Alfa

Interesting that if you extended this graph to the present day, it would be the first time we have seen house prices reach a peak and then plateau. A new paradigm perhaps?

It looks as if a crash in 2006 is even less likely than the one you were all hoping for in 2005. From the Telegraph:- "House prices to fall 20pc", Capital Economics warned last year. What happened? Prices rose 4.5pc. Capital Economics has now revised its forecast, predicting a 2pc decline in 2006 and 5pc over the following two years. But even that looks bearish. Also guys please change the graph on your front page. The levelling off period has been happening for some time now.

The fact is things ARE different this time. The following effects WILL cause a change to the so called 50 year norm: Selling off of council housing. Long term historically low interest rates. People using BTL as a pension vehicle. Joe Public beginning to inherit property. Lending multiples significantly increased. SIPPs able to invest in residential property. I do consider the growth days to be over, but as for a crash no way.

I also lived throught he last crash and IRs will have a BIG bearing on what happens this time. What the bears seem to forget is a lot more people have opted for interest only mortgages this time around. If the BoE wants to cut rates to avoid a crash, it can slash them to nearly 0%. Effectivley taking down the monthly repayment to next to nothing. I believe house prices in real terms will return to normal. But it is going to be a very, very long drawn out affair.

Perhaps to some my views may seem naive, but I did actually live through the last HPC as a FTB. That time we bought in pretty much at the bottom of the crash, not quite at the bottom but very nearly. This time around we own a decent house with no mortgage and have a pile of cash waiting to be injected into the BTL sector. I intend to get the timing right again. Reaching the bottom, I believe, will be a long drawn out affair. There will be no jumping in on false dawns for us. Interest rates WILL play a big part. The BoE can reduce rates to practically zero if they need to to prop things up. This happened in Japan and it can happen here.

House are not like shares, you cannot simply trade them on the open market. Also people have to live somewhere. Coupled with the effect of interest rates being slashed we may only see a fall of around 20% over the next couple of years. This will still equate to a real value drop of 30% allowing for inflation. I believe the following 8-10 years will then see a general stagnation with small peaks and troughs here and there. Allowing for inflation again this will eventually give us a true house price of around 60% of what we have today. Don't fall into the trap of looking at historical data for todays trends. High interest rates were the deciding factor last time. We are very unlikely to see rates of 15% this time around.

GB will do anything to ensure he succeeds Bliar into No. 10. This is a massive con trick to make FTBs pay more than the realistic market price for housing. A bribe effected with taxpayers and the Banks money to ensure the "no more boom and bust" slogan lives on. Utterly disgraceful. History will show GB as the man who broke Britain.

When the previous crash occurred prices in our neighbourhood fell by about a third for the average home, with the typical FTB flat dropping by around 40%. One must not forget however, this was during a period of extremely high interest rates. I remember friends of mine falling over themselves to take out fixed rate mortgages when the IR finally dropped below 10%. They couldn't believe their luck! With the BoE set to drop the IR again this autumn the envisaged HPC will not be a carbon copy of what happened in the early 90s.

Seventeen years ago I was in a position similar to the one that you FTBs find yourselves in today. Newly qualified into a respectable job I could only afford to buy a pokey 1 bed dwelling priced at about 60K. Thankfully through good fortune and judgement I held off from making a purchase. Two years later after a crash in prices and an increase in earnings I was able to buy a brand new 3 bed detached house for 75K. Three years after this, and at the bottom of the price cycle, the Mrs and I bought our current property, which is in a similar area in a pleasant town on the South Coast. This is a 4 bed detached house bought in 1993 for 97K (real price today circa 155k) and is currently valued at 325K. Thankfully for my children they will not be looking to buy their first property for another fifteen years, when hopefully this current madness has more than run its course. We, on the other hand, have been priced out of the next stage up the property ladder. The anticipated move, which would have been about 75K in normal times, is now 150K. I would feel like I had overspent by 75K. Whether in or out of the market we have all been shafted by the greed of the Banks and the EAs and the Government’s credit fuelled boom. As for future prices,however, I cannot predict how it will turn out for the FTBs of today. We were lucky enough before we made our first purchase to have interest rates of 15% coupled with a recession. It is not a case of history repeating itself for history is different this time. [/size]