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Debate House Prices
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New recruit for the 70% club
macaque_2
Posts: 2,439 Forumite
Come what may, economic gravity will have its own way.
http://money.uk.msn.com/investing/articles/nicklouth/article.aspx?cp-documentid=10924988
Strictly speaking, this is 70% of the gains. The question is, which gains?
http://money.uk.msn.com/investing/articles/nicklouth/article.aspx?cp-documentid=10924988
Research by professor Morgan Kelly of University College Dublin shows that house price bubble across the world have similar characteristics. On average prices lose 70% of the gains made from trough to peak before bottoming out. This research is backed up by an international study made by the Bank of International Settlements in 2004, which found a strong positive correlation between the size of a housing bubble and the subsequent fall.
Strictly speaking, this is 70% of the gains. The question is, which gains?
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Good statistic.where would that leave UK house prices? The last downturn in the housing market ended in July 1995, when average prices according to the Halifax were £61,000. That gain, trough to peak over 12 years, is £139,000. So if this is a typical bubble, the fall would be 70% of that, £97,000, taking the price of the average house at the low to just £103,000.0
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where would that leave UK house prices? The last downturn in the housing market ended in July 1995, when average prices according to the Halifax were £61,000. That gain, trough to peak over 12 years, is £139,000. So if this is a typical bubble, the fall would be 70% of that, £97,000, taking the price of the average house at the low to just £103,000.
I thought he meant a 70% fall in real house prices. That article used nominal didn't it?The last slide in UK house prices was a rather modest affair, though it lasted six years from May 1989 to July 1995. House prices as measured by the Halifax fell by 13%, from an average of £70,000 to £61,000 over the period. That might be a comforting precedent
The 'real' house price in 1989 was more like £118k. The real house price at the trough in 1995 was around £73k. That is a £45k drop on a £118k starting value - a 38% fall in real terms.0 -
stephen163 wrote: »I thought he meant a 70% fall in real house prices. That article used nominal didn't it?
The 'real' house price in 1989 was more like £118k. The real house price at the trough in 1995 was around £73k. That is a £45k drop on a £118k starting value - a 38% fall in real terms.
He is saying 70% of the 12 year gain could be wiped out. It compares to less than 50% off house prices.
The average house did not cost £118K in 1995.
GGThere are 10 types of people in this world. Those who understand binary and those that don't.0 -
Gorgeous_George wrote: »He is saying 70% of the 12 year gain could be wiped out.
The average house did not cost £118K in 1995.
GG
No, it cost £118k in 1989, by 1995 it was only £75k.
Source: http://www.housepricecrash.co.uk/graphs-average-house-price.php
1989-1995 were the peak to trough of the last one.0 -
PasturesNew wrote: »No, it cost £118k in 1989, by 1995 it was only £75k.
Source: http://www.housepricecrash.co.uk/graphs-average-house-price.php
1989-1995 were the peak to trough of the last one.
Of course, £75K in 1995 would be worth almost £110K today (inflation).
GGThere are 10 types of people in this world. Those who understand binary and those that don't.0 -
Gorgeous_George wrote: »He is saying 70% of the 12 year gain could be wiped out. It compares to less than 50% off house prices.
The average house did not cost £118K in 1995.
GG
thanks George - some people get too caught up in the headline0 -
The point I was querying was the article's use of nominal, rather than real, house prices for their example of what might happen in the current cycle. Then they used nominal values - wrongly - to say there was only a 13% fall in house prices in the last bust.0
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His articles on the Irish property market and other things is here:
http://www.ucd.ie/economics/staff/mkelly/
--C0
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