Are House Prices Going to Crash?

talksalot81

mjfusent wrote:

My thoughts exactly, plenty of people are praying for a crash because they think that way they will be able to afford a house/buy a bigger house. What they don't realise is that if there is a crash its likley that the very reasons for that crash will prevent many of them from doing this (high interest rates or unemployment to name but two).

Not so. I am priced out of the market by people who earn less than I do. The reason is that they are making enormous profits on their current housing. If that profit is not there, they simply cannot price me out. Hence if their house devalues, I gain ground on them.

Rick62

If there is a crash, people who have bought to live in with affordable mortgages will be ok, the big losers will be people who have recklessly piled into Buy to Let at the top of the market. This will be the first and hardest hit market.

The house market is definately a speculative bubble. Why, because prices have lost touch with underlying costs, this is the very definition of a bubble. It is propped up by the time drag for new deveopments and by planning controls. What we don't know is how long the government can maintain this speculative market.

MonkeySaving?

scorpio_princess wrote:

You're spot on about the job losses Lynz. I can't speak for the rest of the country, but in this area there has been some pretty hefty job losses in the past few months - a large printing firm went bust leaving hundreds of people jobless, most of which were middle aged men who'd worked there all their lives (and guess what's going to be built on the land it occupies in the city centre...). And let's not forget the hundreds, if not thousands of jobs that Norwich Union have offshored to India - and it's only going to get worse.

There just aren't many jobs about, especially for unskilled, manual workers (the jobs in manufacturing, transport and agriculture are going to the increasing immigrant population, as for some reason employers don't have to pay them the minimum wage).

All of this doesn't bode well, IMO - house prices, GOING UP, unemployment, GOING UP, population (immigrants, not birth rate) GOING UP, wages GOING DOWN (or at least staying the same). Something has to give!

I do wish people would stop getting so defensive and bitter about all of this. Like i've said before, i'd love for there to be a correction, but not a major 'crash' as too many of my loved ones would be affected. I simply want the playing field to be evened out a little, because all this resentment (and in some cases, blatant greed) is causing divisions in society - the 'haves and have nots'. It's really feeding into the 'i'm alright Jack' mentality, and eating into what little community spirit we seem to have left. Actually, this all sounds rather familiar - are we sure it's Labour in government, or could they be imposters in disguise...?

Excellent post! Don't forget a huge factor as well...consumer debt, GOING UP! I think all the signs are present for a crash although i don't believe it to be as imminent as "within" a year. The house prices in my area are quite static, and i know at least 10 people who are trying to sell that have dropped the price of their properties by 10/15k and at least another 10 that have not sold their houses after they have been on the market for at least a year (and this is in a highly desirable area near the Peak District National park).

Basil_Hume

No, they will continue to rise

My view is that the long-term macro trends support the level of current house prices in general terms - for cities and other well-connected locations that do not rely totally on car use.

I have been intrigued that house prices have remained so high and that they have continued to rise, but on reflection I think there are more factors at play than the ones most commonly talked about. I'm also not so sure that prices are "that" high across the board.

We can compare average housing costs to earnings over time, but the "average" wage over time is not a constant - wages have been rising in real terms for a long time and the ratio of high to low earners changes over time. I also think that relatively modest earners are much more prolific in today's housing market: until the closing decades of the 20th Century, far fewer people bought houses in the lower socio-economic strata. Think council housing sell-offs and the long-term impact of creating property ownership as the norm.

These aren't necessarily reasons for sustained prices, but they do show the limitations of comparing prices over time and make me question some of the comparisions that are made.

Another poster identified that house prices can be local and regional in character - and drew attention to some demographic trends at play. Most interesting to me is the impact of rising energy costs, especially the cost of travel. Britain has some constants, being particularly: a highly urbanised island with strict planning laws, ageing infrastructure and a highly mobile population. These are often cited as reasons for rising house prices... and I concur, in a different way than many do.

I think that, unless a radical new technologies are identified, that living in isolated locations will become more and more expensive if you travel to work. I'm talking "Peak Oil", geopolitics affecting gas etc - but not just about the countryside: there are plenty of places isolated from transport networks in urban areas. These trends would be less of an impact if exisiting technologies and social patterns allow for more home-working... but the fact remains that housing dependent on long-distance travel will become more expensive to sustain in terms of communting.

As a result, my incling of an idea is that house prices for mainstream, well-connected hubs will be sustained.

whambamboo

Yes, within the next year

Basil_Hume wrote:

My view is that the long-term macro trends support the level of current house prices in general terms - for cities and other well-connected locations that do not rely totally on car use.

I have been intrigued that house prices have remained so high and that they have continued to rise, but on reflection I think there are more factors at play than the ones most commonly talked about. I'm also not so sure that prices are "that" high across the board.

We can compare average housing costs to earnings over time, but the "average" wage over time is not a constant - wages have been rising in real terms for a long time and the ratio of high to low earners changes over time. I also think that relatively modest earners are much more prolific in today's housing market: until the closing decades of the 20th Century, far fewer people bought houses in the lower socio-economic strata. Think council housing sell-offs and the long-term impact of creating property ownership as the norm.

These aren't necessarily reasons for sustained prices, but they do show the limitations of comparing prices over time and make me question some of the comparisions that are made.

Another poster identified that house prices can be local and regional in character - and drew attention to some demographic trends at play. Most interesting to me is the impact of rising energy costs, especially the cost of travel. Britain has some constants, being particularly: a highly urbanised island with strict planning laws, ageing infrastructure and a highly mobile population. These are often cited as reasons for rising house prices... and I concur, in a different way than many do.

I think that, unless a radical new technologies are identified, that living in isolated locations will become more and more expensive if you travel to work. I'm talking "Peak Oil", geopolitics affecting gas etc - but not just about the countryside: there are plenty of places isolated from transport networks in urban areas. These trends would be less of an impact if exisiting technologies and social patterns allow for more home-working... but the fact remains that housing dependent on long-distance travel will become more expensive to sustain in terms of communting.

As a result, my incling of an idea is that house prices for mainstream, well-connected hubs will be sustained.

This is pure speculation. They have been talking about oil running out since the 70s, but there is still plenty of it left (e.g., oil sands), and it will be replaced by alternative supplies in time.

Not only that, but the underlying cost of oil is fairly minor in the UK due to massive taxation levels and short distances compared with the US. We also have more efficient cars here

freebo_2

talksalot81 wrote:

Not so. I am priced out of the market by people who earn less than I do. The reason is that they are making enormous profits on their current housing. If that profit is not there, they simply cannot price me out. Hence if their house devalues, I gain ground on them.

Always assuming you've still got a job of course :money: and if the devaluation is caused by a rise in interest rates you'll be able to afford less too...

bunking_off

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

Basil_Hume wrote:

I think that, unless a radical new technologies are identified, that living in isolated locations will become more and more expensive if you travel to work. I'm talking "Peak Oil", geopolitics affecting gas etc - but not just about the countryside: there are plenty of places isolated from transport networks in urban areas. These trends would be less of an impact if exisiting technologies and social patterns allow for more home-working... but the fact remains that housing dependent on long-distance travel will become more expensive to sustain in terms of communting.

As a result, my incling of an idea is that house prices for mainstream, well-connected hubs will be sustained.

Actually, I think you under-estimate the impact of homeworking. We increasingly live in a knowledge-based economy. 15 years ago, how many people worked from home? Nowadays, large proportions of office-based staff spend at least a couple of days working from home, and significant numbers (including myself) work at home full time. Why? Well what are you looking at, at the moment? Broadband technologies to the home mean that companies can allow their staff to access the corporate network over VPNs. Only last week I was reading that the AA now have call centre staff working at home, taking calls over VoIP. Given their busy periods are morning & evening, it makes sense because people are happy to take split shifts if they're at home.

Point is, with the new digital economy the need to go into cities is diminishing. Time was in rural areas you couldn't get broadband. I wouldn't say the situation's gone away, but when I've looked at houses in the countryside I've not found any that BT can't provide with DSL.

I think you may find that as more & more people work from home, they'll realise there's no need to stay in the big towns & cities and demand for decent properties in the countryside will increase.

lewt

I've absolutely no idea

i ruddy well hope the market does crash so i can buy i house.....

talksalot81

freebo wrote:

Always assuming you've still got a job of course :money: and if the devaluation is caused by a rise in interest rates you'll be able to afford less too...

Thankfully I have a highly transferrable skill set. As for being able to afford less, yes indeed that is the case but it was already factored into my thinking. As I said, I am priced out, at times, by people with less income than I. So whilst I can afford less with an IR rise, the same is true for them.

Sapphire

Yes, within the next year

Here is a sensible article about the possibility of a HPC that might be worth reading:

http://www.home.co.uk/company/press/API_Nov06.htm

Leave you to draw your own conclusions …