Will house prices crash? Poll Discussion

[Deleted User]

Your statement is illogical.

You say people have stated the house prices will crash over X quantity of years, it hasnt crashed THEREFORE it will always rise.

1) People can not forsee or predict the future, they can only make an informed estimate. If they could that would be known as psychic powers.
2) Because people forsee changes in market condition through their psychic powers and they have got it wrong it must mean that some devine being makes the housing market increase exponentially forever to change the future.

The housing market is very resiliant, some people are prepared to spend the majority of there entire lifes salary in order to live in a tiny box in the city centre with a hanging basket out the window, 15 storys up. But what happends when the person that wants his flat cant borrow as much because the multiplyers have been dropping due to bad debts, or if the interest rates go up by 2% and the box owner cant afford food anymore. Or the rich BTL merchant doesnt want to accept low to negative yields (ie deminishing money)

KILOCHARLIE

Just because I stated "people have been saying house prices will crash for many years now and its boomed relentlessly" in no way means "THEREFORE it will always rise". To come to that conclusion requires very twisted logic.

People have had similar views as this thread for the last 5 years and if you had taken their advice and sold your home / not bought a property based solely on their comments, you'd be kicking yourself right now. Maybe you were one of these people who gave their views. Who knows. Your example of someone in a studio flat is poor too. In no way does that mean that a drop can be expected, in fact it agrees with my view that things will level off.

gonlan

It's simple - houses will crash when people stop believing in the myth of "forever increasing house prices". The housing market is driven far more by expectations and sentiment than supply and demand, or (thanks to the banks) peoples ability to pay.

The poll shows that most people on this site still think house prices will rise, and if I had to guess I'd say that money-savers are more geared towards expecting a crash than the rest of the populous. Given this sentiment, I think it's clear there's more room for growth.

What I'm interested in is the rate of change of these expectations. I've got no evidence other than my own feeling, but I'd say more people expect a crash now than they did a year ago. Indeed the comments in this thread show a strong bias towards a crash expectation. Does this mean it's coming closer and will happen sooner?

Personally, I give it 18 months to 2 years for general perception to change. But when it happens I fully expect it to be big, systems with this much (positive and negative) feedback just don't level off.

tonyhamm

Since Labour changed the rules in 2000 for MIRAS.

The landlord uses a mortgage on a property and pays no taxes due to tax relief on source income.
The FTber has no tax relief from his source income - he cannot afford to to pay the equlivalent.

Both are in reality, in business - both are economic agents who have to sell thier services and receive income from thier activities. On form of income is called a wage, the other, rent.

One is passive income, involving little labour which gets tax breaks.
One is active income which is all labour, and forms the basis of society, family creation, and gets none.

Add in mass immigration, huge - 1.4m since 2004 (source: BBC) and your looking at the end of resources like housing being within normal peoples reach.

People will put up with rising taxes and stagnant/falling wages - as long as houseprices go up. This has been shown by many YouGov polls.

By the time they realise there is no benefit to them in this, unless they can live in a shoe, it will be too late.

[Deleted User]

I bought last year, and i ran a monte carlo simulation of my finances including a full risk assessment. I would only advise to buy if people can afford higher interest rates. I would never advise to buy or sell to try and profit from market fluctuations as this would need a psychic powers, which are impossible. Im not a gambler either.

I still believe there will be a crash though because markets can not grow at a faster rate then there is new money which has been happening. There needs to be a correction, exact date unknown. It is rare that markets level off, mainly because when the stuff hits the fan a PANIC occurs as people try to sort things out, ie those that cant afford the rates pop there housing up, landlords that cant afford to subsidise their tennants anymore also pop the house up, no body wants to buy as houses are so expensive and rates so high. The landlords and house owners then start a reverse bidding war undercutting themselfs.

danthemoneysavingman

I have seen the results of a number of economic forecasts relating to house price inflation and interest rates. I t is conceived extremely unlikely there would be a drop of 10+% due to the more stable output gap cycle we have attained in recent years (mainly due to BoE being in control of rates now). A slowdown is the most likely outcome, and we'll certainly not see 10% pa gains in the near future - but a crash is rather unlikely. I can't divulge much detail more than that, and these are only predictions, but consider the full economic impact of recent rate rises on the UK economy and you'll see a crash, or indeed a fall, is rather unlikely. Rates should rise again, but not much more than we see now. A drop in consumer spending will stabilise the economy, which will have a controlling influence on inflation. The situation should then improve - who knows at what pace? TTFN

harryhound

Hi Moneysavers,

In the recent poll there were at least 63 of you in every 100 who were more "bullish" than I was.

Can I revise my vote from "at least 2% drop" to at "least 12% drop"?

Turning to the specifics of Northern Rock bank:

Why can the big banks "screw" Northern Rock?

What is the future of Northern Rock's:

Borrowers?

Shareholders?

Depositors?

Has the Bank of England done the right thing?

The big banks know that they are home to an unexploded bomb, placed by American financial terrorists. But they don't know where it is and who has got it. Meanwhile they enjoy an army of "numpties" who are depositing loads of money with them for free, So they are sitting on that money, just in case they might have to pay for the bomb damage.

Meanwhile, most mortgage providers have been handing out cheap money like there is no tomorrow. Northern rock has been borrowing wholesale. Northern Rock has been shovelling out this retail money faster than most and suddenly their suppliers have gone on strike. This looks like classic borrowing short and lending long?
Does anybody know Northern Rock's loan to (inflated) value ratio of loans over the last 12 months? More specifically the proportion over (say) 80%, with or without a loan guarantee ? (Remember the South of England Building Society ?). How large are last year's mortgages as a percentage of all NR mortgages?

So what is the position of a borrower? In the old days, when Abbey National was turning itself into a Bank; I hated the place because I always had lots of time to stand in the Q and study the warning notice that said a mortgage was repayable on demand (just like an overdraft).
Does anyone know if this is still the legal position?
If I had borrowed, in the last year more than 3 X my income and had a loan to value ratio of more than 90%, I think I would be buying a cheap caravan and asking my parents if I could park it on their front lawn.

If you are a depositor of less than 32K, you are more or less covered, though if the worst happened, it might be like trying to get your money back if a holiday company goes bust. (I seem to remember it took about 3 months and then they knocked off a 10'er for "administration".)

If I had more money than that deposited, I think I would take out the excess and buy short term Gilts (are these still available through the Post Office, because you just do not know where the bombs have been placed).

If you are a shareholder (and I am, I had my 100GBP+ in NR when it became a bank) the future is foggy. As I write, I hear on the radio, that there is "blood on the screen" this morning. Price down 20%? In the day's when I had a mortgage, it was with The Leeds Permanent Building Society. It too was caught with its financial trousers down and ran out of money (or so I am told;)). However, as a "club" that had grown up on legislation dating back to the days of self builders getting together in pubs to pool their savings, everything was hushed up, Leeds merged into Halifax; and I eventually got a double dose of HBOS shares. However, when you are a public company in global era of the internet and the satellite 'phone it is no longer possible to call on fellow members of the cartel to hush things up.

So has the Bank of England done the right thing? - In the short term, yes. The prospect of a crop of mortgagees facing repossession proceedings in the run up to Xmas, does not bare thinking about. BUT I do hope the Bank knows what is happening & is "Kicking As..." and gets this mess restructured by Christmas. I don't see why my taxes as well as my savings should be at risk, to bail out dodgy mortgages on both sides of the Atlantic.

Don't panic, the sun will rise tomorrow.

Harry.

(The Bank of England had to set up a "lifeboat" in the 1970's - different problem caused by uncompetitive UK, big balance of payment deficit, high taxes and high oil prices - come to think of it not that much different. The bosses of the secondary banks were locked into the basement on a Friday night, with a few curly sandwiches and told they would not be let out until they signed on the dotted line, that was before cell phones had been invented.).

Comdot

Northern Rock have done nothing wrong, they just can't borrow cheaply like they did before. They use debt to provide mortgages to people and they can't raise that debt at the current price banks charge them for it.

A large property company called Opel couldn't raise the funds for a large development they had planned so it was put on hold or cancelled. That is another example of businesses not being able to raise funds. Interestingly this case will provide less property in the long run and less property investment opportunities in the medium term, resulting in upward pressure on property prices though not for some time.

Halifax, who provide 20% of mortgages in the UK, have increased their rate for new mortage takers but only by 0.10-0.20%. That will have no macro effect.

I presume Northern Rock's existing debt has been changed to a higher interest rate, does anyone know? I wouldn't expect their crisis comes from raising new debt but I would expect it to come from a rate change on their existing debt. That's the only scenario I can't see them being able to back down from. I mean, they aren't forced to take new customers are they.

My money is now on a 2-5% increase, before I said 5-10%.

Flip side of the credit problem is property prices won't go up as much. Downside is if you own a property, you're mortgage could be affected in the long term.

Anyone who tells you the UK property market is weak or unsustainable is wrong at this moment in time. I just tried to rent a flat in Manchester and supply is not meeting demand, rental prices are going up fast.

[Deleted User]

comdot, fraid your completely wrong.

Markets go around in cycles those that hang on to their optimism when it down turns get their fingers burnt.

NRs fingers are well and truely burnt, the directors must be heading for the nearest sky scraper.

Comdot

harryhound wrote: »

Hi Moneysavers,

In the recent poll there were at least 63 of you in every 100 who were more "bullish" than I was.

Can I revise my vote from "at least 2% drop" to at "least 12% drop"?

Turning to the specifics of Northern Rock bank:

Why can the big banks "screw" Northern Rock?

What is the future of Northern Rock's:

Borrowers?

Shareholders?

Depositors?

Has the Bank of England done the right thing?

The big banks know that they are home to an unexploded bomb, placed by American financial
terrorists. But they don't know where it is and who has got it. Meanwhile they enjoy an army of
"numpties" who are depositing loads of money with them for free, So they are sitting on that
money, just in case they might have to pay for the bomb damage.

Meanwhile, most mortgage providers have been handing out cheap money like there is no tomorrow.
Northern rock has been borrowing wholesale. Northern Rock has been shovelling out this retail
money faster than most and suddenly their suppliers have gone on strike. This looks like classic
borrowing short and lending long?
Does anybody know Northern Rock's loan to (inflated) value ratio of loans over the last 12
months? More specifically the proportion over (say) 80%, with or without a loan guarantee ?
(Remember the South of England Building Society ?). How large are last year's mortgages as a
percentage of all NR mortgages?

So what is the position of a borrower? In the old days, when Abbey National was turning itself
into a Bank; I hated the place because I always had lots of time to stand in the Q and study the
warning notice that said a mortgage was repayable on demand (just like an overdraft).
Does anyone know if this is still the legal position?
If I had borrowed, in the last year more than 3 X my income and had a loan to value ratio of more
than 90%, I think I would be buying a cheap caravan and asking my parents if I could park it on
their front lawn.

If you are a depositor of less than 32K, you are more or less covered, though if the worst
happened, it might be like trying to get your money back if a holiday company goes bust. (I seem
to remember it took about 3 months and then they knocked off a 10'er for "administration".)

If I had more money than that deposited, I think I would take out the excess and buy short term
Gilts (are these still available through the Post Office, because you just do not know where the
bombs have been placed).

If you are a shareholder (and I am, I had my 100GBP+ in NR when it became a bank) the future is
foggy. As I write, I hear on the radio, that there is "blood on the screen" this morning. Price
down 20%? In the day's when I had a mortgage, it was with The Leeds Permanent Building Society.
It too was caught with its financial trousers down and ran out of money (or so I am told).
However, as a "club" that had grown up on legislation dating back to the days of self builders
getting together in pubs to pool their savings, everything was hushed up, Leeds merged into
Halifax; and I eventually got a double dose of HBOS shares. However, when you are a public
company in global era of the internet and the satellite 'phone it is no longer possible to call
on fellow members of the cartel to hush things up.

So has the Bank of England done the right thing? - In the short term, yes. The prospect of a crop
of mortgagees facing repossession proceedings in the run up to Xmas, does not bare thinking
about. BUT I do hope the Bank knows what is happening & is "Kicking As..." and gets this mess
restructured by Christmas. I don't see why my taxes as well as my savings should be at risk, to
bail out dodgy mortgages on both sides of the Atlantic.

Don't panic, the sun will rise tomorrow.

Harry.

(The Bank of England had to set up a "lifeboat" in the 1970's - different problem caused by
uncompetitive UK, big balance of payment deficit, high taxes and high oil prices - come to think
of it not that much different. The bosses of the secondary banks were locked into the basement on
a Friday night, with a few curly sandwiches and told they would not be let out until they signed
on the dotted line, that was before cell phones had been invented.).

Do you read Reuters? Their website is very good, they are a news agency and provide news and
statistics for the media. Even the BBC heavily rely on them, though with the BBC you get hype,
distortion and the BBC's agenda. Reuters provide news also for professionals. They don't try to
entertain you or wind you up into a frenzy like the BBC or The Telegraph or even The Financial
Times. They seem to be the most objective source of news there is, and one of the biggest sources
with stories from around the world many minutes before anyone else. I think they are the world's
biggest news agency, so you probably already know! I'm fairly sure they are the biggest financial news provider.

www.reuters.co.uk

http://uk.reuters.com/article/UKNews1/idUKWLB190920070914 Bank props up wounded Northern Rock

http://investing.reuters.co.uk/investing/FinanceMarketsChain.aspx?sym=gb!ftse FTSE 100

http://uk.reuters.com/article/businessNews/idUKL0775334920070914 FTSE ends down 1.2 pct as
Northern Rock plunges

http://uk.reuters.com/article/businessNews/idUKLAK00018120070914 Gloomy house price survey adds
to mortgage woes

http://uk.reuters.com/article/stocksNews/idUKCAS43721220070914 Credit crunch claims biggest UK casualty

http://uk.reuters.com/article/stocksNews/idUKCAS43759720070914 Darling says world must act to shore up market defences

http://uk.reuters.com/article/fundsNews/idUKNOA34301420070913 Economic growth seen slowing sharply next year

http://uk.reuters.com/article/fundsNews/idUKNOA33210420070913 Gold bull run set to continue

http://uk.reuters.com/article/personalFinanceNews/idUKHIL43948620070914 Mortgage borrowers and savers told not to panic

http://uk.reuters.com/article/personalFinanceNews/idUKHIL34952220070913 Halifax hikes mortgage rates amid credit crunch

http://uk.reuters.com/article/oddlyEnoughNews/idUKL147902220070914 Baboon adopts a chicken at Lithuanian zoo

....and that's just today (well, yesterday).

p.s. the FT is still very interesting for news analysis. It's just a shame Murdoch owns it.