Are House Prices Going to Crash?

Alan_M_2

Yes, within the next year

I've read articles similar to that over the last 3-4 years and it makes complete sense to me.

I am openly someone that has been a harbinger of doom for at least the last two years having had my fingers burned in a previous crash.

The bulls of the forum will argue that what occurs in Australia, America and Japan has no relevance to the current UK situation. I think that assumption is utter nonsence.

I personally feel the price increases have been artificially aided by extended credit and the very type of lending described in the article, it has postponed the inevitable to a point where the bubble is growing larger and larger as time passes and the correction is going to hurt more the longer this continues.

I don't want a crash, my income is derived largely from professional developers, which is why I've wanted to see a correction over the last few years, I think we've passed the point of no return and if you spend time reading the financials and not the tabloids, you'll see that a fair proportion of the lemmings have already started jumping.

OverlandLandy

Yes, within the next year

Leave you to draw your own conclusions …

Given that we in the UK are somewhat prone to follow our American Cousins (in almost everything)....we all better start saving now!

Woby_Tide

ollyshaw wrote:

What ever happens to house prices its a big assumption to suggest that no crash over the previous years equates to there being no crash coming!

Olly

it's a big assumption to interpret what I wrote into what you think I was saying, which was nothing along those lines. Predicting a house price crash is like me predicting your going to die. I'll be right.

One day. It's not a very exact art is it?

IFA

No, they will stabilise and interest rates will stay low enough

Well if enough people vote on here for a crash and everywhere else on the web consumer sentiment may create one lol (then i woke up)

benood

I've absolutely no idea

So how much would prices have to fall for cautious prospective FTBers to take the plunge? 5%, 10%, 20%, 50%

Whatever percentage that is will, all other things being equal (bit of an assumption), set the floor once the last buyers have left the market, and that is what those who want a crash need to consider as they plan to make a killing.

Too many difficult to measure variables for me at the moment, luckily I'm a homeowner but given the choice at the moment I'd prefer to borrow to buy large cap equities than borrow for BTL.

prudryden

<So how much would prices have to fall for cautious prospective FTBers to take the plunge? 5%, 10%, 20%, 50%>

So far, no one has defined crash on this thread, which sort of makes all the discussion fruitless in relation to the OP's subject title.

aderbyshirelad

prudryden wrote:

<So how much would prices have to fall for cautious prospective FTBers to take the plunge? 5%, 10%, 20%, 50%>

So far, no one has defined crash on this thread, which sort of makes all the discussion fruitless in relation to the OP's subject title.

At last, someone has spotted it!!!!!!!!!!! No-one seems bothered by the poll results either. Says it all!

Guy_Montag

Yes, within the next year

benood wrote:

So how much would prices have to fall for cautious prospective FTBers to take the plunge? 5%, 10%, 20%, 50%

Assuming prices start heading down, then all the pressure comes off. Suppose the market in your area is dropping at, say 6% per annum (-10% inc 4% wage inflation), but keeping it nominal, c. 0.5% per month.

If you see a house for say £100k on the market, then in a month's time it will be "worth" £99,500. Or alternatively you can get a slightly nicer place for the same money. So if you don't find the perfect place, it's worth waiting. Currently people have been of the opinion that the important thing is to get on the ladder whatever the cost.

Alan_M_2

Yes, within the next year

prudryden wrote:

<So how much would prices have to fall for cautious prospective FTBers to take the plunge? 5%, 10%, 20%, 50%>

So far, no one has defined crash on this thread, which sort of makes all the discussion fruitless in relation to the OP's subject title.

The difficulty with the definition is the housing market isn't a traded market with set parameters like say, the FTSE 100.

Now with a regulated trading market (FTSE 100) a crash (and I may be wrong here - in which case someone please correct me) is a drop of 2% or greater in any one 24 hr trading period. This is easy to define and the results are instant.

The housing market operates much longer term, and the statistics we recieve are a long way in arrears compared to other markets that we're never really sure what is happeneing on a day to day basis.

So how can you define a crash? Well an extended period of reducing prices is the obvious answer.

Is there a fixed figure at which a correction becomes a crash? I don't know, I doubt it very much. Only after the event will we know if one actually happened.

See, unlike stocks or shares that have a stated value at any time to the minute, a house is worth what someone is willing to pay for it but it may take weeks months or years for this figure to change.

Anyhow, all that said, if there is an actual (economic) definition of a housing crash I'd be as interested as the next guy as to what it is.

My personal experience was a loss in value of over 40% of my orginanl purchase price, plus all the money I'd sunk into the property in improvements (new roof, double glazing, central heating etc). That's obviously a crash, but would it be the same of it were say 10%?

I dunno, but more importantly, does it actually matter if there is a definition or not? Surely it's little more than common sense.

prudryden

Alan - Well written! I won't even attempt to emulate your post for fear of embarrassment.

So, as I understand it, what is a "house crash" is relative to the percentage of the population that suffers a hardship. And at what point that is, we won't know until it happens.

If house prices drop 15% and no one has to sell, then there is no crash because no one suffered. It was only a paper loss, not a real loss. Therefore, the only risk was the lost of opportunity i.e. selling at the peak and buying lower.

As you said, does it really matter if there is a definition? I agree -let common sense prevail and as I said before "Hope for the best, expect the worse" and have a plan.