Saturday, Jun 14, 2008
house prices must drop 63%
daily mail: house prices must drop 63%
reality is starting to set in that the housing bubble will not end with a 20% correction.
I have said all along the problem of disaffected youth starts with the inability to 'buy in' to normal society
Posted by taffee @ 08:44 AM (1294 views) Add Comment
16 Comments
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1. japanese uncle said...
Unfortunately prices will probably drop from the peak by nearly 70% at the over-shot bottom, and then recover to the 65%-drop level .
2. First Time Buyer said...
"A home was deemed ' affordable' if the interest payments on the mortgage would be 25 per cent or less of gross income". Why do people use gross income as a measure of affordability? That's equivalent to 38% of my net income and 50% if you include principal repayments. Is it normal to dedicate 50% of your net income to your accomodation? I don't think so. I want to live for god sake. It should be no more than 33%. It's when banks breached this basic rule that they allowed for this mess to be created. So I say bring on the massive fall in house prices.
3. str 2007 said...
When you realise -63% refers to making Westminster property affordable to FTB's you wonder why people buy this paper - still at least the headlines work in our favour.
Quite a few towns they consider to already be affordable.
4. hpwatcher said...
@japanese uncle 75%
Mail 63%
I'm getting very excited now!
5. Steve99 said...
Westminster has never ever been affordable. However lots of first time buyers have always bought there on account of their family wealth, this has been the case for eons. Westminster house prices are based on 'free' money, not wages. eg inheritance, city bonuses, pop stars, footballers etc
6. dohousescrashinthewoods said...
The simplest measure is that average houses are between 6 and 10 times average salary and the sustainable level is between 3 and 3.5 times salary. That gives a peak-to-average range of 42% - 70% fall, making a 50% drop look very plausible. Bear in mind this is to reach a sustainable level so any overshoot will add trimmings, and 63% is still in that range.
Or put it this way, house prices have tripled, but the average growth is about inflation+1%. Therefore, they need to drop by around 2/3 in today's money, less about 10-11% (cumulative 1% over 10 years). That's about 56%, not including overshoot.
7. dohousescrashinthewoods said...
The really cute thing is that we now talk about "a 20% correction" without even straining a whisker. A year ago, anything worse than "remaining flat" was considered a bit crazy.
The New Statesman article the other day reckoned "a crash is defined as a 20% fall over 2 years" which is about where media consensus is already!
8. Dave Marks said...
remember a statement from our leader..............NO MORE BOOM AND BUST...............another load of BULL
9. Tiggerthetiger said...
Houses will not drop in price by 55% in a short time period (say three years) .Prices will drop around 30% in that time then stagnate for ten to fifteen years which may amount to that in real terms but people will not realise and aprt from stressed sellers will not feel the pain.Buyers will slowly come back in and life will go on :-)
10. japanese uncle said...
hpwatcher
75% drop would be for London/Edinburgh, generally 65% will be the size of the drop.
11. iguana said...
I find the idea of agreeing with the Mail a very disturbing one, I seek comfort in assuming that the article was based upon the new years day blogs on this site. (69% anyone?)
12. mark wadsworth said...
I applaud dohousescrash's maths. About 50% looks about right to get us back to mid-1990s levels plus inflation.
13. angonamo said...
Guys,
Check out this listing on Rightmove …
http://www.rightmove.co.uk/viewdetails-17819602.rsp?pa_n=2&tr_t=buy
Guyhirn is a grotty village and these houses are next door to an even grottier pub. They’ve been up for sale for month’s (at least since Nov 07) – I don’t think any have been sold (there are 13 houses in total).
The listing details include this line …
‘we would ask for your co-operation in order that there will be no delay in agreeing the sale.’
Originally the developer had the land listed on RM for something like £660K, but had no takers. I know of a ‘Real’ property developer that offered the seller £330k, but was turned down as the seller said the site would be a £1.2m value when finished. This real developer told him to ‘build the houses himself’, as if the land was worth £660k as it would make more money. The developer that gave the advice, knew the land just wasn’t worth the asking price. He was surprised and pleased the seller of the land decided to take the advice and build himself.
I’m guessing the seller is now regretting his decision to build himself, in view of the ‘no delay’ line above.
Now check this listing on RM ….
http://www.rightmove.co.uk/viewdetails-17819599.rsp?pa_n=3&tr_t=buy
Same seller, same agent, same house, same conditions – but 23% less
Still a long way to go to meet the drops mentioned in these comments but the seller is moving the right way. Once he discounts by up to 50% he just needs to figure out how to move the houses from a shit hole like Guyhirn.
AngOnAMo
14. jonb said...
I get worried when the Daily Wail starts agreeing with me. OK I said 61%, but it is close enough.
15. Maihem said...
@angonamo The 23% lower price is for a 20% lesser share of the property.
16. Crashaddict said...
All this stuff about the Daily Mail... I get it...only on Saturday and really only for the tv supplement.. and of course Jonathan Cainer..I know the papers rubbish but arent they all?? The Express is worse, The Times and the Telegraph need a week shut in a small quiet room to read through, the Independant is boring and the Mirror, Sun, Star etc arent Newspapers anyway...theyre full of adverts and made up sordid stories that make you feel like a gossipy perv just by reading the headlines... Have I missed one out there... I got out of the market in 2004 and been waiting ever since. I'm quite intelligent, good sense of humour...nothing too smutty though.. dabble with commodity investing..(still waiting for my silver to come back up).. enjoy HPC blogs...Which paper do you recommend... ?