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House Prices Could Drop 10% Next Year

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House prices could drop 10% next year, Capital Economics forecasts.

Paul Diggle, property economist at Capital Economics, says the Office of Budget Responsibility prediction of a 3.1% fall is modest.

He says: “Unlike the OBR’s forecast of a relatively modest decline of 3.1% in house prices in 2011, we believe that a more significant fall next year, perhaps of 10%, is plausible.

“Looking ahead, the continued boon to home-owners from the favourable level of interest rates makes predicting the pace of further falls in house prices difficult.

“But with access to credit still very constrained, demand dropping away quickly, and selling conditions deteriorating noticeably, we expect the rate of decline of house prices to accelerate next year.

“What’s more, public sector job losses as a result of the fiscal contraction, which we think could be more than double the revised 330,000 estimated by the OBR on Monday, will also weigh on house prices.

He adds: “2010 was a year in two halves in terms of house prices. Modest growth in the first six months was largely still a reflection of the supply shortages which characterised 2009.

“But in the second half of the year, the poor fundamentals underlying the housing market have weighed on prices, reversing the rises seen in the early part of the year. It now seems probable that 2010 will be one of just six years in the past three decades in which nominal house prices have fallen on an annual basis.”

http://www.mortgagestrategy.co.uk/economy/house-prices-could-drop-10-next-year/1022929.article

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Nothing will really shake our housing market unless there is a trigger. So far, we have escaped virtually unscathed from the Brown years with HPI more or less intact (maybe 10-12% down from peak and falling every so gently), no significant job losses, PMI steaming ahead, Sterling resilient, FTSE strong, rents soaring, record low IR.....

So what will shake houses?

Massive job losses due to a collapse in demand for our exports

Apart from that I am beginning to think the market will continue to decline slowly and maybe flatten out for years. The government is doing all it can to preserve HPI and will stop at nothing to prevent a crash (20% down in a year). But the chances of a meltdown due to job losses is, IMO, extremely high. The price must be paid for Brown's 10TR debt burden placed on this country.

Edited by Realistbear

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Nothing will really shake our housing market unless there is a trigger. So far, we have escaped virtually unscathed from the Brown years with HPI more or less intact (maybe 10-12% down from peak and falling every so gently), no significant job losses, PMI steaming ahead, Sterling resilient, FTSE strong, rents soaring, record low IR.....

So what will shake houses?

Massive job losses due to a collapse in demand for our exports

Apart from that I am beginning to think the market will continue to decline slowly and maybe flatten out for years. The government is doing all it can to preserve HPI and will stop at nothing to prevent a crash (20% down in a year). But the chances of a meltdown due to job losses is, IMO, extremely high. The price must be paid for Brown's 10TR debt burden placed on this country.

Absolutely the decline has to be managed, with a fast fall there is the prospect of 'bargain hunters' interrupting the process with a dead cat bounce. Inflation is part of that policy to reduce the debt burden, wages will deflate by the use of inflation. Much of this was discussed during Maggies years, the exact figure of inflation that doesn't set off wage has to be chosen and they seem to have it for now at 3.2% or so. Obviously its above the official target but we are not getting calls for inflation matching/busting pay rises which are devastating to the economy. Inflation get rid of the national debt as well, however much of UK debt interest is index linked.

What is the inflation adjusted fall in house prices since peak? is there a chart anywhere?

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Nothing will really shake our housing market unless there is a trigger. So far, we have escaped virtually unscathed from the Brown years with HPI more or less intact (maybe 10-12% down from peak and falling every so gently), no significant job losses, PMI steaming ahead, Sterling resilient, FTSE strong, rents soaring, record low IR.....

So what will shake houses?

Massive job losses due to a collapse in demand for our exports

Apart from that I am beginning to think the market will continue to decline slowly and maybe flatten out for years. The government is doing all it can to preserve HPI and will stop at nothing to prevent a crash (20% down in a year). But the chances of a meltdown due to job losses is, IMO, extremely high. The price must be paid for Brown's 10TR debt burden placed on this country.

Disagree with this theory about needing some huge external events.

House prices trail credit availability like a lost puppy.

Now the credit bubble has burst and more sensible lending practises are in place, house prices will continue to drift down and be eroded by inflation.

Most people on this site seem to be lusting after £300k+ houses in the south east, but if you are happy with something elsewhere and more modest, the price of a starter home is slowly becoming viable.

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Absolutely the decline has to be managed, with a fast fall there is the prospect of 'bargain hunters' interrupting the process with a dead cat bounce. Inflation is part of that policy to reduce the debt burden, wages will deflate by the use of inflation. Much of this was discussed during Maggies years, the exact figure of inflation that doesn't set off wage has to be chosen and they seem to have it for now at 3.2% or so. Obviously its above the official target but we are not getting calls for inflation matching/busting pay rises which are devastating to the economy. Inflation get rid of the national debt as well, however much of UK debt interest is index linked.

What is the inflation adjusted fall in house prices since peak? is there a chart anywhere?

Have you considered that inflation is going to exacerbate the problem without wage inflation?

Are you suggesting stable gross earnings, rising taxes and ever increasing (other)living costs from lower net incomes will support inflated prices?

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Have you considered that inflation is going to exacerbate the problem without wage inflation?

Are you suggesting stable gross earnings, rising taxes and ever increasing (other)living costs from lower net incomes will support inflated prices?

>>the problem

Confused.

Which problem? debt, inflation, house prices or...?

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Are you suggesting stable gross earnings, rising taxes and ever increasing (other)living costs from lower net incomes will support inflated prices?

Agreed, finances are being pinched from all sides. Sure there are exceptions like BT increasing wages at 5%, but they're in the minority.

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House prices could drop 10% next year, Capital Economics forecasts.

The million dollar question is;

Are forecasts like this seen by the government/banks/media as a call to attempt preventative action?

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>>the problem

Confused.

Which problem? debt, inflation, house prices or...?

The problem? unaffordable housing.

I could have made clearer. I was referring to your highltighted text requesting an inflation adjusted figure - i assumed you felt the relevance of the inflation adjusted figure would help support prices temporarily as the tone of your reply was to bring prices down slowly.

My view is that without wage inflation, an increase in the cost of other goods will impact on how much people can afford to spend on a mortgage.

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Disagree with this theory about needing some huge external events.

House prices trail credit availability like a lost puppy.

Now the credit bubble has burst and more sensible lending practises are in place, house prices will continue to drift down and be eroded by inflation.

Most people on this site seem to be lusting after £300k+ houses in the south east, but if you are happy with something elsewhere and more modest, the price of a starter home is slowly becoming viable.

If you work in London, have all your friends and family in London etc. then you're looking at a baseline of about £250k for a 2/3 bed house in somewhere like Walthamstow, Brockley or East Ham - that's about as cheap as it gets to find something substantial closer to town. You could buy a 2 bed in an ex-LHA block for about the average UK house price (165K or so), but you probably wouldn't want to raise a family there if you have any choice.

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House came on in the Summer for 249K, EA told me that others were interested, get in now, quick, in a desirable location... just dropped to 229K.

Another EA just tried his damndest to sell me a house that has dropped 70K in asking price since it came on the market earlier this year. Then tried it with 2 or 3 other houses.

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Most people on this site seem to be lusting after £300k+ houses in the south east, but if you are happy with something elsewhere and more modest, the price of a starter home is slowly becoming viable.

That is true. Where I am, there is a definate increase in the number of 'ok' properties in my price range and some are sticking on the market for a long time. I saw one recently that has been on since May and the owners desperate to sell, liked it but have decided against it for now as it comes with questionable access issues between its neighbours. Should the price drop again in the New Year however I may take a second look though. The agent keeps emailing me encouraging to go and see it again.

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The problem? unaffordable housing.

I could have made clearer. I was referring to your highltighted text requesting an inflation adjusted figure - i assumed you felt the relevance of the inflation adjusted figure would help support prices temporarily as the tone of your reply was to bring prices down slowly.

My view is that without wage inflation, an increase in the cost of other goods will impact on how much people can afford to spend on a mortgage.

Ok. I see your point. Basically house prices will keep falling until they are eventually affordable. I'd say its impossible to say how long becuase the charts indicate its way longer than you could guess the future economic situation.

Answering mine, 19% is the inflation adjusted fall from peak..

More interesting is their illustration – through a comparison with house price falls in the early 1990s – of the pressures on prices which could contribute to future fluctuations. From Martin Gahbauer, Nationwide’s chief economist:

A general conclusion that can be drawn is that although house prices have so far fallen by less than they did in the early 1990s, house purchase activity has fallen by more. Over the first 18 months of the current downturn, real (i.e. inflation-adjusted) house prices tracked the path of the early 1990s very closely….

Over the following 18 months, however, real house prices staged a small rebound, whereas in the early 1990s they continued falling broadly at the previous rate of decline. As things currently stand, real house prices are 19% below their 2007 peak, whereas at the equivalent stage of the early 1990s downturn, they were 31% below their peak.

http://ftalphaville.ft.com/blog/2010/12/01/423111/homeowners-luckier-this-time/

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Nothing will really shake our housing market unless there is a trigger. So far, we have escaped virtually unscathed from the Brown years with HPI more or less intact (maybe 10-12% down from peak and falling every so gently), no significant job losses, PMI steaming ahead, Sterling resilient, FTSE strong, rents soaring, record low IR.....

So what will shake houses?

Massive job losses due to a collapse in demand for our exports

Apart from that I am beginning to think the market will continue to decline slowly and maybe flatten out for years. The government is doing all it can to preserve HPI and will stop at nothing to prevent a crash (20% down in a year). But the chances of a meltdown due to job losses is, IMO, extremely high. The price must be paid for Brown's 10TR debt burden placed on this country.

1. What exactly are they doing?

2. What could they be doing (eg extending stamp duty cuts, tax subsidies for buyers, lowering CGT etc.)?

If the answer to 1. and 2. is the same then yes you're right.

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  • 284 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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