So why isn't this possible?

kennyboy66_2

Graham_Devon wrote: »

Yet Japan shows us it's perfectly possible, and our own previous 2 crashes show it is perfectly possible. So why all the laughing and belittleing when history shows us actually, 50% looks more likely, and 20% from peak and then a recovery has simply never happened since records began.

You sort of answer your own question.

Exactly how does UK history show that 50% falls are more likely ?

In the last crash, nominal prices fell 13%, in the previous crash they didn't fall at all in nominal terms.

Japan is a pretty different country. The scale of their bubble in the 1980's was a factor greater than the UK's. The Nikkei went up from roughly 5000 to 39000 in 12 years.

I am always a bit suspicious of "Japan House Price index" as it was more normal to record land prices.

Land prices peaked at $1m dollars per square metre.

I have seen it stated that prime financial district prices in 2004 were a mere 1% of their peak and that residential prices were 10% of peak.

For these reasons it seems a little pointless trying to argue that this property crash will be just like Japans.

Lady_Hamilton

prices in Northern Ireland already down 40% from peak and still falling

Dan:_4

Graham_Devon wrote: »

Yet Japan shows us it's perfectly possible, and our own previous 2 crashes show it is perfectly possible. So why all the laughing and belittleing when history shows us actually, 50% looks more likely, and 20% from peak and then a recovery has simply never happened since records began.

Property never fell more then 20% in the 1990s crash.

mbga9pgf

True, but a terrace on the shankhill was never worth 200K was it? Same way newbuild studios in london arent worth 250K, 3 bed semis in middle britain arent worth 200K and former LA nonstandard constructs are not worth 150K.

To claim that prices nationally will face japanese scale falls I am sorry, is false in my opinion. 40% at most, as a national average. Some flats will fall 60%, average (pre-newbuild monstrosity widescale builds) houses will fall at most 35%. But, to be fair, 160-170K for a house valued at peak of 250K sounds about right to be honest, does it not?

I could purchase at peak a 5 bed detatched 3 year old barratts down the road for 289K at peak, about right for that sort of property to fall to around 190.

Back in 1995, my parents bought a 4 bed detached with 1/2 acre for 110K. Assuming 4% annual inflation, that property today is worth around 190K. 1995 was the bottom of the trough remember.

kennyboy66_2

Lady_Hamilton wrote: »

prices in Northern Ireland already down 40% from peak and still falling

QED then.

It has long been known that the rest of the UK's housing market follows the lead of Northern Ireland.

Thrugelmir

tomterm8 wrote: »

What happened to Japan is somewhat different to what is happening in the UK. The main difference is the size of the bubble, which was absolutly huge... at one stage the land under the imperial palace was valued as worth the same amount as california (which would be the 7th largest economy in the world if it wasn't part of the US)

The second is pure demographics... Japan had a much older demographic profile at the time of the crash than us.

The third is that Japans savings rate allowed banks that were otherwise insolvent, and a drain on Japans economy, to remain in existance as Zombie banks for two decades... Japans banks are still insolvent.

The fourth is that we have engaged in a much more aggressive monetary stimulus much earlier in the process of the asset burst.

Despite all this, as a perma bear, I think the housing market is guaranteed to go down, because with the demolition of the shadow banking sector, there simply isn't enough credit available to sustain house prices at the current level.

The fifth was that Japanese banks held incesteous share holdings in the very companies they lent to. As the Nikkei rose so did the value of the asset that was securing the lending.

The difference to the UK is that Japanese banks were lending to commercial borrowers. Whereas the main problems in the UK have resulted from residential lending which was leveraged up on the back of spiralling residential property.

Interestingly Japanese mortgage rates have remained more or less static at around 3.5% throughout the whole period.

Really2

Lady_Hamilton wrote: »

prices in Northern Ireland already down 40% from peak and still falling

Good point, that makes the average fall worse than what it actualy is in most areas of the UK:)

Thrugelmir

Dan: wrote: »

Property never fell more then 20% in the 1990s crash.

I bought late 80's sold early 90's.

Bought 88k
At Peak £125k ( based on next door neighbour)
Sold 88.5k

All in under 5 years.

Thats 42% from peak.

It happened. Some of us witnessed it.

Same as now clever people jumped ship and rented.

kennyboy66_2

Thrugelmir wrote: »

. Whereas the main problems in the UK have resulted from residential lending which was leveraged up on the back of spiralling residential property.

.

Simply not so, most of the write offs of the major banks (not Northern Rock) have been because of commercial lending so far.
Check out the write offs of HBOS and RBS.

That's not to say that there will be material write offs in housing loan book.

mbga9pgf

If there is a major bond strike however and we have to cut the deficit to 0%, I agree, there will be massive blood on the streets. But things dont work like that. You wont have absolutely everyone striking; people have varing levels of risk, some will be risk adverse, some will be keen for rediculous levels of risk. It will seriously screw the system and really hurt, but all out collapse will not happen IMO.