gone up and up throughout history. Else why would they have mansions worth £40,000 in the seventeenth century that are worth £40 million now?
My parents house - bought in 1966 for £2000. Now worth £175,000.
Our house - bought in 1993 for £65,000. Now worth £200,000.
Where are the downturns there?? Surely, as an investment, property is one over which you have to take the 'long term view' ie, the duration of the mortgage - 25 years. If you can't take a long term view, then maybe property isn't the right investment for you. Rent and use your money in other ways. In 25 years time will our house be worth more or less than the £200,000 it is today? I'm betting yes. But if it isn't, who cares? We'll own it, we'll be living in it, and we might not leave our kids with an inheritance tax bill! And if it's worth nothing at all then the state can pay for our nursing home. Win win I reckon.
This is something I've been agonizing over again and again as I'm able to buy in but not sure I should. All your points smala01 are true, but many of them have been true for several years now and haven't had the logical impact expected. House prices seem to be more linked to emotion, and who knows where that's going to go...
I'd like a crash (50% asap!) so it was more affordable for me, but the economic backlash (ie jobs, cost of living) would be major. A slow correction would be preferable.
Oh and do something about stamp duty, it doesn't achieve the primary goal of capping house prices! But then it does generate over 4bn in tax, which would need to come from somewhere else, like my pay slip... eeek... man economics is complicated.
Prices are indeed influenced by sentiment, everybody thinks they make money then any other investment thus there is a bull run for the brick.
Reality is far from the imaginations of the population inspired by the TV programs touting that they will become millionaire property developers and land barons by wacking huge sums of money into the brick. The rarely do full investment appraisals leading them to have no idea of all the costs, taxes, regulations, work and general risks involved.
Truth is at current house prices most landlords either barely break even or actually lose money and worn out poorly decorated houses are only priced at the work required below a posh pad. Yields are break even or negative, compared to a good ISA yielding 6% or a good stock fund yielding 20%+.
If the general population ever dawned on the truth there would be a major price crash. As it stands its got to stop because the banks are now not loaning out any more wage multipliers-in fact theyll bring the multipliers down as people default on their negative equity homes, people arnt earning any more money, in fact they are earning less and less each year with inflation being astronomical.
I'll admit I don't know much about the housing market, but I can't see a crash in the next year, despite the rise in interest rates, because the demand seems to be outstripping the supply atm. I can see it happening a bit further down the line tho, as Yant has said, the banks are gonna have to stop lending money at 5x salary, as people are less and less able to afford the repayments. Repos must also be on the up!?! And how many people would be stuck in negative equity if they did crash? A bl00dy lot I expect.
Having said that, from a personal and purely selfish view, I would love the prices to crash.... I might be able to afford one then!
A crash is inevitable - the housing market can only survive while first time buyers are entering - once they can't afford it, the market will stagnate then prices will fall. We got caught out when we bought in 1990 and 3 years later our house was worth 80% of what we paid - we stayed put and now it's worth 250% of what we paid - CRAZY!! I really feel sorry for those wanting to buy these days. Thankfully we paid off our mortgage earlier this year so the worry isn't here any more.
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I dare not speculate any more - have been unable to believe prices would keep rising for the last five years, yet they have!
Would help us greatly if prices fell - now stuck renting as no way we can afford a house in the South East with three children and only one of us working at the moment!
It's actually quite worrying that people think they will rise. They're almost certainly going to drop - maybe not a huge crash, but I'd bet money on at least 10%.
I think house prices will still rise mainly because demand still outstrips supply by quite a lot, but the increase will be less pronounced up to 5%. Also, there seem to be many vested interests in keeping the rise going. Certainly at the top end prices continue to rise, because the rich are still doing very well and the supply of high priced property doesn't seem to increase much. Property shares have fallen and may fall further, but higher interest rates and sentiment are the factors behind this.
You have mentioned supply vs demand but what about the other factors, affordability, bad debts, demand for a type of housing in a type of area. How many ghost towns do we have were demand fell to nothing a fair few, not in the SE mind but maybe everywhere else. Every body wants to drive a rolls royce but they cant afford it so demand isnt as high as demand is
Ok so we have doctors, lawyers, dentists, stock brokers and CEOs that get paid about 5 times plus what there worth. But the rest that are on normal salarys have taken up the infinite supply of credit offered by banks and the interest payments are likely to double at 8% or even higher just like not so long ago infact in the scheme of the economy and things. Do you think banks will still be offering all the sub-primes that are taking up idiot mortgages to feed the bottom rung of the house prices 6x multiplier mortgages and 125% LTVs in one years time? Maybe 8x and 200% LTV over 80 years perhaps, or maybe 8 generation mortgages for your kids, kids, kids... to pay off for you.
It can only go up? 10% rise every year is compounded its more and more money, few years ago the estate agents got there kicks by raising everything 2K now there getting off on raising it 20k a year. Have wages gone up 20K this year on average? After tax? After the cost of living increases? Did you put 20K in your piggy bank this year?
Its as safe as houses mate, I tell you what you want to get in to is that buy to let business make you minted mate. Eh, you watch sarah beeny on the TV last night, what a fox, well its inspired me im gonna sell my london flat and buy two duffers in newcastle make me a millionaire. Roll-over this weekend 77million better get myself a lottery ticket, wont be in work on monday im sure to win.
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Pls be nice to all MoneySavers. There's no such thing as a stupid question, and even if you disagree courtesy helps.
Will house prices crash? Poll Discussion
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