How low will property go?

Electrum

First high end property started to fall, now the falls are spreading to average properties nationwide.

As the banking crisis deepens credit will dry up, just as interest rates have to start correcting back to normal, how low will property go?

Out,_Vile_Jelly

I reckon they could go as low as a whole street for a tenner and HPCers would still be whining.

Stevie_Palimo

These posts do make me laugh and by rights the people that start them should be seeking answers from a crystal ball as they will have as much chance to gain the correct answer as they would from a forum poster.

movilogo

Most likely you will only pay for the bed rooms and will get bathrooms and kitchen free

Carl31

considering a big chunk of property is sold to overseas investors, and for them at least, property has just got a lot cheaper, probably not that much, but hopefully prices might stabilise a bit

cells

I was thinking of a possibility of prices falling yesterday and I thought about the various asset classes. The three big ones being property, shares, bonds/corp-paper.

During the last crash and economic recession all the asset classes crashed in value. The FTSE fell to below 4000. Bond prices fell (yields went up) at least for a while. And of course property fell too. All of them subsequently recovered a lot of their value but they all fell for a period

Can we get a fall in property prices but an increase in the other two asset classes? I think it is unlikely.


Prices in London are already up 3% this year according to Land reg sold figures. I dont expect prices to fall below Jan 2016 without also a fall in share prices.

Generali

cells wrote: »

I was thinking of a possibility of prices falling yesterday and I thought about the various asset classes. The three big ones being property, shares, bonds/corp-paper.

During the last crash and economic recession all the asset classes crashed in value. The FTSE fell to below 4000. Bond prices fell (yields went up) at least for a while. And of course property fell too. All of them subsequently recovered a lot of their value but they all fell for a period

Can we get a fall in property prices but an increase in the other two asset classes? I think it is unlikely.


Prices in London are already up 3% this year according to Land reg sold figures. I dont expect prices to fall below Jan 2016 without also a fall in share prices.

Nine of the ten biggest shares in the FTSE100 make the vast majority of their profits outside the UK so it would be perfectly possible for the FTSE to increase in GBP terms even if the UK's economy goes to hell in a handcart. It's hard to see any significant link between the price of a house in London and the value of shares in Royal Dutch Shell or Vodaphone. Of the top 13 shares in the FTSE100, which make up 51% of the weight of the index according to this, only HSBC and the National Grid have fates that are closely tied to the UK and even then people will stop buying a lot before they turn the lights off.

As a result I think house prices could definitely fall in London without the FTSE falling significantly. If the policy reaction to house prices in London falling is more QE (possible/likely IMHO) then it is highly unlikely that Gilt prices would fall along with house prices. That depends on the policy response of course, if interest rates need to rise to defend the pound then Gilts would almost certainly fall in value.

cells

Generali wrote: »

Nine of the ten biggest shares in the FTSE100 make the vast majority of their profits outside the UK so it would be perfectly possible for the FTSE to increase in GBP terms even if the UK's economy goes to hell in a handcart. It's hard to see any significant link between the price of a house in London and the value of shares in Royal Dutch Shell or Vodaphone. Of the top 13 shares in the FTSE100, which make up 51% of the weight of the index according to this, only HSBC and the National Grid have fates that are closely tied to the UK and even then people will stop buying a lot before they turn the lights off.

As a result I think house prices could definitely fall in London without the FTSE falling significantly. If the policy reaction to house prices in London falling is more QE (possible/likely IMHO) then it is highly unlikely that Gilt prices would fall along with house prices. That depends on the policy response of course, if interest rates need to rise to defend the pound then Gilts would almost certainly fall in value.

I cant disagree with the ideas and theory I would only point out that property prices tend only to fall in recessions (and so do shares) so there looks to be a correlation.

Of course the data points are so few and far between that its not really a reliable idea

Generali

cells wrote: »

I cant disagree with the ideas and theory I would only point out that property prices tend only to fall in recessions (and so do shares) so there looks to be a correlation.

Of course the data points are so few and far between that its not really a reliable idea

I think the difference is that a recession impacts on both share and house prices. A secular repricing of an asset class for whatever reason needn't be repeated across asset classes. An example of the latter is the 35 year bull market in bond prices.

michaels

If property prices fall and you were moving, would you choose to spend less of your income on a similar property or the same proportion on a better property? Seems to me that unless people overall decide that property is poor value adn that they would sooner spend their money elsewhere and accpet worse accomodation in return then affordability is unlikely to change.

The last property slow down did not last long enough for 'forced sellers' to emerge in large enough numbers to exert strong downward pressure on prices, volumes simply dried up, not sure I can see anything different happening now.

TrickyTree83

The HPC brigade view on the impact of modest house price fluctuations.

https://www.youtube.com/watch?v=QcGtOsEUPgo