Tuesday, Feb 26, 2008
The Governor of the Bank of England, has issued a sober assessment of UK house prices.
FT: Mervyn King predicts 4 years of falling house prices
In yet another blow for the housing market, Mervyn King, the Governor of the Bank of England, has issued a sober assessment of UK house prices. The Governor warned that UK house prices may fall in real terms for as long as the next four years, as prices largely stayed the same or fell. He was speaking following the release of the Bank's quarterly inflation report, in which he dampened market hopes of a series of interest rate cuts.
Posted by jack c @ 08:05 AM (1238 views) Add Comment
19 Comments
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1. mark said...
gently gently... yeh yeh... how things have changed in the press recently, only a few months ago all was rosy and booming...
2. planning4acrash said...
Well. That's it, game's up! The uber bears will get sucked into more conspiracy theories. I know that i've dabbled, but this is the end point. Affordable homes in 4 to 6 yrs. Get saving or protecting you nest eggs you all, because our time has come!
3. harold said...
Watch the blame propaganda: Inflation from China; OPEC oil production; "credit crunch"; wheat tariffs. You name it, and it will be wheeled out to 'explain' why things are going t*ts up in the UK. Of course, GB and the central banks responsible will be blameless.
4. rickyb said...
This is not news. It's pretty much word for word what he said during the BoE inflation report press conference on 13th February.
5. holding out said...
I wouldn't read too much into this. This is not a new speech but a reinterpretation of the inflation report he gave a couple of weeks ago.
6. happyrenterz said...
agreed planning4acrash save now to buy in 3 to 4 years time
7. sacred contracts said...
He said "But broadly speaking, we are looking for quite a long period now of stability in house prices." So that means no huge falls then? Strangely I suspect there will be...
And I also think 4 years is rather hopeful... the last trough was in '96, if the peak was '07, then the next trough is likely to be at least as long in the making... longer if people really hold on to the dream of their houses being "worth" what they were apparently worth last year.
8. Adrian777uk said...
...And the thing we have to remember is this is Mervyn King trying to play it down! After all a man in his position has the power to cause a panic if he were so minded, but that would be irresponsible of him.
9. wdbeast said...
Although I agree that in the last HPC it took 5/6 years for the trough to be reached, that is based on all the statistics that we love to criticise, Halifax, Nationwide etc.
The market will, I am sure, move very slowly during the first half of 2008, but I think it will really start to crash next year and you may be able to grab a bargain at prices approaching the bottom of the market by as soon as Autumn 2010.
I am not saying that reported house price deflation will have reached the bottom by then, but some real bargains from heavily distressed sellers should be available by then, if you stay close to the market.
That’s only 30 months away, so cheer up everybody!
10. Ohdear said...
Once you've stopped cheering other peoples misery (if it comes to that), just for one minute try to work out how any bad news for the economy helps YOU? If like Johanthon Davis or Moneyweek Merryn, you've got a few quid stashed away then fair enough, pehaps you may be making a percentage call, If you simply believe that a reduction in house prices puts you all on a par with those that have houses today then indeed you are sadly mistaken!
11. Jonathan said...
@ Ohdear said "If you simply believe that a reduction in house prices puts you all on a par with those that have houses today then indeed you are sadly mistaken!"
Any reduction in house prices has to help first time buyers and recent grads who are currently, and would otherwise be permenantly, excluded from home ownership. If home owners lose their shirts (or family home) in a coming HPC, that would be a shame and is not something to celebrate. However if speculative investors lose their shirts (again not a cause for celebration - most are ordinary people and some are friends of mine) it's their problem as with any poor investment decision. Most will have piled in to make fabulous gains and not looked for the downside.
That's life. Sad, but there are only 1m BTL investor and the upside is that a greater majority will gain.
12. cornishman said...
King only predicted falls in real terms. I think the sub-text for that is that the BoE will do all it can to try to keep house prices static in pounds sterling.
13. happyrenterz said...
@ Ohdear I cheer house prices returning to the long term average relationship of salaries versus house prices. In the long run our society will be better off for the inevitable deflation of this bubble. Some people made risky decisions over extending themselves when there was a housing bubble and will now lose their homes. This would not be something to cheer about, partly due to their misery but also because we who did not make these reckless mistakes will be called upon to bail them out. This has already started with the Northern Rock saga.
14. paul said...
Seeing as the Bank of England created the boom in the first place, I think this latest missive should have been accompanied by an apology.
Seriously.
15. Anti Ohdear said...
Ohdear, yes I am cheering other people's misery for as long as these people are those who have contributed to the current situation. They deserve to loose everything because everything they have gained is not the result of their work but speculation. Personally, I have prepared myself very well to weather a massive recession and I am sure many more have. Now is our time and I will enjoy watching their downfall. I will be happy to buy their house for 50% less when they go bankrupt.
16. wdbeast said...
@Anti Ohdear, who are the 'they' that you hate so vehemently?
17. C'mon Correction said...
The amount of times people have talked down to me about not being a home-owner and that I'm an idiot for not buying (in a super over-inflated market??!) over the last 5 years. I don't pity the people who have over-stretched themselves. I educated myself about one of the biggest commitments of my life, if others don't do that - more fool them. That's life, don't whinge about if your house-price goes down - tough.
18. Ohdear said...
For the record I agree with 'happyrenterz', however I just hate to associate myself with the sad world of post no:15, as 'wdbeast' says who are 'they'? and if a couple of % drop in prices leaves you convinced it's now 'our time', and you have it all planned then you really are a deluded fool.
The bit that really shows you up is where you say 'They deserve to loose everything because everything they have gained is not the result of their work but speculation' then you follow that in the next sentence by saying that you'll be all made up if your 'speculation' of a 50% reduction in prices comes true!!
19. Fed Up said...
The last crash took place from 1988 - 92, with prices at sensible levels for the following five years until Mr Bean created the bubble. For this crash we should see a repeat with prices getting back to sensible levels from 2012/13 onwards. What happens then is anyone's guess. Another boom and bust for the next generation?
I agree with cornishman though, the BoE is going to devalue sterling as much as it can get away with, lying all the while about inflation figures.