House Price Crash Discussion Thread

lisyloo

This will cause the housing market to correct itself very quickly (over 3-4 months)

No way hose.
The last "correction" took place between 1989 and 1993-1996 (depending on which graph you look at or where you live, so 5 ish years is much more realistic.

hgllgh

lisyloo wrote: »

No way hose.
The last "correction" took place between 1989 and 1993-1996 (depending on which graph you look at or where you live, so 5 ish years is much more realistic.

yeh but "it's different this time"... people are more sensitive to the direction of house prices due to increased availability of this data on the internet and forums such as this one, and many will remember the last crash. Also, if the credit crunch continues then there simply won't be the funds available to support prices at their current levels therefore they will have to come down rather quickly. For these reasons I think it will be less than 5 years for the market to bottom out. Maybe 2 years ?

HammersFan

I predict house prices will be 2-3% higher this time next year on the back of interest rates being below 5% again. I can see a lot of money coming out of stocks and shares and going back into property with this cheaper credit. I could be wrong, but then so could anybody. Its just a punt.

m00m00

why do people think interest rates matter any more

interest rates of 2% wouldn't have an impact on house prices, if the money isn't there to borrow in the first place for most people

as long as Libor remains high, house prices will continue to fall. The sentiment has changed.

chriz1000

lisyloo wrote: »

No way hose.
The last "correction" took place between 1989 and 1993-1996 (depending on which graph you look at or where you live, so 5 ish years is much more realistic.

Yes but in today’s world we have the technology and awareness for things to move a lot more quickly than what they did 20 years ago. We have the internet, 24/7 access to news and the markets. With the added factor that people already know exactly what happened last time which will increase panic levels and start alarm bells ringing. When people panic, they want out quickly the only way to do that is to accept offers on there property which is much lower than the suggested market level. We have already seen a flat sell in Liverpool for less than 50% of its market value, imagine the impact just that one property will have on the value of the other flats in that building and surrounding area. Panic buying/selling is what will aid the speed of the correction if the market doesn’t improve soon.

LisbonLaura

It's the (attempted) selling that is panicky chriz, not the buying

but yes, the internet's jungle drum power is immense.

Take out crazy valuations & loans. Restore careful lending or have no lending at all (& yes, that is possible), & the true 'value' of property will be quite a shock.
Laugh now, but look again in five years, when the only UK 'asset' is seen for the total bubble it was.

Gorgeous_George

boinging wrote: »

These figures don't add up... If you started in Year 1 with 100K and assuming you got the current best rate after tax (4.5%), you would end up with £241,171 at the end of Year 20. This is based on all interest being put into the same savings account (why would you assume all interest is spent?).

Against getting 5K a year rent (£40,000 profit for 40% tax payer).

Therefore you would need property price to have gone up by 100% just to get the same return as investing. (i.e. 100K to 200K). Unless of course you invested your rent return into a similar savings account then it's more like 75%.

Plus this doesn't even take into account, all the repair bills, periods of no rent, plus the tax when you come to sell.

I accept some of your points but not all. Iassumed all interest (and rental income) was spent for simplicity.

If you are saving the interest and compounding it then you need to save the rent and compound that too. Bearing in mind that rent should increase by RPI (3%?) as well as earning interest, you will have saved about £200K (at 4.5%) and still own the house with an undetermined value. Yes, there will be costs but these depend largely on the tenants that you choose.

While I bought my BTL for £15.5K in 2001, a similar property can still be had for between £85K to £95K and my rental income is greater than £5K this financial year.

Like I said, if the numbers stack up then they stack up. If they don't, then they don't. Everyone should do their own appraisal and it is likely that the numbers won't stack up so easily with today's over-inflated house prices.

GG

hgllgh

Another sub prime hit. UBS for £5billion
http://www.thisismoney.co.uk/investing-and-markets/article.html?in_article_id=427394&in_page_id=3&ct=5

It's noticeable that every bank is taking a sub prime hit with many around the same level as UBS. Merryl Lynch is next in the media hotlist with a £3 billion loss. Just goes to show they all had their fingers in that rather dirty piece of American Pie!

Once these losses are "written down" does that mean they will not lose any more from the sub prime meltdown? Do they not have additional loans that could be defaulted on if there is a recession in the US which would surely signal further losses next year as people lose jobs and therefore are even more likely to lose their homes?

WTF?_2

hgllgh wrote: »

Another sub prime hit. UBS for £5billion
http://www.thisismoney.co.uk/investing-and-markets/article.html?in_article_id=427394&in_page_id=3&ct=5

It's noticeable that every bank is taking a sub prime hit with many around the same level as UBS. Merryl Lynch is next in the media hotlist with a £3 billion loss. Just goes to show they all had their fingers in that rather dirty piece of American Pie!

Once these losses are "written down" does that mean they will not lose any more from the sub prime meltdown? Do they not have additional loans that could be defaulted on if there is a recession in the US which would surely signal further losses next year as people lose jobs and therefore are even more likely to lose their homes?

They've been spinning the write-downs as being one-offs but this is the second one that UBS have announced from US sub-prime.

http://news.bbc.co.uk/1/hi/business/7021529.stm

Back in October they announced a 1.67bn quid loss and made out that it was the limit of their exposure - now with the latest disclosures it's up to 6.67bn pounds.

Looks like the strategy is to stagger the bad news over a couple of quarters. Who knows how much more of this stuff is out there?

And if you think this is bad, wait until personal debt defaults start to kick in following a recession triggered by falling house prices. Oh, and UK and other European 'sub-prime' which does exist in large amounts, despite desperate media attempts to spin it as an exclusive US problem.

Paul_N_4

If my memory serves me correctly, didn't the whole sub-prime meltdown only begin to appear around about summer of this year when those classed as sub-prime began to come off their 2/3 year fixed rate deals? And that it was only around this time that lenders began to tighten their lending criteria, obviously in response to the fact that investing in sub-prime was a big mistake.

But if the tighter lending only began in August this year, wouldn't it be safe to assume that sub-prime lending continued right up to this point? If so this has only really just begun. The fallout of sub-prime is going to continue for the next couple of years at least, or once the 2/3 year fixed rate deals that were given out to sub-prime borrowers up til the summer of '07 have expired.

These big right offs by the banks, are they predicted losses for the WHOLE of their sub-prime lending, or only the losses for the current financial year? If the later, then they'll probably be writing off sub-prime losses right into 2009 at least. One things for sure, they won't be dipping their fingers into sub-prime anymore and a stricter lending criteria will be with us for some time.