MW: Britain's housing market is an unexploded economic bomb

Pimperne1 · 13 May 2011 at 5:11PM

geneer wrote: »

Dated June 2008 by the way.

Yes but I was referring to comment number 1.

http://housepricecrash.co.uk/newsblog/2008/06/blog-video-hpc-hero-merryn-s-webb-on-the-crash-14127.php

Better stay off the net tonight Gneer - looks like you are in for another pounding.

geneer · 13 May 2011 at 6:56PM

Pimperne1 wrote: »

Nationwide predicted a 9% rise in 2004:

http://www.nationwide.co.uk/hpi/2004_Forecast.htm

That would have meant house prices climbing from £140,225 to £152,845 (but they were wrong, house prices only rose to £152,444).

So whilst I wouldn't describe a Building Society as being a "bull" I would say that their prediction was bullish. One thing it certainly wasn't, however, was a prediction of a "soft landing".

:rotfl::rotfl::rotfl:One link to one VI in one year.
Well done you.

geneer · 13 May 2011 at 6:58PM

Pimperne1 wrote: »

Yes but I was referring to comment number 1.

http://housepricecrash.co.uk/newsblog/2008/06/blog-video-hpc-hero-merryn-s-webb-on-the-crash-14127.php

Better stay off the net tonight Gneer - looks like you are in for another pounding.

:rotfl:Oh you were referring to the comment of a bull mentalist on a house price crash website.
Well thats solid proof right there.

You might want to refer to this thread pimperdoodle.

https://forums.moneysavingexpert.com/discussion/3133650

Looks like I was wrong about 2004.
Turns out it was 2002.

Pimperne1 · 13 May 2011 at 8:15PM

geneer wrote: »

:rotfl:Oh you were referring to the comment of a bull mentalist on a house price crash website.
Well thats solid proof right there.

You might want to refer to this thread pimperdoodle.

https://forums.moneysavingexpert.com/discussion/3133650

Looks like I was wrong about 2004.
Turns out it was 2002.

In your 2002 link Nationwide are predicting a rise in prices of a mere 10% - soft landing indeed:

"Nationwide said house prices will rise 10% in 2003, a marked slowdown from this year's 25%. But it warned that house price growth in London was likely to be half the national average and property values could fall in some parts of the capital". :rotfl::rotfl::rotfl:

geneer · 14 May 2011 at 8:35AM

Pimperne1 wrote: »

In your 2002 link Nationwide are predicting a rise in prices of a mere 10% - soft landing indeed:

:rotfl:So moving on.....eh pimp.

Pimperne1 wrote: »

"Nationwide said house prices will rise 10% in 2003, a marked slowdown from this year's 25%. But it warned that house price growth in London was likely to be half the national average and property values could fall in some parts of the capital".

What was the headline again pimp? :rotfl:
Yawn.

http://www.nationwide.co.uk/hpi/2003_forecast.htm

Central view is that UK housing market achieves a soft landing in 2003…

Doh! Pimp fluffs it shocker!

But it certainly is interesting to dig a little deeper.
Because it appears that Nationwide was predicting a "soft landing" at best, with a potential crash on the downside.

Naturally, being VI bulls, "soft landing is the central view".

That was fun pimp.
Do feel free to continue banging your head on a brick wall on topic on the thread linked.

geneer · 14 May 2011 at 8:40AM

Anyway, I'll repost this interesting article.

Clever old pimp has a link to the Soft landing thread and so naturally will be compelled to post on topic.

Interesting to note that the bulls don't appear to want to discuss the contents of the article itself, and instead revert to the cut and past white noise so representative of their typical efforts.

http://www.moneyweek.com/investments/property/uk/britains-housing-market-is-an-unexploded-economic-bomb-11906?utm_source=newsletter&utm_medium=email&utm_campaign=Money+Morning

Rather good analysis of the current situation.
Some insight into the likelyhood of balancing on the "real but no nominal fall" zone the property bulls keep trying to make their own post crash.

Britain's housing market is an unexploded economic bomb
By MoneyWeek Editor John Stepek May 10, 2011

Comments (24) Print this article
High house prices will damage the economy

UK house prices saw their biggest fall in 18 months in April, reckons the Halifax.
Yesterday's report from the lender suggested that house prices fell by 3.7% in the three months to April, compared to the year earlier. And month-on-month, prices were down by 1.4%. The average house price – by this measure at least – is now £160,395.

Halifax economist Martin Ellis preferred to describe this as "some downward movement in prices", which shows just how averse property pundits are to using the word "falls". But there's no doubt that this is a pretty hefty decline.
However, it's nowhere near enough to make houses affordable yet – and that's bad news for the rest of the economy.
Are house prices set for a long slow decline?

Not every property survey is quite as gloomy as the Halifax's most recent one. Surveyors and estate agents are more optimistic than anyone had expected. According to the Royal Institution of Chartered Surveyors (Rics), the majority are still seeing house prices fall. But the reading for April came in at -21, rather than the -23 expected. And that's the most upbeat they've been since July 2010.
Perhaps this isn't too surprising. You'd expect there to be a bit of a 'spring bounce' in the market. But other aspects of the report suggest that the market is about to run into more quicksand.
The number of buyers on estate agents' books has stopped falling. But the number of homes on the market is rapidly rising. The percentage of agents seeing a rise in sellers came in at 18, compared to just four in March. As usual, when you have supply rising faster than demand, that suggests prices should fall.
And house prices remain unaffordable on historic measures. As Allister Heath in City AM points out, the average house now costs around 4.4 times the average income, still well above the "post-1983 average of 4.0 times". After the early 1990s crash, "prices fell to 3.1 times earnings".
So it's hard to believe that house prices are set to rise any time soon. It's just a question of how much further they'll fall. A recent report from the National Institute of Economic and Social Research (NIESR) suggested that real - ie inflation-adjusted - prices will slide by 10.5% by 2015.
NIESR expects inflation to do most of the dirty work. For example, this year it expects nominal house prices to be flat, but for CPI inflation to come in at 4.5%. It doesn't sound disastrous, but if it happens, "it will be the longest period of falling house prices that we have seen", says NIESR.
Or will we face a short sharp plunge?

The idea that inflation will bring house prices back to affordability is probably comforting for property bulls. Sure, it's not painless, but it's less painful than an almighty crash. But to me, there's a problem with this notion. And you can sum it up by comparing the British housing market to the US one.
US house prices are still falling. In fact, they're in the midst of a double-dip right now. And that could continue for some time.
What was the difference between Britain and the US? It comes down to the way mortgages are affected by central bank policy in each country. In the US, borrowing costs for homeowners are linked to long-term rates, rather than short-term ones. So the Federal Reserve, despite its very best efforts, could only do so much for homeowners.
Even when the Federal funds rate was slashed to 0.5%, the monthly bill for most homeowners didn't drop as much. So in effect, there was no real bail-out for homeowners. And that's been painful.
In Britain of course, when the Bank of England slashed rates to 0.5%, many homeowners saw their home loan payments plunge. That put a floor under the housing market, and prevented a surge on repossessions. However, it now leaves us in a difficult position. Here's why.

High house prices will be a drag on the UK economy

The US may not raise interest rates for quite some time. But when the time comes for rates to rise, the one thing the Fed won't have to worry about is causing a surge in 'foreclosures' and a fresh collapse in prices. Because property in the US is now cheap on many measures.
Sure, there's a tremendous backlog and over-supply of repossessed homes to get through, so prices may keep falling for a while. But in effect, the worst of the shock is over. I suspect that anyone who had the money and the inclination to buy now would probably turn a profit at some point in the future. And when a recovery eventually comes, US consumers will benefit from cheap housing.
Britain has yet to go through this 'clearing' process. We're going to have this millstone of over-priced housing dangling around the neck of our economy for a long time. The Bank of England can't raise interest rates for fear of crippling the consumer and therefore the banking sector, by sparking another slide in house prices.
This is a serious handicap. For inflation to bring house prices back in line with earnings quickly, then wages have to start rising more rapidly than they are now. But if that happens, then the Bank will have no choice but to raise rates. And that in turn will hit house prices. On the other hand, if wages remain stagnant and the cost of living keeps rising, that'll just put more pressure on consumers and homeowners. That's not a recipe for strong house prices either.
In short, British house prices are still unaffordable. And the economy would have to tread a remarkably steady path between inflation and stagnation over the next four years for prices to come back into line simply through gentle erosion. I don't think we can expect that degree of stability – I'd be surprised if we don't get a second leg of the house price crash well before then. In the meantime, you can keep an eye on what's going on with house prices using our housing market indicators.

Pimperne1 · 14 May 2011 at 9:38AM

geneer wrote: »

Around the same time the bulls were predicting a soft landing as I recall.

To summarise then.

In 2004 you recall the bulls predicting a soft landing.

When pressed you indicate that the bulls are Nationwide, Halifax and Columbo.

On investigation it transpires that Nationwide was predicting a 10% rise for the year, Halifax a 16% rise and Columbo wasn't active on any House Price Crash sites.

Would that be a fair summary? :rotfl::rotfl::rotfl:

£50k since Jan 2006 though.

des_cartes · 14 May 2011 at 9:56AM

The UK economy cannot recover until the housing ponzi is unravelled. Thats why there will be at least 3 more years of falling living standards.

Pimperne1 · 14 May 2011 at 10:54AM

des_cartes wrote: »

The UK economy cannot recover until the housing ponzi is unravelled. Thats why there will be at least 3 more years of falling living standards.

Thanks Carty but I think you posted on the wrong thread.