House prices may halve warns Vince Cable

drbeat

StevieJ wrote: »

house prices will not drop by 70% .

Did they not drop by that much and more in Japan though?

beingjdc

drbeat wrote: »

Did they not drop by that much and more in Japan though?

Prime land in Tokyo fell by just over 99%.

Meanwhile, despite the interest rate cuts, another collapse in Spreadfair house price futures. Still predicting the trough at December 2010, but now predicting it between 121k and 126k, so just under 40% nominal fall.

Kenny4315

What I don't understand was why these economic guru's could not see this coming 3 years ago or more. It was obvious to anyone with any understanding of economics/human psychology/finance/history. All markets are cyclical, otherwise they'd always be winners, which is never the case. There are always winners and they are always losers. Interest rates go down borrowers win, savers lose and vice versa. Companies .. hot weather .. air con units go up, heating suppplies go down. Bookies ... favourite at Goodwood wins .. bookies lose, punters win, outsider wins vice versa.

So the rules of investment are spread your risk.

CASH IS KING, always hold a cash or near cash equivalent slush fund for opportunities and to lower overall investment risk.

But the main rule of winning is TIMING, knowing when to get in and when to get out. Buy low and sell high, and by high I mean somewhere close to the peak when most of the gain is obtained, when I say low I mean close to the low as-well, as the absolute point is impossible to establish in advance.

That way you'll have plenty in reserve when the SH&t hits the fan, and you'll virtually always be the winner. Sheep don't win the only end up as Sunday lunch with Mint sauce. To many individuals in the Uk just follow everyone else blindly, shares going up lets buy those, houses going up lets buy those, when they go down lets panic. because we've not really looked at the details of the investment over a longer time frame.

I always make money out of all my investments, and usually a large percentage.

WTF?_2

It's a bit difficult to see where the growth is going to come from to get us out of the recession.

The lower pound will help exports but who do you export to when there's a global recession? As I see it the only real export markets for a while will be in energy and food, the basics of life.

In the meantime, we import massive amounts of stuff including food and energy. There's the assumption that the falling price of oil is going to bail us out but take a longer term look at oil prices. The huge spike of the summer was just that - a blip - it may have fallen from the recent peak but over the longer term it's just a little down from the trend. In the meantime we've seen the pound collapse which will exert upward pressure on the price of everything imported. I think that will mean inflation will take a lot longer to fall back than many assume, CPI anyway.

So we'll be getting poorer as a nation but the price of a lot of essential things won't be reducing that much.


The good news for would be house buyers who have held out through the bubble madness is that house prices are well and truly set to continue deflating and they are priced in pounds so no loss from sterling devaluation and not so much of a worry because of loss of savings interest either. Without having to take on the huge debt burden of recent times when buying a home it should give future buyers a bit more to spend.

Of course, if the government keeps grabbing money from the future taxpayer to bail out banks and such it's going to have the effect of dampening future economic growth.

Generali

!!!!!!? wrote: »

It's a bit difficult to see where the growth is going to come from to get us out of the recession.

Well the traditional route is to export if domestic demand has fallen. The trouble is, demand seems to be falling right across the world so who do you export to?

Generali

StevieJ wrote: »

Gen we are entering a recession with low import prices, low interest rates. I think we will have about 3 to 4 quarters of negative growth and low inflation. The problem I see is down the line when commodities regain their vigour and inflation bursts back into life - after that who knows? The one thing I do know is that house prices will not drop by 70% (mainly because Dervish thinks they may do, not very scientific I know).
Yes I do agree about Obama but knowing what the USA is like I am not sure he will last that long.

My feeling is that the pensions problem across much of Europe is going to throw a massive spanner into the works.

The French lorry drivers, for example, aren't just going to accept that they can't retire at 55.

I don't think that the most likely outcome is that house prices will fall 70% but it is possible if banks don't sort themselves out. That is something that appears as distant as ever - Paulson is buring his way through that $700,000,00,000 but it seems to be having little to no impact.

setmefree2

!!!!!!? wrote: »

I think that will mean inflation will take a lot longer to fall back than many assume, CPI anyway.

The BOE data from the November projection shows the chance of an actual fall in prices has moved from less than one in ten to less than one in three. There is therefore a realistic possibility of CPI inflation falling to zero. This means that the chances of CPI inflation falling below 2% is extremely high - possibly happening as early as Qtr 1 2009. Which is why it the BOE swung the axe.

setmefree2

!!!!!!? wrote: »

The lower pound will help exports but who do you export to when there's a global recession?

IMHO the main benefit of a lower ponud - if the BOE projections for inflation are to be believed - is to bring some inflation into the UK economy to counteract the deflationary pressures that have been brought on by the credit crunch. The BOE November forecasting show that by qtr 2 2009 inflation would have fallen to less than 1%. Thus, they swung the axe, interest rates came down, the pound fell and they import some inflation to keep them from falling below their 2% target.

setmefree2

StevieJ wrote: »

The problem I see is down the line when commodities regain their vigour and inflation bursts back into life.

Agree - long term, this is a real problem, particularly oil.

neverdespairgirl

Generali wrote: »

Paulson is buring his way through that $700,000,00,000 but it seems to be having little to no impact.

that number of zeros still astonishes me.