Why house prices are certain to fall

chucky

bigheadxx wrote: »

http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=145&a=10106

http://afullerview.wordpress.com/2007/10/30/news-international-invests-in-globrix-a-new-property-search-engine/

http://en.wikipedia.org/wiki/Globrix

Why?

have a look at the land registry

btw - the same volumes whilst prices have been rising were around when prices were dropping. should we ignore those?

bigheadxx

chucky wrote: »

have a look at the land registry

btw - the same volumes whilst prices have been rising were around when prices were dropping. should we ignore those?

Couple of months of rises?

chucky

bigheadxx wrote: »

Couple of months of rises?

it was you that said they were rising

bigheadxx wrote: »

I would therefore conclude that house prices are not increasing but appear to be because there is so little activity for any figures to be accurate.

it all depends which index you use and which one suits your viewpoint.
the Nationwide has 6 months of rises, the Halifax has 2 or 3 not sure.
the trend is up up at the moment though.

i agree with your point about volume of transactions by the way.

IveSeenTheLight

Thrugelmir wrote: »

You need to understand the underlying reasons for the change in prices over the past 20 years. For the figures to be understood. A whole combination of factors impacted on the market. Mainly at the macro level.

Using your 1998 -2008 figures. Thats still over a 9% per annum compound rise. Far in excess of wage inflation. This in itself points to a longer term correction to come.

As for future prices, factoring in interest rates at over 5% with wage inflation at say 1-2%. Property doesn't hold great attraction in terms of leveraging up.

You chose the 1998 - 2008 10 year timeframe and concluded that the 9% compound interest is unsustainable and the need for a longer term correction, but you obviously havent factored in that was right after a correction where house prices had over corrected the long term trend, thus some of that rise was to re-correct.

Look at the 1978 - 1988 nominal figures, that shows a 13% compounded rise. What do you deduce from that?

the_ash_and_the_oak

IveSeenTheLight wrote: »

You chose the 1998 - 2008 10 year timeframe and concluded that the 9% compound interest is unsustainable and the need for a longer term correction, but you obviously havent factored in that was right after a correction where house prices had over corrected the long term trend, thus some of that rise was to re-correct.

Look at the 1978 - 1988 nominal figures, that shows a 13% compounded rise. What do you deduce from that?

That prices have risen alongside owner occupancy rates

IveSeenTheLight

the_ash_and_the_oak wrote: »

That prices have risen alongside owner occupancy rates

Or you could say that as demand rose, so did house prices. (Obviously the amount of supply is a factor as well)

Thrugelmir

IveSeenTheLight wrote: »

You chose the 1998 - 2008 10 year timeframe and concluded that the 9% compound interest is unsustainable and the need for a longer term correction, but you obviously havent factored in that was right after a correction where house prices had over corrected the long term trend, thus some of that rise was to re-correct.

Look at the 1978 - 1988 nominal figures, that shows a 13% compounded rise. What do you deduce from that?

Real wage growth in first half of the 70's was 4.5%. Between 1984 and 1989 was 2.9%. Between 1995 and 2005 was only 1.5%.

http://www.pwc.co.uk/pdf/PwC-Wage_inflation-July2005.pdf

For a lot of people negative wage growth is impacting as unemployment, reduced pay, pay freezes reduce their take home pay. Increased taxation will only reduce disposable income further.

Also the trend towards interest only mortgages more recently. Allowed prices to rise further than they might have done in a more regulated lending market.

the_ash_and_the_oak

IveSeenTheLight wrote: »

Or you could say that as demand rose, so did house prices. (Obviously the amount of supply is a factor as well)

yes - you could!

IveSeenTheLight

Thrugelmir wrote: »

For a lot of people negative wage growth is impacting as unemployment, reduced pay, pay freezes reduce their take home pay. Increased taxation will only reduce disposable income further.

And for a lot of people, including myself, wages have vastly increased over the course of my career, even over the course of my mortgages.

Certainly more than 1.5% per year.

In the last 15 years, my wages have nearly quadrupled, as has many of the people I know.
It's these people that have and can afford higher prices.

I will not deny that the percentage of people that can afford has lowered in recent years, but it would appear that there have been enough to drive prices up.

It will be tough with people losing their jobs, hopefully spread across so that there are lower number of households that totally lose their income (i.e. someone still working in the home), but I do not subscribe to unemployment being catastropic to the economy and house prices.

Unemployment has already gone up 6-700,000 so far and an estimated further 500,000 to go.
We've not seen a big impact so far for the 6-700,000, so what make you think the remainder will tip it over the edge.

the_ash_and_the_oak

IveSeenTheLight wrote: »

And for a lot of people, including myself, wages have vastly increased over the course of my career, even over the course of my mortgages.

Certainly more than 1.5% per year.

In the last 15 years, my wages have nearly quadrupled, as has many of the people I know.
It's these people that have and can afford higher prices.

I will not deny that the percentage of people that can afford has lowered in recent years, but it would appear that there have been enough to drive prices up.

It will be tough with people losing their jobs, hopefully spread across so that there are lower number of households that totally lose their income (i.e. someone still working in the home), but I do not subscribe to unemployment being catastropic to the economy and house prices.

Unemployment has already gone up 6-700,000 so far and an estimated further 500,000 to go.
We've not seen a big impact so far for the 6-700,000, so what make you think the remainder will tip it over the edge.

Less sure about this – am kinda feeling that prices overall have far outpaced wages over the last decade – at least in London (tho not for the 5 years previous to that)

You (and your contemporaries) wages may well have quadrupled but I’m kinda assuming this is through career progression and promotion (unless you mean that the starting salary of your original position has also quadrupled)

Agree the effect of unemployment may well be overstated - and any effect is more likely to manifest itself in ‘struggling buyers’ than ‘struggling owners’ (which would be a much more slow burning and less immediately perceptible effect)