House prices: disaster ahead - today's Times

michaels

HenryWeston wrote: »

Maybe when the dust settles most working people will be able to buy a reasonable house to live in and raise a family without bankrupting themselves, is this to much to ask in a 'wealthy' country like the UK.

I think there is some sort of fallacy of aggregation going on here. A price crash will not increase the stock of 'reasonable houses' and even if it deters a few migrants it will not significantly reduce the demand for such houses. So suppose a 'reasonable house' currently costs 50% of average take home pay and after a 50% price fall it will cost 25%. Now suddenly such a house is within range of a lot more people - and yet there are no more houses available so the odds are the price will not fall so far unless there is suddenly a change in how much of their income people are willing to pay for a reasonable house or there is a big fall in salaries or increase in borrowing costs in which case although prices have fallen the proportion of income required to secure one will stay the same.

fc123

dolcevita wrote: »

And that is the tragedy of boom and bust economics brodders.

That people like yourself have to suffer as a result of mis-management by people who are supposed to know what they're doing.

If things were kept on an even keel with wages keeping pace with prices and in tune with real economic growth built on a sustainable foundation none of this would be happening. and we would all be a lot happier.

Instead we've had massive growth built on cheap credit which has left the country, the government, the banks and the people up to their eyes in debt with nowhere to turn.

It is a tragedy which could so easily have been avoided or at least prepared for.

The worse thing is, one doesn't even notice it's happening at the time either. Well, I didn't. Just thought we were doing well...because, well.......we were reasonably talented, honest and very hardworking.
Didn't realise approx. 25% of my T/O was from the 'never never' either.

The classic 'Don't know you're at the top of the mountain until you slide down it' comes to mind.

Nenen

michaels wrote: »

I think there is some sort of fallacy of aggregation going on here. A price crash will not increase the stock of 'reasonable houses' and even if it deters a few migrants it will not significantly reduce the demand for such houses. So suppose a 'reasonable house' currently costs 50% of average take home pay and after a 50% price fall it will cost 25%. Now suddenly such a house is within range of a lot more people - and yet there are no more houses available so the odds are the price will not fall so far unless there is suddenly a change in how much of their income people are willing to pay for a reasonable house or there is a big fall in salaries or increase in borrowing costs in which case although prices have fallen the proportion of income required to secure one will stay the same.

Alternatively.... we could all try very hard to imagine a scenario whereby all the lenders who were previously falling over themselves to lend 5x salary multiples and 125% of value actually stop doing this and so people cannot borrow ridiculous amounts of money (which only fuels HPI)! In this 'Sci-fi setting' the world money markets suddenly stop lending, so that people without large deposits and/or provable incomes can't get mortgages. In this 'fantasy future' eventually, when mortgages cost less than 30% of take home pay, fewer people met the borrowing criteria set by the lenders and so the whole population can't all rush to buy a house...... I know it's hard to imagine but you can do it if you really try!

PS... I know sarcasm is the lowest form of wit... my excuse is PMT!

chappers

HenryWeston wrote: »

For the past ten years the banks have been literally throwing money at anyone with a pulse, Recently the easy credit has been turned off, its not hard to imagine what happens next to property prices.

Oh I am under no illusions as to the effects of the credit contraction it's just those who said 10,5,3 years ago it was going to happen and then said i told you so.

carolt wrote:

What is your timescale for them rising? Immediately, without any falls at all (after this 2.5% one, of course)? Ever? Or do you just mean they will fall now but at some point in the future they will rise beyond current levels?

If it's the first 2, I'm happy to stick my neck out and predict that prices will fall lower than they are at present. If you just mean the last one, then yes, I would guess 99.9% of people who post on here -myself included - believe that, unless we have a MASSIVE deflation, of course nominal prices will eventually return to current levels. But it could be a long time..and for real (ie incl. inflation) prices, even longer.

So, chappers - are you prepared to stick your neck out and tell us whether you think prices will ever fall lower than current levels? Because if not, I think you could have some explaining to do next month!

Or did you just mean that at some point prices would rise above current levels? If so, when, and is that nominal or real prices?

Just so as we're all clear.......

jamescredmond wrote:

chappers is just winding you up carol. calm down, girl!

couldn't possibly mean it... err... could you...chappers?

if you do, then please regale us all with the overwhelming evidence that only you seem to have access to.

(thinks: steady now, miladdo. he's got you at it as well!)

I was indeed throwing a heavy dose of sarcasm in there but being pushed I think we are in a better position to ride this downturn out. I will stick my neck out and say I think we will see a sharpish downward correction of maybe upto 20%, but more like 10-15%, but I also think we will see a fairly quick recovery again fuelled by those, who are currently saying they are going to wait for prices to fall, coming into the market.
So my guess is a fall of maybe up to 20% with a turnaround back up to current prices of 5-6 years. With some of the more stable areas seeing smaller falls and quicker recovery.

There you go you heard it here first

pobby wrote:

You are certainly right.House prices will rise.After a very steep fall,stagnation for a number of years,wages catch up then we will see them rise again.

jamescredmond

thanks for quantifying. it's your opinion and I accept it, even if I disagree.
and disagree we probably will over this ad infinitum (or at least until the market bottoms out - only then will we and joe public really know which of us is right).

btw, I'm optimistic by nature and I stand to 'lose' more than most. but the key indicators all point to a serious correction. i.e in excess of 25%. I'm puzzled that you cannot see this.

WTF?_2

dolcevita wrote: »

Hopefully you will now see the truth. This assumed wealth and prosperity is nothing but debt. Fuelled by cheap credit and inflated house prices.

The economic miracle is nothing but a sham built on selling ever more expensive houses to each other in order to borrow more money against the inflated value of said houses.
And while house prices go up, nobody notices that their wages have stagnated because people feel richer. And during these times it's easier to get more money from your bank manager than your employer.

But now things have turned you can't get more money from either.

Absolutely bang on.

People equated borrowed money with real wealth.
And they equated this 'wealth' and the resulting consumption with happiness.

I think that British society is in for a real shock. Especially since most people younger than their mid-30s have absolutely no idea what a recession is or what it entails.

tomstickland

michaels wrote: »

suppose a 'reasonable house' currently costs 50% of average take home pay and after a 50% price fall it will cost 25%. Now suddenly such a house is within range of a lot more people - and yet there are no more houses available so the odds are the price will not fall so far unless there is suddenly a change in how much of their income people are willing to pay for a reasonable house or there is a big fall in salaries or increase in borrowing costs in which case although prices have fallen the proportion of income required to secure one will stay the same.

Markets don't follow a logical supply-demand prediction though. If people generally think that prices are falling then they all wait for the them to fall to the bottom before buying, and in doing so cause them to fall.

chappers

jamescredmond wrote: »

thanks for quantifying. it's your opinion and I accept it, even if I disagree.
and disagree we probably will over this ad infinitum (or at least until the market bottoms out - only then will we and joe public really know which of us is right).

btw, I'm optimistic by nature and I stand to 'lose' more than most. but the key indicators all point to a serious correction. i.e in excess of 25%. I'm puzzled that you cannot see this.

I am aware and do realise the possibility for a larger more long lasting correction, and i will admit i am no financial analyst, however the economy is still holding up fairly well, generally, we still have high levels of employment and whilst the arrows in the intrest rate quiver are running low, the treasury does have other weapons at it's disposal, such as releasing more money to the lending markets and allowing those lenders with funds available to manipulate their securitisation. there is also alot of talk about forcing lenders to pass on intrest rate cuts to their borrowers , but personally I can't see that happening in a fair market economy.

dopester

chappers wrote: »

I am aware and do realise the possibility for a larger more long lasting correction, and i will admit i am no financial analyst

Whilst shaking my head in disbelief and going for the quote button I accidentally gave you a thumbs up for your post - when I couldn't disagree more with your post.

And that's right.. you are no financial analyst and completely unaware of just how much the Government / Treasury / BoE are restricted with room to move. The UK property market is sick... it doesn't need massive cocaine injections (it's already had enough)... it needs to let the illness work itself out.

van_persie

dopester wrote: »

Whilst shaking my head in disbelief and going for the quote button I accidentally gave you a thumbs up for your post - when I couldn't disagree more with your post.

And that's right.. you are no financial analyst and completely unaware of just how much the Government / Treasury / BoE are restricted with room to move. The UK property market is sick... it doesn't need massive cocaine injections (it's already had enough)... it needs to let the illness work itself out.

How very true.
And the reason why I clench a fist whenever Brown or his cronies come out with drivel to do with 'supporting' homeowners and First-Time Buyers - be it low mortgage rates, shared-equity schemes or 1,500 quid towards your deposit...it's a disgrace. Mortgage rates ARE low - it's the amount borrowed that's the problem, to fund over-priced properties.
They've based an entire economy on rising house prices and are petrified that if they crash, it'll take the economy with it.