Wednesday, Mar 11, 2009
UK house prices will plummet
MoneyWeek: UK house prices will plummet: look at this scary chart
If you're thinking of getting back into the British housing market – don't. Any recovery in confidence helped by low interest rates and money pumping will be short-lived, says Dominic Frisby. In the longer run, prices are headed nowhere but down.
Posted by damien @ 10:55 AM (2015 views) Add Comment
17 Comments
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1. cyril said...
This is a bit of a flimsy argument - suggests that the last housing crash was actually the first stage in a mega-housing boom. But he's using cash prices and so has not taken into account the devaluation of money over time. While I sincerely hope house prices do plummet, I can't imagine any government allowing it to happen. Inflation is the answer to all our current problems (and someone else's problem in the future).
2. mountain goat said...
I like this chart. House prices are falling but their relative value is actually still forming a blow-off peak. Big falls yet to come.
3. need-a-crash said...
@1. cyril
I initially thought using the 90's crash as a Bear Trap was a bit flimsy but on reflection a lot of people on here have suggested that today's problems are the result of global banking, abandonment of the gold standard in the US and various other factors that do go back to the 1980's, so perhaps there's something in the argument.
4. techieman said...
Cyril is that the same government that wont allow falls to happen? Thats what we were being told when the BTLs used to frequent this site.
5. afrobaggie said...
What ever happened to Glorious Sunshine and Green Bay et al?
6. Liddiard said...
It is GOOD to start reading more and more about loan to income ratios and their relevance to what is going to happen to property prices. Its simple really, if lending is returning to sensible levels, which it HAS to because irrepsonsible lending broke the banks, then property prices are going to have to fall 40 -50% and they will not rise for a long long time and then only in line with wages.
7. cyril said...
@ 4 - I mean that the Govt would prefer Zimbabwe-style economic policy rather than total collapse in house prices! But I take your point that propping up house prices is not directly controllable.
8. growler said...
@1. "Inflation is the answer to all our current problems"
And it's that inflation (that will happen) that will send interest rates soaring relative to today. That will lead to devastation for the mortgage payers which will cause the serious slump yet to come.
9. techieman said...
afrobaggie @ 5 - am guessing soon as there is any countertrend move over say three months they will be back - telling us we have missed our chance and prices are off to the moon!
10. Dbc Reed said...
Good to see someone high-lighting the 1973 spike when house prices rose 70% in 18 months after 20 years of staying level (you youngsters don't know you're born.) What happened with gold was that Nixon closed the "gold window" by which people exporting to the US could opt to be paid in gold rather than US currency.Heath in the Uk figured that he too could abandon any care over exchange rates and in 1972 Chancellor Tony Barber introduced the infamous giveaway budget and house prices took off (the Tories having abolished a workable tax on homeownership in 1963. Meanwhile the oil producing countries did n't like being paid in depreciating currencies and upped oil prices (basically to keep level) and the British unions tried to maintain wage levels .
Somehow the Tories emerged from all this untainted by any suggestion of incompetence and proceeded to hammer the unions as the real enemy while paying their voters in continuously rising house prices and later a few one-off privatisations.
New Labour has bought into the same Big Lie electoral strategy but just too many people have gotten into property (not just the middle class and wannabes) and the whole Buy Votes with rising house prices scam has collapsed to ruin the capitalist system.
11. Maddison said...
As people spend less of their disposable income on things like food compared to 20 years ago assets will always be the subject of price rises and falls which are more extreme
12. Scrooge said...
We all would have been alright & now you've gone & posted this graph - everyones now rushing around creating mass-hysteria.
We're doomed.....sell sell take you savings out the banks - save yourselves....arrghhhhhhhh
13. str 2007 said...
Growler
''And it's that inflation (that will happen) that will send interest rates soaring relative to today. That will lead to devastation for the mortgage payers which will cause the serious slump yet to come.''
I suspect they will simply come up with another measure for inflation to allow them to keep interest rates low.
They changed from RPI to CPI as soon as house prices started rising - they'll soon change back when it suits them or invent another measure altogether.
14. str 2007 said...
DBC
Thanks for the history lesson, I didn't know all that.
15. mark wadsworth said...
STR 2007, re DBC's history lesson, the 70% rise was bad enough, but they smoothed over the subsequent fall (back to a sensible price earning ratio) by having twenty per cent plus inflation for three years - nominal prices hardly fell in the next two or three years, before the late 1970s bubblette.
16. landofconfusion said...
11. str 2007 said...
"They changed from RPI to CPI as soon as house prices started rising - they'll soon change back when it suits them or invent another measure altogether."
They changed from RPI to CPI because that's what's used in Europe; the house price effect was just incidental.
That's not to say that they won't later fiddle the measure though.
17. crunchy said...
I am sitting back waiting for oil to become yet another lethal weapon. I feel it is only a question of time before it is used again. The next
time to the upside. If you can't beat them join them.