Media Is Now Predicting A Massive 40% Property Price Crash

economic

Thrugelmir wrote: »

Seems to be historically based on the last major correction. Where prices moved on average 37%. Remember it well. Over a 5 year period bought a property at £88k. At it's peak was worth around £125k. Eventually sold it for £88.5k. Many people got stuck with negative equity for years. A neighbour cashed in and moved into a rental. We said at the time you are mad. Proved us wrong. At a stroke leapt up the ladder. Fortune favours the brave.

past also does not indicate the future.

having said that it does look tempting to sell even your own home, but the key question is where would you put your money (or at least the bulk of the proceeds)?

cash - guaranteed to lose
property (resi and commercial) - you want to get out of it!
equities - probably the best thing to invest in risk-reward perspective
P2P - far too risky for that much money given its very new
bonds - at the historic highs? no thanks
gold/other commodities - i like to sleep at night thanks! plus offers no yield

so equities is the only place really. no wonder we are hitting new highs in equities!

however for theres to be a crash in property you would need lot of selling and asking prices reducing. how can this happen?

- recession - would have to be a severe one but can happen although we had a severe one in 2008 so might be a whilst for a severe one ot happen. most likely we get a shallow one. you would probably want to be in cash then.
- global growth on a large scale - would cause capital to leave london to be invested in growth causing ripple effect. but unlikely to happen in the near term at least and possibly even medium term. proceeds invested in stocks for sure.

i can not imagine any other likely scenario to cause a crash.

padington

economic wrote: »

past also does not indicate the future.

having said that it does look tempting to sell even your own home, but the key question is where would you put your money (or at least the bulk of the proceeds)?

cash - guaranteed to lose
property (resi and commercial) - you want to get out of it!
equities - probably the best thing to invest in risk-reward perspective
P2P - far too risky for that much money given its very new
bonds - at the historic highs? no thanks
gold/other commodities - i like to sleep at night thanks! plus offers no yield

so equities is the only place really. no wonder we are hitting new highs in equities!

however for theres to be a crash in property you would need lot of selling and asking prices reducing. how can this happen?

- recession - would have to be a severe one but can happen although we had a severe one in 2008 so might be a whilst for a severe one ot happen. most likely we get a shallow one. you would probably want to be in cash then.
- global growth on a large scale - would cause capital to leave london to be invested in growth causing ripple effect. but unlikely to happen in the near term at least and possibly even medium term. proceeds invested in stocks for sure.

i can not imagine any other likely scenario to cause a crash.

Ether coin

Thrugelmir

economic wrote: »

past also does not indicate the future.

The world revolves in cycles. Same old issues will crop up again. Once there's a generation who are none the wiser.

Otherwise the Medici family would still be ruling banking today.

so equities is the only place really. no wonder we are hitting new highs in equities!

Equities are living companies. Not just a name to be traded.

People like buffalo like to herd together for comfort. People like buffalo stampede for the exit once danger appears.

economic

padington wrote: »

Ether coin

thats worse then both gold and P2P.

economic

Thrugelmir wrote: »

The world revolves in cycles. Same old issues will crop up again. Once there's a generation who are none the wiser.

Otherwise the Medici family would still be ruling banking today.



Equities are living companies. Not just a name to be traded.

People like buffalo like to herd together for comfort. People like buffalo stampede for the exit once danger appears.

everything is a trade. of course cycles exist - in everything. from life to the atomic level to space and to the economy and markets.

what i meant by past is no indication of future is that even though things rhyme/cycle, its never going to be predicatble by using the past (e.g. by saying since it crashed last time with x% overvaluation, itll crash again at the same x% overvaluation).

Thrugelmir

economic wrote: »

what i meant by past is no indication of future is that even though things rhyme/cycle, its never going to be predicatble by using the past (e.g. by saying since it crashed last time with x% overvaluation, itll crash again at the same x% overvaluation).

Agree with that. Though to derive the figure of 40%. Someone has modelled a possible what if scenario. Using the characteristics of the previous "crash". Last time no one saw it coming either. To move a market by such a magnitude though takes relatively few transactions to tip the balance. Think it's around 15%. After that momentum takes over. In essence self perpetuating as lenders reign in their criteria and valuations become increasingly cautious. Then there's the regulatory aspect through the BOE as we've seen in the last week. Which tightens the lenders ability to leverage.

bobbymotors

Thrugelmir wrote: »

Agree with that. Though to derive the figure of 40%. Someone has modelled a possible what if scenario. Using the characteristics of the previous "crash". Last time no one saw it coming either. To move a market by such a magnitude though takes relatively few transactions to tip the balance. Think it's around 15%. After that momentum takes over. In essence self perpetuating as lenders reign in their criteria and valuations become increasingly cautious. Then there's the regulatory aspect through the BOE as we've seen in the last week. Which tightens the lenders ability to leverage.

Precisely. I think there will be a slowdown and some easing of prices: but not major and certainly not 40%. Money is so cheap to borrow, housing is in short supply.

Look at any 10 year period in the last 60 years - any 2 years that are 10 years apart, and property is worth more than it was.

So, if there is an easing, and you don't need to sell, it doesn't matter, sit it out.

bobbymotors

Plus there are all the HPC'ers poised to buy.....!

Thrugelmir

bobbymotors wrote: »

Look at any 10 year period in the last 60 years - any 2 years that are 10 years apart, and property is worth more than it was.

Still painful for those that do overpay. As it's not just the purchase price but the interest to service the debt. Cheaper to borrow £130,000 at 6% than £150,000 @ 4%. Low interest rates are relative.

bobbymotors

Thrugelmir wrote: »

Still painful for those that do overpay. As it's not just the purchase price but the interest to service the debt. Cheaper to borrow £130,000 at 6% than £150,000 @ 4%. Low interest rates are relative.

sorry but those figures are wrong

£130k @ 6% = £7800 p.a. interest 25 yr at £838

£150k @ 4% = £6000 p.a. interest 25 yr t £792

Yes it is painful, but only in the short term - if you can wait it out without having to sell, even if you buy at the very peak, in 10 years you'll be in front.

And you've got a home to live in thrown in.