House prices 'to fall for the next five years' in longest property slump for a lifeti

geneer

Poshbird wrote: »

So we are pretty much in agreement then

Although even if the 'price' is a little higher by 2015 I still think houses will have crashed in value, which is my entire point.

The bulls have been trying to wriggle into the "real falls" zone since the crash part 1.

Strange, given that a significant proportion of the 90's crash was indeed "real".

IveSeenTheLight

Poshbird wrote: »

So we are pretty much in agreement then

Although even if the 'price' is a little higher by 2015 I still think houses will have crashed in value, which is my entire point.

I don't believe there will be a "crash" in value.

The other point is that people pay nominally, not in real terms.

Poshbird

geneer wrote: »

The bulls have been trying to wriggle into the "real falls" zone since the crash part 1.

Strange, given that a significant proportion of the 90's crash was indeed "real".

Just to prove you 100% spot on :

IveSeenTheLight wrote: »

I don't believe there will be a "crash" in value.

The other point is that people pay nominally, not in real terms.

IveSeenTheLight

Poshbird wrote: »

Just to prove you 100% spot on :

Oh dear, quoting geneer. That explains a lot

Let me put something to you: -

Inflation is circa 4.5% at the moment.
Many expect this to lower, some others not so.
Let's take a house price at £160k in 2011, compounding four years inflation at 4.5% would mean the house should be valued at £190,803.
Assuming that there is a 10.5% real terms fall over the same timeframe, this would mean that the house price is actually nominally valued at £170,768

In other words, house prices increase on average 1.31% per year while inflation is 4.5%

Bottom line is house prices are more expensive, just not increased as much when compared to other things

2011_____£160,000____4.5% inflation
2012_____£167,200____4.5% inflation
2013_____£174,724____4.5% inflation
2014_____£182,586____4.5% inflation
2015_____£190,803____4.5% inflation

10.5% real term fall means this house example would be valued at £170,768.70

This example house price is over £10,000 more expensive in 2015 as opposed 2011, yet Poshbird constitues this as a crash........ classic

geneer

Poshbird wrote: »

Just to prove you 100% spot on :

The bulls aren't renowned for their self awareness.

Poshbird

IveSeenTheLight wrote: »

Oh dear, quoting geneer. That explains a lot

Let me put something to you: -

Inflation is circa 4.5% at the moment.
Many expect this to lower, some others not so.
Let's take a house price at £160k in 2011, compounding four years inflation at 4.5% would mean the house should be valued at £190,803.
Assuming that there is a 10.5% real terms fall over the same timeframe, this would mean that the house price is actually nominally valued at £170,768

In other words, house prices increase on average 1.31% per year while inflation is 4.5%

Bottom line is house prices are more expensive, just not increased as much when compared to other things

2011_____£160,000____4.5% inflation
2012_____£167,200____4.5% inflation
2013_____£174,724____4.5% inflation
2014_____£182,586____4.5% inflation
2015_____£190,803____4.5% inflation

10.5% real term fall means this house example would be valued at £170,768.70

This example house price is over £10,000 more expensive in 2015 as opposed 2011, yet Poshbird constitues this as a crash........ classic

Let me put something to you: -Your example is wishful thinking I never said that would be a crash.

I am saying if the Pound sterling continues its waterfall decline in purchasing power along with the Dollar/Euro ect even if house price flatline or go up up a little in price then they will still be crashing in value. Forget the dodgy government figures they do not mean anything.

Is it really that hard to understand Ivseenthelight?

IveSeenTheLight

Poshbird wrote: »

Let me put something to you: -Your example is wishful thinking I never said that would be a crash.

I am saying if the Pound sterling continues its waterfall decline in purchasing power along with the Dollar/Euro ect even if house price flatline or go up up a little in price then they will still be crashing in value. Forget the dodgy government figures they do not mean anything.

Is it really that hard to understand Ivseenthelight?

It's fine.
What your saying is if something is £10,000 more expensive in 4 years time, that's okay, because it's "value" (real term to be precise) has "crashed"

Thrugelmir

IveSeenTheLight wrote: »

Let's take a house price at £160k in 2011, compounding four years inflation at 4.5% would mean the house should be valued at £190,803.
Assuming that there is a 10.5% real terms fall over the same timeframe, this would mean that the house price is actually nominally valued at £170,768

In other words, house prices increase on average 1.31% per year while inflation is 4.5%

What's the connection between house prices and inflation?

Wouldn't the average wage index be a better basis.

As house prices have risen above the rate of inflation over an extended period then logic dictates that a price correction will take place. Even if it takes another 10 years.

[Deleted User]

Thrugelmir wrote: »

What's the connection between house prices and inflation?

Wouldn't the average wage index be a better basis.

Comparisons to inflation are relevant because it is quite possible that a lot of the downside the 'bears' mention will materialise in real value losses as opposed to nominal losses.

Wages generally follow inflation for obvious reasons, so inflation is likely to give you an earlier insight. I think the lag between inflation and wages will continue to grow for sometime yet.

As house prices have risen above the rate of inflation over an extended period then logic dictates that a price correction will take place. Even if it takes another 10 years.

Only if there are no other factors behind those increases. In reality there are lots of other factors such as less housing being built in a downturn, increasing population, the option to let rather than sell given increased rental demand, low interest rates, mortgages rates still well above base rate, among others.

All of these different factors effect the market to varying degrees at varying times it's actual direction is a result of the net impact of all the factors at play.

Thrugelmir

[quote=[Deleted User];44006550]
Wages generally follow inflation for obvious reasons, so inflation is likely to give you an earlier insight. I think the lag between inflation and wages will continue to grow for sometime yet.
[/QUOTE]

I agree with this. Normally increases in wages exceed inflation levels though. This is how debt is inflated away.

In the roaring 70's when inflation reached 18.5%, I received a 21.2% pay increase. So pay packet looked good but bought little more.

The scenario we are entering now is that real average incomes are going to fall. As the economy rebalances. Outsourcing to cheaper wage economies isn't going to cease.