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Bootle Predicts Extended Period Of Falling House Prices

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http://www.propertyweek.com/news/news-by-sector/residential/bootle-predicts-extended-period-of-falling-house-prices/5005691.article

Leading economist Roger Bootle kicked off Property Week’s RESI 10 event in Newport today with a sober analysis of a house market that is likely to remain fragile for some time.

In a keynote speech to 850 delegates , Bootle said that mortgage availability along with rising taxes and job cuts in the public sector would all contribute to lower house prices over the new few years.

“I don’ think there will be a crash. There will be an extended period when prices drift down,” he said.

But he added that “falling prices are a good thing” in housing just as they would be in any other area of consumer spending. House price inflation, he said, is “a mark of failure”.

He added: “That failure can be laid primarily at the door of government.

“This is a response to a planning regime that is too tight and restricted and a failure by government to come to terms with the fundamental imbalance between the amount of housing that people want in this country and the amount that is supplied.”

Bootle, the managing director of Capital Economics and famously bearish on housing, said the sector remains overvalued and has yet to endure the post-boom adjustment that has hit equities and commercial property despite falls in house prices over recent months.

“The year ahead is going to be the period when the chickens finally come home to roost for this market,” he told Property Week afterwards.

Bootle added: “From a macro demand point of view the impact of this is unlikely to be good. But in relation to the structure of the UK economy and the overall health going forward, I think, it’s about time too. It will be healthier in the long run if we have lower house prices.”

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What so many experts fail to recognise is the long history of booms and busts where property is concerned. More recently, some on here will recall David "Plateau" Lereah, the former head of the US EA organisation, who predicted a soft landing for house prices after a long period of boom. David resigned sometime in the second year of the US crash.

Boom and bust does not allow for plateaus or long periods of gentle decline. When the market switches from seller's advantage to buyer's prices always, not sometimes, drop sharply until a bottom is reached. With the most recent boom the precarious nature of house values is not to be undertestimated.

Given the huge run up in prices from 1998 to 2007 well in excess of 100% we can expect a correction of the order of 40-50%.

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"Given the huge run up in prices from 1998 to 2007 well in excess of 100% we can expect a correction of the order of 40-50%."

In Paper "Fiat" money terms YES, but in other assets EG Gold/Silver/oil/gas............overseas stocks etc i expect 1981 prices!!!!!

Mike

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Bootle puts alot of emphasis on supply and demand of the product, not so much on the credit to purchase the product.

no - he emphasised supply and want, which is itself a combination of demand , money availability and sentiment. The implication is that short term building and planning constraints add fuel to a bubble in its early stages when people first start getting irrationally exuberent.

The other thing is - he is hardly going to go to a property convention and start going on about 10 years of real terms falls due to the fallout of the credit crunch and tight mortgage lending - he, as a senior advisor to the treasury and the bank of england, is probably minded of the need for the property industry to keep working to satisfy ongoing need to build, and is likely to tailor his words to that end - it would be irresponsible for him to do anything that panicked the horses.

Edited by Si1

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indeed, he very very deliberately did not use the word 'demand'.

it's an old hobby horse of his:

...demand is not an absolute. It only has meaning in relation to people's ability and willingness to pay. I have a "demand" for an eight-bedroomed Georgian house in central London, complete with garden and garage. But sadly this "demand" is not realisable.

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Don't mention:

+ Interest rate policies,

+ Mortgage subsidies

+ Rental subsidies provided as benefits.

Don't mention those things, or start thinking about them, Roger, or you may start getting it right, for a change.

he is a senior adviser to the treasury and the BoE - he has to tread very carefully when presenting to a property junket

think about it - for the country's sake (and he is officially involved and responsible) - does he really want to deepen the depression in the building industry, reduce new-building provision for the UK over the next decade, and exacerbate the next cycle? careless words if he said something you are suggesting?

no, therefore he has spun it the way he did, in the national interest.

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he is a senior adviser to the treasury and the BoE - he has to tread very carefully when presenting to a property junket

think about it - for the country's sake (and he is officially involved and responsible) - does he really want to deepen the depression in the building industry, reduce new-building provision for the UK over the next decade, and exacerbate the next cycle? careless words if he said something you are suggesting?

no, therefore he has spun it the way he did, in the national interest.

+1

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  • 153 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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