50% house price falls

Generali

Dithering_Dad wrote: »

Then it's a good time to buy some.

Buy low, sell high!

Don't try to catch a falling knife!

TTMCMschine

Generali wrote: »

Don't try to catch a falling knife!

Too true!

Otherwise you end up buying low & selling lower!

IveSeenTheLight

David_beach wrote: »

I was there the last time

I bought my first house in the early eighties for £21k it rose quickly to £80k+ till the "crash" which wiped 20k of it's value.

I needed somewhere to live so I took it on the chin, which in hindsight was the best thing I could have done.

A few years later I turned it into my first buy to let and it is now worth £190k.

The main difference I can see between then and now is that the mortgage rates rose to 15% + which caused the high repos

It does not seem likely we will see rates anywhere near that high and therefore I can not see the same kind of drop, but if it does I will buy buy buy as there is a massive house shortage and in time that will only get a lot worse.

Just my view

David

Wise words David.
I'll join you

IveSeenTheLight

golddustmedia wrote: »

You have to look past the media hype and short term fluctuations.

Take the housing market over the last 40 years, INCLUDING the crash around the early 90's, prices have on average doubled every 9 years.

Yes you will find isolated examples where they don't likewise others where they more than double (hence it's an average figure). Property is a safe LONG TERM investment if you're able to wait out any fluctuations that may last a year or so.

Yeah you can speculate about "making £50k in 1 year" on a £200k house, but I say better to look at making £200k over 10 years on it, which is a more realistic AND PROVEN figure.

Also, when saying "prices will drop by 50%" look at the other factors;
- The population is continually expanding from immigration, births, marriage separation, single person living until older etc etc.

The demand for housing continually outstrips supply, even if buyers get cold feet they still need to live somewhere and this feeds the rental market, thus demand remains.

Very few people are in the position that if the property market crashed they would be able to opt out since everyone has to live somewhere, ok you may sell your house to minimize loss but you'll still either rent or buyer a cheaper property. Once all the rental properties are gone you have to buy or demand means someone else will and rent it to you. The only way out completely is to leave the country or become "of no fixed abode" and live in a caravan etc.

Someone mentioned getting a better rate in the bank than on buy to let. Well again it's speculative. I think we'd all agree you're not going to get rich on the interest from your savings in the bank, unless you have LOTS and can live on the interest. Especially once you've had inflation and income tax on them. However if the income from buy to let goes most of the way to paying the interest on a mortgage on the property then you've got an asset that should increase in value and potentially sell at a larger gain. Yes markets fluctuate, but given the choice between putting my savings in a bank and putting them in property, I think I'm more likely to retire on the profit from property, even if the road might be a little bumpy along the way.

another very intuitive post.
Thanks

Gorgeous_George

Generali wrote: »

Don't try to catch a falling knife!

TTMCMschine wrote: »

Too true!

Otherwise you end up buying low & selling lower!

No, you cut your hand.



GG

Doc_N

IveSeenTheLight wrote: »

Wise words David.
I'll join you

Good for you - buyers should have plenty of choice according to today's Observer (and other papers for that matter). The panic is spreading already, and the longer you wait the lower the prices are going to be. It may be a good time to build your portfolio in the longer term (it might be years before things pick up again), but in the short term you can't get away from the fact that falling prices means that your property portfolio becomes worth less and less.

The smart money is on selling up, and then buying back into the market later when prices are lower.

House price crash feared as buy-to-let landlords sell


http://money.guardian.co.uk/houseprices/story/0,,2174921,00.html

wisbech_lad

codger wrote: »

There wasn't a 50% fall in house prices then, and there won't be so catastrophic a fall now.

Anyone who thinks for a moment that such a drop is on the cards should be buying up emergency food supplies, candles and generators now, because a halving of the national value of the UK's property portfolio would do damage on an unimaginably vast scale to every aspect not only of the economy, but to Society itself.

Meh, disagree. I lived & worked in both Japan and Hong Kong when they had property busts (HK went down about 60%-65%) and in neither place was there unimaginable damage done to Society itself. Actually I prefer Japan now to Bubble Era Japan - but it is still Japan.

Historically inflation is far more damaging to Society and likely to lead to unrest than deflation. E.g. the overthrow of Suharto and anti-chinese pogroms in Indonesia followed a huge jump in inflation. The 1989 Tianenmen Square revolt was driven by inflation - and the KMT lost the fight against inflation first, then the civil war against the communists. Or look at Zimbabwe today.

The reason is because in deflation the vast majority are better off as prices fall (are you upset that computers are always getting cheaper?) It is only a few poor unfortunates that suffer badly (normally due to redundancy) and the 90% or so that are OK tend to band together and make sure the 10% are looked after well enough that they don't start rioting (social security etc)

Inflation the proportion reverse. 90-95% are worse off, and 5-10% better off - and they tend to be the "spivs" who are not interested in alleviating the pain of the majority. Result - unrest.

tonydee

99% of this thread is speculation and what you'll see is homeowners saying there may be a slight correction but no big drops. The peeps waiting to buy or have sold to rent will be the ones saying the house prices will fall by alot more and may even mention the word "crash".

Golddustmedia has probably posted the most sensible reply yet.

Good luck to all of you

Doc_N

tonydee wrote: »

99% of this thread is speculation and what you'll see is homeowners saying there may be a slight correction but no big drops. The peeps waiting to buy or have sold to rent will be the ones saying the house prices will fall by alot more and may even mention the word "crash".

Golddustmedia has probably posted the most sensible reply yet.

Good luck to all of you

Golddustmedia's main point, I think, was that in the longer term house prices will rise, whatever happens in the short term. The statistics do bear that out, and if you already own a house it doesn't much matter what happens to prices unless you're planning to trade down. Most people trade up, and falling house prices is good for them, because the gap between their house and the bigger one that they buy gets smaller in actual cash terms.

For those who haven't yet bought, however, falling prices are a real boost, and they're going to be the big winners now that confidence (which is the only thing holding up the market) is disappearing following interest rate rises and the banking crisis.

Golddustmedia is right on the longer term, but you can't ignore the short term falls/crashes. They help the FTBs, which can hardly be a bad thing. They can also seriously damage the Buy to Let people, who are now, according to yesterday's Observer, (http://observer.guardian.co.uk/cash/story/0,,2174919,00.html) having to sell up to cover their rising costs and falling rentals.

Now that IS good news. Once the leaches have been forced out of the market, with their fingers badly burned, all our kids and the younger folk will again have the chance to own their own homes.

WTF?_2

wisbech_lad wrote: »

The reason is because in deflation the vast majority are better off as prices fall (are you upset that computers are always getting cheaper?) It is only a few poor unfortunates that suffer badly (normally due to redundancy) and the 90% or so that are OK tend to band together and make sure the 10% are looked after well enough that they don't start rioting (social security etc)

Inflation the proportion reverse. 90-95% are worse off, and 5-10% better off - and they tend to be the "spivs" who are not interested in alleviating the pain of the majority. Result - unrest.

I'm not too sure about that - poor economic conditions are what causes the unrest. Moderate to strong inflation isn't going to trouble people too much and if it's bailing out those who borrowed large amounts in the boom then it's likely to be a lot less unpopular with Joe Voter (and the tabloid press) than deflation coupled with lots of repossessions and bankruptcies.

The simple fact is that so many people are now in so much debt that the government will have to pursue policies to bail them out. Either because they want the votes or because mass debt default threatens the financial system.

The predictable outcome is that those who didn't get involved in the debt orgy of the first years of the 21st Century will be the ones paying to bail out those who did. Inflation erodes debts and savings alike.