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FSA: 50% house price falls were a reasonable scenario

brit1234
brit1234 Posts: 5,385 Forumite
in Debate House Prices & the Economy
radio4_today2.jpg


Lord Turner: 'Housing market behind boom and bust'

Lord Turner, the chairman of the Financial Services Authority, is calling for radical reform of the global financial structure.

He speaks to Today presenter, Evan Davis, before setting out his views in a speech later today.

http://news.bbc.co.uk/today/hi/today/newsid_8818000/8818631.stm
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Comments

  • FTBFun
    FTBFun Posts: 4,273 Forumite
    All properties devaluing by 50%? Now that's just silly.
  • chucky
    chucky Posts: 15,170 Forumite
    10,000 Posts Combo Breaker
    FTBFun wrote: »
    All properties devaluing by 50%? Now that's just silly.
    who would even dare to predict or expect nonsense like that...

    hold on.... someone did.... what's his name??
  • Exocet
    Exocet Posts: 744 Forumite
    chucky wrote: »
    who would even dare to predict or expect nonsense like that...

    hold on.... someone did.... what's his name??
    Is it Lord Turner - chairman of the Financial Services Authority?
  • brit1234
    brit1234 Posts: 5,385 Forumite
    At the end he says 50% falls in residential and 60% falls on commercial property were reasonable for their stress test calculations on banks.
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  • chucky
    chucky Posts: 15,170 Forumite
    10,000 Posts Combo Breaker
    Exocet wrote: »
    Is it Lord Turner - chairman of the Financial Services Authority?
    he said it was a possible scenario if everyone sat on their hands.

    the guy that did say that we were going to have 50% falls was some crack pot nutter on an internet forum who uses Wingdings Size 36 Font.
  • Exocet
    Exocet Posts: 744 Forumite
    chucky wrote: »
    he said it was a possible scenario if everyone sat on their hands.

    the guy that did say that we were going to have 50% falls was some crack pot nutter on an internet forum who uses Wingdings Size 36 Font.
    Do you know if Ireland, Spain or the US have suffered 50% falls in the shakeout? I think Japan did when they had the crash, and I think I read something about Beijing property the other day. I agree that it sounds nonsensical but then I'm sure you'll agree some of the price rises we've seen have been equally out of step.
  • torontoboy45
    torontoboy45 Posts: 1,064 Forumite
    Exocet wrote: »
    Do you know if Ireland, Spain or the US have suffered 50% falls in the shakeout? I think Japan did when they had the crash, and I think I read something about Beijing property the other day. I agree that it sounds nonsensical but then I'm sure you'll agree some of the price rises we've seen have been equally out of step.
    in ireland: a fall of 30% in dublin, 25% elsewhere (based on may figures) with further falls feared.

    a lot of unhappy people over there, I can tell you.

    but it couldn't happen here, now could it....
  • Kohoutek
    Kohoutek Posts: 2,861 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    edited 14 July 2010 at 2:41PM
    Exocet wrote: »
    Do you know if Ireland, Spain or the US have suffered 50% falls in the shakeout? I think Japan did when they had the crash, and I think I read something about Beijing property the other day. I agree that it sounds nonsensical but then I'm sure you'll agree some of the price rises we've seen have been equally out of step.

    There is precedent for a very large falls during severe financial crises. In Hong Kong after the Asian financial crisis, house prices fell by 50% over a short space of time, eventually 70% fall peak to trough. Obviously there are many differences with a market like the UK, and the fact that the recent financial crisis was not as bad as could have been without government intervention.

    hkrealestate2008.png

    In the US, it's been about 30% so far.

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  • chucknorris
    chucknorris Posts: 10,795 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 14 July 2010 at 3:14PM
    50% falls were the extreme parameter that they tested their financial model to. When you stress test something you test it to extremes, not to what you think it will reasonably go to. So to say that 50% was a reasonable scenario is not correct.

    If you were stress testing a model of a dam or sea wall would an engineer merely test it take the forces of what he reasonably expected it to take in the natural environment, the answer is no, he would test it much further.
    Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop
  • FTBFun
    FTBFun Posts: 4,273 Forumite
    brit1234 wrote: »
    At the end he says 50% falls in residential and 60% falls on commercial property were reasonable for their stress test calculations on banks.

    Not the same, then, is it?
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