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House Price Crash Forum

Tommy

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Everything posted by Tommy

  1. I will be a regular from now on... I have been reading the posts (without registering an account and not too regularly) for quite a while anyway.
  2. > in real terms (i.e. after adjusting for retail price inflation). Yes, again with the word "Real" they mean "Adjusted for inflation". Also 13% is over 2 years... Let's look at the data.: Period - index - Price Q2 1974 530.3 10,027 ... Q2 1976 620.9 11,739 So house prices increased from 10,027 to 11,739 in two years, so 15% in two years. It only takes an inflation of 28% over two years to make HPI adjusted for inflation go down 13% in two years... You said inflation was even higher than that at the time... So it all adds up. So, the article you posted talks about 13% decline in 2 years while in fact there has been a 15% rise in two years. > In 1976 HPI went negative at minus 13%, inflation was 16.5%, and IRs averaged out at 13% that year. > I bought my second property for £18k in 1976 which was sold as a new build in 1971 for £14k. > When you consider HPI was running at an annual 33% in 1973 I found this to be amazing at the time, > in fact I`ve always said 1976 was the best time to buy. Again, from your original post, 13% is over two years and not one and it's only negative when adjusted for inflation. Prices actually went up 15% in that term. HTH, Tommy
  3. My spreadsheet taken from the link in my original post tells me that prices were still increasing in 1976: Quarter Index Price Annual Change % Q4 1975 597.0 11,288 10.6 Q1 1976 609.2 11,519 10.9 Q2 1976 620.9 11,739 9.4 Q3 1976 634.6 11,999 9.3 Q4 1976 645.7 12,209 8.2 Q1 1977 656.3 12,409 7.7 I am sure there are diffent sources and different ways of calculating HPI. BOE rate in that year was changing very frequently, up and down, in the range from 9% to 15%. Anyway, you are painting a picture which is much different from todays: - inflation was much higher - interest rates were much higher - demand was much lower I must admit I was not around then, so your story is most surely more relevant than any spreadsheet I have! Regards, Tommy
  4. I might be wrong. We are all making predictions here... I cannot see any reason to laugh though, especially when you consider that since 1955 prices have only been falling once (early 90's). At that time inflation was 13.88% and the situation in general much different. The other 2 dips shown on the graph on the homepage of this site are only stagnations. It looks as if prices are going down because the graph factors-in inflation. In reality prices did not go down. Time will tell... Tommy
  5. In my humble opinion there will not be a "crash", so on this I agree with the professional advice of your friend. However, I doubt that the BTL guys would be buying properties in a crashing market. They would wisely wait until the end of the crash, and then, when prices are beginning to pick up again (or just before they do), only then, start buying again (and using house price inflation to start remortgaging every couple of years to get deposit for more and more houses). Here is in short my prediction for the future of house prices: I think house prices will stagnate for about 6-10 years (for wages to catch up) and then pick up again. I do not think we will have a crash. Yes, it has happened in the past, but I think the situation is very different today. The main graph on the homepage of this website shows "Real house prices" (I do not think the word 'Real' is the most appropriate), or in other words house prices adjusted for inflation. These kind of graphs show many corrections (crashes) since 1975, in fact they show 3 big ones (and the 4th one is to come). If you do not factor-in inflation, however, you get a completely different picture: Since 1955 (and not just 1975) there has not been any crash other than the one that started in 1990 and that lasted until 1995 (average price fell from 60k in 1990 to 51k in 1995). [http://www.nationwide.co.uk/hpi/downloads/UK_house_price_since_1952.xls] At that time, in 1990, the BOE interest rate was 13.88% and gradually went down to 6.63% in 1995. [http://www.bankofengland.co.uk/mfsd/iadb/Repo.asp?Travel=NIxIRx] Today interest rate is at 5.25% far from 13.88% and demand for new houses is still very high. So, unless the BOE brings rates higher than 6.5% I cannot see how prices could go down. All I can see is a stagnation in prices for a few years. This would still show as a crash on many graphs that factor-in inflation: inflation goes up, house prices stay the same = house prices adjusted for inflation go down. Yet house prices will not 'literally' go down. Regards, Tommy
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