If house prices fall another 37% ...

Graham_Devon

I remember a year or so back, even 9 months back, people stating house prices could only fall roughly 10% by roughly this time, as it would not be allowed to fall further because of the election and people would be snapping up houses as they would be at a bargain price. Hasn't happened.

In fact, house prices have fallen over 20% from peak in a very very short period of time.

People are still saying Brown won't allow it. Well how can he really stop it? If people are not willing to buy, he would have to come up with some pretty serious plans to force people to buy or some draconian legislation stating it is now mandatory that house prices stay above a certain level.

It's certainly possible that they will fall another 37% from now. Whats clear is that no one is saying they will, BUT they are saying if it follows the last recession step by step, thats where we would end up.

It's a possibility I think anyone would be foolish to rule out.

Kenny4315

Graham_Devon wrote: »

It's a possibility I think anyone would be foolish to rule out.

There's more chance of me going down on Mr Clown than a 57% fall from peak. :eek: and I hate the fat ugly sqinty eyed scottish bar steward with a passion. :money:

Jim_B_3

Assume that the "correct" price is 100.

100 to 135 - 35% too high.
135 to 58.05 - 57% drop.

That's from 35 over to 42.95 under. If they can go 35 over, I reckon they could go 42.95 under, given the right circumstances such as increased unemployment, increasing tax burden and all the rest of the things we may well have to look forwards to.

Hey, if Kenny's allowed to just repeat himself, so am I!

JP45

Can't help wondering what level of fall the FSA assumed in their recent stress testing of UK banks. I doubt they allowed for a further 37% drop.

Whilst a fall of this magnitude might seem at first glance like good news for potential first time buyers, it would also further undermine the banks' ability to lend, which wouldn't be good for anyone other than cash buyers.

Wookster

Kenny4315 wrote: »

There's more chance of me going down on Mr Clown than a 57% fall from peak. :eek: and I hate the fat ugly sqinty eyed scottish bar steward with a passion. :money:

Its a bold man that rules anything out in these times.

Cat695

just think if they did fall by 40/50% (overall) how much money would be free to pour back into the econemy.....well for those that didn't buy in the last 4/5 years anyway.

Kenny4315

Wookster wrote: »

Its a bold man that rules anything out in these times.

It's not really bold ruling out a 57% drop it's obvious. :money: It would bankrupt most individuals in the country which Mr Clown can't afford to do.

Jim_B_3

JP45 wrote: »

Can't help wondering what level of fall the FSA assumed in their recent stress testing of UK banks. I doubt they allowed for a further 37% drop.

Whilst a fall of this magnitude might seem at first glance like good news for potential first time buyers, it would also further undermine the banks' ability to lend, which wouldn't be good for anyone other than cash buyers.

Surely it doesn't actually create a problem for the banks unless more people default on their mortgages, and if that's going to happen, it'll happen whether or not the price jumps about as the price change doesn't affect people's repayment (barring the need to remortgage).

How do lower prices undermining the banks ability to lend? Surely it will improve their ability to lend; more people needing smaller mortgages, with lower chance of defaulting.

Jim_B_3

Kenny4315 wrote: »

It's not really bold ruling out a 57% drop it's obvious. :money: It would bankrupt most individuals in the country which Mr Clown can't afford to do.

How will it bankrupt them? If they could afford the mortgage before, they can afford it even when the price has dropped.

Graham_Devon

Kenny4315 wrote: »

It's not really bold ruling out a 57% drop it's obvious. :money: It would bankrupt most individuals in the country which Mr Clown can't afford to do.

Why would it bankrupt most individuals in the country, when prices rose 200%+, 300%+ being the norm in 10 years? 50% have no mortgages, and a hell of a big chunk of the other 50% with mortgages will be sitting on a LOT of equity.

It would only bankrupt those who can't afford to pay the mortgage and BTL's.

Edit: Anyone know in the last crash what percentage it was from peak to trough? I calculate it at 38% drop?