Jump to content
House Price Crash Forum
Sign in to follow this  
The McGlashan

Capitulation In Aberdeen

Recommended Posts

Hamish has kindly provided us with an anectotal case of property-market capitulation in Aberdeen.

Post sourced from here.

... a friend of mine is looking to upsize at the moment. He currently lives in a 3 bed house, has two kids, and is looking to move up to a 5 bed house. Whilst he is willing to sell his house for less than peak prices, he has been unable to find a larger family house with a similar % discount. Some discount, yes, but not enough to compensate. Meaning that the gap for him has widened, not narrowed. After looking for a year, and entering serious negotiations on half a dozen properties to no avail, he has now taken his house off the market completely and is building an extension, which will cost him 50K, but is less than half the cost of moving. I expect we'll see a lot more of this sort of thing.

In other markets, such as equities and commodities, capitulation is characterised by 'stop-loss' selling at any price as investors leave the market with burnt fingers.

Capitulation in the housing market differs from capitulation in these other markets, for the simple reason that, as Hamish has pointed out, housing itself differs as an asset class because it provides utility for the holder, in addition to any potential capital gains.

Therefore, in the case which Hamish has so kindly illustrated, we can see that the holder has chosen to maximise the utility value of his holding, having given up on realising any upside capital gains. He has re-evaluated his position and decided to make the best of the status quo.

His friend has most definitely left the market with his expectations in tatters. He has removed demand from the above-average end of the market - no new business for the mortgage lenders - no extra froth into the property market.

But he and his family must live somewhere. So, instead of regarding his house as a capital asset class, he has sensibly chosen to regard it as a home, and is behaving accordingly. He is no longer playing the musical chairs property game because the music has stopped - he has capitulated.

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   288 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.