How low will property go?

michaels

It is a fair enough post, but 'eventuated'....?

westernpromise

sure:

https://www.google.co.uk/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=define%3A%20eventuate

It means not just "occur" but "occur as a result" - but is shorter :-)

Crashy_Time

westernpromise wrote: »

There were indeed some absolute gems back in February 1996. You had both classic crash trolls and some very acute insights in response, which the trolls mainly just ignored.

house prices wouldn't rise with inflation since the low turnover indicates that houses are still perceived as overpriced.

lack of demand indicates that housing is still regarded as overpriced. That indicates further falls rather than a rise.

Added to...factors like housing probably having reached a peak in terms of the percentage of the Uk population who actually want to be homeowners...The odds are that there will be further real falls in house prices.

The fact that volumes are low when compred even with the period before the boom indicate that houses are still overpriced.

Rising interest rates, I suspect, may be the trigger for phase two of the housing bust.

Notice how very, very little the crash trolls' thinking has changed in 20.5 years. The claim that low volumes connote falling prices was neatly exploded further down the thread by another contributor with a much better - and still relevant - explanation:

As anyone who has tried to buy a house recently will tell you, the problem is a lack of quality on the market. Sellers perceive prices to be too low relative to the income that can earned from renting the property out.

to which another poster replied, with great insight

This [early 1996] is the soon-to-disappear golden age of house-buying. Anyone still procrastinating over making a purchase had better get their skates on. First time buyers have got it made, but not for very much longer.

A very perceptive and wholly accurate observation. To some people it was abundantly clear at the time that this was a stupendously good time to buy. Someone else notes:

the overall housing market defies simple mathematical analysis...the more expensive homes in London are now some 40% above the bottom of the market at the end of 1992.

As we have discussed before, quality of location holds its value. If you were awake and paying attention in 1996, like that poster, you could see it then. Elsewhere in that thread, we have this observation:

I saw an offer advertised for new houses (purchase price about £70,000) which equated to repayments of £49 per week. This was subsidised by the developer, so once the subsidy stopped it was going to go up to about £65 per week. Rental on roughly equivalent properties seemed to be nearly double that amount. This is in London....

This is of course how BTL started. Rents were astronomical in 1996; there'd just been a property bust and people would pay almost anything not to be exposed to another one. If you had the cojones you went long property, taking the risk of capital loss, and let your property out to people frightened of that risk, for roughly double what buying was costing you.

All of the above from this Usenet thread of 1996: https://groups.google.com/forum/#!msg/uk.finance/ziECfUDSCFM/K4wuspagd6kJ

Here's another which is also fun.
https://groups.google.com/d/msg/uk.finance/tjd5oVhI0S0/4JajEtTtjzgJ
From December 1995, and entitled "House prices 1995", we have more vintage crash trollery:

Well my learned real estate friend, What happens if the investment yu buy depreciates?? then yu are stuck in a home yu bought because yu thought it was an investment NOT becuase yu really wanted to live there. 30 years stuck in a bad buy that yu never even liked in the first place??? I dont think so.

That was written on December 22, 1995. Crashy Time could have written it yesterday; the thinking is identical. But from others, there is also insight:

Growth in demand is likely to be strong in family homes. Also don't forget the Grey Panthers. The population is ageing, and more last-buyers will be trading down.

Scroll forward to March 2005 and the crash trolls were still hard at it:

This attempt to kick-start a house-price debate is laughable. Everyone knows the crash has already begun

Here is someone the crash trolls scared out of buying:

I don't understand how anyone gets on the ladder. Maybe I could afford a 1 bed studio flat with all my savings and 4x my wage, but those will be the first things to drop when a housing crash happens. I'm earning just a bit under the UK average wage (academia, you see). So I'm renting scummy places (and that's 1/3 of my income), in the hope I can ever save up enough to get on the first rung.
https://groups.google.com/d/msg/uk.finance/tF7vf6R-YAI/v7I0odZhlSUJ
Note bit in bold. Not "if"; "when". That's crash trolls, that is; that's where listening to them gets you. I expect he's grateful to the crash trolls of 2005 for their sage insights and very glad he acted on their advice and didn't buy....not.

A sensible poster suggested that
if you accept that inflation and interest rates have reached a lower level than for the 1980's-90's, you should also accept that the 3.5 to 4.0 multiple will reach a higher level - perhaps between 5.0 & 6.0?

- which of course is an accurate prediction of what has eventuated since. The crash troll won't have it though:
No, I don't accept that. There is no justification for a higher multiple if real rates have not declined, and later, the financially attractive alternative of renting is where the smart money is.

Was it even possible to be more wrong? This is why I tend to dismiss crash trolls as holding the least valuable opinions anywhere online. Their opinions, forecasts and reasoning are wholly stale and have not moved on in 21 years; probably longer if archives went back that far. They resemble a doomsday sect forever predicting the end of the world next Tuesday week, and when it doesn't happen, they just forget they were ever wrong and change the date.

If you "dismissed" Crash Trolls you wouldn`t be concerned about them, but it seems you live and breathe "Crash Trolls", every day :rotfl: Go out and get some fresh air and stop making a fool of yourself.

westernpromise

I refer you to my last paragraph above, Crashy. What is your BCR, exactly? QED.

p1212

westernpromise wrote: »

This is of course how BTL started. Rents were astronomical in 1996; there'd just been a property bust and people would pay almost anything not to be exposed to another one. If you had the cojones you went long property, taking the risk of capital loss, and let your property out to people frightened of that risk, for roughly double what buying was costing you.

Here is someone the crash trolls scared out of buying:

I don't understand how anyone gets on the ladder. Maybe I could afford a 1 bed studio flat with all my savings and 4x my wage, but those will be the first things to drop when a housing crash happens. I'm earning just a bit under the UK average wage (academia, you see). So I'm renting scummy places (and that's 1/3 of my income), in the hope I can ever save up enough to get on the first rung.

That's exactly why prices have been rising since then, as at that time there was hardly any speculative money and demand (BTL) and banks were regulated properly. There was space to grow.

Fast forward a bit by now speculative money is maxed out, even Osborne and Carney started to restrict BTL first time ever. Foreign and speculative money has been identified as the biggest risk and they've started tightening and that is what you can expect in the future.

1995 was the beginning of the 20 year expansion of speculative money, hence rising prices, which came to an end now. These are different times today.

Below the average wage would not buy absolutely anything even if prices would crash tomorrow 50%. You can always find someone below the minimum wage who is complaining, but today people on 2-3x of the average wage have problems buying. The situation today is totally different than it was in 1995.

Brexit is actually the best thing that could happen for Carney, he will have some inflation due to the falling pound and the speculative money will make a U-turn and he cannot be held responsible for any "negative" effect, like any market correction, as it's all Brexit.

That's why I predict May won't reverse Osborne's BTL tightening, maybe they will even go further and restrict BTL even more or ease up planning so construction sector and mortgages to build can pick up.

Jack_Johnson_the_acorn

Crashy_Time wrote: »

If you "dismissed" Crash Trolls you wouldn`t be concerned about them, but it seems you live and breathe "Crash Trolls", every day :rotfl: Go out and get some fresh air and stop making a fool of yourself.

You don't even attempt to make hpc arguments anymore Crashy.... what happened? Reality hit?

What's your BCR? Have you not managed to calculate it yet?.

cells

p1212 wrote: »

According to the nationwide data in 1995 first time buyer earnings and price ratio in London was 2.6, the lowest value in the whole series and just dropped down from 6 + banks and debt were strictly regulated.

Today this number is 10 - the highest number ever - and we have the effect of the last 2 decades unregulated debt built into sky high prices and the whole financial and political environment has been promoting debt for very long time.

In 1995 everything was set to the minimum, prices, debt, now everything is maxed out, there is no way further up from here, unless they start giving helicopter money to house buyers.

While prices have been increasing in the second half on the nineties and they are increasing now too, the two are totally different situation.

So what do you think is the correct value in London give me a ££££. When will that be achieved by?

Crashy_Time

Jack_Johnson_the_acorn wrote: »

You don't even attempt to make hpc arguments anymore Crashy.... what happened? Reality hit?

What's your BCR? Have you not managed to calculate it yet?.

Don`t need to mate, the government and media do it for me every day now...:rotfl:

westernpromise

p1212 wrote: »

That's exactly why prices have been rising since then, as at that time there was hardly any speculative money and demand (BTL) and banks were regulated properly. There was space to grow.

Fast forward a bit by now speculative money is maxed out, even Osborne and Carney started to restrict BTL first time ever. Foreign and speculative money has been identified as the biggest risk and they've started tightening and that is what you can expect in the future.

1995 was the beginning of the 20 year expansion of speculative money, hence rising prices, which came to an end now. These are different times today.

Below the average wage would not buy absolutely anything even if prices would crash tomorrow 50%. You can always find someone below the minimum wage who is complaining, but today people on 2-3x of the average wage have problems buying. The situation today is totally different than it was in 1995.

Brexit is actually the best thing that could happen for Carney, he will have some inflation due to the falling pound and the speculative money will make a U-turn and he cannot be held responsible for any "negative" effect, like any market correction, as it's all Brexit.

That's why I predict May won't reverse Osborne's BTL tightening, maybe they will even go further and restrict BTL even more or ease up planning so construction sector and mortgages to build can pick up.

As the archives from 1995 and 1996 show, there is always someone who will insist that prices are too high, and who will always do so, including when they have just crashed. Nothing personal, but I have a lot of time for the opinions of those who have done well out of property, and none at all for those who have either been idiotically wrong for 20 years or who sound very similar to such folk.

System

The housing market has been manipulated over the years to suit. Yes, some people have done well out of it aided by the central bankers. The property market is one of the best tools to create money.