House Price Crash Discussion Thread

ManAtHome

Gearing works on the downside as well - 25% drop in prices is a 100% loss...

HammersFan

boinging wrote: »

When you say historically they have doubled which period of history are you looking at?

Prices did not double from 1990 - 2000. Yet they did nearly triple 1995 - 2005. You can take a 10 year period of 30 years and get very different results.

You asked me about 10 years, so that's the opinion I gave. The long run historical average is about 4-5% per year, so I plumped for that. If you look back quite a way running a 10 year period from any given year it's about 70+% ish over the ten year period. I looked a while ago so don't have the figures at my fingertips. Anyway, I am speculating, but I think its a fair bet.

And getting into exact predictions from past history is a bit of red herring. There is never going to be an exact mapping of past growth onto future growth (or we'd all be very rich indeed). The general point is that over 10 years property gives a fair return (even if you had to hold into year 12 or 13 to see the best return).

HammersFan

ManAtHome wrote: »

Gearing works on the downside as well - 25% drop in prices is a 100% loss...

Only if you sell when prices are low. Why would anyone crysallise a loss unless they were absolutely desperate? Sensible gearing is a good thing if you have enough back-up cash to see you through some rainy days.

I would ask you this question. You can buy a house from me today, and I place in front of you two envelopes. One contains the price of the house in ten years time. The other contains the price of the house now. You can choose either envelope and pay the price inside the envelope for the house. But you do not know what the prices are inside the envelope. Would you chooise the price now, or the price in 10 years time?

IveSeenTheLight

m00m00 wrote: »

but buy to let speculators HAVE been basing their decisions on the hypothetical opportunity cost of HPI continuing, and outstripping other investments.

No.
I have BTL properties and I have based the decision of buying the properties on whether the rental income will cover the mortgage and associated costs.

I do not need to have a HPI to know that at the end of the mortgage term I will have investments that makes a monthly return which will have been paid for by others.

Most BTL landlords view their investments on a long term view and not on a short term gain accrued by HPI

John_Pierpoint

HammersFan wrote: »

There's something tangible about property, it has the feel of a secure investment. As long as people keep having babies and people keep living longer, there will be good demand for houses. Its hard to make that case for a lot of other investments.

I cannot take a 30 year view as I will most likely be dead or at least ga ga by then:D

Let us distinguish between "demand" and "need". In present day China there is a huge need for housing but the demand is kept in check by the average wage (<100 GBP per month ?). So let us look forward a generation (30 years):

There is a big need, world population has now trebled its 1960 figure (?) Global warming has turned the population of Canvey Island into refugees needing housing. Too little was done too late (?) However we are all living at a density of two people per habitable room because after buying scarce food and paying ridiculous prices for fossil fuels and had our carbon ration cards stamped, we can no longer afford to occupy nor to heat our large poorly insulated heritage detached homes.
There are a few "oligarchs" who can afford new well insulated homes with high tech.
heating, but the majority of us are living in urban squalor and burning pallet wood. Our gas suppliers are playing games with supply again and terrorists have blown up the other pipeline in a country called .......stan.

OK that is science fiction but why should your 30 year scenario be any more accurate than mine?

Harry.

PS. Cash buyers of rural property, at the bottom of the 2012 slump, at least enjoy a reasonable amount of space and an element of self sufficiency, though they are always at risk from marauding unemployables from the cities, on their way to loot what is left of luxury homes at low tide.
Those who hung onto their bonds too long, were wiped out by politicians, who faced by riots, tried to buy time by abandoning anti-inflation policies. We are now using "The new Euro" (valued at 10,000 original Euro) as our unit of exchange.

PPS Have we all noticed current grain prices? Not surprising really as the market has woken up to the realisation that there is only 100 days of consumption left in the granaries (lowest figure since aftermath of WWII). If we have a big volcano blow its top, the resulting "year with no summer" would leave millions no longer on the breadline. Unlikely I know, but it has happened before.

Back on thread, here is "adetorial" in The Times:
http://timesbusiness.typepad.com/money_weblog/2008/02/ten-tips-to-sur.html

IveSeenTheLight

John_Pierpoint wrote: »

OK that is science fiction but why should your 30 year scenario be any more accurate than mine?

I'm glad you put this in John.
I generally have agreed with your posts but when I saw this one I thought you had taken a leaf out of the SquatNow book of posts.

John_Pierpoint

IveSeenTheLight wrote: »

I generally have agreed with your posts but when I saw this one I thought you had taken a leaf out of the SquatNow book of posts.

Some of Squat's ideas have more than just an element of truth.
If he were elected as president of one of "the new democracies" that Bush seems to favour, I'm sure his one-man-one-vote-one-time-only poverty stricken voters would agree, as they become envious of the celebrity culture fed to them by their newly free media.? I just wish he would put some Wikipedia style intellectual rigour into his arguments.

Empires do fall to pieces regularly, Russia was in a real mess 10 years ago and now they have a president who gives them the same confidence as did Adolph for the Germans or Napoleon for the French. I doubt that the economic world will be readily recognisable in 30 years time. That is my major argument against Nuclear Power, I cannot see generations for the next 200,000 years safely looking after the tennis ball sized toxic waste, my family will be leaving them.
However it looks like I am going to be pushed in that direction, when in a few years time all properties in Europe, will have their HIPS energy report put on a public database. The good people of Guildford, or is it Cobham, or Surbiton, will have another web site to look up, in addition to "nethouseprices", and chatter about their neighbours:D

Eyesparky

John_Pierpoint wrote: »

Empires do fall to pieces regularly, Russia was in a real mess 10 years ago and now they have a president who gives them the same confidence as did Adolph for the Germans or Napoleon for the French.

... and someone who lies about the economic health of Russia as readily as Stalin. Interesting you mention Adolph, as Putin's former chief economic adviser says the parallels between 30's Germany and this decade's Russia have reached scary proportions. Let us hope that his future influence on European house prices is not as major as it could be.

ManAtHome

HammersFan wrote: »

Only if you sell when prices are low. Why would anyone crysallise a loss unless they were absolutely desperate? Sensible gearing is a good thing if you have enough back-up cash to see you through some rainy days.

The problem with sensible gearing is that a given number is only right at any one point in time. If prices go down, your gearing rises - if your loans need refinancing you could hit desperation pretty quickly (and we've already seen some of that from financial institutions).

Haven't bothered answering the "10 years" question as you didn't provide 10 years-worth of details about interest rates, credit availability, inflation, [un]employement, currency value, taxation etc (one thing I would bet on - if you ask 100 people for a "10 years time" valuation, you'll get close to 100 different answers)...

neverdespairgirl

HammersFan wrote: »

And getting into exact predictions from past history is a bit of red herring. There is never going to be an exact mapping of past growth onto future growth (or we'd all be very rich indeed). The general point is that over 10 years property gives a fair return (even if you had to hold into year 12 or 13 to see the best return).

Had you bought a house in, say, 1991, I don't think it had necessarily recovered its value in real terms by 2001. Depends where, of course, but in terms of average prices, it wasn't worth as much.