50% house price falls

golddustmedia

Isn't that what this thread is about?

tr3mor

golddustmedia wrote: »

Well there's the proof;
1973 - 1983 = MORE THAN DOUBLE
1983 - 1993 = Nearly double (but mid recession)
1993 - 2003 = No figure but assuming will be over 100k then DOUBLED.
2003 - 2013 = ??? Well if it was £100k in 2003 then as it's £200k in 2007 it's ALREADY doubled!!!

1989-1993 = 33% fall.

We're at the peak now, regardless of long term inflation, I'd rather buy in a trough.

Turnbull2000

golddustmedia wrote: »

I'm trying to tell you all that if you stop trying to make a big gain short term then buying a property is a sound investment, whether you did it last year, this year or next year.

Oh please. You should try jumping off the roof from your BTL ivory tower.

You're assuming FTBs are looking for short term gains and view property as an investment. Being an investor yourself, I guess it's in your interest to take this view on the market and sustain the price of your existing assets.

But what you don't seem capable of comprehending is that first time buyers now account for roughly 1/5th of their traditional numbers, and a good proportion are priced out completely.

And even for the minority who can stretch to buy, you conveniantly ignore the long-term inbalance we're facing between salary inflation and living cost inflation - hence the debt is not erroded, repayments over the full term are astronomical (way beyond anything experienced) and the scope for upsizing is limited.

Generali

golddustmedia wrote: »

Since you mention history lets look at WHY those foreign markets crashed...

Hong Kong: Britain (A capitalist state) vacated and handed back a massive economic zone to a communist country, this involved the mass migration of thousands of people OUT of the country. Obviously you get lots of people leaving an area and selling their property and the prices will fall. Doesn't seem likely given the current UK immigration that we'll see that repeated in the UK.

Tokyo: During the 2nd world war an ENTIRE generation was effectively killed, when I visited Japan in the 1990's I saw only 1 elderly person in a 10 day stay. 60 years later and Japan is facing a new problem; RETIREMENT and old age. For the first time (in modern economic terms) the country is having to cater for pensions, caring for elderley relatives etc and this has had a major economic impact on them since overheads and costs are increasing as they pay for persons who are unable to contribute either economically or practically to the country. Again, this isn't about to be repeated in the UK since we were not affected to the same degree by the war, i.e. we have significantly more OAP's than Japan has until now.

As such, although it is interesting that other countries have seen massive property market crashes, there has in each case been a significant historical event that can be seen to cause the crash. Unless there is some major event in British history I'm not aware of then it's unlikely a crash will occur. Yes the EU is a historical event, however ironically this has led to massive immigration to the UK and only pushed demand and prices higher.

I say it once again, aside from short term fluctuations, the property market does and will continue to rise as it has done for the last 50+ years.

All the people who say they've put off buying for the last 1/2/5 years etc.... bet you wish you could buy a house today at the price when you decided not to those few years ago?

I was pointing out a few contrary examples to the misplaced idea that no asset market has crashed by 50% ever.

Generally, when asset prices fall extensively, the situation is unique (or at least very perculiar) post hoc. That or a huge fraud is subsequently identified.

Interesting theories about Japanese house prices falling because of the post-war generation retiring. By your calculation, people born in the years 1945-55 (is that what you'd describe as the post-war generation?) were retiring between the ages of 35-50.

A simple compound interest calculation shows why house prices can't increase faster than wages/GDP growth indefinitely.

Try an starting point (e.g. house price = 1 years salary or 3 years or even 5 years) and then increase wages at 5% pa and house prices by 10%. Very soon house prices shoot off to a level that cannot be afforded by anyone except the exceptionally wealthy. Do your calculation over a long enough period of time and Mr Abramovich would struggle to own a 2 bed terrace in one of the dingier bits of Shepherds Bush.

hgllgh

golddustmedia wrote: »

Since you mention history lets look at WHY those foreign markets crashed...

Hong Kong: Britain (A capitalist state) vacated and handed back a massive economic zone to a communist country, this involved the mass migration of thousands of people OUT of the country. Obviously you get lots of people leaving an area and selling their property and the prices will fall. Doesn't seem likely given the current UK immigration that we'll see that repeated in the UK.

Tokyo: During the 2nd world war an ENTIRE generation was effectively killed, when I visited Japan in the 1990's I saw only 1 elderly person in a 10 day stay. 60 years later and Japan is facing a new problem; RETIREMENT and old age. For the first time (in modern economic terms) the country is having to cater for pensions, caring for elderley relatives etc and this has had a major economic impact on them since overheads and costs are increasing as they pay for persons who are unable to contribute either economically or practically to the country. Again, this isn't about to be repeated in the UK since we were not affected to the same degree by the war, i.e. we have significantly more OAP's than Japan has until now.

I don't know much about the hong kong crash but I do know about the Japanese crash. I am not sure what OAP's had to do with it :rolleyes:

there are worrying parallels between Japan 1991 and the UK 2007. The same irrational belief that prices always go up, the same frenzy regarding property, and same muppets driving central and retail banks...

In 2005 Japanese property was worth less than half its 1991 peak, meanwhile un-mortgaged property in the United Kingdom has more than tripled in value, to reach a total value of around £3.6 trillion and debt secured on UK property has risen to around £1 trillion, both all time highs. Private homeowners were amongst the hardest hit. In Japan's six largest cities, residential prices dropped 64% between 1991 and 2004. By most estimates, millions of homebuyers suffered substantial losses on the single largest purchase of their lives.

Their experience contains clear warnings for UK homebuyers. One is to avoid the sorts of temptations that appear in over-heated property markets, particularly the use of risky or exotic loans to borrow beyond one's means e.g. extended lending multiples, interest-only and 125% mortgages. Another is to avoid property that may be hard to sell when the market cools.

Like their UK counterparts today, too many Japanese homebuyers overextended their borrowing to buy property that cost more than they could sensibly afford, because they wrongly assumed that house prices could only rise. When Japan's house prices dropped, many buyers were financially ruined or caught in the negative equity trap and a similar tale is now unfolding in the US.

Japan's story of post-crash woe also contains obvious lessons for UK policy makers. Firstly, MPC members should be mindful of the failure of Japan's central bank to attenuate the growth of the country's property bubble, although this lesson may have been learned too late. Second, policy makers should be aware of the Bank of Japan's failure to soften the fall and help reduce the pain."

Japanese interest rates in 1991 were the same as ours are now. They then lowered them quickly but the slump continued regardless.

golddustmedia

What I meant about Japan was that pretty much all men over the age of 16 were killed in the war, subsequently children who were born in the 1930's began creating demand on the Japanese economy by the 1990's where they required increasing volumes of medical and social care, for which the country was unprepared and largely had not had to provide to the aged for a period of 60 years.

It's written up in economics books as being one of the major contributing factors to the fall of the japanese economy.

Jonbvn

I am not sure that Japan is a good parallel to the UK, since they have had such ridiculously low (or non-existent) interest rates for such a long period.

hgllgh

Jonbvn wrote: »

I am not sure that Japan is a good parallel to the UK, since they have had such ridiculously low (or non-existent) interest rates for such a long period.

The BofJ had to lower interest rates because the bottom fell out of their economy, but before the crash their rates were the same as ours are now, but when they started lowering them (as the BofE may do here) it made no difference to the loss of confidence in property...

Conrad

Golddust I'm a property investor but I

Conrad

Golddust I'm a property investor but I dont particularly care for price rises.

I'm it for the rent yield.

If a property increases in value £100,000 and I sell I will lose £40,000 in CHT so hardly worth the bother.
In this sense it pays to buy wisely in order to secure the optimum rental yields.
Buying right now as far as investing is concerned holds a lot of downside risk. Better to wait and see how the current market pans out early next year.

Generaly I'm of the opinion prices wont fall unless we have a sudden unforseen shock (I predicted the sub prime problems and dont class this as a sudden unforseen shock).

Having said this, the big unknown is sentiment which may pull prices down as the herd gets what it expects - a self fulfilling prophecy.

Longterm you are correct to state property is by far the best investment and far superior to relying on insurance companies to provide for your future wealth. Row your own canoe and all that - plus a pension dies with you, property can be passed on.