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Debate House Prices
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FT: House prices to start rising steadily as soon as October
Comments
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:rolleyes:Four million homeowners in the UK are playing a waiting game with the property market, watching for the best moment to trade up and cash in on cheaper home-ownership before prices start to rise.
According to research from First Direct, these homeowners are now sitting on a savings pot of £20.2bn which is ready to be ploughed into the housing market when the time is right.
The survey found that with the property market already showing small signs of recovery, the average Brit expects house prices to start rising steadily as soon as October 2010.
http://www.ftadviser.com/FTAdviser/Mortgages/News/article/20090416/3532d7f4-29d6-11de-8da9-00144f2af8e8/House-prices-to-start-rising-steadily-as-soon-as-October.jsp
Dan: do you agree with this predictiomn? :rolleyes:0 -
Graham_Devon wrote: »LOL.
Love how you have chosen to use nominal house price over real house price
nice!
I buy everything in nominal terms.;)
If you don't get wage inflation "real prices" mean nothing.
That is why buying at the bottom is a myth those troughs in "real prices" were only actually shown after the event.
Nominal is what you pay, I would always say look for the nominal bottom is that not the lowest price.
(unless you get strong deflation) 0 -
Graham_Devon wrote: »I've already asked this a while ago, i.e. when was the last time interest rates went up that house prices also rose, and when was th last time house prices rised in a recession, or even, 2 years after.
No one came forward to answer. But did spin something else I said
IIRC, real house prices were rising within 2 years of the 1970s recession and the early 80s one. There was about a 4 year delay after the 1990s recession ended.
My guess is that the difference is that the 70s and 80s recessions were more 'working class' and at the time, home ownership would have been more concentrated among the richer (middle class mostly) parts of society.
The early 90s recession was the first 'white collar recession' so had a greater impact on house prices.
Also by policy, home ownership was more widely spread (eg right to buy).
Interest rates were also unwisely pushed up despite falling GDP due to idiotic exchange rate policies.
Time will tell what will happen this time around. My guess is the pain is going to be spread around pretty evenly. This may well be the first 'welfare recession' where welfare recipients find their benefits cut or limited in some way.0 -
I buy everything in nominal terms.;)
If you don't get wage inflation "real prices" mean nothing.
That is why buying at the bottom is a myth those troughs in "real prices" were only actually shown after the event.
Nominal is what you pay, I would always say look for the nominal bottom is that not the lowest price. (unless you get strong deflation)
Close your eyes, cover your ears - la la la la *inflation doesn't exist* la la la.
Unfortunately, if you did buy at a bottom of a trough in real house prices, it was the bottom of the market. Imagine someone bought a house in Zimbabwe last year for around 1 million Zimbabwean dollars. Then imagine the same person bragging to their friends at a restaurant that their house was valued at 1 billion Zimbabwean dollars last week. Then, at the end of dinner, they give a 1 trillion dollar tip to the waiter.
It's an extreme example but it shows the folly of using nominal prices to judge the success of past investments.0 -
stephen163 wrote: »Close your eyes, cover your ears - la la la la *inflation doesn't exist* la la la.
Unfortunately, if you did buy at a bottom of a trough in real house prices, it was the bottom of the market. Imagine someone bought a house in Zimbabwe last year for around 1 million Zimbabwean dollars. Then imagine the same person bragging to their friends at a restaurant that their house was valued at 1 billion Zimbabwean dollars last week. Then, at the end of dinner, they give a 1 trillion dollar tip to the waiter.
It's an extreme example but it shows the folly of using nominal prices to judge the success of past investments.
Andy Flower(?) was commentating on the cricket on the ABC a few months back and he made a great point about hyperinflation.
He'd bought a T-shirt which cost (I think) a billion Zim dollars. He went back a couple of years later and the T-shirt was pretty much knackered. Someone offered him 4 trillion for it.
An interesting way to measure relative value over time is, How long would someone need to work to earn (net) the money to buy an item? It's hard to do though.0 -
IIRC, real house prices were rising within 2 years of the 1970s recession and the early 80s one. There was about a 4 year delay after the 1990s recession ended.
Recollection is not quite correct. Nationwide shows real house prices fell from Q1 75 to Q4 77 (3 years). They may have peaked a bit before Q1 75, but their figures don't go back earlier than that. Nominal house prices rose during that time, but inflation was very high.
Next peak was Q4 79 dropping until Q2 82 (2.5 years).
Next peak was Q2 89, dropping until Q4 95 (6.5 years).
Latest peak was Q3 07, dropping until ....?
The Nationwide figures use RPI to represent inflation. Their figures show a strong trend of real house price increases of about 2.9% pa (R-squared = 0.7). That mainly reflects increases in pay relative to the RPI, where pay has tended to rise over very long periods at 2-3% pa faster than prices.
I have reworked the figures to use the average earnings index instead of RPI. This shows effectively no trend (R-squared = 0.1). Is there any way to upload a graph to this website? It's an interesting graph - like a positive feedback loop cycling out of control!No reliance should be placed on the above! Absolutely none, do you hear?0 -
Recollection is not quite correct. Nationwide shows real house prices fell from Q1 75 to Q4 77 (3 years). They may have peaked a bit before Q1 75, but their figures don't go back earlier than that. Nominal house prices rose during that time, but inflation was very high.
Next peak was Q4 79 dropping until Q2 82 (2.5 years).
Next peak was Q2 89, dropping until Q4 95 (6.5 years).
Latest peak was Q3 07, dropping until ....?
The Nationwide figures use RPI to represent inflation. Their figures show a strong trend of real house price increases of about 2.9% pa (R-squared = 0.7). That mainly reflects increases in pay relative to the RPI, where pay has tended to rise over very long periods at 2-3% pa faster than prices.
I have reworked the figures to use the average earnings index instead of RPI. This shows effectively no trend (R-squared = 0.1). Is there any way to upload a graph to this website? It's an interesting graph - like a positive feedback loop cycling out of control!
How does that tally with ends of recessions per the question?
I'm not in a position to look it up but (again from my dodgy memory) the 70s recession ended in Q3 1974 so I'm wrong on that one.
Early 80s was a wierd recession as GDP bounced about all over the place. It ended about Q3 1981 so I'm right there I think - house prices rose shortly after the end of the recession.
I think the only way to post a graph would be to use a tool like the (very excellent) SnagIt to turn it into a jpeg file and post as an inserted image.0 -
IIRC, real house prices were rising within 2 years of the 1970s recession and the early 80s one. There was about a 4 year delay after the 1990s recession ended.
My guess is that the difference is that the 70s and 80s recessions were more 'working class' and at the time, home ownership would have been more concentrated among the richer (middle class mostly) parts of society.
The early 90s recession was the first 'white collar recession' so had a greater impact on house prices.
Also by policy, home ownership was more widely spread (eg right to buy).
Interest rates were also unwisely pushed up despite falling GDP due to idiotic exchange rate policies.
Time will tell what will happen this time around. My guess is the pain is going to be spread around pretty evenly. This may well be the first 'welfare recession' where welfare recipients find their benefits cut or limited in some way.
In the back of my mind. I seem to recall that interest rates were cut in the 80's as well though levels of taxation did rise. Correct me if I'm wrong.0 -
£20,000,000,000 is baggur all unless they can leverage up. There are some obvious problems surrounding that right now.
Well most A/Bs can still access gearing. Furthermore, I posit a great many will invest savings in bricks rather than low yielding cash.
My bet is still on this summer to be the turn in the South East.0
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