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othello

Property Prices Falling - Outrageous!

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Why do some people think it outrageous that anybody might suggest property prices will fall by 20%-30%?

Why is it any more surprising than the recent price rises of 20-30% per annum?

In a speculative market, you don't need a trigger for prices to fall by that amount. Quite simply if prices are unaffordable to FTBs and people are mortgaged to the hilt, the whole thing runs out of steam until prices have realigned to incomes.

In addition to that I sense a change in sentiment. Prospective FTB friends of mine no longer see any need to jump on the property ladder and would not do so even if they could afford it. Renting or living at home is a much cheaper option than the interest on a 25 year mortgage.

I also have a friend who works for the banks/building societies advising clients who have fallen into arrears on their mortgage (ioften due to massive personal debt). Her workload has risen three-fold since the start of the year. What is interesting is that the lenders are desperate not to repossess (I wonder why) and encourage borrowers to refinance as much as possible. They can keep the lid on for now, but for how long?

Prices are coming down significantly already. The falls are disguised by the headline figures, but within the next 24 months I predict prices will be down 30% on their peak values, which will wipe out the gains made since around 2001. Why is that surprising?

For those who cannot afford to buy a home, don't lose heart, don't listen to the VIs, just be patient.

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Why do some people think it outrageous that anybody might suggest property prices will fall by 20%-30%?

Why is it any more surprising than the recent price rises of 20-30% per annum?

In a speculative market, you don't need a trigger for prices to fall by that amount. Quite simply if prices are unaffordable to FTBs and people are mortgaged to the hilt, the whole thing runs out of steam until prices have realigned to incomes.

In addition to that I sense a change in sentiment. Prospective FTB friends of mine no longer see any need to jump on the property ladder and would not do so even if they could afford it. Renting or living at home is a much cheaper option than the interest on a 25 year mortgage.

I also have a friend who works for the banks/building societies advising clients who have fallen into arrears on their mortgage (ioften due to massive personal debt). Her workload has risen three-fold since the start of the year. What is interesting is that the lenders are desperate not to repossess (I wonder why) and encourage borrowers to refinance as much as possible. They can keep the lid on for now, but for how long?

Prices are coming down significantly already. The falls are disguised by the headline figures, but within the next 24 months I predict prices will be down 30% on their peak values, which will wipe out the gains made since around 2001. Why is that surprising?

For those who cannot afford to buy a home, don't lose heart, don't listen to the VIs, just be patient.

Not so sure that would wipe out the notional gains since 2001

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Prices are coming down significantly already. The falls are disguised by the headline figures, but within the next 24 months I predict prices will be down 30% on their peak values, which will wipe out the gains made since around 2001. Why is that surprising?

Some areas are going to fall other's aren't. There is a huge difference in demand for proprty often within very small areas of the country. If you think that every house will fall in price by 20-30% i think you will be disappointed. But that's not to say parts of the country won't fall by this level.

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Some areas are going to fall other's aren't. There is a huge difference in demand for proprty often within very small areas of the country. If you think that every house will fall in price by 20-30% i think you will be disappointed. But that's not to say parts of the country won't fall by this level.

Which parts will & which will not?

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Guest Charlie The Tramp
What is interesting is that the lenders are desperate not to repossess (I wonder why) and encourage borrowers to refinance as much as possible.

Lots of extra interest in their coffers?

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Which parts will & which will not?

I think it is the parts of the country that have risen most in the years since 2002 that will lose the most. These areas are mainly in the North, and are also the areas where the price/earnings ratio is at its most ridiculous.

In the South, I think it will be the recent 'up and coming' areas that will lose the most. For example, I know a few people who moved to Acton because they couldn't afford Ealing. Sure, Acton has 'gentrified' slightly as a result, but as Ealing starts to come down in price, Acton will have to fall faster.

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I completely agree that the falls will vary and the 'hot spots' will suffer (or benefit - depending on your point of view) the most. I was talking averages which are not that helpful but what I meant to say was that prices will return to their long-term sustainable levels which on avearge equates to a 30% drop.

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A 33% fall would wipe out the doubling of prices since 2001.

No it wouldn't - 100 x 2 x 67% = 134 (33% fall)

A 50% fall would though - 100 x 2 x 50% = 100 (50% fall)

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I think it is the parts of the country that have risen most in the years since 2002 that will lose the most. These areas are mainly in the North, and are also the areas where the price/earnings ratio is at its most ridiculous.

In the South, I think it will be the recent 'up and coming' areas that will lose the most. For example, I know a few people who moved to Acton because they couldn't afford Ealing. Sure, Acton has 'gentrified' slightly as a result, but as Ealing starts to come down in price, Acton will have to fall faster.

That seems to sum it up perfectly IMO

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No it wouldn't - 100 x 2 x 67% = 134 (33% fall)

A 50% fall would though - 100 x 2 x 50% = 100 (50% fall)

Yes this percentage disparity is a VERY IMPORTANT POINT!!

The 100% rise in a house value is wiped out with a 50% fall!!! Oh yes.

"Yes Gary - show your commitment to Team HPC by getting on your knees and..."

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A 33% fall would wipe out the doubling of prices since 2001.

Don't you mean a 33% fall would wipe out a 50% rise?

Surely it would take a 50% fall to wipe out a 100% rise.

frugalista

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House costs 100K

House rises by 50% = house now worth 150K

A 50% fall means house is worth 75K

A 30% fall means house is worth 105K

A 33% fall means the house effectively falls by one third so is now worth 100K or thereabouts

People often make the mistake - simple arithmetic - that HPs have to fall by the same percentage to get back to where they were. This is not the case.

Hence whilst, as I still believe, that we will see 40% falls across the UK, higher in some parts such as Wales, and that prices will fall dramatically putting people into negative equity.

House costs 200K

House rises by 50% = house now worth 300K

A 50% fall means house is worth 150K

A 30% fall means house is worth 210K

A 33% fall means the house effectively falls by one third so is now worth 200K or thereabouts

In other words a 33% fall wipes out all increases. Anything above a 33% fall is a loss.

I was reading The Economist again last night - the article that describes the current housing bubble as the biggest bubble in history - EVER. Bigger than the dot.con crash. It would be nice to see HPs go the way of Cisco shares and plummet 80%.

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I was reading The Economist again last night - the article that describes the current housing bubble as the biggest bubble in history - EVER. Bigger than the dot.con crash. It would be nice to see HPs go the way of Cisco shares and plummet 80%.

The main reason I am not buying now is that it just feels too much like the dot.con years. I was living in the US just at the time of the biggest boom and it was unbelievable. People were dropping out of college with a month or two to go on their degrees because they figured they would start a dotcom and make so much money they didn't need a degree. What characterised the atmosphere then, as now, was the feeling that things just --could not-- go down. Even if the numbers didn't add up or there was no logical reason, things just --could not-- go down.

It made me very nervous then and I didn't want to get involved with any of it (I was living in Boston, and I am in IT, so there were ample opportunities in 1999-2000). For a while after I was kicking myself but it just seemed like a bad idea to go into something with so little concrete facts behind it. Everybody had an idea for a company but no real justification for how it would make money. Companies would offer to fly you across the country just for an interview, tell you to stay three days in San Francisco and give you pocket money to have fun with besides.

I got a job with a bank which was extremely boring but I stilll have it. I can't tell which way things will go this time with house prices, but I also can't shake my gut instinct that this is no different from the dotcom boom- based on wishful thinking. Only time will tell if I guessed right, but as I've said, stagnation suits me fine for now.

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  • 301 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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