The last House Price Crash...

Heyman_2

Cast your minds back, older members!

Were house prices as relatively high as they are now (or were last year) back in 1989 when we had the last crash? I just wasn't old enough back then to know - I remember that my Dad had a house where the tenant died and he was looking to sell right in the middle of it all (i.e. the bottom of the crash!).

Cannon_Fodder

I bought mid-1990, so not at the bottom, an end terrace for £46K when the next door neighbour had bought around 18 months earlier for around £62K, iirc.

Would have had to plump for a flat until the crash came. Wouldn't have got anywhere near £63K on the multiples used in those days.

Heyman_2

So around a 25% drop then - and not even at the bottom of the slump.

I guess it depends whether things now will drop in % terms or in money terms - it would take the banks fully pulling up the ladder on 90% deals and multiples over 3x for a sustained period of time to really hammer home the crash. That and the BofE sucking it up and putting rates up by at least half a point.

Apparently last time, prior to the start of the crash, average prices had risen by around 35% in the preceding 12 months!!

IveSeenTheLight

Heyman wrote: »

Cast your minds back, older members!

Were house prices as relatively high as they are now (or were last year) back in 1989 when we had the last crash? I just wasn't old enough back then to know - I remember that my Dad had a house where the tenant died and he was looking to sell right in the middle of it all (i.e. the bottom of the crash!).

The key to your answer is affordability.
If you look at http://www.hbosplc.com/economy/includes/25_07_08Affordability.xls you can see the affordability for the last 25 years.

The UK average peaked at 5.95 times salary in Q3 07 at 5.95 while the previous peak was at 4.99 in Q2 89. So On average in the UK the peak this time was higher in affordability terms.

However......

If you look at your specific area (my one is Scotland), it shows that the affordability peak was in Q2 89 at 4.83 and reached a peak recently at 4.73 in Q3 07. therefore relatively house prices were higher the last time.

It's interesting to see that affordability ratio is lowering in all areas, some still have a bit to go (South East is 6.5) some dont have so far to go (Scotland is 4.38)

**NOTE** The Q3 results should be out soon to get latest data, which I would presume would be lower than the last quarter

dopester

Wow - a rare guest appearance from our Scotland bull, and a lecture on affordability.

I hear your Bank of Scotland needed to be rescued. SNP can't be chuffed with that.

moanymoany

We paid £149k at the peak in 1989 - 1993 it was worth £99k

Through 1989 and up to the end of double MIRAS the prices went up week by week. This despite interest rates of 14%!

The difference was the personal debt factor. People did have debt, loans and credit cards, but not so much and it was not so spread around the population. However, many people who had bought their council houses and borrowed to put in new kitchens etc. lost their homes as the second mortgagees repossessed.

Small businesses that had done very well until then went to the wall during the early 1990's, losing their houses which they had put up to get loans for their businesses.

Saying that, there was nothing like the meltdown we are seeing now. It was slow burning and took more than a year to get where we have got to in four months this time.

dopester

IveSeenTheLight wrote: »

The key to your answer is affordability.
If you look at http://www.hbosplc.com/economy/includes/25_07_08Affordability.xls you can see the affordability for the last 25 years.

:rotfl:

Yeah. Keep giving us the stats from the bank that Lloyds is having to pick up in a deal to stop meltdown.

Chris2685

IveSeenTheLight wrote: »

The key to your answer is affordability.
If you look at http://www.hbosplc.com/economy/includes/25_07_08Affordability.xls you can see the affordability for the last 25 years.

The UK average peaked at 5.95 times salary in Q3 07 at 5.95 while the previous peak was at 4.99 in Q2 89. So On average in the UK the peak this time was higher in affordability terms.

However......

If you look at your specific area (my one is Scotland), it shows that the affordability peak was in Q2 89 at 4.83 and reached a peak recently at 4.73 in Q3 07. therefore relatively house prices were higher the last time.

It's interesting to see that affordability ratio is lowering in all areas, some still have a bit to go (South East is 6.5) some dont have so far to go (Scotland is 4.38)

**NOTE** The Q3 results should be out soon to get latest data, which I would presume would be lower than the last quarter

Interesting to note that the same excel file shows 'mortgage repayments as a percentage of income'.
That was much higher in the late 80's/early 90's than it was even at the peak of this one... Maybe it's not so bad afterall?

IveSeenTheLight

Heyman wrote: »

So around a 25% drop then - and not even at the bottom of the slump.

Rather than look at one property in one location at taking it as the consencus, take a look at this spreadsheet http://www.hbosplc.com/economy/includes/19_01_08PostTownsData3.xls where it shouws house prices in many towns over the last 20 years.

Heyman_2

Nooo Chris, it's bad alright - it's interesting to see the figures because it probably gives a good idea where we're headed, although it's fair to say that it could be like the early 90s on Fast Forward, as moanymoany indicated.

IveSeenTheLight

dopester wrote: »

:rotfl:

Yeah. Keep giving us the stats from the bank that Lloyds is having to pick up in a deal to stop meltdown.

It's factual info that you can choose to look at or ignore.
You choose.