House Price Crash Discussion Thread

Walter_J

pickledpink wrote: »

house prices DO increase over the years. Always.

</p>
Absolute rubbish.

You are making the elementary mistake of confusing 'nominal' prices with 'real' prices.

The nominal price of everything has gone up over the last 100 years because of general inflation. One wouldn't expect house prices to be any different. What counts is how house prices perform in relation to general inflation - i.e. 'real' house prices.

In the mid 1970's for instance, house prices remained static for 3 or 4 years at a time when inflation was running at between 15 and 24%. In reality then, house prices fell during this period by upwards of 50%, although if you look at nominal statistics it looks as though prices stayed constant!

In the house price crash of 1989-1993 nominal prices fell by around 25%, real prices by around 40% once inflation was taken into account.

The house price crash which is now starting will be be much worse. Inflation is historically very low, so virtually the full impact of price falls will be reflected in the nominal figures. This will result in considerable hardship for anyone with a big mortgage as their equity turns negative. Negative equity was unheard of in the crash of the 1970's because nominal prices didn't fall, and high inflation made mortgage payments progressively more affordable.

The other factor to consider this time is the fact that the incredible rise in house prices over the last eight years shows all the signs of being a classic speculative bubble. This bubble has been inflated by a huge increase in demand fed by the ready availabilty of cheap credit, the buy to let phenomina, and fraudulent mortgage lending/borrowing.

We all know what happens when bubbles reach bursting point. Never in the history of mankind has a speculative bubble ended in a 'soft landing'!

We are currently at the peak of the housing cycle. It is a higher peak than normal, which means only that the coming trough will be deeper than normal. You say that property is a good investment. A lot of the time you are of course, right. Like anything else, however, it depends when you buy it and when you sell it. Now is the time to be selling.

The time to be buying is not likely to be for another 4 or 5 years. That's how long house price crashes last.

I should add that I have absolutely no vested interest in house prices. We own our family home outright and have no plans to move. It doesn't matter a fig to me whether it is worth £300k or £150k

I would like my kids to have the opportunity to buy their own places when they get a bit older, however.

Cheaper, sustainable house prices will benefit society in general in the long run. It is a pity though, that a lot of people are about to lose their shirts.

Walter_J

nightwatchman wrote: »

I have already +30k in the bank. Tahnks to this MSE next year I will have an extra 5k. What I don’t have is the insanity to splash it out to buy a house that I can not afford under the circumstances.

Bide your time, mate.

Renting is currently much cheaper than owning - work your togs off and stash as much as you can in the bank.

House prices are going to be falling for the next 4 or 5 years. It would be amazing if they didn't fall by 40% overall.Keep your credit rating good, save a decent deposit, and when you are ready to buy in a few years time at the bottom of the market you will be treated like royalty!

When you do come to buy - buy somewhere you will be happy living for the next 20 years. By then you'll be able to afford it as prices become more affordable and your deposit and earning power go up.</p>

Incidentally, my wife was 39 when she had our first baby - don't panic just yet!
Good luck.

pickledpink

nightwatchman wrote: »

Pickledpink

If you have alternative accommodation to live then you did well. Selling and getting out of the property market with £440k profit is something that the most of us we don’t dare to dream. If I was in your place I would had done exactly the same. To be honest I envy you.

However if you have to buy a new house of the same standards to the one that you sold then all your profit will be absorbed by your new mortgage. This £440k in this case will be only paper earnings.

Yes the property will go up in the long term, this is undeniable. Please bear in mind though that there are examples of decline and stagnation that has last decades. The most obvious example in my memory is Japan were the property prices have hardly increased since 80’s.

Nightwatchman,

I''ve paid cash for my new property - so I shan't have a mortgage. Incidentally, my new property is (in my opinion) actually nicer than the one I sold; only difference is that I've moved 10 miles out of inner London to a much greener, leafier and prettier area.

This 'paper money' you speak is actually very valuable; without it we we wouldn't be able to make deals or buy properties would we? If for some reason (say I was moving abroad) I could easily liquify my 'paper money' into cash and buy outright abroad. But I'm extremely happy with my new property and I intend to live there for many years to come.

As for the situation in Japan - I don't really see the comparison. We are the UK. But if property stagnates it shan't affect me as all other property will stagnate too.

I'm just curious why with you having such a pessimistic outlook on the future of the property market, you are so desperate to get on the ladder?

pickledpink

Walter_J wrote: »

</p>
Absolute rubbish.

You are making the elementary mistake of confusing 'nominal' prices with 'real' prices.

The nominal price of everything has gone up over the last 100 years because of general inflation. One wouldn't expect house prices to be any different. What counts is how house prices perform in relation to general inflation - i.e. 'real' house prices.

In the mid 1970's for instance, house prices remained static for 3 or 4 years at a time when inflation was running at between 15 and 24%. In reality then, house prices fell during this period by upwards of 50%, although if you look at nominal statistics it looks as though prices stayed constant!

In the house price crash of 1989-1993 nominal prices fell by around 25%, real prices by around 40% once inflation was taken into account.

The house price crash which is now starting will be be much worse. Inflation is historically very low, so virtually the full impact of price falls will be reflected in the nominal figures. This will result in considerable hardship for anyone with a big mortgage as their equity turns negative. Negative equity was unheard of in the crash of the 1970's because nominal prices didn't fall, and high inflation made mortgage payments progressively more affordable.

The other factor to consider this time is the fact that the incredible rise in house prices over the last eight years shows all the signs of being a classic speculative bubble. This bubble has been inflated by a huge increase in demand fed by the ready availabilty of cheap credit, the buy to let phenomina, and fraudulent mortgage lending/borrowing.

We all know what happens when bubbles reach bursting point. Never in the history of mankind has a speculative bubble ended in a 'soft landing'!

We are currently at the peak of the housing cycle. It is a higher peak than normal, which means only that the coming trough will be deeper than normal. You say that property is a good investment. A lot of the time you are of course, right. Like anything else, however, it depends when you buy it and when you sell it. Now is the time to be selling.

The time to be buying is not likely to be for another 4 or 5 years. That's how long house price crashes last.

I should add that I have absolutely no vested interest in house prices. We own our family home outright and have no plans to move. It doesn't matter a fig to me whether it is worth £300k or £150k

I would like my kids to have the opportunity to buy their own places when they get a bit older, however.

Cheaper, sustainable house prices will benefit society in general in the long run. It is a pity though, that a lot of people are about to lose their shirts.

Well if you think property prices do not rise over the years, why is it so difficult for FTB's to get on the ladder? Why have so many people become so rich simply through owning their own property?

Property always rises in the long term; of course we have blips and falls - but they always pick up again! If you yourself are so confident that properties are going to crash, why don't you sell your place now and double (or treble) your money in 2 or 3 years time? No.................didn't think you were that confident!:rotfl:

pickledpink

Walter_J wrote: »

Bide your time, mate.

Renting is currently much cheaper than owning - work your togs off and stash as much as you can in the bank.

House prices are going to be falling for the next 4 or 5 years. It would be amazing if they didn't fall by 40% overall.Keep your credit rating good, save a decent deposit, and when you are ready to buy in a few years time at the bottom of the market you will be treated like royalty!

When you do come to buy - buy somewhere you will be happy living for the next 20 years. By then you'll be able to afford it as prices become more affordable and your deposit and earning power go up.</p>

Incidentally, my wife was 39 when she had our first baby - don't panic just yet!
Good luck.

"House prices are going to be falling for the next 4 or 5 years":rotfl:


And you'd know I suppose, Walter. Anything else you can tell us with your crystal ball?

Walter_J

pickledpink wrote: »

Well if you think property prices do not rise over the years, why is it so difficult for FTB's to get on the ladder? Why have so many people become so rich simply through owning their own property?

Because we are right at the top of the cycle when prices are at their highest.

In 1996 it was very easy for FTBers to get on the ladder bacause prices were low. Your logic wouldn't have made much sense if you had spouted it then. At that time many people were still in negative equity in properties they had bought in the late 1980's

The housing market like any other is cyclical and making it work for you is all about timing. Your timing is obviously good. At least have the good grace to admit that this has more to do with luck than judgement.

pickledpink wrote: »

Property always rises in the long term; of course we have blips and falls - but they always pick up again! If you yourself are so confident that properties are going to crash, why don't you sell your place now and double (or treble) your money in 2 or 3 years time? No.................didn't think you were that confident

My house is my home. It's where my family and myself live, and we're happy with it. We're also lucky enough to have been able to pay the mortgage off - so it is very cheap to live in. I do not look on it as an 'investment'.

Because we'll probably never sell it.

carpetbelly

Walter_J wrote: »

Because we are right at the top of the cycle when prices are at their highest.

I'd like to point out that this is your opinion though. Until it's happened this cannot be said to be a fact. Yes, I won't disagree it seems we're in for a couple of years of flux, some people say crashing some people say stagnation (which tbh is still a real price drop but not as hard). No one knows until it's happened. Everyone around here seems to have a crystal ball and speak as if it's the truth.

Walter_J wrote: »

In 1996 it was very easy for FTBers to get on the ladder bacause prices were low. Your logic wouldn't have made much sense if you had spouted it then. At that time many people were still in negative equity in properties they had bought in the late 1980's

It was also a very different market in 1996. BTL mortgage products were only just being released. I mean, you go look at the figures, by 1999 only 70k had been taken up keeping that first rung quite open for FTBs. By the end of last year that figure was up to 700k. That's quite a number of properties that would normally go to FTBs being taken up for investment purposes.
The market has changed but people seem to think that the cycles will remain the same. I disagree with this but happy to wait and see what happens.

Walter_J wrote: »

The housing market like any other is cyclical and making it work for you is all about timing. Your timing is obviously good. At least have the good grace to admit that this has more to do with luck than judgement.

I'll agree with you a little on that one. Timing does almost seem to have been a generational thing (slight generalisation there but I don't fancy writing an essay).

Walter_J wrote: »

My house is my home. It's where my family and myself live, and we're happy with it. We're also lucky enough to have been able to pay the mortgage off - so it is very cheap to live in. I do not look on it as an 'investment'.

Because we'll probably never sell it.

If everyone thought like that it would be a much better market. Houses are homes, not a way to make money but some people will also see property and think pound signs.

Walter_J

carpetbelly wrote: »

I'd like to point out that this is your opinion though. Until it's happened this cannot be said to be a fact.

Of course its my opinion!

Isn't that what internet discussion forums are for - to put forward one's opinions?

I'll put my mortgage on it that I'm right though!

Ooops, I forgot...

... I haven't got a mortgage!

pickledpink

Well thank you very much, Walter, for allowing others to have opinions too!:T

As it happens, I don't agree with your opinion either, but I don't think I'm better than you because I have different views.:rolleyes:

The problem with your argument is that you categorically state what's going to happen in the property market! Have you told Gordon Brown by any chance?:rotfl:

You're only going on assumptions and no-one really knows what's going to happen. BUT, looking back over the last century it's proven that even when their is a dive/crash/stagnation - it ALWAYS bounces back plus MORE!

I bet YOUR house is twice what it was just FIVE years ago; and even if there is a slump - property will never drop back to those prices.

And now interest rates are set to go down AGAIN, it will stave off a crash of the proportions that some of you sour-graped property-wannabee's are gleefully hoping for.

The UK has severe housing shortage, and as long as demand outstrips supply property will always be in demand - and that keeps prices stable (even accounting for the odd blip every decade or so).

Anyway, except for a very small reduction, property prices haven't dropped that much at all: and going by all the news reports etc it's doubtful they'll drop much further given the proposed TWO interest rate cuts for the new year!

carpetbelly

Walter_J wrote: »

Of course its my opinion!

Isn't that what internet discussion forums are for - to put forward one's opinions?

I'll put my mortgage on it that I'm right though!

Ooops, I forgot...

... I haven't got a mortgage!

Judging by some of the comments I've received before by stating what my opinion is you'd have thought otherwise

I wasn't having a go btw, I can definately see where you're coming from but agree to disagree