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fru-gal

What Happened In 2009 That Made House Prices Fall?

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Since the economic crisis began in 2007, the only time that house prices (specifically in London) have had major falls was in 2009.

What happened in that year that was different to before or since?

Everyone always says that high house prices are caused by a) low interest rates, lax mortgage deals and 100% etc mortgages high LTV, c) supply and demand (amongst other things).

However, we had normal (5-6%) interest rates pre 2008 and this didn't put downward pressure on house prices. Why does anyone think things will change if rates go up (if people could pay 5-6% in 2007 why wouldn't they be able to pay it now?).

We also have much tighter mortgage restrictions now which should have made a dent in the market but the opposite has occurred.

As to supply and demand, one would think that all those people sitting in huge houses would be wanting to sell now in order to get the best price but that doesn't seem to be happening either. It can't just be foreign buyers as there are only so many that want to buy a million pound terrace in Finchley.

I think the whole market has gone into different/unpredictable territory where the old factors that would determine house prices no longer seem relevant.

Edited by fru-gal

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Pre -2008 if you could fog a mirror you could borrow 8 x your made up salary for a 125% mortgage to outbid the competition with the guarantee your 'properdee investment' would double in a few years.

Yes, that's my point. We have higher house prices now in London in the middle of a financial crisis with mortgage restrictions than we did pre-2008 so the market is no longer predictable and has gone into crazy territory. All the fundamentals are creating the opposite effect to what should be happening.

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Yes, that's my point. We have higher house prices now in London in the middle of a financial crisis with mortgage restrictions than we did pre-2008 so the market is no longer predictable and has gone into crazy territory. All the fundamentals are creating the opposite effect to what should be happening.

In USD or EUR houses in London are down c.25% from 2008

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Yes, that's my point. We have higher house prices now in London in the middle of a financial crisis with mortgage restrictions than we did pre-2008 so the market is no longer predictable and has gone into crazy territory. All the fundamentals are creating the opposite effect to what should be happening.

I think if you had a graph like that that went back to 2009 you'd see relatively high mortgage rates.

http://themortgagemeter.com/#/graphs

2009 was panic time in London. Prices were falling, no-one was buying, selling, lending or borrowing. The economy (not just the housing market) was in freefall so the government panicked and underwrote the economy with future promises.

Then foreigners panicked abroad and shoved even more money into London as a safe haven as our currency dropped.

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Pre -2008 if you could fog a mirror you could borrow 8 x your made up salary for a 125% mortgage to outbid the competition with the guarantee your 'properdee investment' would double in a few years.

YES!!!

A.K.A. LIAR LOANS.

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There used to be this thing called free market capitalism- and one of it's wacky ideas was that people known as 'investors' could actually lose money! I know that sounds crazy now- but back then people actually believed this was possible.

In fact so afraid did people become that they might lose money that the banks stopped lending to each other which meant that the price of assets based on credit availability looked about to crash.

Which is why the prices of those assets fell.

Of course there never was free market capitalism- that was just a story told to the working classes to explain why they had to get poor when their jobs went to China- and as soon as all the 'investors' realised that they would never be allowed to lose money (Hurrah!!) the price of those assets went back up.

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Since the economic crisis began in 2007, the only time that house prices (specifically in London) have had major falls was in 2009.

What happened in that year that was different to before or since?

Everyone always says that high house prices are caused by a) low interest rates, lax mortgage deals and 100% etc mortgages high LTV, c) supply and demand (amongst other things).

However, we had normal (5-6%) interest rates pre 2008 and this didn't put downward pressure on house prices. Why does anyone think things will change if rates go up (if people could pay 5-6% in 2007 why wouldn't they be able to pay it now?).

We also have much tighter mortgage restrictions now which should have made a dent in the market but the opposite has occurred.

As to supply and demand, one would think that all those people sitting in huge houses would be wanting to sell now in order to get the best price but that doesn't seem to be happening either. It can't just be foreign buyers as there are only so many that want to buy a million pound terrace in Finchley.

I think the whole market has gone into different/unpredictable territory where the old factors that would determine house prices no longer seem relevant.

To answer the part in bold above you need to look no further than the price off energy and food now compared to 08-09 then compare wages now too wages in 08-09

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The proximate cause of the Great Financial Crash was the creeping failure of the shadow banking system from the Spring of 2007 onwards, triggered by the peaking of US house prices in major metro areas such as Florida. The run on the shadow banking system culminated with the collapse of the London offices of Lehman's and AIG, through which much of the liar loan fraud was distributed. Nearly $2trn in credit disappeared from global securitisation markets between 2006 and 2008. London house prices corrected sharply as a consequence.

800px-Securitization_Market_Activity.png

Edited by zugzwang

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The banks effectively stopped lending as there was no trust in the market

We had a currency devaluation by 30% which made uk property 30% cheaper for the rest of the world

Mortgages were being rejected where they were being approved before.

If you cant borrow money UK houseprices go down.

Uk houseprices went down

The rest of the world was still panicing

The rest of the world saw cheap property and the UK Tax Haven

money moved back into the uk

Uk houseprices prices stabilised and went up in some places

Edited by AteMoose

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What happened in that year that was different to before or since?

Demand. Or lack of. By July 2008, mortgage approvals were a quarter of what they were a year earlier. So the only homes being bought were those with motivated sellers (and the fear factor had probably increased their motivation further). By early 2009, base rates had dropped to 0.5% and the stamp duty holiday had kicked in, so stoking demand and thus supporting prices.

TPTB know its all about demand, hence the many schemes to bring it forward. When rates rise, whether through base rate rises, or withdrawal of FLS or whatever, there may be some more demand brought forward (fear of 'missing the boat') and then demand will fall off a cliff again and prices will follow.

Remember too that there was a much smaller gap between base rates and mortgage rates then than there is now, potential buyers are significantly poorer thanks to cost inflation, and demand that has been brought forward has to come from somewhere.

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Yes, that's my point. We have higher house prices now in London in the middle of a financial crisis with mortgage restrictions than we did pre-2008 so the market is no longer predictable and has gone into crazy territory. All the fundamentals are creating the opposite effect to what should be happening.

Sales volumes for the UK as a whole, and probably non-prime London? are half what they were in 2007, meaning a lot of people are stuck with the house (and the debt) they bought. The stats are based on a shrinking pool of sales, house prices are not going up like they were in the run up to 2007(when prices and volume of turnover, BTL, second and third homes was skyrocketing) they are falling in most of the country I would say. The landlord of this flat, which will soon be for sale, thinks he will be lucky to break even on a 2002 purchase, and that is in the centre of Edinburgh. There is only one outcome for UK property, and just because people are clinging on doesn`t change it. A look at citylets/rightmove/zoopla etc. for Edinburgh flats for rent will show you how many plunged into BTL, and why that sector will lead the crash. 5% or whatever is meaningless when you are going interest only and just thinking how much you can MEW to go abroad, that type of mortgage doesn`t exist for the masses any more.

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Sales volumes for the UK as a whole, and probably non-prime London? are half what they were in 2007, meaning a lot of people are stuck with the house (and the debt) they bought. The stats are based on a shrinking pool of sales, house prices are not going up like they were in the run up to 2007(when prices and volume of turnover, BTL, second and third homes was skyrocketing) they are falling in most of the country I would say. The landlord of this flat, which will soon be for sale, thinks he will be lucky to break even on a 2002 purchase, and that is in the centre of Edinburgh. There is only one outcome for UK property, and just because people are clinging on doesn`t change it. A look at citylets/rightmove/zoopla etc. for Edinburgh flats for rent will show you how many plunged into BTL, and why that sector will lead the crash. 5% or whatever is meaningless when you are going interest only and just thinking how much you can MEW to go abroad, that type of mortgage doesn`t exist for the masses any more.

Maybe in Edinburgh but I don't see this happening in London.

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In USD or EUR houses in London are down c.25% from 2008

Seems like this is an important point. First time poster here. Since about 2004 I've been looking at property thinking I could not buy at 'current' prices, and yet next year, prices are higher. I'm specifically talking about London.

If we look at London house prices in terms of almost any other currency bar GBP, they have fallen. With that in mind, and given that I'm not sure the country could actually handle a real crash, and what most people seem to think will happen with more QE, are we really going to see lower prices in GBP, in London any time soon?

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Seems like this is an important point. First time poster here. Since about 2004 I've been looking at property thinking I could not buy at 'current' prices, and yet next year, prices are higher. I'm specifically talking about London.

If we look at London house prices in terms of almost any other currency bar GBP, they have fallen. With that in mind, and given that I'm not sure the country could actually handle a real crash, and what most people seem to think will happen with more QE, are we really going to see lower prices in GBP, in London any time soon?

1/3 rent, 1/3 have no mortgage and 1/3 have some kind of mortgage? Let`s allow that of the last third 60 - 70% could handle rate rises and would decide to keep paying, even when in NE (if for no other reason than they don`t want to be uprooted from "their" home) That means that the country COULD handle a crash, but the banks couldn`t, although from what I am seeing in Edinburgh people are starting to offload BTL property, and this will hasten the crash whether the banks like it or not. I can`t wait to see how the politicians try to sell another bank bailout (of course the covert bailout is ongoing meaning that soon both BANKS and COUNTRY will be ready to crash?) A lot of MEW is going to go unpaid though.

Edited by dances with sheeple

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Credit bubbles must inevitably come to an end because of debt saturation. Everybody who is willing to destroy their lives with debt takes on as much as they can possibly service. When this point is reached demand is crushed under the burden of debt repayments, credit stops expanding and begins to contract and there is usually a recession as asset prices that were bid up by crazy credit return to normal and money begin to be reallocated away from nonsensical speculation to actual real investments.

That is, of course, unless the state steps in to drag the process out fby forcing down interest rates and bailing out failing businesses. When they do that we get a depression, like the one we are in.

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Credit bubbles must inevitably come to an end because of debt saturation. Everybody who is willing to destroy their lives with debt takes on as much as they can possibly service. When this point is reached demand is crushed under the burden of debt repayments, credit stops expanding and begins to contract and there is usually a recession as asset prices that were bid up by crazy credit return to normal and money begin to be reallocated away from nonsensical speculation to actual real investments.

That is, of course, unless the state steps in to drag the process out fby forcing down interest rates and bailing out failing businesses. When they do that we get a depression, like the one we are in.

Yes. The reversal of the credit bubble is just about starting in the residential mortgage market. If the trend holds then things look bleak for sellers of existing property for the remainder of this year, what with the 'Help to Buy' slush fund funnelling demand to newbuilds.

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  • 259 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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