Has the housing market hit freefall yet?

leftieM

Parisien wrote: »

Leftie.....why state the obvious or what will eventually happen......we all know ifs its dry today, tomorrow - if you predict it will rain sometime then of course you will eventually be right.......

I would be more impressed if you had said 5 years ago....house prices would rise until May 2007.......so...go on...tell me something/anything I don't know!!

I wasn't too interested in impressing you to be honest, just putting my view out there. For the record I put a figure against the price drop I think we'll see - 30%, which will bring prices back to where they were around April 2006.
As for telling you something you don't know - well, you obviously know it all so I can't possibly do that :cool: .

leftieM

chunter wrote: »

http://www.rte.ie/news/2007/0928/economy.html

The Irish goverment's "thinktank" announced today that they reckon house prices down south will fall 15% in the next year.

Now we know there's a strong correlation between the two housing markets, (we're just a year or two behind) it's just how strong...

15% is optimistic I'd say. Surely it's already fallen by 15% there? Did you see this article? Really rotten for the people affected but you pays your money, you takes your chances I suppose.

championmongo1

LeftieM I think (and hope) you are wrong about prices decreasing by 30%.

One of the factors that has effectively forced a housing market slow down has been the continually rising interest rate followed by the current financial market turmoil. However with the Bank of England effectively bailing out Northern Rock, a precedent has been set which effectively means the Bank of England will help banks if they get into trouble in the current climate as long as they have an otherwise sound business model.

With the US Federal Reserve dropping it's interest rate by 0.5% and inflation here dropping to 1.8% which is now below the governments target of 3%, I think the Bank of England is likely to cut it's base rate by 0.25% in the coming months.

This will instill a little confidence back into the financial markets which in turn will inspire more confidence in the housing market. Prices here peaked in May and have dropped off a little since (averaging around 3% down in my area) but houses are starting to sell again already albeit for near the asking price rather than above it.

I think house prices here will stagnate for 1-2 years then possibly begin to rise again albeit only by 0.1-0.5% per annum which would be below inflation (targetted around 3% per annum). This would mean that in 'real' terms houses will be cheaper over the next few years but without the dramatic price crash some people seem to be hoping for.

leftieM

You'll sell before anything awful happens champion.

I don't think interest rates by themselves are going to save the situation. Investors and investor confidence has gone from the market. Think about it - an investor was buying thinking that they will make a significant capital gain. Now capital gains of the type seen previously are not happening so investors are no longer willing to buy a house that returns 1-3% (gross) on their cash investment (and is loss making if they have a mortgage). Why would they when they could put the money in a savings account and realise 5% net or spread the risk in the stock market?
Without investors you are relying on owner occupiers to drive the market and their needs are different. They are not in it for the money, they are looking for an affordable home. Houses are not affordable to the vast majority of people at the moment. So what happens next?
My guess of 30% drops is just that, frankly, a guess. I think that if you are trying to buy or sell at the moment it isn't safe or helpful to read anything that is said about house prices because you are emotionally involved. I can afford to waffle on. I'm not buying or selling at the moment.

championmongo1

Thanks LeftieM-as always you are the voice of reason!

I hate being emotionally attached! I just hope I sell soon so I can join my better half so I don't have to cook anymore! lol!

IvanOpinion

Overall the bottom line is that EVERYBODY is guessing ... NOBODY actually knows what is likely to happen (anybody who says otherwise is only fooling themselves). Personally I would like to see a fall because I would defintiely pick up a couple of BTLs .. on the other hand I have a house for sale at the minute that I would like to offload .. if not it just gets rented out until prices pick up again ... I am in no rush either way

Ivan

leftieM

championmongo1 wrote: »

Thanks LeftieM-as always you are the voice of reason!

Lol - I'm going to show this to my husband to give him a laugh.

championmongo1

I'm guessing that you have managed the Northern Ireland property game to your advantage IvanOpinion, you lucky thing!?!

And leftieM-MSE is lucky to have a member as helpful as you! :money:

leftieM

Shucks
It's amazing what a life led in front of cbeebies can do for the soul.
Just don't read any of my other posts then in case the illusion is shattered!

talksalot81

championmongo1 wrote: »

LeftieM I think (and hope) you are wrong about prices decreasing by 30%.

One of the factors that has effectively forced a housing market slow down has been the continually rising interest rate followed by the current financial market turmoil. However with the Bank of England effectively bailing out Northern Rock, a precedent has been set which effectively means the Bank of England will help banks if they get into trouble in the current climate as long as they have an otherwise sound business model.

With the US Federal Reserve dropping it's interest rate by 0.5% and inflation here dropping to 1.8% which is now below the governments target of 3%, I think the Bank of England is likely to cut it's base rate by 0.25% in the coming months.

This will instill a little confidence back into the financial markets which in turn will inspire more confidence in the housing market. Prices here peaked in May and have dropped off a little since (averaging around 3% down in my area) but houses are starting to sell again already albeit for near the asking price rather than above it.

I think house prices here will stagnate for 1-2 years then possibly begin to rise again albeit only by 0.1-0.5% per annum which would be below inflation (targetted around 3% per annum). This would mean that in 'real' terms houses will be cheaper over the next few years but without the dramatic price crash some people seem to be hoping for.

Whilst I too believe that the cpi figure will be sufficient to induce a drop in rates you should be aware that 2% is the target, not 3%. 3% is considered to be dangerously high and that was why we had the recent batch of rises. In all honesty, 1.8% is close enough to target that they should leave it alone but I doubt they will.

As for your predictions - where will the money come from to keep it up and then induce further growth? Wage inflation is low and has a long way to go before property becomes affordable to those without existing equity.