House Price Crash Discussion Thread

ManAtHome

Why do you think boyf is a div - unless your place is the only one in the country to drop, trading up is likely to be cheaper as higher-priced places will drop more in actual value for the same percentage...

Only downside is that a price drop pushes your loan percentage up, so you might not get a top deal when/if you remortgage.

van_persie

Vincenzo wrote: »

Well the report I was really referring to was the 'independent' Barker review.

And my point was that it is fairly unliklely that the government would engineer a report to make both themselves and the crisis look worse.

It is undeniable that there are acute housing shortgages, both in terms of the type of stock available and affordability.

Certainly a shortage of affordable property - but I'd argue if there was a genuine shortage of stock we'd be seeing rents climb with property prices, which hasn't happened (see graph). This proves one thing - we're in a huge speculative bubble with investors hoarding properties. It'll be interesting to see how much quicker this particular bubble bursts because of them cashing in their chips; they've effectively created more liquidity in the housing market with properties changing hands chain-free a lot quicker than owner-occupiers in chains. Anyone notice more chain-free properties on the market?
The next 6 months will be most interesting IMHO...

Generali

van_persie wrote: »

Certainly a shortage of affordable property - but I'd argue if there was a genuine shortage of stock we'd be seeing rents climb with property prices, which hasn't happened (see graph). This proves one thing - we're in a huge speculative bubble with investors hoarding properties. It'll be interesting to see how much quicker this particular bubble bursts because of them cashing in their chips; they've effectively created more liquidity in the housing market with properties changing hands chain-free a lot quicker than owner-occupiers in chains. Anyone notice more chain-free properties on the market?

It's the great imponderable of this bubble - how will small investors react (small-time BTLers with a single property or maybe a handful of them)?

Usually when a bubble bursts in any asset market, small investors wait a little while and then sell everything when it becomes clear that a recovery isn't around the corner and that prices aren't going to recover.

The thing is, people really do see property as a long-term investment - even the most rose tinted glasses wearing BTLer realises that property is expensive to sell and highly illiquid. The question is, will they hold on through a slump, maybe lasting several years, collecting their rent and not worrying so much about how much the property us worth? Personally, I doubt it. I have no way of knowing for sure though.

van_persie

Generali wrote: »

It's the great imponderable of this bubble - how will small investors react (small-time BTLers with a single property or maybe a handful of them)?

Usually when a bubble bursts in any asset market, small investors wait a little while and then sell everything when it becomes clear that a recovery isn't around the corner and that prices aren't going to recover.

The thing is, people really do see property as a long-term investment - even the most rose tinted glasses wearing BTLer realises that property is expensive to sell and highly illiquid. The question is, will they hold on through a slump, maybe lasting several years, collecting their rent and not worrying so much about how much the property us worth? Personally, I doubt it. I have no way of knowing for sure though.

I doubt it, too.
As I recall back in the mid-90s, property was a dirty word. Negative equity was rampant. This crash promises to be far worse.
Sentiment will play a huge part and the 'amateur' BTLers who have bought within the past 3 years stand to lose the most.
I also think the trough will be deeper and last longer than before. History shows that the cycles have experienced more severe peaks & troughs as property has become a more traded asset (see graph).



On the whole, I am staggered by the lack of general knowledge regarding the economy, market cycles, etc. displayed by many BTLers I know or those who post on forums such as these. It seems they're governed by several things: greed, fear (of not getting on the 'ladder') and herd mentality - all underpinned by naivety.

Lotus-eater

Does anyone know what the percentage long term gains per annum in house prices are like compared to inflation rates?
What I mean is, if it drops down back to the trend line, would you have gained by buying at any time on the trend line before, more than inflation I mean.

Generali

Lotus-eater wrote: »

Does anyone know what the percentage long term gains per annum in house prices are like compared to inflation rates?
What I mean is, if it drops down back to the trend line, would you have gained by buying at any time on the trend line before, more than inflation I mean.

IIRC, house price rose by an average of about 1% more than inflation over any 50 year period from 1901-1951, 1902-1952....1950-2000.

subjecttocontract

The more intense the property crash the higher rents will rise.

Basic economics of supply & demand......with nobody buying, more will want to rent but there are only so many properties and there is already a shortage so rents will rise BIG time.

mystic_trev

subjecttocontract wrote: »

The more intense the property crash the higher rents will rise.

Basic economics of supply & demand......with nobody buying, more will want to rent but there are only so many properties and there is already a shortage so rents will rise BIG time.

I agree and the same thing happened in the last crash, so no reason why not this time around. BTL's will be getting better yields but (say) a 30% loss on their capital ! :eek:

adr0ck

mystic_trev wrote: »

I agree and the same thing happened in the last crash, so no reason why not this time around. BTL's will be getting better yields but (say) a 30% loss on their capital ! :eek:

yes if there looking to sell now

no loss if they want to keep for the next 10 years

yanex

A while since read this thread..

i stand corrected for my poor economic advise. For the record I was commenting only on house prices and for people like myself who invest in property, though not for the mid term future in the UK. The interest rate cut was good to keep the market ticking over, however potentially bad for inflation.

thanks for all additional input.:beer: