Are House Prices Going to Crash?

Alan_M_2

Yes, within the next year

I don't think hardship is neccesarily a requirement, but I can't see any reduction occuring without it's share of hardship thrown in. Whenever a drop in prices occur, anyone who bought in the preceeding 18 months, unless they had a substantial deposit will be subjected to an element of hardship, even if that's negative equity, which even if they can comfortably cover payments is mental hardship.

The problem with a 15% correction, or the theory of a 15% correction is sentiment. While a 15% correction might technically be correct (although who says what's correct?) this starts a snowball effect.

What really drives a crash is sentiment (ok the exceptional interest rates in the 90's didn't help), this is why in the entire history of the housing economic cycle there's never been such a thing as a "small correction" or "Soft landing".

Something occurs to trigger the event, that something can be a single event or a combination of things but once triggered can't be stopped.

The prices will continue to drop until they reach a value at which they are more attractive than investing in the stockmarket or alternative investments vehicles such as bonds, i.e. rental yeilds will be practically double figures. At this point the professional Investors prop up the market by removing their investments from whever they are back into housing, and so the whole cycle starts again.

This is the closest property comes to stocks and shares, a share price will drop to such an extent that the p/e ratio of that share means it becomes a must buy, that is the lowest value the free market will allow it to reach (unless the business goes bust of course).

cwcw

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

It was reported that the latest 0.25% interest rate increase will cost the average home owner £20 more per month. I can't see interest rates going above 6% within the next few years, so I don't see how this will be enough to trigger a crash. Wishful thinking on my part maybe? The last crash saw double figured interest rates.

I don't think prices have quite reached their peak yet either, although they're not far off. If a crash does happen, forums (or should I say 'fora') like this, and housepricecrash.co.uk to a greater extent, will surely be partly to blame? Speculation is rife and I have to say the main instigators are those unable to afford to buy now who effectively want to pull the ladder down with everyone on it just so they can get on instead.

PabloNeruda

Personally I hope the crash comes sooner rather than later. The buy-to-let developers who have driven prices to a ridiculous level might think twice next time. And perhaps the government will be forced to address the serious lack of social housing.

Guy_Montag

Yes, within the next year

cwcw wrote:

I don't think prices have quite reached their peak yet either, although they're not far off. If a crash does happen, forums (or should I say 'fora') like this, and housepricecrash.co.uk to a greater extent, will surely be partly to blame? Speculation is rife and I have to say the main instigators are those unable to afford to buy now who effectively want to pull the ladder down with everyone on it just so they can get on instead.

You seem to be implying that a house price crash is something which is bad. On the contrary the majority are winners.

1) FTBs are winners
2) People trading up are winners
3) People trading down, who have children in groups 1 & 2 are winners
4) People wanting to get into BTL are winners

5) People trading down, who do not have children in groups 1 & 2 are losers
6) People bought to speculate are losers
7) Banks are losers
8) The treasury is a loser

Who has sympathy for groups 6,7 & 8? And those in group 5 should make money anyway.

Alan_M_2

Yes, within the next year

Exactly, the only losers in this situation are people who have overstretched themselves, be that FTB's buying with huge income multiples and no deposit or BTLer's that haven't conformed to a sensible business model.

Both of these groups of people have be berated elsewhere on this forum as people who should know better, should be aware of what they are getting themselves into, Cavet Emptor.

For the rest of the population, it makes housing more affordable and as a result increases your standard of living. How is this a bad thing?

A bad thing is a cost of living so high it's outstripping income.

On the interest rate issue, of course we won't see double digit interest rates in the near future, although it's bound to happen again given a infinite amount of time, but the thing is, we don't need to see double digit figures again because the sums of money borrowed are proportionately larger, therefore, a quarter point rise now, equates to a full point rise back in the bad old days, in hard cash terms.