how many REALLY think there'll be a crash rather than a stabilisation ?

keeperbear

saunaboy wrote: »

Do prople on here who I'm assuming are less biased towards doomsday scenarios really believe that there'll be a 30% crash or more or do you (like me) think that things will just more or less stick & allow inflation & salaries to catch up in time ?[/quote

A general house price crash will require an economic trigger, such as higher unemployment levels in the economy. Just like the value of the stock market, house prices do not crash without a prior change in economic fundamentals/sentiment. While higher interest rates will stablise house prices, it will take widespread redundancies to trigger a full scale collapse in house prices. If lots of people lose their jobs, repossessions will certainly depress house prices.

Apart from Ikea announcing 300 odd job losses, I have not seen that many job losses in the news. I guess we will have to wait and see what happens.

eek

keeperbear wrote: »

saunaboy wrote: »

Just like the value of the stock market, house prices do not crash without a prior change in economic fundamentals/sentiment. While higher interest rates will stablise house prices, it will take widespread redundancies to trigger a full scale collapse in house prices. If lots of people lose their jobs, repossessions will certainly depress house prices.
/quote]

This is one reason why HPC is a good site. You could watch this argument being torn to shreds twice a day.

Currently house prices are made of a pack of cards built on sand. It will only take a small change in sentiment (on tv, or inside banks or elsewhere) for this to change.

You may say that the UK is not the US, but can you tell me what external factor actual caused prices to start falling in the USA last year. Sentiment is what has changed the market and there are already places (in Florida for 1) where prices have fallen 50% from the top (which I do admit is an extreme example, at the moment).

There are 3 obvious examples where sentiment may play an issue:-
in banks (yes Mr Smith we did say last year that we could lend you £250,000 but times change and now we are only willing to lend you £150,000).
or a change in the markets so they are less willing to buy mortgage based bonds (you are aware that you pension actually consists of some equity purchases and a large number of bonds, some of which may well be your mortgage). Banks are far less willing to lend their money compare to other peoples.
or a change in affordability. once loans moved from being based on fundamentals to be being based on what you could afford at well below long term rates the game was up. Based on affordabilty as rates go up, loan amounts have a habit of falling quickly. (Many people will have screwed up their finances for life thanks to these but that is another story).


Finally at the end of no housing cycle have real house prices stabilized. Granted in 1974-7 they didn't fall. Houses prices remained constant while 3 years of roughly 20% inflation increased all other prices had rising by 50%.

If by stabilise you mean not rising while the cost of fuel, food and everything else not included in the inflation figure continue to rise by 8-10% a year, it may well do so. I'm not sure I would call it that tho.

Romani_Ite_Domum

keeperbear wrote: »

A general house price crash will require an economic trigger, such as higher unemployment levels in the economy. Just like the value of the stock market, house prices do not crash without a prior change in economic fundamentals/sentiment. While higher interest rates will stablise house prices, it will take widespread redundancies to trigger a full scale collapse in house prices. If lots of people lose their jobs, repossessions will certainly depress house prices.

Apart from Ikea announcing 300 odd job losses, I have not seen that many job losses in the news. I guess we will have to wait and see what happens.

Keeperbear, the housing market would not crash the same as a stock market, it requires more time. The trigger for a crash would be stagnation in itself.

Booming HPI= Booming economy ( Built on Debt) = Employment
Stagnating HPI = Recessionary economy = Employment cutbacks

Neither of the above is a very good economic model. It's either boom or bust. There is no middle ground. 5 years of bust, then wage inflation will start the cycle again.

shelovestobuystuff

[quote[/quote

A general house price crash will require an economic trigger, such as higher unemployment levels in the economy. Just like the value of the stock market, house prices do not crash without a prior change in economic fundamentals/sentiment. While higher interest rates will stablise house prices, it will take widespread redundancies to trigger a full scale collapse in house prices. If lots of people lose their jobs, repossessions will certainly depress house prices.:T

ABSOLUTELY RIGHT!!!!Look at the previous housing crash, it was very clearly linked to a general and widespread economic disaster in this country.I cannot see it happening again without this prerequisite.

Apart from Ikea announcing 300 odd job losses, I have not seen that many job losses in the news. I guess we will have to wait and see what happens.[/quote]:eek: Oh no!!!!!Not IKEA.

dannyboycey

shelovestobuystuff wrote: »

Ehm Yes!!! and where have you been living for the last 2 years?And just out of curiosity how are property prices on THE MOON!!!;)

Sit down and do the maths. I have included compound interest in my calculations. The fact is, there comes a point at which houses become out of peoples financial reach if HPI increases at a faster rate than wages. Simple stuff really. Yet despite this, many believe HPI will continue to soar!

granville_2

shelovestobuystuff wrote: »

[quote[/quote

A general house price crash will require an economic trigger, such as higher unemployment levels in the economy. Just like the value of the stock market, house prices do not crash without a prior change in economic fundamentals/sentiment. While higher interest rates will stablise house prices, it will take widespread redundancies to trigger a full scale collapse in house prices. If lots of people lose their jobs, repossessions will certainly depress house prices.:T

ABSOLUTELY RIGHT!!!!Look at the previous housing crash, it was very clearly linked to a general and widespread economic disaster in this country.I cannot see it happening again without this prerequisite.

Apart from Ikea announcing 300 odd job losses, I have not seen that many job losses in the news. I guess we will have to wait and see what happens.

:eek: Oh no!!!!!Not IKEA.[/quote]

nope, not necessarily! as has been pointed out before credit tightening - i.e. the banks willingness to lend money will play a *major* factor.

it's beginning to happen already (look to the USA).

don't be fooled by the mantra that our economy is strong and everybody has a job. look behind the scenes and you will see many people who should be counted as unemployed are on incapacity benefits.

what does the uk make anymore? we simply sell things to each other at ever inflated prices... we are indeed a nation of shop keepers...

poppy10_2

poppy10 wrote: »

Erm... what actually is the average salary in the UK then?

From the horses mouth (Office of National Statistics) - don't believe the Council of Mortgage Lenders figures)

Year    Median Salary [SIZE=1](ONS)[/SIZE]   Median Salary [SIZE=1](CML)[/SIZE]
1997    16,666                    18,080
1998    17.415                    19,600
1999    17,966                    21,141
2000    18,668                    22,018
2001    19,547                    23,700
2002    20,327                    26,644
2003    21,008                    27,137
2004    21,798                    29,270
2005    22,422                    31,173
2006    23,249                    33,997

shelovestobuystuff

dannyboycey wrote: »

Sit down and do the maths. I have included compound interest in my calculations. The fact is, there comes a point at which houses become out of peoples financial reach if HPI increases at a faster rate than wages. Simple stuff really. Yet despite this, many believe HPI will continue to soar!

I know,as far as I can see this has been a problem already for over 2 years at least nationwide.If I hadn,t bought when I did 6 years ago and had waited even another 2 years I would not be a home owner now in my area and would have absolutely no prospect of ever becoming one.
My hubbys wages go up by a very insulting 2% per annum,not even enough to cover the basic rate of inflation never mind enough to cover inflation in house prices,property prices in my area have gone up by 26% in the last quarter alone:eek: .
I still believe the market will level off not crash.There is a race on to provide low cost housing and fill the gap in the rental markets too.I am entirely optomistic that there will be no disaster.

dannyboycey

shelovestobuystuff wrote: »

I am entirely optomistic that there will be no disaster.

Would a crash really be a disaster? Perhaps a long term period of stabilisation would be worse?

shelovestobuystuff

poppy10 wrote: »

From the horses mouth (Office of National Statistics) - don't believe the Council of Mortgage Lenders figures)

Year    Median Salary [SIZE=1](ONS)[/SIZE]   Median Salary [SIZE=1](CML)[/SIZE]
1997    16,666                    18,080
1998    17.415                    19,600
1999    17,966                    21,141
2000    18,668                    22,018
2001    19,547                    23,700
2002    20,327                    26,644
2003    21,008                    27,137
2004    21,798                    29,270
2005    22,422                    31,173
2006    23,249                    33,997

Thats a relief!!!First time I have seen the median figures used which are off course far more accurate than the average figures which everyone seems to quote.