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The Great House Price Crash - 2015 To 2020

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BoE interest rates have been kept too low for too long - Andrew Sentance says this means that IRs will have to go higher for longer to control inflation...at some point

My guess is that that point is being put off into the future, and we will see cyclical peak of base rates around 2015 or after, IRs just nudging up year by year until then, and house prices will, following the gradual falls from 2010 to 2015, fall much harder for a period of years after 2015, as interest rates settle down at a higher level and as peoples' long term IR expectations are revised, and as people realise just what a 250k mortgage really feels like.

Puts the bottom at 2020 then....

This govt are NOT trying to protect house prices deliberately - the low IRs environment may FEEL like that, but they are trying to help industry with low interest rates, to help a frankly weak recovery, and they are SACRIFICING long term house prices on the back of this; and they are trying to push the public's realisation of this off past the year 2015, current buyers are lambs to the slaughter, harvested and reaped to support bankers and industry.

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My guess is that that point is being put off into the future, and we will see cyclical peak of base rates around 2015 or after, IRs just nudging up year by year until then, and house prices will, following the gradual falls from 2010 to 2015, fall much harder for a period of years after 2015, as interest rates settle down at a higher level and as peoples' long term IR expectations are revised, and as people realise just what a 250k mortgage really feels like.

Friends of mine about to take on a £300k mortgage just weeks after losing £50k on their first house purchase.

"But it is only £1400 a month"

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BoE interest rates have been kept too low for too long - Andrew Sentance says this means that IRs will have to go higher for longer to control inflation...at some point

My guess is that that point is being put off into the future, and we will see cyclical peak of base rates around 2015 or after, IRs just nudging up year by year until then, and house prices will, following the gradual falls from 2010 to 2015, fall much harder for a period of years after 2015, as interest rates settle down at a higher level and as peoples' long term IR expectations are revised, and as people realise just what a 250k mortgage really feels like.

Puts the bottom at 2020 then....

This govt are NOT trying to protect house prices deliberately - the low IRs environment may FEEL like that, but they are trying to help industry with low interest rates, to help a frankly weak recovery, and they are SACRIFICING long term house prices on the back of this; and they are trying to push the public's realisation of this off past the year 2015, current buyers are lambs to the slaughter, harvested and reaped to support bankers and industry.

That timing would be bucking the trend of recent past housing cycles. Why 'gradual falls from 2010' - prices have been falling since 2007, and certainly in real terms (round me asking prices are now around 2004 prices). I'm guessing the bottom will be around 2014-15, though small increases after that may mean small nominal increases thereafter are more than wiped out by inflation so real drops. Affordability may be determined more by wage inflation (if any) as house prices stagnate.

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That timing would be bucking the trend of recent past housing cycles.

yep, but the upward cycle also bucked the trend very very significantly

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Friends of mine about to take on a £300k mortgage just weeks after losing £50k on their first house purchase.

"But it is only £1400 a month"

£1400...jeese, 0.5% interest....some deal :lol:

Normally a 300K mortgage would be about £1800 pcm...or about £22K per year, equivalant of about £30K+ of taxable income.

Great idea, tell them to go for it.

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£1400...jeese, 0.5% interest....some deal :lol:

Normally a 300K mortgage would be about £1800 pcm...or about £22K per year, equivalant of about £30K+ of taxable income.

Great idea, tell them to go for it.

Most times I talk to them they sound fairly sensible about house prices and how slow the market is etc

Then a few weeks later they buy somewhere for 4.5x combined salary with her (the main breadwinner by far) wanting children asap and his job looking shakey!

Both come from well off families so there is no danger of starvation but still.

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I'm guessing the bottom will be around 2014-15,

Whereas I would say 2nd bottom in 2013/14 then more money printing as we head into election then 3rd bottom c 2018.

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I've always reckoned this correction would bottom out around 2020-2025, solely based upon demographics.

I have come over to this way of thinking over the past 5 years, and I see political cycles and interest rate cycles as the means by which demographics communicates into house prices over this time frame

Whereas I would say 2nd bottom in 2013/14 then more money printing as we head into election then 3rd bottom c 2018.

and that sounds a fair way to get there

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time wise, not at all - its just the magnitude of this one that is exceptional.

no

upward move of 90s crash was 83 to 89/90, downward move, 89/90 to 95/6 - 6 years up and 6 years down

this one, the up move went from 96 to 2007 - 11 years up, twice the length of the earlier 83 to 90 upswing

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owning a house really is everything to some of us brits clearly, take a little time out for a life, you,ll be gone befor you know it

get on with your life. get a huge amount of debt for a shoe box. yeah man.

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I have come over to this way of thinking over the past 5 years, and I see political cycles and interest rate cycles as the means by which demographics communicates into house prices over this time frame

and that sounds a fair way to get there

if you are thinking that the final bottom is coming 2020-25, thats a long way off. In a worst case senario that means 18 years from peak (2007) to 2025! people not on IO mortgages should be able to pay off a good chunk of their mortgage by then. If interest rates stay low to stimulate the economy irrespective of inflation as they are now, that gives some mortgage holders a chance.

the tragic thing about a long drawn out correction is that if the avg age of a FTB is 37, the there must be some who are consderably over 40. For those individuals, if they have to wait another 10 years at least for prices to correct to a level they can afford based on sensible salary multiples, they'll be over 50 and they simply wont be able to get a 25 yr mortgage - stuffed. this generation will then be followed up by heavily indebted graduates and employees on low salaries competing in a global economy. What a wonderful future to look forward to.

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if you are thinking that the final bottom is coming 2020-25, thats a long way off. In a worst case senario that means 18 years from peak (2007) to 2025! people not on IO mortgages should be able to pay off a good chunk of their mortgage by then. If interest rates stay low to stimulate the economy irrespective of inflation as they are now, that gives some mortgage holders a chance.

IRs won't stay low over this period, that was my initial point

the tragic thing about a long drawn out correction is that if the avg age of a FTB is 37, the there must be some who are consderably over 40. For those individuals, if they have to wait another 10 years at least for prices to correct to a level they can afford based on sensible salary multiples, they'll be over 50 and they simply wont be able to get a 25 yr mortgage - stuffed.

no, if they have long term investments (not savings, investments) they will be able to buy a place for cash, easily, meanwhile I expect renting as a proposition to improve with the expansion of REIT schemes

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IRs won't stay low over this period, that was my initial point

I agree that IRs wont stay low over this period, but what do you think will happen over the medium term to wages, tax and inflation. I think that the government will offer some sort of tax cut prior to the next election, having tried to deal with the deficit now, I think that there will be considerable pressure to raise rates, which will be dependent on how well business is doing, and finally the pressure for wage inflation will be significant, unions will push hard, but find it difficult, and the desperation of some to find jobs based on unemployment will help business keep wages down.

no, if they have long term investments (not savings, investments) they will be able to buy a place for cash, easily, meanwhile I expect renting as a proposition to improve with the expansion of REIT schemes

I am sure that some will have long term investments and that easy purchase may be possible, but I think that they will be in the minority. There are simply too many people who dont have savings/investments and are living month by month with no safety net if things go wrong.

Personally I think that there is already at least one generation stuffed by high house prices and another generation growing up into it who will have high debts. renting will become more prevalent but possibly not due to choice and finally I think that there will be an every greater divide between the have and have nots.

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I agree that IRs wont stay low over this period, but what do you think will happen over the medium term to wages, tax and inflation. I think that the government will offer some sort of tax cut prior to the next election, having tried to deal with the deficit now, I think that there will be considerable pressure to raise rates, which will be dependent on how well business is doing, and finally the pressure for wage inflation will be significant, unions will push hard, but find it difficult, and the desperation of some to find jobs based on unemployment will help business keep wages down.

hard to say isn't it, real IRs will likely be higher over next 20 years than last 20 years simply because of boomers retirement/care costs across western world - seeing as it will be funded out of tax base instead of savings

everying else is of course hard to tell, I agree

I am sure that some will have long term investments and that easy purchase may be possible, but I think that they will be in the minority.

There are simply too many people who dont have savings/investments and are living month by month with no safety net if things go wrong.

quite possibly so - most people make terrible investors

Personally I think that there is already at least one generation stuffed by high house prices and another generation growing up into it who will have high debts. renting will become more prevalent but possibly not due to choice and finally I think that there will be an every greater divide between the have and have nots.

not sure about the divide unless you mean between denerations, in which case I agree

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hard to say isn't it, real IRs will likely be higher over next 20 years than last 20 years simply because of boomers retirement/care costs across western world - seeing as it will be funded out of tax base instead of savings

everying else is of course hard to tell, I agree

As I am not an economist, can you clarify why if boomers/care costs will being funded out of the tax base instead of savings would make IRs higher? I understand that IRs have been lower in the last 10 or so years compared with the 80s and early 90s.

I always think of Japan when I think of low interest rates, what did they think when their bubble burst, did they anticipate that it would be as long and slow as it has been and why couldnt this happen in the UK? with low interest rates.

quite possibly so - most people make terrible investors

very true, probably why there is such interest in bricks and mortar, people can relate to the concept of ownership of something tangible even if the numbers dont add up.

not sure about the divide unless you mean between denerations, in which case I agree

The divide I mean is wealth divide - BTL people with money can afford to buy property and effectively force people who cant buy (either through salary levels, or lack of time to pay off a mortgage) to rent. As renters increase in number this allows small and large professional landlords to increase their holdings.

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  • 312 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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