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When Is The Next Phase Of The Crash Coming?


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i got the best one:

2 bed house, Sidney St, London E1, at 2007 peak £305k.

In April one went for £275k - felt a bit gutted i missed it, about the only property ive looked at that i think i could have had.

One has just gone on this week with Foxtons for...£375k.

So 2007 is no longer the high point, the high point is this week...

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Same wherever I look. I regularly travel between Devon, Dorset, Wilts & Hampshire - and there are many properties that have been sitting for sale for 1 year or more. Friends and aquaintances are in the same boat.

Question: How does the average FTB earning £16-23k "afford" the "average" property at £180-200k?

Answer: With a LIAR LOAN.

Eric - i understand your crusade against LIAR LOANS - but i think you need to accept they are part of the game now - people buy properties way above their salary ranges - because they want to own a home themselves - its seen as progress when you buy a place rather than rent.

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Do you think they have all got this wrong? Recent articles

House price fall tipped after end of 'irrartional' rally

Get Ready for a Double Dipin UK Propery Prices

Then there is Ernst& Young /Rightmove and on and on and on all confirming the current blip is being driven by the cash rich and is unsustainable because where will the money come from to support a recovery at 2007 values plus ?

4 Reasons UK House Prices Will Keep Falling

...although there's been a big brouhaha about the latest HSBC 1.99% home loan offer, don't expect many other lenders to follow suit. A lot of lending power has now left the market for good. Almost £300bn of UK mortgage debt was securitised, i.e. packaged up and sold off from bank balance sheets onto the bond markets, between 2005 and 2007.

"That represents more than 90% of the growth in mortgage debt over that period", says CreditSights. And "the world isn't exactly clamouring for British securitised mortgages anymore, and won't be for a long time", says Matthew Lynn on Bloomberg. "With less money coming into the market, there won't be the same kind of demand for houses".

Yet a Rightmove survey at the end of August gave the "encouraging" signal that 78% of respondents reckoned UK house prices won't fall any further this year. And also that "the UK property industry is now seeing a virtuous circle of confidence building upon confidence".

Why's this another worry? Well, as Fidelity's Anthony Bolton explained in the weekend's FT about the stock market, "if everyone is positioned for the market to rise, it means these bullish expectations are already discounted" – i.e. factored into the price. As a result, "the market often moves to make the majority wrong and does the unexpected… so at turning points especially, the correct is the minority view".

And while there are plenty of differences between shares and houses, the principles of crowd behaviour are the same for every asset class. When almost everyone is bullish, get ready for a price fall. The near-8.5% bounce in property prices within the last six months (using Nationwide's figures at least) now looks ripe for a reversal.

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Nobody knows when the next phase of all of this is going to hit, nor do they know what the next phase is going to be. But some very odd things are happening.

Has anyone watched the stock market zoom up, or the price of gold increase relentlessly?

Asset prices tend to be inversely proportional to interest rates. After the near financial collapse last year, our government decided to cut interest rates and print money. This policy was designed to stop people hoarding cash.

After a bit of a time, this policy is now starting to work, people are moving out of cash into real assets, including property. A lot of people are finding that with interest rates so low, they can bid a lot of money for a house. Confidence has returned with avengence. I too see firm to rising prices where I live.

If you ask me, and nobody has, I would say that inflation has to be around the corner. All of that QE and government expenditure is going to have an effect. Add in the huge demand increase from councils buying houses for all of our illegal and legal immigrants, and house prices appear to be going only one way at the moment.

What the government should be doing now is raising interest rates, before this new boom gets out of control. They wont though, there is an election on the way. This is a really serious issue, as another pumping up of the bubble is going to mean something bad happens. If you ask me, we are likely to see some serious inflation. Remember, that normal interest rates are around 4% not 1/2%, and that low rate is super-expansionary. At best the economic situation demands that we return to a 4% level, and perhaps even 6% to calm things down a bit.

If inflation does let rip, and you havent bought a house, or you are invested in shares or some other real asset, you might well take a bit of a beating. Sooner or later though, interest rates are going to have to rise to get things under control again, and that would be a good time to move back into cash.

As for timing all of this, I havent a clue.

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Government meddling in interest rates and forthcoming plans by the BOE to charge banks for the privilege of hoarding all their capital with the BOE will probably mean that banks will continue to grow their lending books. All the scare stories on this website and others was that there were a considerable number households due to come off fixed rate mortgage deals in 2009 and most would be unable to remortgage due to negative equity, leading to repossessions and further price drops.

This does not yet appear to be the case, possibly because many households are now sitting on absurdly low SVRs and are reducing their debt rather than trying to remortgage or conversely being unable to remortgage. The reality is that if lending continues to pick up then those unlucky enough to have bought at 2007 peak prices on 90%+ LTV 2-year fixed rate mortgages will simply remortgage (due to prices picking up / paying off capital) or continue on SVR whilst BOE rate remains low.

If this continues to happen I can’t really see “the next phase of the crash†happening (was there every really a “crash†in the first place anyway?), unless interest rates rise high and fast, and by that I mean to 5%+ . Even with if rates shoot up to 3% overnight the BOE will still be historically low and money will still be cheap. Higher rates of 5%+ will come but this will take at least 2-3 years to nurse the economy back into shape before rates go this far.

Its interesting to read comments in relation to NW London. Living in N London myself (round the corner), it’s bizarre to see that prices have nearly returned to early 2007 levels. This is most probably due to the lack of properties on the market and the number of people trying to buy. I have two FTB friends who have been gazumped several times in the past few months, both with substantial deposits and with finance agreed.

There are also lots of young professional couples out there on combined salaries in excess of £70k paying substantial amounts in rent who are looking to buy. Most of these people are smart enough to know that buying somewhere where they will live for the next 5 years will be a great investment, particularly when inflation kicks in and eats away their mortgage.

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I know of an ex-council flat near Lambeth North that sold in August 2007 for £344,000 and despite all updating work having been done by the previous owner, it came back on the market a couple of months ago at £365,000.

What surprised me (and the agent apparently) is that until last week it was under offer for a figure in excess of £350,000. It's fallen through, but it beggars belief that people still don't appear to be doing any research about their potential property's price history.

I know what 3-bed ex-councils around there are work because I sold mine in February (completing in April) at pretty much the absolute bottom of the market. Just wanted rid because of risk of major works bills at some point in next 2-3 years and so I no longer had to deal with Southwark Council.

It just goes to show that sometimes as overpriced as a property may appear, there may still be someone who might offer it. So it's no wonder desperate / greedy people (depending which they are) list them at these prices. Occasionally someone will come along and offer what they want or possibly need. Doesn't make those of us who sold up a while ago feel any better about it, but them's the breaks.

The knock-on effect that property appearing to have sold at that price tho is another resident in the same block has put their property on the market at £350,000. This is still at least £50,000 more than it's worth, especially if Southwark Council do start announcing major works soon, but that's the knock-on effect of over-pricing on a very small scale.

Edited by Guy M
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Do you think they have all got this wrong? Recent articles

House price fall tipped after end of 'irrartional' rally

Get Ready for a Double Dipin UK Propery Prices

Then there is Ernst& Young /Rightmove and on and on and on all confirming the current blip is being driven by the cash rich and is unsustainable because where will the money come from to support a recovery at 2007 values plus ?

4 Reasons UK House Prices Will Keep Falling

Why not. Did any of these people predict the upturn in 1996 then correctly predict the slight crash at the end of 2007? I doubt they did. At the moment there is little evidence to support a further crash anytime soon in the south east and I suspect that it nothing starts to happen in the 6 months or so then it will be quite a while before the next crash.

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I'm getting a bit frustrated, we have STR fund sold probably for peak minus 10% in Sept 08 and now are finding houses are selling for peak prices again (NW London). When is phase 2 coming?

The masses don't know their ar5e from a hole in the ground. The market is unstable due to Government intervention. However the downward trend is inexorable. The current frenzy will take a while to subside, but it won't last.

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Why not. Did any of these people predict the upturn in 1996 then correctly predict the slight crash at the end of 2007? I doubt they did. At the moment there is little evidence to support a further crash anytime soon in the south east and I suspect that it nothing starts to happen in the 6 months or so then it will be quite a while before the next crash.

The market is out of freefall but is still on a strong downward trend. There is nothing to hold it up.

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Everyone CALM THE F*CK DOWN.

We all knew this was going to happen... it's the "bull trap", the "return to normal" part of the graph. (Can someone post it please, prefably along with the matching house price graph.)

Everything is still going exactly as expected. The maths is playing out. There is no economy to support house prices at current levels. This is simply the last of the honest money is being sucked from the market, just as expected, and just as expected many long term HPCers are bottling it and panic buying. The last few people with any savings are diving into the housing market and are about to be raped.

Calm down, keep your panties on, don't bottle it.

We all know what comes next, and it's not another boom.

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I keep an eye on E14 and St Albans and they have hardly dropped at all.

Sure you can get a shabby property cheaper than they once were but not the good ones or ones in a good area. :angry:

E14 is going crazy right now -- several properties have come on to the market recently at peak prices, and others which had been languishing for a while have gone sold STC.

I saw one place, a repo, which came on to the market at £320K. Within a couple of days it sold for £40K over asking price after the whole sealed bid shenanigans. The EA told me that it later got down-valued by the surveyor, but the guy buying it ploughed on ahead regardless.

I think the predictions that 2009 prices will end up higher than at the start of the year look sound right now. It's property boom II right now.

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"After the election next year Interest rates up QE stops"

Nonsense.

The Tories will want to keep the middle class home owners happy who have voted them into power having defected from Labour. The state workerfoce created by Labour will be the ones who get hit by pay freezes, Quangos will be no longer be funded, services will be cut. Rates will probably stay low (I mean less than 5%) to allow people to pay off personal debt. It's all part of the recovery process.

Raising rates will mean businesses can't borrow, people will lose their jobs and won't be able to pay their mortgages. The Tories will not let this happen

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funny this happens now i've bloomin' bought, but there are a few serious price reductions and a couple of sensibly priced new additions round by me now

stubbornness all summer, it looks like cracks are appearing. anyone else seeing this in mid staffs?

just got an email from an EA - a lock cottage, detached, by the canal, some work needed... 95k as an opening gambit. that is seriously cheap. maybe it has ghosts

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Sep 2008 Sep 2009 Change

Detached 178 days 287 days +61%

Semi 149 days 229 days +54%

Terraced 143 days 264 days +85%

Flat 153 days 255 days +67%

Some try and tell me my local market is not crashing...these figures are time on the market.. :lol::lol:

http://www.home.co.uk

I agree. There's a lot of nonsense of this thread. People looking at EA prices and Sold STC signs. Base your views on facts, not noise.

Comparing Oct 2007 selling prices to now.

W13

St Albans

E14 Something funny about the detached figures here. Can't be many dtached houses in E14.

Cambridge

Look at the prices, look at the volumes, look around the site and find the time on market. Crash is still on, this recovereh is a stagnation, next leg down coming soon (a matter of months).

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"After the election next year Interest rates up QE stops"

Nonsense.

The Tories will want to keep the middle class home owners happy who have voted them into power having defected from Labour. The state workerfoce created by Labour will be the ones who get hit by pay freezes, Quangos will be no longer be funded, services will be cut. Rates will probably stay low (I mean less than 5%) to allow people to pay off personal debt. It's all part of the recovery process.

Raising rates will mean businesses can't borrow, people will lose their jobs and won't be able to pay their mortgages. The Tories will not let this happen

The overnight leap in rates to 15% that Gordon used to bang on about happened under the tories? why not again?

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