House prices to fall by 40% from peak, 3-4 million in neg. equity

StevieJ

_bankrupted wrote: »

I really think people are fooling themselves when they believe that in general house prices will fall 50%. Of course there will be properties in localised areas that will see this size of fall, but that will be for a very specific reason, specifc to the property.

If my house falls 50% it will put it at a price (adjusted for wage inflation) at the price I paid for it in 1993 right at the bottom of the last slump.

Then interest rates were 12%.

The difference today is that interest rates are 4.5% and predicted to fall to around 3%

There is greater demand today for housing due to population growth and more people living alone.

At the end of the day it's a complex issue but the price is in part driven by affordability and demand. Both of those favour house prices higher than the last slump.

Surprisingly balanced view for this board.

ManAtHome

_bankrupted wrote: »

The difference today is that interest rates are 4.5% and predicted to fall to around 3%

But there won't be enough cash floating around at that rate to service current loans, never mind new ones

_bankrupted wrote: »

There is greater demand today for housing due to population growth and more people living alone.

There appears to be next-to-burger-all demand at the moment...

Pobby

Well for someone who has been around a long while, I was amazed what has been going on in the financial markets. The very thought that there would be a run on a bank what unbelievable. That, it would appear, is only the tip of the ice burg. 50 % drops, well maybe. Then again, maybe not. However I find it strange that in the period from 1998 to 2007 my house was valued at a staggering 400% price increase.

Try as I may, not one person has ever given me a logical answer to why that was .

StevieJ

Pobby wrote: »

Well for someone who has been around a long while, I was amazed what has been going on in the financial markets. The very thought that there would be a run on a bank what unbelievable. That, it would appear, is only the tip of the ice burg. 50 % drops, well maybe. Then again, maybe not. However I find it strange that in the period from 1998 to 2007 my house was valued at a staggering 400% price increase.

Try as I may, not one person has ever given me a logical answer to why that was .

OK, for starters.
1) House prices fell from late 80's to mid 90's, providing a lower base to start from.
2) Inflation and long term interest rates have fallen boosting affordablilty.
3) Overshoot, house prices overvalued in 1997.

sabretoothtigger

Supply and demand altered greatly during that time.
Lots of demand which I think is still there and a rise in supply of credit but not the number of properties available

Take your 1998 price, multiply by 1.028 for each of the 10 years since and thats a reasonable 'fall' in value from the 2007 value, based on trends since the 1970's
I'd be interested to know what percentage difference that is

House prices fell from late 80's to mid 90's, providing a lower base to start from.

Average price in the 90's was higher then average for the 80's I reckon

StevieJ

sabretoothtigger wrote: »

Average price in the 90's was higher then average for the 80's I reckon

Pardon my ignorance but what have average prices for the 80s and 90s got to do with it?

Realy

Is this people or motgages?

If it is mortgages that means 1/3 of all mortgages!
I can't see 1/3 of all mortgages have been taken out in the last 6 years.
Also if it did it would mean nearly all of those who purchased put down no deposit or equity.

ad9898_3

Realy wrote: »

Is this people or motgages?

If it is mortgages that means 1/3 of all mortgages!
I can't see 1/3 of all mortgages have been taken out in the last 6 years.
Also if it did it would mean nearl all of those who purchased put down no deposit or equity.

I think Realy, you can't underestimate how many people mewed over the house price bubble years, cars, holidays, consolidation, credit cards, loans,BTL dinner parties, helping their kids get on the the ladder

Alot of people who would have been in good positions, now find themselves shafted.

baileysbattlebus

We lost almost 40% of the "value" of our house in the last crash - we live in the south east which was hit quite hard then. Other parts of the country saw much smaller drops, but didn't have the huge price increases that we saw here.

Where we are prices peaked in 1989 and the first falls were also in 1989 prices fell until 1993 when there was a slight rise, they continued rising reaching pre crash prices again in the middle of 1998, so the cycle for us was 9 years.

Prices could easily fall 40%+, they certainly did in our area, although the figures would have you believe that the falls were less than that - it depended on where you lived.

According to the Halifax prices in the south east fell by 31% and the north east by 9.5%, though my sister who lives there saw her own area increase in value slightly during the same period.

The north east didn't see any falls until 1991 - prices there started to fall later and were still falling slightly when the south east had started to recover, but the north east was still up to 1991 level prices by 1998.

Personally, I don't think prices will fall in a uniform manner across the country, I could be wrong, but I would be surprised if they did.
Some areas will fall further than others - some people are saying prices have risen slightly in areas where they live - that wouldn't surprise me either - but they could just be be lagging a bit.

Pobby

StevieJ wrote: »

OK, for starters.
1) House prices fell from late 80's to mid 90's, providing a lower base to start from.
2) Inflation and long term interest rates have fallen boosting affordablilty.
3) Overshoot, house prices overvalued in 1997.

Can only speak from my own experience. Purchased in 1988 @£75000. Tried to sell a few years later. Was advised that £59000 would clinch a deal. Sold in 1999 for £73000.
As to point 2, I agree but also wage inflation has dropped to a great degree. The area I live in is known for very low wages yet it is only just below the property prices found in the South East, our area is in fact the 3rd highest for property in the UK.

In 3 do you mean that property was undervalued in 1997, I certainly would have not said over valued.