Are House Prices Going to Crash?

mr.broderick

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

whambamboo wrote:

Yeah right.... All losers for being born in the wrong year. Good thinking, all those people who just graduated from university this year: losers the lot of them.

Here's a newsflash for you mate, the cost of housing is holding normal decent working people back from having kids. This means the only people having children will be the unemployed people on benefits who get everything paid for by the state. What this means for you is that there won't be anyone to pay for your pension, because let's face it the children of the welfare state aren't going to be out earning a packet are they?<qoute>


By the way my dad was born into a family of 9 who were brought up on benefits due to my grandad leaving them. 2 are solicitors, 2 have their own building firms,1 a plumber,1 a teacher and 3 housewives. I think that comment sums up your mentality.

jyonda

No, they will stabilise and wages will catch up

Here's my forecast:

Higher interest rates will mean overstretched borrowers get repossessed and lenders stop lending as much because borrowing higher multiples is no longer 'affordable'. Inflation will lead to higher earnings so the majority can keep paying their mortgages. House prices won't drop more than 5% overall and not at all in London though as demand for housing in the UK remains high.
A prolonged period of stagnation and high prices is my guess that eventually gets swallowed by inflation.

When people refer to a crash I sometimes think they mean that property won't carry on gaining 10% a year. If HPI rose in line with wages I think some would think there's been a crash.

Sisyphus

Yes, but not yet

A question to all those who say/think that house prices are going to flatten out and not rise further or crash. What makes you think that? I look at charts of asset prices all day long. I've yet to find one where prices just flatten after a sustained cycle of inflation. Could you give me an example of another asset where this has happened?

whambamboo

Yes, within the next year

mr.broderick wrote:

Newsflash - People renting now and who have deposits ready for a house hoping for a crash dont give a monkeys about people who bought in the last couple of years at high prices so I will defend them and call you losers, you dont like it do you when its turned against you do you. There are a lot of members on here you,mean machine angela d just to name a few who criticise people for buying now in the hope that no one buys now at inflated prices hence prices may come down so they can buy. These people dont give a monkeys about people who has other people put it "Risked" by buying during this explosion, i commend them for their balls. I didnt buy during this so I have relatively little to lose but lets look at the bigger picture and stup hoping for a crash to quote angela d "30% drop". I bought my house for the long term i dont care if i dont make a penny on it, its all relative anyway.

We have a very difficult situation. It's arguable that government should act to maximise happiness in the population.

In 1996 we were doing ok in the UK - economic growth was steady, housing was affordable, people had jobs, unemployment was low.

Now in 2006, economic growth is still steady, people have jobs, unemployment is low.

The difference is there is now a lot of problems caused by house price inflation. People buy smaller houses than would suit their needs because they are worried about speculation driving house prices beyond their reach forever, so they settle for somewhere nasty for a high price. It's clear that house price inflation has had net negative impact on the country.

So that being so, what should be done? Now that prices have been inflated to absurd levels, beyond pretty much every country in the world, we either end up with a recession or a world where housing is unaffordable. It's obvious that the situation should have been avoided in the first place, but now we are in it, do we either decide that we don't give a monkeys for the people who bought in the last 3-4 years, or do we accept, as Tory MP David Willetts suggests, that 'Contraceptive house prices' (http://conservativehome.blogs.com/torydiary/2006/08/contraceptive_h.html ) are a bigger problem for society than the financial well-being of people who bought.

Either way it's very clear to me that house price inflation has been bad for the country, convincing people that they've made £50k in a year, when in fact they've not actually made anything at all because they still need somewhere to live, and conned people that rising prices are a good thing when in reality it puts the house they really want even further from their grasp.

I guess it benefits the banks, who encourage people to borrow against their 'equity', and Gordon Brown who earns massive tax on it, but the chattering classes boasting how much richer than they were last year thanks to the housing market should think very carefully about who is really better off.

Personally I'd prefer to see lower house prices and a higher birth rate, so no I don't think that wanting house prices to fall makes me a loser.

Pobby

Yes, but not yet

sm9ai wrote:

What is interesting is more people think houses will crash than not crash.

When a similar poll type thread was done a year or so ago what did people think then? That would be the key.

I have a fairly simplistic view on why I think that a crash will happenI just look at any market which has risen above affordability or indeed where many people are chosing not to buy.All booms are followed by a bust or as I would say a market correction.

The real problem is that ,apart from a feel good factor enjoyed by some that have bought property before the boom ,I cannot see as a whole any good coming from this situation.It means for many that they have less disposable income.

I am ,bar £5k ,mortgage free and I have seen my house pretty much more than tripled in the last few years.Do I feel any happier,more wealthy .No I can`t say I do.I am certainly not going to leap up and down with joy and then use my equity to buy stuff with.I am delighted that my monthly payments are very small.What it does mean is that I could give up my stressful but well paid job and take something lower paid but apart from that I see little advantage for me sitting on a pile of equity.

abaxas

Yes, within the next year

jyonda wrote:

Here's my forecast:

Higher interest rates will mean overstretched borrowers get repossessed and lenders stop lending as much because borrowing higher multiples is no longer 'affordable'. Inflation will lead to higher earnings so the majority can keep paying their mortgages. House prices won't drop more than 5% overall and not at all in London though as demand for housing in the UK remains high.
A prolonged period of stagnation and high prices is my guess that eventually gets swallowed by inflation.

When people refer to a crash I sometimes think they mean that property won't carry on gaining 10% a year. If HPI rose in line with wages I think some would think there's been a crash.

I agree with the concept of inflation. However as a county could we afford to do this?

We already are exporting jobs so if we had another 'winter of discontent' we would be basically be the most expensive place on earth (if we aren't already).

Also we'd need Maggie Thatcher's evil twin sister to get us out of it (again).

Lets just have a house price crash, mini recession then get back to making money again. If people can hold on they'll not loose out in the medium/long term. But that doesnt mean it won't hurt in the soft term (3-5 years).

The_Tax_Mans_Cash_Machine

Yes, within the next year

jyonda wrote:

Here's my forecast:

Higher interest rates will mean overstretched borrowers get repossessed and lenders stop lending as much because borrowing higher multiples is no longer 'affordable'. Inflation will lead to higher earnings so the majority can keep paying their mortgages.

The flaw in your argument is that wages are being depressed by the huge influx of immigrant workers. In any area with a large number of immigrants wages have actually gone DOWN over the last few years. The overall effect is to limit wage rises to around the official level of inflation, which as we all know is total & utter tosh.

With wages static or rising by very small amounts, & true inflation at a far higher level than 2.4% & rising, you can expect to see the number of defaults accelerate almost exponentially as disposable income falls in real terms, & especially as IR's start to climb.

Immigrant workers are only good for the owners & shareholders of companies who see profitability increase due to reduced costs. For the rest it's a disaster waiting to unfurl itself.

whambamboo

Yes, within the next year

mr.broderick wrote:

whambamboo wrote:

Yeah right.... All losers for being born in the wrong year. Good thinking, all those people who just graduated from university this year: losers the lot of them.

Here's a newsflash for you mate, the cost of housing is holding normal decent working people back from having kids. This means the only people having children will be the unemployed people on benefits who get everything paid for by the state. What this means for you is that there won't be anyone to pay for your pension, because let's face it the children of the welfare state aren't going to be out earning a packet are they?

By the way my dad was born into a family of 9 who were brought up on benefits due to my grandad leaving them. 2 are solicitors, 2 have their own building firms,1 a plumber,1 a teacher and 3 housewives. I think that comment sums up your mentality.

You deal in one-off anecdote.

I prefer hard data.

Here's the facts from the government http://www.standards.dfes.gov.uk/keystage3/downloads/ws_inc_wwcb_write139705.pdf:

There is a strong, direct and long-standing association between social class and successful achievement in education. DfES figures for many years (1997–2003) show that pupils from advantaged backgrounds (management, professional) were more than three times as likely to obtain five or more GCSE A–C grades than their peers at the other end of the social spectrum (unskilled manual). Indeed, although children from both social groups have improved, in percentage terms, in obtaining five or more GCSE A–C grades, the gap between them is getting larger every year.

In the ten years between 1988 and 1997, the percentage of pupils from managerial and professional backgrounds obtaining five or more GCSE A–C grades moved from 52% to 69%. The comparable figures for children from unskilled manual backgrounds moved from 12% to 20%. The Key Stage 3 English results for 2003 showed that only 35% of white boys receiving free school meals achieved level 5; the figures for white boys not receiving free school meals was 68%.

The evidence is extremely clear. Children of educated parents on average achieve much higher results and will earn more on average and therefore pay more taxes than uneducated parents. Yes, there are exceptions to this, which you can spout all you like, but but the overall trend is clear.

jyonda

No, they will stabilise and wages will catch up

A house price crash by general concensus would be very handy indeed as I'm sure it would benefit almost everyone except those who bought their first property in the last 3 years. That's probably not such a big number of people and it's not like they didn't get any warning!

prudryden

Sisyphus wrote:

A question to all those who say/think that house prices are going to flatten out and not rise further or crash. What makes you think that? I look at charts of asset prices all day long. I've yet to find one where prices just flatten after a sustained cycle of inflation. Could you give me an example of another asset where this has happened?

Good question: Off the top of my head - none. Unless the price of the commodity is being artifically supported, such as the old gold standard.

But which is the cause/effect? Do commodity prices influence inflation or does inflation influence prices?:)