Property crash soon???

Deemy

trigger_mike wrote:

well thank you for this joyful thread, just what you want to hear when you have a £132000 mortgage on a £152000 home...

don't worry if the expected decline happens and your house is worth say 90k at the bottom, then you can console yourself in knowing that you are not alone

Deemy

distilled wrote:

A pundit? OMG I've been called some names in the past but a pundit!! Just leaving the office after dealing with a record number of reservations last week, (what recession?????). If I can drag myself away from the pub later, I'll be more than happy to explain why you're talking absolute !!!!e! (rhymes with night)

Reservations business ?

Surprised your jobs not been shipped abroad yet

Deemy

Woby_Tide wrote:

the house price crash officially happened from August 2004 until everyone got bored. The topic is still lurking a few pages further along this forum.

Nothing new to see here, move along

True the housing market has been holding its own against a background of a growing economy, hence it is marking time until a recession occurs.

There are many converging factors that are liekly to bring a recession forth during the next 18 months or so .

The key ones are -

1. Debt mountains in the UK and USA
2. Commodity bull markets causing inflation, and hence higher interest rates
3. Crude oil bull run resuming upwards towards $80 and above

Live-on-Less

Deemy wrote:

True the housing market has been holding its own against a background of a growing economy, hence it is marking time until a recession occurs.

There are many converging factors that are liekly to bring a recession forth during the next 18 months or so .

The key ones are -

1. Debt mountains in the UK and USA
2. Commodity bull markets causing inflation, and hence higher interest rates
3. Crude oil bull run resuming upwards towards $80 and above

njwd also pointed out that a correction is due because:
My main reasons are:
1. Global interest rate rises (why do people think the UK is immune - think about the effect on sterling if we don't follow suit)
2. £1.1Trillion and growing debt mountain
3. Average house now about 6 times average wage
4. Fudged inflation figures. 2% pah! Just because I can buy a cheap Chinese built DVD / MP3 player doesn't mean I'm not impacted by the massive increases on necessities (Gas, Electric, Petrol, Council Tax)

I also agree with your comments deemy. You mention the growing economy, the other interesting thing to notice is that the economy has only been growing due to the illusion of wealth created by rising house prices. 60-70% of the whole UK economy is driven by consumer spending. People have been taking equity out of their homes to spend, on top of other borrowing fuelled by low interest rates. We now see this topping put as house prices stop rising, the consumer is spent out (borrowed to the hilt!), the downside will not be pretty, especially for all you buy-to -let property magnets out there.

One last point (I promise); and distilled please take note, in every bubble there has ever been the majority don't see what's coming until it actually hits them. Might explain why you are still taking plenty of reservations for your McMansions.

meanmachine_2

But those of us who would like to see a return to sanity in the housing market have been proven wrong by events of the last 6 months or so.

The market from mid 2004 onwards was looking like it would follow the last crash, but it hasn't done so.

We have to look at why that is so - the reason being there has been no sudden spike in costs, no ending of MIRAS etc.

Affordability just before the last crash was extreme - 15% interest rates for many months.

The last crash came about from a combination of factors which have yet to be replicated.

I can see prices going up for a good while yet. But the higher they go the more vulnerable the market becomes to any unexpected event.

We'll eventually get to the stage where even a 0.125% rise in interest rates will tip people over the edge. How insane is that?

We're not there yet though. Look at Ireland. That other thread - detailing a grotty 3-bed in Dublin on the market for a million quid will be one of the enduring images of this whole ludicrous housing bubble.

njwd

wibble68 wrote:

This is a possible outcome but IMO not in the short term.

It's very hard to see where the trigger will come from to produce a crash.

Based on the current state of the economy it's very likely we will see a long period of adjustment.

Looking globally at what is happening to interest rates is the interesting point. Of course there are a million variables (war, decline of petro-dollar etc.), the main thrust of my point is:

US, European, Australian etc. rates are currently on the increase. In fact it seems likely that US rates will be above ours by the end of March. This has only happened twice in the last 25 years for very short periods of time. (80s crash / dotcom).

There are talks that Japan will be upping their rates from ~0% for the first time in an age. This will impact on the vast amount of liquidity in the world. The Yen carry trade will begin to be scuppered.

A good link explaining this:
http://www.safehaven.com/article-4709.htm

Athough the BoE MPC's only remit is to control inflation at ~2% (which I believe is fudged already). What happens when Sterling starts slipping against other currencies? We import inflation. All imported goods become more expensive. To control the inflation the BoE will up interest rates. Like it or not, we are in a global economy. The UK barely manufactures anything anymore, so we import just about everything.

Broken_hearted

It will crash when the interest rate goes up and all those people who over streched themselves go under. Houses are repossesed and flood the market.

Caso_2

I think we are heading for a recession.

Wickedkitten

The way I see it, a house is a home first, and an investment for the long term next.

Broken_hearted

Wickedkitten wrote:

The way I see it, a house is a home first, and an investment for the long term next.

and the banks till its paid for!