QUOTE
Words of warning over way the housing market is heading - Jeremy Gates
Do you remember the big house price crash of 1956? Nor do many others, as it happens, but as the cost of mortgages rises for the fourth time since August, it could be the key to the next worldwide crash in property prices.According to Fred Harrison, economist and author of Boom and Bust: House Prices and the Depression of 2010, due out in paperback this month, an 18-year sequence of property crashes runs faithfully through 1902, 1920, 1938, 1956, 1974 and 1992. Money Week magazine, which carries Mr Harrison's warnings and his last predictions in 2005, sees little reason to adjust the countdown to doom this time.
Nine years after each crash, says Harrison, comes a "mid-cycle recession" which is not quite so painful. These he dates to 1911, 1929, 1947, 1965, 1983 and 2001.
"By the start of next year, prices will stall, before falling, " he writes. "I believe UK prices will fall 20-30 per cent - and as we are seeing in Spain, Ireland and the US, the pain will not be limited to the UK. "The crash will be a global event, leading to a depression.
"The signs are everywhere: overblown real estate markets in India and China, record prices for property in Latin America and Africa, the rush to erect record-high skyscrapers in the Gulf states - all point to property markets heading for a synchronised bust-up."
Fred Harrison says many of the axioms we trust in the UK are not borne out around the world: if property prices supposedly rise when demand exceeds supply, why did they soar in Spain while output climbed to 800,000 a year? Similarly, low interest rates supposedly push house prices up - but Japan, even with zero interest rates, has had prices falling over a decade.Mr Harrison says: "In Britain, people are locked into a £1.3 trillion debt pile. And when we pay for land, we merely transfer income from one person to another.
"We do not add anything to the nation's wealth. One person's rise in housing wealth is a lifelong noose around another's neck. That's why we should worry about falling global savings and investment in industrial countries. "As spending dries up, company profits will be hit, leading to rising unemployment, more repossessions and further falls in property prices." Stirring stuff - but is it fantasy or a fateful warning?
Richard Donnell, director of research at property data bank Homesearch, said: "The timing of any turning point in a market is very hard to predict, but I am wary of using years in a timetable.
"What was the level of owner-occupation in 1938? See how much better our system handles debt today, than it did in the 1950s. Even so, Britain is not immune to a global crash. "At Homesearch, we do not forecast any major downturn. But we do see a prolonged period of low single digit annual house price rises, and risks which were there a couple of years ago are still there. "International comparisons are usually shaky: the US, for instance, has a large private rented sector, but in Britain almost nobody exits the housing
market once they have bought into it - until they trade down or exit the planet. "Even so, I am not aware that house price falls in the States so far are anything like 20 per cent. I can't see a doomsday scenario this side of the Atlantic either."
Henry Pryor at property website Primemove.com said: "I believe the market will see more than an easing off. The 20 per cent prediction is plausible, because 20 per cent tends to be the froth in house prices at the peak of the market.
"But I don't believe it would wipe out the equity held by the great majority of homeowners and they would see no need to put their homes on the market. A 30 per cent fall leaves people with little or no equity on a grand scale."Writing for a website called HousePriceCrash.co.uk, nobody would expect Jake Brumby to be cheerful: he backs a fall in house prices of 25 per cent over three years, and a further 20 per cent in the subsequent six years.
At London and country agents Savills, research director Yolande Barnes says: "I am not sure Mr Harrison's analysis - or really the idea of a proper value for property, begun by economist Roger Bootle in 2003 - is basically correct, but it is interesting he picks on 2010 for a new slump. "While the fundamentals of the market are not overstretched, I think that if the market doesn't slow later this year, we could be looking at a bit of a disaster.
"Certainly Central London prices are getting into bubble territory." "While the fundamentals of the market are not overstretched, if it doesn't slow later this year, we could be looking at a bit of a disaster. "
Do you remember the big house price crash of 1956? Nor do many others, as it happens, but as the cost of mortgages rises for the fourth time since August, it could be the key to the next worldwide crash in property prices.According to Fred Harrison, economist and author of Boom and Bust: House Prices and the Depression of 2010, due out in paperback this month, an 18-year sequence of property crashes runs faithfully through 1902, 1920, 1938, 1956, 1974 and 1992. Money Week magazine, which carries Mr Harrison's warnings and his last predictions in 2005, sees little reason to adjust the countdown to doom this time.
Nine years after each crash, says Harrison, comes a "mid-cycle recession" which is not quite so painful. These he dates to 1911, 1929, 1947, 1965, 1983 and 2001.
"By the start of next year, prices will stall, before falling, " he writes. "I believe UK prices will fall 20-30 per cent - and as we are seeing in Spain, Ireland and the US, the pain will not be limited to the UK. "The crash will be a global event, leading to a depression.
"The signs are everywhere: overblown real estate markets in India and China, record prices for property in Latin America and Africa, the rush to erect record-high skyscrapers in the Gulf states - all point to property markets heading for a synchronised bust-up."
Fred Harrison says many of the axioms we trust in the UK are not borne out around the world: if property prices supposedly rise when demand exceeds supply, why did they soar in Spain while output climbed to 800,000 a year? Similarly, low interest rates supposedly push house prices up - but Japan, even with zero interest rates, has had prices falling over a decade.Mr Harrison says: "In Britain, people are locked into a £1.3 trillion debt pile. And when we pay for land, we merely transfer income from one person to another.
"We do not add anything to the nation's wealth. One person's rise in housing wealth is a lifelong noose around another's neck. That's why we should worry about falling global savings and investment in industrial countries. "As spending dries up, company profits will be hit, leading to rising unemployment, more repossessions and further falls in property prices." Stirring stuff - but is it fantasy or a fateful warning?
Richard Donnell, director of research at property data bank Homesearch, said: "The timing of any turning point in a market is very hard to predict, but I am wary of using years in a timetable.
"What was the level of owner-occupation in 1938? See how much better our system handles debt today, than it did in the 1950s. Even so, Britain is not immune to a global crash. "At Homesearch, we do not forecast any major downturn. But we do see a prolonged period of low single digit annual house price rises, and risks which were there a couple of years ago are still there. "International comparisons are usually shaky: the US, for instance, has a large private rented sector, but in Britain almost nobody exits the housing
market once they have bought into it - until they trade down or exit the planet. "Even so, I am not aware that house price falls in the States so far are anything like 20 per cent. I can't see a doomsday scenario this side of the Atlantic either."
Henry Pryor at property website Primemove.com said: "I believe the market will see more than an easing off. The 20 per cent prediction is plausible, because 20 per cent tends to be the froth in house prices at the peak of the market.
"But I don't believe it would wipe out the equity held by the great majority of homeowners and they would see no need to put their homes on the market. A 30 per cent fall leaves people with little or no equity on a grand scale."Writing for a website called HousePriceCrash.co.uk, nobody would expect Jake Brumby to be cheerful: he backs a fall in house prices of 25 per cent over three years, and a further 20 per cent in the subsequent six years.
At London and country agents Savills, research director Yolande Barnes says: "I am not sure Mr Harrison's analysis - or really the idea of a proper value for property, begun by economist Roger Bootle in 2003 - is basically correct, but it is interesting he picks on 2010 for a new slump. "While the fundamentals of the market are not overstretched, I think that if the market doesn't slow later this year, we could be looking at a bit of a disaster.
"Certainly Central London prices are getting into bubble territory." "While the fundamentals of the market are not overstretched, if it doesn't slow later this year, we could be looking at a bit of a disaster. "