House Price (Non) Crash 1

sarah_elton · 4 January 2007 at 11:48AM

I complain about the number of 'Crash!' threads as much as anyone, but there's some interesting reading on the FT site.

Article here re their survey of economists for 2007:
http://www.ft.com/cms/s/2ffd2ece-99c3-11db-8b6d-0000779e2340.html

"Most of the rises in the rebounding housing market are now viewed as sustainable by three-quarters of economists in a reversal of the position two years ago, when the same proportion viewed a housing crash as posing a serious threat to the economy."

The full survey results are here:
http://media.ft.com/cms/08d0a5fa-99c4-11db-8b6d-0000779e2340.pdf
Pages 32-38 cover the detail of the views on the housing market.

Just thought I'd throw this one into the mix on here... A little like throwing petrol on a BBQ.

mystic_trev · 4 January 2007 at 12:26PM

Thanks for a bit of balance Sarah...however todays Mail.

Property price panic

Henry Pryor, founder of one of the UK's biggest property websites, says a rush of sellers among home owners who believe the boom has passed its peak is threatening to produce a glut that will push prices down.

http://www.thisismoney.co.uk/mortgages/house-prices/article.html?in_article_id=416087&in_page_id=57&ct=5

Personally I can't see it. The current market looks very strong and I think they'll be more HPI until the end ot the year.

House price crash is now cancelled until 2008!

Gorgeous_George · 4 January 2007 at 12:26PM

sarah_elton wrote:

"Most of the rises in the rebounding housing market are now viewed as sustainable by three-quarters of economists in a reversal of the position two years ago, when the same proportion viewed a housing crash as posing a serious threat to the economy."

So, the economists have a history of being wrong then!

GG

Gorgeous_George · 4 January 2007 at 12:28PM

mystic_trev wrote:

Henry Pryor, founder of one of the UK's biggest property websites, says a rush of sellers among home owners who believe the boom has passed its peak is threatening to produce a glut that will push prices down.

Where will they live now. BTL market to boom! Caravan sales take off.

:rotfl:

lisyloo · 4 January 2007 at 12:37PM

So, the economists have a history of being wrong then

Actually yes they do.
Here's a whole load of wrong predictions.

https://www.housepricecrash.co.uk

sarah_elton · 4 January 2007 at 1:09PM

Gorgeous_George wrote:

So, the economists have a history of being wrong then!

GG

Well, to quote The West Wing, "economists were put on the Earth to make astrologers look good".

Still, their comments are a mixture of predictions, and I just found it refreshing to read different perspectives. This forum can read a little like Daily Mail Readers Anonymous some days.

Alan_M_2 · 4 January 2007 at 1:10PM

lisyloo wrote:

Actually yes they do.
Here's a whole load of wrong predictions.

https://www.housepricecrash.co.uk

Damn, I didn't realise that site was populated by economists, I thought they were general members of the public having a chat on a forum just like this one

Generali · 4 January 2007 at 1:22PM

A crude calculation taking the average UK house price for the Nationwide HPI as £172,065 and the average m/f couple income being £487 and £387 p/w each being £45,448 between them gross shows that the price of a house is about 398% of the average income, currently. If we increase each at their current rate (9.3% p.a. for the house and 4.1% p.a. for the income) we get an average house price of £500k after 12 years with an income of £73,600 (house is 680% of income).

Going further, in 20 years a house is worth in excess of £1mio while the income to buy it is £101,500 (1004%). Indeed in 50 years (hopefully within the life of a 30 year old buyer, at least the non-smoking female ones) the average house price is a little over £14.5 million with the average earnings being a little under £340k. A house is worth 4332% of the average earnings - a lifetime's gross income.

This suggests to me that either house prices have to rise at a lower rate or incomes at a higher one. I don't see what will drive wages to rise much more strongly than they do at present. This suggests to me that if I buy a house for my son today, he'll be independent from ever having to work. Or that house price inflation must slow or go into reverse.

This suggests to Mrs Generali that I should get out more but the point is made. Waddaya think?

Alan_M_2 · 4 January 2007 at 1:24PM

The FT article is very interesting indeed, if you are interested I'd urge you to read the full version not the headline version. It gives a very interesting insight into how these people think.

Also it reads from a global perspective rather than particularly a UK only perspective with the single most cited concern on our economy being a freefall in value of the USD.

Good interesting read, that comes across as neither bullish or bearish but somewhat in the middle.

talksalot81 · 4 January 2007 at 1:27PM

lisyloo wrote:

Actually yes they do.
Here's a whole load of wrong predictions.

https://www.housepricecrash.co.uk

You may joke, but I think in so doing you show a level of ignorance.

Many of those who would laught at HPC.co.uk are finding themselves with enormous mortgages with the very real threat of rising repayments due to interest rate rises and the threat of market slowing because of affordability issues.

While HPC has to date been wrong and many still do not own their own property, it is full of reasoned arguements which are strictly correct. The arguements to the contrary are almost entirely unable to give fundamental explanation of how the market continues to be strong and how it can be sustained (read affordability).

Alan_M_2 · 4 January 2007 at 1:33PM

Generali wrote:

A crude calculation taking the average UK house price for the Nationwide HPI as £172,065 and the average m/f couple income being £487 and £387 p/w each being £45,448 between them gross shows that the price of a house is about 398% of the average income, currently. If we increase each at their current rate (9.3% p.a. for the house and 4.1% p.a. for the income) we get an average house price of £500k after 12 years with an income of £73,600 (house is 680% of income).

Going further, in 20 years a house is worth in excess of £1mio while the income to buy it is £101,500 (1004%). Indeed in 50 years (hopefully within the life of a 30 year old buyer, at least the non-smoking female ones) the average house price is a little over £14.5 million with the average earnings being a little under £340k. A house is worth 4332% of the average earnings - a lifetime's gross income.

This suggests to me that either house prices have to rise at a lower rate or incomes at a higher one. I don't see what will drive wages to rise much more strongly than they do at present. This suggests to me that if I buy a house for my son today, he'll be independent from ever having to work. Or that house price inflation must slow or go into reverse.

This suggests to Mrs Generali that I should get out more but the point is made. Waddaya think?

I think extrapolating figures in that manner really doesn't prove anything, either way and doesn't forecast anything happening in reality.

If you told someone in the 1970's that their £10,000 house would be worth £100,000 10 years later they'd have told you that you were bonkers, but we went through a phase of staggering inflation and that did in fact occur, but at what cost socially?

There is an imbalance between perceived value of property and income which needs to be addressed reasonably soon otherwise a sharp correction could occur, which really does no one any good. The current increase in house prices continues to be fuelled by the ability to borrow (along with low rates enabling the borrowing) - as long as these two things continue to be in existence I see no correction.

It isn't inconceivable that prices increase a further 10% during 2007, then again it also reasonable to suggest they could go in the other direction, lets face it, neither would exactly be a shock would they?

House Price (Non) Crash 1

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