House Price Crash

Gorgeous_George

F_T_Buyer wrote:

Yes, of course.

Because interest rates are not guaranteed to always be low.

They weren't guaranteed to remain as low as 16.5% in 1985

I must have been bonkers to buy in such a market.

HPI is a misnomer. It's land that costs so much. Unless we release more land for the immigrants to build on, land prices will remain high. because we are not building more land.



GG

MickKnipfler

A couple of things really worry me....

firstly, a half % increase is a lot more painful when interest rates are low and people are overstretched

secondly, neg equity won't be erroded by high inflation this time

Pobby

MickKnipfler wrote:

A couple of things really worry me....

firstly, a half % increase is a lot more painful when interest rates are low and people are overstretched

secondly, neg equity won't be erroded by high inflation this time

Hmmm,I agree with your first statement but I am not sure that the published inflation figures are quite correct.It seems to me that the government are basing the current figures on CD players,bogofs at Morrisons and secondhand cars.Now if these prices were based on things we all need,housing,fuel,gas and electricity what do you think that the inflation rates would look like over the past 10 years.

As much as I respect Martin,there seem to be a few posters here that have never considered the housing market may go belly up.For years I have heard the mantra``house prices always go up``

---

``they won`t allow a housing crash``.Yea right.This isn`t a game,this is part of being a global economy,decisions on interest rates are not just controlled by what the U.K. does.

I know many people with really huge mortgages and finding they are approaching negative equity.Sorry,just think there will be a market correction.

MickKnipfler

Me too.

Long term, I guess prices have always gone up. However, I do prefer to buy at the bottom of a trough than on the peak of a wave.

I really pitty people trying to get on the ladder but I think I'd wait a little longer if I was in their shoes. Property prices aren't at their current levels because the asset is fairly priced but because the money to buy an overvalued asset is cheap.

F_T_Buyer

Gorgeous_George wrote:

I'll look forward to the blog.

I'm not sure how many people have based their business models on house price inflation remaining at the ridiculously high rates that we have suffered/enjoyed over the last few decades. Not many I would hope!



GG

More than half according to ARLA - capital gains at any rate that is.

FaTB

I don't think it matters about the exact wording of whether there will be a crash or could be a crash.

The fact that a respected person like Martin even mentioned the possibility is very important to market sentiment.

The HPC site is not just a bunch of crackpots anymore, it should be taken seriously.

Well done Martin !!

bunking_off

F_T_Buyer wrote:

Because interest rates are not guaranteed to always be low.

Certainly true, but...

Wouldn't be crass enough to suggest a product to anyone, but it's possible to get 25 year fixed rate mortgages....which means they would be guaranteed to stay at the initial level (albeit obviously not the cheapest deal available - though 5.5% isn't outrageous...). In this context, depends on your definition of "low" but if risk averse then it is actually possible to guarantee the payments you'll have to make.

It's interesting to contrast this rate with when I got my 1st mortgage in 2002, and the rate for a 25 yr fix then was about 10%. Taken in this context there is an implication that rates are forecasted to be generally lower than was thought when the same prediction was made 15 years ago. As such, I can see a logic of loan to values being based around affordability (as in how much the payments are versus salary) rather than the blunt instrument of "3x salary".

None of this means I'd advocate hocking yourself to the eyeballs to buy a property. As Martin actually said, only borrow what you can afford and take account that interest rates can rise, and no-one - even the self-proclaimed experts on this board - know whether house prices will rise or fall. When I bought my first place, I did so on the basis that it was cheaper than renting, and using a 10 year fix to take away the worry of interest rate fluctuations. (As it happens, that was a bad move as interest rates fell to half that level & I had to pay a mint to get myself out of it!!!)

Pobby

MickKnipfler wrote:

A couple of things really worry me....

firstly, a half % increase is a lot more painful when interest rates are low and people are overstretched

secondly, neg equity won't be erroded by high inflation this time

Hmmm,I agree with your first statement but I am not sure that the published inflation figures are quite correct.It seems to me that the government are basing the current figures on CD players,bogofs at Morrisons and secondhand cars.Now if these prices were based on things we all need,housing,fuel,gas and electricity what do you think that the inflation rates would look like over the past 10 years.

As much as I respect Martin,there seem to be a few posters here that have never considered the housing market may go belly up.For years I have heard the mantra``house prices always go up``

---

``they won`t allow a housing crash``.Yea right.This isn`t a game,this is part of being a global economy,decisions on interest rates are not just controlled by what the U.K. does.

I know many people with really huge mortgages and finding they are approaching negative equity.Sorry,just think there will be a market correction.

tomstickland

We brought our house

No you didn't, you
BOught it!

MickKnipfler

I'm glad you BROUGHT that up!!