When will the correction come to house prices?

pgalland

N1AK wrote: »

Until the end of last the lifetime trend of bitcoin was up. Historical trends are useful but they aren't a crystal ball.

House prices have consistently beat inflation for at least 40 years, and I think they will continue to do so for probably 15+ years yet, but there's a fundamental flaw with just assuming it will carry on forever: There's a limit to what people can afford.

If you apply that ridiculous long term trends graph* that people have been using to show where house prices should be then a house should cost in real terms today 3x as much as it did in the last 70s. If the trend continues they'll be worth 3x as much in 2050 as they are now. They'll be worth 9x current prices in real terms in 2090.

Given that wage inflation has been subdued, and well below house prices, for 30 years how exactly do we expect people to be able to buy at that price? When a £150,000 house today would cost £1,350,000 in today's money. The only way that is possible is if other long term trends change, so why assume that housing is the one thing that won't.

* Even if you don't they're worth more than double and increasing by 10% pa so they'll actually be 3x 70s prices in real terms within 2 years.

I'll take my chances... i feel more comfortable having 100yrs of history on my side than hoping a mathematical exercise proves everybody wrong. Especially when international capital (flowing in london) are more fluid than ever before... hence the massive international demand, boosting prices up.
What would need to happen is a clear paradygme change in people mindset about their implicit attraction to own their property...
You also tend to forget that the average size people are willing to live in, is a major adjustment factor, not taken into consideration in your argument. People might be happy to reduce their living space expectation by 3/4% a year to bridge that delta between inflation and real estate cost increase....

The-Joker

AndyGuil wrote: »

The cycle is around 10-12 years. So 2018-2020. However this crunch has been drawn out a bit so a longer downturn can be followed by a longer up turn. So more realistically it would be 2024. Then it will be a slight fall followed with futher increases.

Maybe, but so many factors could bring it earlier. The only thing that is certain is that there will be another house price crash just can not say when. But you are right the bigger and longer the boom the bigger and longer the crash.

Im sure you will still get some on here insisting property will never crash because there is an increasing population more than property is being built etc. etc.

It doesnt matter one bit how many people move to our shores, all that matter is what they can afford compared to average property prices.

In refugee camps there is way more demand than supply but maybe they should just work harder and banks should lend them currency and all that...........

MFW_ASAP

The-Joker wrote: »

Maybe, but so many factors could bring it earlier. The only thing that is certain is that there will be another house price crash just can not say when. But you are right the bigger and longer the boom the bigger and longer the crash.

Im sure you will still get some on here insisting property will never crash because there is an increasing population more than property is being built etc. etc.

It doesnt matter one bit how many people move to our shores, all that matter is what they can afford compared to average property prices.

In refugee camps there is way more demand than supply but maybe they should just work harder and banks should lend them currency and all that...........

Fingers crossed that you might finally get your housing crash before you die of old age.

MrRee_2

There will not be a housing crash - ever ...... it simply won't happen.

Of that there is no doubt - housing is as rock solid an investment as it always has been .... stop waiting and get buying.

Look at those losers over on HPC - they have sacrificed their families happiness and security on the alter of hope .... hope of a crash - they have collapsed and burned.

The-Joker

MrRee wrote: »

There will be another housing crash - again and again forever ...... it simply will happen.

Of that there is no doubt - housing is certain of a crash - they have collapsed and burned many times and the cycle will continue whenever the market gets overvalued

I have corrected your post for you mate

padington

What was 2008 ? The biggest financial upset since the 1930's and London property dipped briefly no more than 20% and most of the best properties were just taken off the market.

It's a dangerous game waiting for house price crashes in London.

Bantex_2

padington wrote: »

What was 2008 ? The biggest financial upset since the 1930's and London property dipped briefly no more than 20% and most of the best properties were just taken off the market.

It's a dangerous game waiting for house price crashes in London.

london prices did drop 25% or so early mid 90s.

alexanderalexander

Bantex wrote: »

london prices did drop 25% or so early mid 90s.

True, and no one ever seems to remember this. I'm not a crashist by inclination, but I don't understand why people think London house prices are invincible given what happened 20 years ago.

AndyGuil

alexanderalexander wrote: »

True, and no one ever seems to remember this. I'm not a crashist by inclination, but I don't understand why people think London house prices are invincible given what happened 20 years ago.

Perhaps because it was a very short period and they got back on track and rose again. They fell after 07/08 too but have now contnued back with the long term trend.

Bantex_2

AndyGuil wrote: »

Perhaps because it was a very short period and they got back on track and rose again. They fell after 07/08 too but have now contnued back with the long term trend.

Took 10 years to get back to 1990 prices.