Could UK house prices follow Japan?

IveSeenTheLight

the_ash_and_the_oak wrote: »

I know where you are coming from with the trend line but imo there's a reason in cyclical markets why it goes above and below that line - and that is that both the above and the below periods 'distort' the trend line (in a way I read it a bit like the way that prices may be y-on-y down but rising - or y-on-y up but falling)

The trend line is over a 30 year period.
It is not distorted by much because it has taken the highs and the lows over the 30 year period.

adr0ck

to answer the op

could house prices fall in UK like Japan?

Yes they could if we started replacing our existing housing stock at the same rate as Japan replaces theirs and the majority of people didn't want to live in housing over 30 years old

then yes i see no reason why house prices wouldn't fall circa Japan

the_ash_and_the_oak

thats why i put 'distorts' in inverted commas

I think perhaps a better way of looking at it is that as a figure comes down to meet a rising trend line it must be crossed (and the same in reverse) - think this is why we get overshoot and undershoot every time

Quite like this argument imo (was disappointed when it ended last time)

the_ash_and_the_oak

as for OP I don't think that would happen (I don't think Japan is a good comparison point. California might just be though)

IveSeenTheLight

the_ash_and_the_oak wrote: »

thats why i put 'distorts' in inverted commas

I think perhaps a better way of looking at it is that as a figure comes down to meet a rising trend line it must be crossed (and the same in reverse) - think this is why we get overshoot and undershoot every time

Quite like this argument imo (was disappointed when it ended last time)

I think you are looking at the trend line too simplistically.
It's set over a 30 year period (fair time length in my opinion as mortgages are usually set for 25 years).

The trend line will always rise as the moving 30 year replaces the 30 year old data with the latest years, although the calculated trend percentage will adjust by a fraction of a percent.

Look at the period inthe graph below where house prices undershot the long term trend.
Why didn't the trend line go down then? Because the data it replaced was from 30 years previously and house prices were far lower in the 60's than they were in the 90's



I have not yet seen a recorded time period where house prices were lower than they were 30 years previously, hence why in my opinion, this is a reasonable ascertation of where house prices should be on average catering for the highs and lows of a cyclical market

the_ash_and_the_oak

yes.. the trend line can rise even as the price line goes under it. much as the y-on-y can fall/rise while prices may be doing the opposite

the_ash_and_the_oak

Maybe we're saying the same thing?

ninky_2

[QUOTE=Generali;25442621
Since 1997 in the UK wages have risen 55% and house prices have risen 170% thus house prices must fall.

[/QUOTE]

and what about rents? have they risen more than house prices and if so must they fall too?

IveSeenTheLight

the_ash_and_the_oak wrote: »

yes.. the trend line can rise even as the price line goes under it. much as the y-on-y can fall/rise while prices may be doing the opposite

the_ash_and_the_oak wrote: »

Maybe we're saying the same thing?

We probably are saying the same thing.

The point is that the trend line gives an accurate representation of where house prices should be over a 30 year timeframe.

The question is, does it need to undershoot? If people believe the answer to that is yes, then they are subscribing to a yo-yo, boom / bust principle and can expect prices to go above and below the trend line leading to periods in the cycle when there is great demand as many people can afford and also periods when many people are priced out of being able to afford.

In my opinion, although unlikely to happen, it would be much better to follow that trend line and then stability would be seen in the housing market.

Graham_Devon

Does the trend line go up and down with the prices? Or is it a static line?

Or maybe a static line that moves?