House price crash?

bandraoi

what I love is all the people going around saying things like
"X (random influential economist) said that there will be a 40% drop in the price of house prices and Y (random senior city insider) believes it will be in the region of 25% - 35%)

and when you actually look at what what X and Y said they stated:
property is 40% overvalued
or
property is 25% - 35% overvalued

which is not the same thing at all.

dolce_vita

Generali wrote: »

Absolutely right. Suit retailers too supposedly. The reason? What's the first thing you buy with your redundancy cheque? A suit for all those interviews!

What do you think the outlook is for gold then Gen?

bluejake

bandraoi wrote: »

what I love is all the people going around saying things like
"X (random influential economist) said that there will be a 40% drop in the price of house prices and Y (random senior city insider) believes it will be in the region of 25% - 35%)

and when you actually look at what what X and Y said they stated:
property is 40% overvalued
or
property is 25% - 35% overvalued

which is not the same thing at all.

Please explain what you mean. I think when they talk of something being 'overvalued by 30%' they imply that they think there will be a correction or they wouldn't say something is 'overvalued'.

bandraoi

Well the experts are saying is that a house with a true value of £100,000 is currently valued at £140,000, ie it is on sale at 40% over the value they believe it has.

A house priced at £140,000 that drops in price by 40%, drops £56,000 and sells for £84,000 which is a very different figure altogether.

A 40% over valuation would correspond to a 28.6% drop in price.

Generali

dolce_vita wrote: »

What do you think the outlook is for gold then Gen?

I'm with the Barbarous Relic crowd myself. You spend a fortune digging the stuff out of a hole in the ground and then stick it in another, expensively guarded hole.

The real problem with gold IMO is that it's always a purely speculative purchase as you don't earn an income from it. Therefore you are relying on someone else paying more for it than you have to make any money - the Bigger Fool.

It'd certainly do well if Ron Paul wins the US election (unlikely but you never know) as he favours a return to the Gold Standard I believe.

Generali

bluejake wrote: »

Please explain what you mean. I think when they talk of something being 'overvalued by 30%' they imply that they think there will be a correction or they wouldn't say something is 'overvalued'.

Not necessarily. The valuation of an asset can remain above or below it's 'correct value' for years. Just look at the shares of internet and cigarette companies in the late 90s/early C21st for examples of each.

alan44

Unless there are any major unexpected financial events in 2008, then any kind of fall other than a very small one is unlikely.

In the areas I've looked at supply and demand seem roughly even still, although a lot lower than they have been. I get the impression that a lot of first time buyers are holding out waiting for a crash.

If [and most likely when] it doesn't happen, they will probably have started buying againg by the end of the year. Especially if interest rate cuts help restore confidence to the market.

Generali

alan44 wrote: »

Unless there are any major unexpected financial events in 2008, then any kind of fall other than a very small one is unlikely.

In the areas I've looked at supply and demand seem roughly even still, although a lot lower than they have been. I get the impression that a lot of first time buyers are holding out waiting for a crash.

If [and most likely when] it doesn't happen, they will probably have started buying againg by the end of the year. Especially if interest rate cuts help restore confidence to the market.

We'll see.

Personally, I suspect that demand is about to get sucked around the U-bend marked credit crunch as people find it increasingly tough to borrow unless they have a large amount of equity, good solid income and an excellent credit rating. So I think you're wrong. In fact I think this is already happening as shown by the shrinking number of sales.

We'll see what happens to auction prices in the spring. They should show what's really happening to the market as a large proportion of sellers are either forced or highly motivated. My guess is that auction prices realised will be shown to be substantially below what's going through estate agents.

hearts

bluejake wrote: »

Please explain what you mean. I think when they talk of something being 'overvalued by 30%' they imply that they think there will be a correction or they wouldn't say something is 'overvalued'.

The poster was quite right. Because someone says something is overvalued by X% it doesn't naturally follow that this means prices will fall by this or even at all. ;-)

Gorgeous_George

Firstly, I am not a professor of anything!

Secondly, sorry for the delay. Work is the curse of the drinking classes.

Turnbull2000 wrote: »

Unless you regard every pleb that jumped on the BTL bandwagon these past few years as "financially astute", do you believe the numbers will be there to sustain the housing/mortgage market?

Obviously it would be unlikely that 'every pleb' was financially astute. Equally, everyone who has rented over the greatest period of HPI is not financially naiive.

The point that I was making was that each lender will score their mortgage applications using a risk model. A BTL application from a wannabe LL with equity in his/her home will score higher than a FTBer with little or no credit history. Financially astute BTL LLs will earn a larger share of the limited funds available. Those who score less well will be locked into the rental market until their credit score improves.

Since the available funds will be limited, it follows that house prices will fall (at the very least, in real terms).

The housing market will be sustained as there are more people wanting houses than there are houses. Prices may not be sustained. I think there will be more BTL properties in the future and, if you need a number, I'll go for 42.



GG