Tuesday, Aug 07, 2007
40% House Price Rise Unlikely
Fool.co.uk: 40% House Price Rise Unlikely
For some time, the loudest commentators and analysts have been positive about house prices.
Many of you will have seen today that the National Housing Federation (NHF) expects house prices to rise 40% by 2012, with the average price then breaching £300,000. With compounding, this means an average increase of roughly 8% per year. This is in line with the long-term average, which Halifax says is 8% since 1983.
Posted by david20040_0 @ 06:26 PM (169 views) Add Comment
13 Comments
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1. david20040_0 said...
Up or down? Which way?????????
The only article I could find commenting on yesterday's main headline.
2. david20040_0 said...
Even the author believes that hosuing is stilla good bet
"If I was asked if house prices will crash soon and I was pressed for a direct, simple, one word answer of 'Yes' or 'No', my response would be that, the general trend for house prices, over the long-term, is upwards and that, if there is a crash, it won't last forever, so anyone willing to stay in the same house for years and who can afford repayments, even if interest rates rise, should be fine.
3. inbreda said...
Yeah. Genius. In his own words, if he was pushed for a yes or no answer he would say....
...just about everything other than "yes" or "no".
"the general trend for house prices, over the long-term, is upwards........blah, blah, blah"
Should've been a politician.
4. paul said...
The reason he can't make a clear cut answer?
Look at what he says about previous writers who have made predictions. No point making a rod for your own back.
5. david20040_0 said...
Basically he hasn't got a clue but just wanted to use the 40% eye catching headline.
6. captain sensible said...
"my response would be that, the general trend for house prices, over the long-term, is upwards".
This doesn't really add anything to the debate, as it is patently true if one looks back at enough previous decades. The problem is that not many people (certainly most BTL investors) OWN property. They have property registered in their name and they have a associated interest only mortgage debt which will never be paid off until the property is sold, Capital Gains Tax deducted etc. Unless investors plan to leave both property and debt to their offspring (a new form of landed gentry?) - difficult because of Inheritance Tax - they should be considering the best time to sell. If we are currently at the top of a market and they miss the chance now, how do they know that interest rates won't again at some point hit 15-20%, leading to a repossession sale and all their expected profit being eaten away by repo costs? Even if this doesn't happen, how do they know that at age 60 or 65 when they plan to liquidate their property assets, this won't be in the middle of a property recession, again wiping out their expected profit? Yes, they may be able to wait another ten or fifteen years (interest rates permitting) until the market has recovered, but who wants to invest in property for 30+ years and then only be able to spend the profit on a place in a more upmarket nursing home? In essence, most of the recent property investors have only experienced running their 'business' in a benign economic climate and because their business is funded entirely on debt, their risk is massive if the climate becomes less benign, even for only a short time. In my opinion, anyone who is sitting on a decent profit and is not selling up is a fool. The nearest equivalent I can think of is having tripled your money at the gambling table, continuing to play in the hope of tripling it again. Yes you may, but far more often you walk away with nothing.
7. paul said...
Yes, that is true, David.
8. inbreda said...
David,
not saying it's a bad thing or anything but I get the distinct impression that you are a lot less bullish than you used to be.
Am I right?
9. david20040_0 said...
I think now it has just got really really stupid and if something pricks this bubble we are going to witness a mega crash.
I have always wanted house prices to drop I just couldn't see it happening before.
I am a bear at heart but my opinions often come across as bullish.
10. Cccbm said...
Dear Captain Sensible.
I like you Casino analogy however anyone who plays will tell you that the casino is guaranateed to win over time because the odds are in their favour. (2.77% in roulette with one zero)
In property time does not have a negative effect but a positive one. Folk demand wage rises, your food bill goes up your rates go up and so will the property value.
40 % is certainly a headline grabber BUT it is also only THE AVERAGE and will certainly be achieved in the time frame iwth a year or two varience for any possible drop.
Oh also upmarket nursing homes are better than no nursing home and folks are certainly healthier now and need to plan longterm until their 90's. That's some 30 years AFTER retirement. SO MAKE PLANS and be sensible.
11. dohousescrashinthewoods said...
If we get a hangover to mirror the current astronomical debt binge, it could be multiple decades before future peaks exceed the current peak. The general trend may be up, but the next peak has a good chance of being lower than this one (real terms, etc.).
Why? Because if people and companies go as deeply bust as the boom was giddily high, psychologically it will take a lot longer for people to forget and be persuaded to make the same mistake again, possibly even skipping a generation of reactionary neurotic savers.
Those who expected to retire on property profits may find that even their children won't get the profit they were hoping for.
12. paul said...
Using the Six Modes of Thinking
Employ each of these when pondering a situation.
1. Objective Thinking
Detach yourself and use logic.
2. Critical Thinking
Look for all negative aspects.
3. Positive Thinking
Look for all positive aspects.
4. Creative Thinking
“Think outside the box.” Entertain all ideas and don’t question the ideas just yet, let them flow. Mind Maps are a good tool for this type of analysis.
5. Intuitive Thinking
Listen to your emotions.
6. Modal Thinking
Examine your personal biases towards the subject.
We have a lot of personal bias here, just as estate agents, lenders and property section editors do. So rational bulls should be as welcome here as rational bears.
13. doomwatch said...
To be fair, his last senence is
"Just don't ask me for an indirect answer."
which I'm reading as CRASH COMING.