Monday, Dec 15, 2008
Barclays CEO joins HPC debate with 30% price drop prediction
Citywire: House prices already 25% lower, say estate agents
Estate agents are reporting actual house sale prices to be around 25% below their peak, making predictions of a 30% fall seem increasingly within reach. Online property search business Rightmove reported the figure alongside its report of a 10% drop in initial asking prices since their May peak.The agents’ suggestion of a 25% fall comes as Barclays chief executive John Varley told the Telegraph that Britain is only mid way through the house price slump. Varley was basing his comment on indices showing that house prices are down around 15% meaning the total fall could be near 30%.
Posted by jack c @ 10:16 AM (1340 views) Add Comment
25 Comments
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1. stillthinking said...
When repossessions peak we will be half way through the crash, which is what happened last time.
2. japanese uncle said...
So my prediction of 25% HPC by the end of fiscal 2008 materialised just a little ahead of schedule, in fact as originally predicted (before I played Brown and changed the goalpost) namely by the end of calendar 2008. In (calendar) 2009, we will see another 20% drop and another 15% plus in 2010. Long stagnation will follow thereafter. London will have to see a slightly severer drop of course.
3. Stevie Dee said...
Nice to see Varley is on the ball. About two years late.. bless
4. new user 2007 said...
The VIs are winning if this logic takes hold. They are talking up bargains by talking about ASKING prices that were incredibly extreme by mid-2007 and were taken even higher by EAs in early 2008, so they could make gullible buyers believe they were then getting a discount.
Until cuts in ACTUAL prices are at least 30% below their peak in mid-2007, no one should be thinking there are bargains in anyway.
5. amjidk said...
i think another 25% at least is on the cards for next year, surely prices will decline at least as much as 2008, if not more..
6. sold 2 rent 1 said...
If this HPC is to be seen in 5 Elliott Waves (3 down - 2 flat) Down, flat, down, flat, down
Wave 1: Q4 2007 - Q1 2009 (30pc drop)
Wave 3: Q3 2009 - Q4 2010 (35pc drop)
Wave 5: Q2 2011 - Q4 2011 (25pc drop)
Total 90pc drop in real prices.
then the strongest wave in the sequencve is usually wave 3.
If we see a 30pc correction by Q1 2009, we should see at least this again between Q3 2009 - Q4 2010 especially as this period should see the Eurozone break up (which we could be a member)
7. titaniccaptain said...
im going for 15% drop by april 2009.....then a further 35% by december 2009 then a further 10% in 2010.....and if im wrong ill eat a steak
8. Neil B said...
Being mid way through the housing slump doesnt necesarily mean that the % drop is half way through: Traditionaly price fall graphs are not linear.
9. crunchy said...
Artical: While many are predicting that the house price falls will go on until 2010, Rightmove says that 2009 is ‘the year of the property deal’ as the current low volume of sales is unsustainable.
Laugh. unsustainable for whom.
2009 should be worse than 08 due to unemployment, weak retail, and so forth, Many houses that have sold this year were bought by people selling their house to move on. Falling prices will effect the next wave of movers and thus reduce their buying power. I think there has been alot of denial also this year It was not untill around April that people started to even wake up to the credit crunch, let alone recession.
Capitulation for 2009. Remember If this is going to be a drawn out affair we cannot expect too greater falls for 2009. another 20% will do just fine.
Personally I do not see anything that will support a bottom just yet. Well I do, but I don't know who's reading this lol.
10. japanese uncle said...
titaniccaptain
You may wish to say American beef steak, then the stake is high enough indeed.
11. luckyjim said...
It would be helpful if people could justify their predictions.
I think broad predictions on average drops are a little pointless anyway - the shape of the market is changing and I think this is as significant as the overall drop. The bottom of the market has fallen by huge amounts - 25% or more - while larger homes have come down by only 5%. Could this be a permanent change ? The first step on the ladder is lower than before but the gaps between steps is greater ?
I certainly don't think the market moves as one huge lump with all house falling by a similar percentage.
12. str 2007 said...
luckjim
I've noticed similar.
One reason could be that larger houses have bigger cushions of equity in general and so are later to suffer falls as the rate of forced sales drags those of typical FTB properties with less equity.
Just a thought.
13. crunchy said...
1. stillthinking said...
When repossessions peak we will be half way through the crash, which is what happened last time.
crunchy: What happened last time was a walk in the park. Expect more futile intervention of empty words.
It will be best for Brown & Co to let this go untill mid 2010. Meanwhile they will have to try and deal with the economy first.
Monsterous task.
14. Mark Wadsworth said...
@ Luckyjim. Here's my chart showing the components of house prices since Q4 1952, adjusted for wages growth (click to enlarge):
As you can see, in the long run, prices increase pretty much in line with earnings, which is hardly surprising - housing in the UK is in more or less fixed supply and housing is a normal good.
Thus I expect an overall fall of 40% to 50% from peak (yes of course city centre new builds will fall much more and other areas or types of housing much less, we're talking overall averages here).
15. mark wadsworth said...
@ Luckyjim, here's my chart showing the components of house prices since Q4 1952, adjusted for wages growth (click to enlarge):
As you can see, in the long run, prices increase pretty much in line with earnings, which is hardly surprising - housing in the UK is in more or less fixed supply and housing is a normal good. Thus I expect overall average fall of 40% to 50%, higher for city centre new builds, lower in other areas or for other types of home.
16. luckyjim said...
Crunchy,
We had double figure interest rates last time - so everybody was affected. It didn't matter what you did for a living, where you lived, what your credit rating was like, you were affected by high interest rates. And house prices fell across the board. I bought at that time and I had a wide choice of houses to pick from - ALL at lower prices.
This time we have small numbers of people who are massively impacted - first time buyers who cannot get a mortgage, BTLers who bought at stupid prices and the (relatively few) people who will lose their jobs. Now when I look at the market I see a handfull of bargains at the lower end and huge numbers of houses still at 2007 prices with owners under no pressure to sell.
This crash has NOT been as severe as the last one. Not yet.
17. crunchy said...
13. luckyjim
This crash has NOT been as severe as the last one. Not yet. crunchy: I take your points
Cannot see a fat lady anywhere. Well not a lady anyway.
18. letthemfall said...
The high interest rates of last time (not high for all that long actually) have to be seen in the context of inflation and the price of houses then (lower than now compared to incomes). The availability and cost of credit is the main factor. Unemployment is another. Credit availability is worse than last time. Unemployment may well be worse than last time. This crash will be different in detail to the rest, but unless money is dropped by the fairies, there is nothing to prevent house prices reverting to mean (compared to incomes), and probably with a substantial overshoot.
19. crunchy said...
Speaking of interest rates. I am getting a bit concerned about Sterling, in that what can be done if it realy goes belly up.
Norman Lamont?
Anyone?
20. luckyjim said...
MW,
Thanks for that.
However, I don't think house price trends pre-1980 are relevant to the future. Everything changed when Thatcher started giving away council houses (and stopped building new ones) and our obsession with home ownership started. I could argue that footballers wages are going to drop by 90% on similar evidence.
I belive it is a sad fact that a bigger proportion of our incomes will continue to be spent on housing compared to our parents' generation. This is why we are 'better off' than our parents but have a lower quality of life - IMHO.
21. titaniccaptain said...
@ju as long as its got a pepper sauce i dont care. Lol
22. Rimmer said...
I think the article has a bit of reverse intent as it its thinking as matey says 30% and we are already at 25% the bottoms close, we all know its just started, the recession and job losses will sadly contineu for at least the next 2 years, IRs are at their limit of government incompitence and the Pound near history..
I agree with Sold2rent however dont forget a 30% fall on something that has already falled 30% is a smaller overall percentage and so forth, i do really see 50% as the norm set for early 2010 and maybe even 60% ( Overall peak to bottom ) HOWEVER................................ and this one is a biggie i dont think you will see house prices going up again until maybe 2014 - 2015 and then only marginally
23. Rimmer said...
Mark
Nice graph and mostly true - HOWEVER ........ ( again ) you have to take into account we have had the largest unsustainable bubble ever the past 5 years, i see what you have commented on being a correction initiated by the credit crunch, the recession will push prices below the line i feel lower than average for a few years
24. mark wadsworth said...
@ Luckyjim
"I could argue that footballers wages are going to drop by 90% on similar evidence."
Well, if you did a chart showing that the ratio of footballers wages to average wages showed a similar boom/bust tendency, I would believe you, but I don't think it would, AFAIAA for Premiership footballers it's more or less a straight line upwards.
25. Adaeres said...
Demand out stripping supply, low rates, return of confidence - 20% increase in 2011 a real possiblity.