House Price Crash Discussion Thread

John_Pierpoint

This posting is not directly related to house prices BUT there seems to be some muddled thinking that classes all immigrants as equal:

There are two important measures of immigrant:
1. Those who have skills and a work ethic versus those who do not.
2. Those who could go home versus those who cannot.

We spend a fortune per child on education and then another fortune per person investing to create a job.

There is an over large population in this country and almost certainly in this planet. Some countries, especially India and China, are aborting (killing) thousands of future citizens, because their families/the state don't want them.
We have immigrants arriving in this country with few skills at a rate 50 - 200K per year, that we cannot repatriate because their country of origin won't recognise them and have them back. Very few of these people will have any "demand" for housing,
where economic "demand" is defined as need plus access to money.

So if there is a recession then this previous posting is only partly true:
"With a dramatic downturn in the economy coming this way, this large transient population may head back home. Poland and other Easter Euro countries are currently playing catch-up with the West."

Unfortunately our social security system is likely to be overwhelmed as the valued, skilled, productive migrants move on and we are left with the ones that cannot move on, to be added to our own unproductive citizens forced onto social security.

I really cannot see these people supporting the housing market, more likely would be new regulations to make it harder for BTL landlords trying to evict them.

Labours "trick", on coming back to power, was to create the conditions for near full employment, where those who wanted to work could get work, thus cutting the burden of social security. However this time it is going to be difficult to create a low interest economic boom. The thought of 1970's style "Staglflation" should be giving the government sleepless nights.

nightwatchman

Quote by John_Pierpoint

1. Those who have skills and a work ethic versus those who do not.

Quote by John_Pierpoint

Unfortunately our social security system is likely to be overwhelmed as the valued, skilled, productive migrants move on and we are left with the ones that cannot move on, to be added to our own unproductive citizens forced onto social security.

End Quote

Hey John is not only the unskilled and without work ethic that are forced onto social security. I am Mr Average Earnings (I think) with household income aprox. £30.000. My wife and I have never been unemployed, have relatively good savings, and yet we can not afford a house.
For the time we rent however when we manage to have a childe of our own then we will have to depend on social security to provide for us.

bluejake

The bubble is about to burst. Hold on to your hats(Oh but it's different this time:D):

David Owen, the chief European economist at Dresdner Kleinwort, said there had only been four times since the Second World War when average house prices were more than seven times disposable incomes: 1948, 1979, 1988 and 2007. In each previous case, house prices then dropped by 30 per cent, adjusted for inflation.

The average home will lose £8,000 or more of its value this year, experts have warned....and that prices could fall not just in the next 12 months, but in subsequent years.

http://www.telegraph.co.uk/money/main.jhtml;jsessionid=YZIRQ3OVALQGHQFIQMFCFFWAVCBQYIV0?xml=/money/2008/01/02/cnhouses102.xml

Research for The Daily Telegraph forecasts house prices will drop by up to four per cent in 2008 - the first annual fall in 15 years.

The warning will cause alarm throughout the UK, where homeowners are already struggling under the weight of rising food and energy bills, a growing tax burden and higher mortgage payments.It comes amid fears that this year will at best be the weakest year for the economy since the early 1990s and that Britain could slip into a recession for the first time since 1992's "Black Wednesday".

merlinthehappypig

Britain this year faces the most difficult economic conditions since the dotcom bubble burst, according to the Financial Times’ annual survey of leading economists, which shows deepening pessimism about the impact of the global credit squeeze.

The annual survey of 55 top economists shows confidence has tumbled from a year ago. The experts also fear that compared with 2001-02, the scope for financial authorities to mitigate any downturn is far more limited.
Nearly nine in 10 think public finances are not in good order so there is no leeway for discretionary tax cuts or increases in public expenditure, and the third most-mentioned risk to the economy is inflation, limiting the ability of the Bank of England to cut interest rates.

Nearly two-thirds of the economists – from the City, academia and including five former members of the monetary policy committee – thought house prices would fall this year [2008], although there was wide disagreement over the effect of a housing downturn on the economy.

Even those usually optimistic sounded a more cautious note after five months of deepening financial market problems.

Many of the problems stem from abroad, especially the likelihood of a housing market slump in the US. Sir Howard Davies, director of the London School of Economics, saw a high probability of a recession in the US and added: “That would be likely to spread to the UK and some other European countries, notably Spain, where property prices seem similarly out of line.”

But at home, concerns centre on the limited ability of the government to mitigate any slowdown because it was still running a large deficit when the economy was performing strongly between 2004 and 2007.

Martin Weale, director of the National Institute of Economic and Social Research, said: “The public finances are in very poor shape . . . HM Treasury has managed several years of self-delusion. No doubt it will explain that it did not foresee the credit crisis and use this as an excuse.”

With inflationary pressures likely to be evident in the first half of 2008, the majority view was that life had got much tougher for the Bank of England, particularly since banks’ unwillingness to lend had reduced the ability of the Bank to influence monetary conditions.

Most, nevertheless, hoped the Bank would choose to turn a blind eye to short-term inflationary pressures and cut interest rates, since they believed that the coming economic slowdown would control inflation and the economy needed the stimulus of looser monetary policy.

With house prices falling across the country, most economists did not think a troubled housing market would be the cause of further weakness. Some of those predicting the sharpest falls in house prices were also the most confident about the economy’s ability to withstand a housing downturn.

WTF?_2

merlinthehappypig wrote: »

But at home, concerns centre on the limited ability of the government to mitigate any slowdown because it was still running a large deficit when the economy was performing strongly between 2004 and 2007.

Martin Weale, director of the National Institute of Economic and Social Research, said: “The public finances are in very poor shape . . . HM Treasury has managed several years of self-delusion. No doubt it will explain that it did not foresee the credit crisis and use this as an excuse.”

Yep - we've had over a decade without real recession and yet the government has managed to put the public finances into a perilous state by borrowing more than ever.

It pretty much sums up the whole sad economic situation - most of the recent good times have been built on getting up to one's neck in debt. Take away the easy credit and the party is over.

Just as well there's not about to be a recession or we'd all be deep in the brown stuff, eh?

simon109

Hi,

My gf and I are going to be first time buyers, we've found a property, survey's been done thats as far as it's got. We can't buy in the town we live in currently as it's too expensive so we are buying in the next county only a few miles out but's a lot cheaper. Now were hearing/reading about house price crashes and all that. With the mortgage for the house we are looking to purchace now we have to get it over 35yrs to afford the repayments ! I'm 30 now so it won't be paid off until I retire. So do we wait and buy something cheaper and have a shorter mortgage or buy now while we can, so confused

Simon.

WTF?_2

simon109 wrote: »

Hi,

My gf and I are going to be first time buyers, we've found a property, survey's been done thats as far as it's got. We can't buy in the town we live in currently as it's too expensive so we are buying in the next county only a few miles out but's a lot cheaper. Now were hearing/reading about house price crashes and all that. With the mortgage for the house we are looking to purchace now we have to get it over 35yrs to afford the repayments ! I'm 30 now so it won't be paid off until I retire. So do we wait and buy something cheaper and have a shorter mortgage or buy now while we can, so confused

Simon.

No-one can tell the future. However, trends are towards lower house prices right now.

Why not take another six months and look at the direction that the market is taking and keep saving to increase the size of your deposit? It's highly unlikely that they'll rise by much, even if they rise at all, so you won't lose out that way. If we see a definite trend in declining prices by that time, wait until you judge the market to be close to bottom before jumping in.

Definitely, I wouldn't feel good about taking on a 35 year mortgage to buy something just when the market appears to have peaked.

izzwizz_2

simon109 wrote: »

Hi,

My gf and I are going to be first time buyers, we've found a property, survey's been done thats as far as it's got. We can't buy in the town we live in currently as it's too expensive so we are buying in the next county only a few miles out but's a lot cheaper. Now were hearing/reading about house price crashes and all that. With the mortgage for the house we are looking to purchace now we have to get it over 35yrs to afford the repayments ! I'm 30 now so it won't be paid off until I retire. So do we wait and buy something cheaper and have a shorter mortgage or buy now while we can, so confused

Simon.

Hi Simon, it depends how long you intend to live in the property. We bought at the peak of the last housing boom with 100% mortgage and found ourselves in negative equity for a while, but when we sold the house 8 years later we still made a profit on the original price, and we had paid a few grand of the mortgage. Besides, we were living in a much nicer property than when we were renting (and we could do what we wanted to it with no srupid landlords coming round or giving notice).

If you've made an offer and had a survey done, it sounds like you decided that to buy was the right thing to do. Remember, it's a HOME you're buying, not an investment, so what you do depends on your own situation.

The only thing I'd say is that you're going to be paying an awful lot of interest on a 35 year mortgage - make sure you can overpay without penalty to reduce the term of the mortgage whenever you have extra funds available.

Best of luck whatever you decide.

bluejake

simon109 wrote: »

Hi,

My gf and I are going to be first time buyers, we've found a property, survey's been done thats as far as it's got. We can't buy in the town we live in currently as it's too expensive so we are buying in the next county only a few miles out but's a lot cheaper. Now were hearing/reading about house price crashes and all that. With the mortgage for the house we are looking to purchace now we have to get it over 35yrs to afford the repayments ! I'm 30 now so it won't be paid off until I retire. So do we wait and buy something cheaper and have a shorter mortgage or buy now while we can, so confused

Simon.

Why don't you reduce your offer. If you are hearing about house price crashes you can be sure the seller is too. I think the general view of the experts across the board is that the property price inflation of recent years is over. Make a low offer, if it is refused then property prices are probably going to be lower next year so there is no need to be in a hurry to get on the [strike]ladder[/strike] snake. Do you really want to be in negative equity if you can avoid it? The decision is yours but remember the market has changed so make sure your thinking takes that into account.

simon109

Thanks for the replies,

I guess we (I) am buying now as I'm 30 and worried if I leave it any longer I will never get on the ladder. Me and my gf have never lived together not even rented our own place, I worried that if we buy now and find out we can't live together in 6 months time and we have to sell and house and prices have fallen then we will be in a very bad situation trying to sell our house for less than we bought it for :eek:

I think it would be wise for us to rent for 6 months to see how the house prices go and if we like living together, if we don't we just go home and have only lost a few months renting money.

Simon.