Fears: "Massive global property crash"

padington

No crash yet ( bar prime London because of unique mansion tax rises) until news comes in that the brexiteers have burnt all bridges and we are destined for a hard Brexit, at which point we'll see the bottom fall out of the market for a year or twenty.

For a hard Brexit I'll be reviewing all my annual price predictions down considerably.

Soft Brexit and its mild boom times for tech friendly cities including central London.

westernpromise

AFF8879 wrote: »

The problem is that the population of the world, not just the UK, is increasing. Generally speaking this will help to support prices, but in a case where there was a crash (due to economic reasons e.g significant and unexpected rise in interest rates), this growing population still needs a place to live. Hence rents will likely rise further and faster than previously. In fact one of the benefits of rising house prices in the UK at least is a (relative) stability of rents. This inverse relationship will hurt the poorer of society far more if house prices crash / rents skyrocket, as obviously they are much more likely to be renting.

A decade of low interest rates and QE seem to have left the politicians of the world in a bit of a predictament, falling house prices are generally not a good sign of economic health (I.e. if prices fall it's not as though everyone who couldn't afford to buy previously will now suddenly be able to), but at the same time growing numbers of people are being priced out of areas they/their families have lived in their entire lives. No matter which way prices go you're hurting one big swathe of voters.

Housebuilding (cheap to mid-range, not luxury apartments) and further punitive measures against second / empty homes are the only feasible ways to stabilise prices and rents IMO.

You can't point out that falling house prices = rising rents, I'm sorry. It's just not allowed around here.

westernpromise

Martinslovechild wrote: »

According to their figures, London house prices now require 10.1 times the average salary. Before the final quarter of 2015, London had never previously hit double-figures. Historically, London has always been higher than the rest of the UK but a figure of somewhere around 6.5 would be a more realistic historical average.

So would you expect interest rates at a 300-year-low to have no effect on that multiple?

In what circumstances would you rather buy: 12% interest rates and 6.5 times one salary, or 0.25% interest rates and 10.1 times one salary?

MobileSaver

luvpump wrote: »

Seems inevitable to me,

Really?!?!

The phrase "Lies, damned lies, and statistics" springs to mind. The headline speaks of a massive property crash but the article then admits that even as late as November almost a quarter of all properties were sold above asking price and that "while prices did not fall across the country last year, there was a slowdown in activity." So last year prices went up and a quarter of sales went for more than the seller expected but there's a crash on the way... Was the article written by our very own Crashy? LOL :rotfl:

Martinslovechild wrote: »

When you need to borrow 10.1 times your income to afford a home in London, you know that there's something very wrong!

https://en.wikipedia.org/wiki/London

• London is the capital and most populous city in the UK.
• One of the world's leading financial centres.
• A world cultural capital.
• The world's most-visited city.
• The world's leading investment destination.
• A 2014 report placed it first in the world university rankings.
• London also ranks first in the world in software, multimedia development and design, and shares first position in technology readiness.

I cannot understand why anyone would be surprised or think anything was wrong that you need 10.1 times your income to afford a home in London! It is simple supply and demand; if millions of people all want a little bit of the same finite thing then the price is going to go up accordingly...

westernpromise

Bear in mind too that the OECD has put out that press release every year for the last four years. Presumably we can look forward to house prices being 50% down by the middle of 2013.

Martinslovechild

MobileSaver wrote: »

I cannot understand why anyone would be surprised or think anything was wrong that you need 10.1 times your income to afford a home in London! It is simple supply and demand; if millions of people all want a little bit of the same finite thing then the price is going to go up accordingly...

The same supply & demand logic was in place for the duration of the data collected by Nationwide which go back to 1983.

At no point before the end of 2015 has the earning ratio hit double-figures in London. Even in 1989 (when the Bank of England base rate was 14.875% in Q4), the maximum ratio for London was 5.7 - a little over half of today's figure!

This is a little off-topic as the original poster was asking about house prices. If they're considering purchasing in London, my advice would be to delay that decision as a borrowing multiple of over 10 times is simply unsustainable, regardless of the obvious positives which have been stated about London as a business hub.

Edit - Bank of England historical base rate data here.

Martinslovechild

westernpromise wrote: »

So would you expect interest rates at a 300-year-low to have no effect on that multiple?

In what circumstances would you rather buy: 12% interest rates and 6.5 times one salary, or 0.25% interest rates and 10.1 times one salary?

The question here is whether I would buy at all - rather than being forced to choose one of the above options.

My own belief is that London prices are too high. Borrowing multiples are unsustainable at their current level. If I really have to live in London, then I would rent in the short-term and allow my landlord take the hit on the asset value of the property when prices start to fall, as I believe they will over the next 2 years.

kabayiri

I've not really been following UK prices, but I do know that my wider family is planning to sell some of their property in Western Canada. It's not just here. Maybe 2017 is the year of the defensive play.

Having said that, Vancouver seems to defy housing logic in the same way London does.

padington

kabayiri wrote: »

I've not really been following UK prices, but I do know that my wider family is planning to sell some of their property in Western Canada. It's not just here. Maybe 2017 is the year of the defensive play.

Having said that, Vancouver seems to defy housing logic in the same way London does.

The problem is caused, from what I understand, from a currency war. Governments are buying their own bonds and other strategic items with quantative easing. This is managing to keep the demand for their own bonds high whilst feeding more and more money (debt) into the system. This is creating inflation. That inflation, because it's at a bank level is finding its way to the best prized assets. (instead of wheelbarrows) and because they are all doing it, protects each currency from being singled out.

The solution is an international agreement to stop doing it, which might be as pie in the sky impossible as international communism.

So the merry go goes round. Crashes and corrections will come but so will even bigger doubling down of this game of nonsense. The end outcome always being bigger and bigger assets prices in the long run and a greater gap between rich and poor.

Capitalism may just be eating itself.

Has anyone else got a better take on the situation ?

economic

padington wrote: »

The problem is caused, from what I understand, from a currency war. Governments are buying their own bonds and other strategic items with quantative easing. This is managing to keep the demand for their own bonds high whilst feeding more and more money (debt) into the system. This is creating inflation. That inflation, because it's at a bank level is finding its way to the best prized assets. (instead of wheelbarrows) and because they are all doing it, protects each currency from being singled out.

The solution is an international agreement to stop doing it, which might be as pie in the sky impossible as international communism.

So the merry go goes round. Crashes and corrections will come but so will even bigger doubling down of this game of nonsense. The end outcome always being bigger and bigger assets prices in the long run and a greater gap between rich and poor.

Capitalism may just be eating itself.

Has anyone else got a better take on the situation ?

i dont think monetary stimulus will go on forever so your argument is incorrect. at some point (probably now) they wont do more and start to raise rates. the reason? worries about pension deficits, savings of people retiring, civil unresr due to what you say about rich/poor divide and banking sector profitability.

what i think will happen is much bigger then most suspect. the US is the reserve currency and they are the only country raising rates. dollar will go up even more higher setting up a worldwide collapse in the eonomy. evetually (probably in the next few years) they will decide dollar can not be the reserve currency. similar kind of thing to the plaza accord.