So why isn't this possible?

mbga9pgf

Well, that article dates from January...

chucky

Generali wrote: »

My opinion FWIW is that you can't really compare the yield on shares with the yield on a house directly as the house has costs associated with ownership the the shares don't (maintenence, council tax etc). BTL is more like a business than a simple investment IMO as you need to find a customer (tenant), keep them happy etc. And on a more practical note, the Chairman of BP won't call you on Boxing Day because the boiler's blown up! (unless your tenant is the Chairman of BP of course).

i 100% agree - there are many different types of yield for different types of asset classes. eg dividend yield.

i know yield is yield but the calculation of it isn't as simple as taking the market value and comparing it against the income from it.

chucky

mbga9pgf wrote: »

Well, that article dates from January...

yep - i deleted it. it was the wrong one. i did find one from March but i've seen one more recently that i can't seem to find right now.
http://www.telegraph.co.uk/finance/financetopics/recession/5018609/Bank-of-England-to-purchase-commercial-paper-as-it-comes-to-aid-of-companies.html

i'll get back to you on the one that i saw that was more recent.

Really2

Thrugelmir wrote: »

There is no such thing as a national average. Its a notional figure. Not an actual house!

So why post one specific house which fell 42%.

Surely an average nominal house price is more representative of the country as a whole.

I bet someone could post a house that actualy went up in value during the last crash.

But I would not then be stupid enough to belive that most houses did rise in value based on one sale. I presume you would think the same so I fail to see your point about one houses value

Graham_Devon

Really2 wrote: »

So why post one specific house which fell 42%.

Surely an average nominal house price is more representative of the country as a whole.

I bet someone could post a house that actualy went up in value during the last crash.

But I would not then be stupid enough to belive that most houses did rise in value based on one sale. I presume you would think the same so I fail to see your point about one houses value

Ok, but what about real house prices.

Take a look at the graph I posted earlier on page 1, for reference...



In 1989 I see prices at 120k. In 1996 I see prices at roughly 72k.

I work that out roughly at a 40% drop.

How can we say prices never fell more than 20%, when its obvious that they fell more just looking above, and nearly halved in real terms.

Why can this not happen this time (I'm forgetting Japan here).

On that chart, why can we not see the previous patterns followed and real prices hit around 100k, which would pretty much follow the previous 2 booms and busts if you had to draw a line on following the pattern.

Is it pointless talking about real house prices (as thats what all my predictions have been based on)?

Really2

Graham_Devon wrote: »

Is it pointless talking about real house prices (as thats what all my predictions have been based on)?

If you own a house yes, as your mortgage in nominal and so is the purchase price.

So if you get wage inflation and house prices are static your mortgage is deflating in real terms at the same speed as your house.

Real house prices only make any difference if you are entering the market and only show big changes after an event.

EG1 if you purchased today you would purchase for a nominal amount do you know what that will be in "real terms" in 5, 10, 15, 20, 25 years time?

EG2 you own a house purchased in say 1990 as it dropped from peak £XXXXX or as it gained £XXXXX nomialy from 1990.
Seen as no asset was sold at peak (realized value) I would evaluate the house in nominal gains and the mortgage held on that house would still be nominal not inflation adjusted.

Is the Japan graph real or nominal you posted?

So to add the average was not £120K in 1989 so what you actually see is prices falling but wage inflation, this doubles the drop in real terms, but the mortgage holder may actually be better of due to the wage inflation.

In short if you purchased in 1989 you purchased nominaly you can not look back and say I paid £120K based on today's values as you purchased in 1989 with a mortgage for the nominal value at that time.

kennyboy66_2

Graham_Devon wrote: »

Is it pointless talking about real house prices (as thats what all my predictions have been based on)?

No its not pointless talking about real house prices.

However, nearly even single poster who was wetting themself with excitment at the prospect of 50% falls, actually thought there would be 50% falls in nominal terms.

The last crash was arguably easier to cope with, because falls in real prices by definition go alongside with increases in wages and salaries, thus making debt repayments easier.

I'm sure the Govt. and and BoE would love some 'benign' inflation of say 3% per year. Engineering that is a fifferent matter.

Graham_Devon

kennyboy66 wrote: »

No its not pointless talking about real house prices.

However, nearly even single poster who was wetting themself with excitment at the prospect of 50% falls, actually thought there would be 50% falls in nominal terms.

The last crash was arguably easier to cope with, because falls in real prices by definition go alongside with increases in wages and salaries, thus making debt repayments easier.

I'm sure the Govt. and and BoE would love some 'benign' inflation of say 3% per year. Engineering that is a fifferent matter.

I bet they didn't.

I bet nearly every single person not wetting themselves, but prediciting above 35% falls, is talking about real prices, hence always using graphs such as I did.

I can see why people would use nominal house prices, it has it's place. However, I have always used graphs such as the above for my predicitions, so I'm talking real house prices, and I would guess the majority are also using real house prices too.

It's the old adage of bulls using one measure, bears using another, which goes on a lot, but just causes a lot of confussion and a lot of arguments!!

Just to be clear, this whole thread is about REAL house prices, NOT nominal. Hence the graphs used.

So looking back at the 90's, house prices in real terms which effects most of the nation, either buying, moving up, or those with neg equity, house fell around 40%.

Why is it so impossible this will happen this time according to some? Maybe this has cleard things up, and it's impossible on nominal house prices?

Really2

Graham_Devon wrote: »

I bet they didn't.

I bet nearly every single person not wetting themselves, but prediciting above 35% falls, is talking about real prices, hence always using graphs such as I did.

Disagree there graham when they say 50% or 70% from peak they are using a nominal figure. (eg if you fall 200 feet it is nominal your real fall would be whether you jumped up or left a dent.)
The 2007 peak is a nominal figure, Unless you know what inflation is going to do in the future real term reductions are virtually impossible to predict.

unless some are predicting high wage inflation (which they were not) how could it be anything but nominal.

Ps is the Japan graph nominal or real as I can find no referance?

Graham_Devon

Really2 wrote: »

Disagree there graham when they say 50% or 70% from peak they are using a nominal figure. (eg if you fall 200 feet it is nominal your real fall would be whether you jumped up or left a dent.)
The 2007 peak is a nominal figure, Unless you know what inflation is going to do in the future real term reductions are virtually impossible to predict.

unless some are predicting high wage inflation (which they were not) how could it be anything but nominal.

Its not that involved.

It's a simple case of people seeing the average house price at 200k, and predicting 30,40,50% falls when the bottom hits.

So houses would be 110k / 130k.

Its that simple, and thats based on real house prices.

Edit: So for me personally, I would expect house prices at the very bottom to be around 110-120k. From the peak, in real terms, thats a 40-45% fall in average house prices.

That is how I have always based my predictions / guesstimates / assumptions.

I would guess, and I can only speak for myself, but can real others posts, that a lot of the bears work in this way hence why we always say "from peak".

The last 2 crashes on the UK graph show this is the "norm".