House prices: disaster ahead - today's Times

carolt

http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article3716586.ece

House prices: disaster ahead

Brace yourself for a 30 per cent fall in house prices: that would only be back to 2004 levels

Anatole Kaletsky

After the biggest monthly drop in house prices since Black Wednesday one simple question is on thousands of lips in Britain this week: “How low can they go?”
A picture can be worth a thousand words, so let me double my usual allowance of enlightenment (or confusion) by drawing your attention to the chart linked to at the top of this article. The two lines on this chart provide what I believe to be the most accurate comparison possible between the housing cycles in America and Britain. It shows the relationship of average house prices to average disposable incomes, the broadest and most relevant measure of the money available to households in each economy for buying homes.
The message from this comparison can be summarised as follows: the boom in the British housing market has been much bigger than the one in America. And the long-dreaded correction in British house prices has hardly even started. So if you believe that events in America since house prices peaked there about 18 months ago could accurately be described as a “crisis” or even a “disaster”, you had better reach for the Book of Revelations to find an appropriate word for Britain's economic prospects in the next year or two.

neas

looks different to the HPC graph... That one looks like this crash is much bigger than the 90's one.

Generali

neas wrote: »

looks different to the HPC graph... That one looks like this crash is much bigger than the 90's one.

That's a fallacy known as reversion to mean - it assumes that houses have a memory of some sort and so know what their price should be.

Things do change over time: since the last peak in house prices (1989) the population has grown, structural changes (freedom of movement of labour) to and expansion of the EU have increased migration (a 2 way flow), incomes have risen and the price of food, clothing, furniture, consumer goods and electronics have fallen dramatically. All those things could support higher house prices.

Similarly things have changed since then that would push down house prices - an aging population (why have a 5 bed house when the kids have left home and your pension is losing value?), banking crisis/credit crunch, rising energy and food prices, falling public sector incomes, increased taxation.

My feeling is that house prices are way too high. I see that in the struggle that people have to buy a house. That they will fall to x% of disposable income or y% of gross income ofr z% of rental value is a bit of a trap economists like to fall into.

PS I reckon The Times will have no problems with your clear citation and quoting of a small part their work ! (see previous posts).

HenryWeston

carolt wrote: »

http://www.timesonline.co.uk/tol/comment/columnists/anatole_kaletsky/article3716586.ece

House prices: disaster ahead

Brace yourself for a 30 per cent fall in house prices: that would only be back to 2004 levels

That should say brace yourself for at least a 30% fall, IMO they have much further to fall to something resembling reality

Generali

HenryWeston wrote: »

That should say brace yourself for at least a 30% fall, IMO they have much further to fall to something resembling reality

It depends where IMO: places that actually have an economy where they sell goods and services that other people want should fare ok-ish. What bothers me the most about this boom is that it has dragged up the prices of properties in absolute hell-holes - someone that's paid £200k or more to live on some of London's roughest estates is going to be cursing themselves for years.

mr.broderick

HenryWeston wrote: »

That should say brace yourself for at least a 30% fall, IMO they have much further to fall to something resembling reality

Then what will happen when they fall 30% + and reach "reality" what in your honest opinion will then happen henry?

neas

chaos, mayhem.. suicides... bankruptcy, economic collapse?

carolt

FWIW, I have a fairly low opinion of Kaletsky. On this one I think he may well turn out to be right, even if for the wrong reasons....

JonnyBravo

Generali wrote: »

PS I reckon The Times will have no problems with your clear citation and quoting of a small part their work ! (see previous posts).

The lack of your own emphasis edited into the article also leaves you less open to charges of bias!

I, and I suspect a few others, know different though carolt so don't worry.

carolt

JonnyBravo wrote: »

The lack of your own emphasis edited into the article also leaves you less open to charges of bias!

I, and I suspect a few others, know different though carolt so don't worry.

So does my post meet with your high standards, then?

I suspect which side of the fence I'm on is not exactly a secret......

(Clue: It's the right one. )

JonnyBravo

carolt wrote: »

So does my post meet with your high standards, then?

I suspect which side of the fence I'm on is not exactly a secret......

(Clue: It's the right one. )

:rotfl:

Yes it does. Nice work.

Incidentally I've unearthed this little treasure. The following is an excerpt from your forthcoming school report!



"carolt's presentation is much improved. She clearly has grasped the importance of not doctoring quotes to suit her own agenda.
Her content is still a little one sided and her apparent glee in solemn moments in class can tend to wind up her classmates.

carolt has also been reluctant to pay for her school tuck up front at the start of the year. With lolly costs now through the roof she has to content herself with a lick of her friends lolly every now and again.
I look forward to the imminent lowering of lolly prices to enable carolt to get her own lolly and stop annoying her classmates.

carolt should also learn to stop picking her nose"



Nice going girl! I reckon great things lie ahead of you! Have you given any thought to your future career?
Oh and the nose thing.... come on carolt.... I thought it was only horrible little oikish lads who did that?