Sunday, Apr 20, 2008
House prices to fall 10% this year and 5% next year - Yippeee
Telegraph: House price falls won’t send the UK into a recession
Strange thing happens when some people comment on house prices. There is something close to an inversion of the logic that is applied to other economic issues. When food prices go up - this is considered bad news. But when house prices go up, this is considered good news. But in many ways houses and food are similar - they are both necessities that you need to buy for as long as you live. Falling house prices are treated as thought the plague has been spotted. Derivatives contracts priced off the Halifax national house price index currently price in a 10 per cent fall in 2008 andaround a 5 per cent fall in 2009 (what about 2 bed flats?). A 10% fall will reduce GDP by 1%.
Posted by who stole my pension? @ 05:39 AM (921 views) Add Comment
13 Comments
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1. hpwatcher said...
Given inflation and also rising unemployment, in my view, there will be a recession.
The overall fall in house prices will be between 50 / 60%....and in some cases maybe a lot more.
2. confused76 said...
with 6 million currently on benefits, and artificially not counting as unemployment, there is going to be a recession, or a massive pound devaluation or both
3. David said...
It's just a shame nobody will be able to get any money from the banks to buy them!! What is the point of a HPC if this is the case?
4. planning4acrash said...
Vested interests start calling falls when inevitable, to control expectations. Expect greater falls.
And, GDP? I really can't see what high house prices have to do with LONG TERM gdp. To quote the sage daily mash, "According to the report estate agents are currently worth 'absolutely fuc$ all' to the British economy, which would be £600 billion better off if they all dropped dead overnight" - This isn't just fun, its true. Print money into a bubble like this, and a few benefit for a little while, but all are harmed by higher prices throughout the economy as inflation kicks in and spills over into the real economy.
5. waiting for the crash said...
In response to your commnet about peoples responses to rising house prices and people see this as a good thing. I think of this as most people own a property and they can benefit from rising prices, even though it will cost them more to buy there next house. Such as a arable farmer must now be thinking great rising wheat prices/biofuels, while a livestock farmer must be thinking bad rising prices. I suppose its to do with people perspections on if they benefit or not. Selfish lot humans!
6. planning4acrash said...
The only people who benefit from rising prices are the ones who print the money, which floods the system and causes price increases everybody else, who suffer from the price increases that benefit those who originally printed the money. BECAUSE, it takes a couple of years for price increases to occur, SO, the person who prints the money, buys into and creates a higher money supply, but buys at pre-inflation prices, and, they pay back their debt at a deflated value at a later date when their return is higher and repayments relatively lower as price increases feed through the system. The price increases then mean that all people must borrow money to buy the asset which was inflated in the first place by, the money printed to make loans in the first place. So its a self-reinforcing cycle that, ultimately is unsustainable, as the bubble inflates and then pops. Of course, the b(w)ankers generally call the top well and move into the next bubble, as members of the public get pounded by the fall in a one way bet.
It is legalised theft, and, default, and the b(w)ankers and government take all. How do government benefit? The fluctuations caused by bubbles cause social ills, rising prices cause poverty, hense a far greater need for income support, housing support, affordable housing, etc. Crashes cause unemployment, so a greater need for benefits, a greater need for government to create needless jobs. Bubbles create irrational distribution of resources, so more regulation, etc is needed to reign in the greed. For example, you guessed it, I'm a planner. Would we need so many town planners if development pressures were not stored up and concentrated into the hands of a handful of greedy builders who have total control over the mortgage market and can print pretty much as much money as they wish, to develop almost whatever they like? Whilst you and I cannot raise enough cash to build a bloomin extension. Would we need so many police, had the working man not been priced out & sold out? Would we have fraud on such large scales if markets were not so overheated?
So, banks benefit from charging interest on money they create from then air, they benefit from a crash because they confiscate assets. Big industry buys into markets at a low price, inflate the market with the cash they generated from the b(w)anks, and government benefit because the chaos that ensues lets them form an ever increasing grip on the community, moving to ever more draconian centralised control, which lets them further rig the market in favour of the corporations they represent.
Rant over, time for a fry up, yum!
7. mark said...
and to think the chancellor on TV this morning (bbc1) admitted they control the BOE and want houseprices to keep going up.... You have to listen carefully as he corrects himself and says the banks decision not ours... hmmm corruption again??? they only want votes stuff people stuff food, stuff everything, lets keep houseprices high so people think they are well off.....
8. letthemfall said...
I think the article is correct that house price falls do not in themselves cause recessions; rather it is the other way round. If Miles's forecast is right, house prices will remain well above trend in the coming few years, storing up more trouble for the future. This will be the result if the govt gets its way. But the article doesn't talk about current personal debt, at record levels we're told. A country cannot borrow indefinitely without incurring economic problems. So either the debt has to unwind, with attendant asset price falls, or we get inflation.
9. uncle tom said...
A 15% drop is not enough to price back in the priced out - nothing like enough.
This piece fails to appreciate the enormity of equity withdrawal on the economy. It's primary nature creating a spending merry-go-round that is ultimately responsible for over 10% of GDP
Buy-to-let speculation (as we have known it) is effectively dead, and the losses to the lenders will ensure that it doesn't return for a couple of generations, at least.
Yes we will have a recession, yes house prices will fall by more than 15%, but no I havn't invested in these long futures on the Halifax index - I don't who is offering them, and if I did, could I be sure I'd get my pay-out at the end of the day??
10. wiltshire said...
The best thing the government could do now is accept that the housing bubble has burst and stop trying to reinflate it. Sentiment has well and truly turned, more so than in at least a generation, and is likely to turn even further as the year progresses. All but the most blinkered fools must realise that to buy now would be economic suicide. Better to let the market settle before jumping in but it's got a long way to drop before it settles. Labour are going to hose money at the banking system but I cannot see the system reacting in the way Labour think it will.
I think (and I hope) Labour get hammered in the forthcoming local elections. It's time they realised that they are increasingly out of touch with the way the majority of people in this country think and it's time they went back to the drawing board rather than just carry on as if nothing is happening. Surely Labour MPs must realise if they allow the party to continue they're all going to lose at the next election?
Regarding house price inflation versus any other inflation. It's very strange isn't it how one is perceived to be fantastic and the other a disaster. I think we've a lot of people in this country who think using their home as a cash machine is a perfect solution to modern day life. Well they're about to find out that in reality the complete opposite is the case. House price inflation is soon going to be viewed as the disaster it really is.
11. mark said...
looks like petrol is going to shoot up in price because of the strike in scotland.... our local garages had queues this morning if stanlow go on strike then the end is nigh..... lol
12. planning4acrash said...
Is this what we get when the country lets politicians destroy unions with inflation & disputes, allows Iraq, ignores id cards, doesn't care about a devalued Sterling, lets them go nuclear. No wonder they are confident that they can fool us this time!
13. uncle tom said...
wiltshire said:
"Sentiment has well and truly turned, more so than in at least a generation"
Yes, but what is significant, is that in the last downturn no-one really believed it until it was forced upon them - media coverage was no more than a tenth what we are seeing today, and there was a genuine feeliong that the bad days of 'old' Labour and union bloody-mindedness were history, and the housing boom was our reward.
People really did not believe that house prices would fall - but today they do.
Harking back to the fairly modest slump of the early seventies (which I have to admit I can also remember!) I would observe that it was regarded by most people to be a direct consequence of the oil crisis and miners' strikes, that in turn led to the ousting of the ineffectual Heath, and the return of the crook, Wilson. A fairly short period of hope and optimism was comprehensively dashed..
What we are seeing today is without precedant - how the populace react is fascinating to watch..