New Poster - Lets Talk About The Crash

[BubbleCurious]

Hi everyone

I am a new poster but have been reading for a little while now and I find the conversation on this forum so refreshing when constantly fed the rubbish from the media about how great house price rises are.

A little about myself - I moved to London for work around a year ago and am in my mid twenties. Job is going well and I can see good career progression over the next few years and firmly want to stay in London as opportunities in all sorts of ways are much better. So obviously for me if we had a crash in the next couple of years it would work out perfectly. However I am well aware some people had the same idea years ago and 6 years on nothing has changed.

I may be naive but I do sense change. The open talk of a gains tax in the autumn statement is hugely encouraging, as is the noise from Labour that they are putting together policies to help beat the 'scary' London house bubble. Sentiment towards hpi has also hugely changed, I don't know anyone who thinks it is a good thing nor is it sustainable.

I know everyone has been kicked in the teeth on here so much and I even see a few people buying which at current prices seems madness but I understand if life dictates you can no longer hang on.

So the question is - am I hopelessly naive to believe thinks could fall nicely into place for me over the next few years or does everything think the current situation can be maintained for the next few years or even become worse. Surely the bubble cannot survive an election and various policies that will undoubtedly be thrown at it as the cost of living oressure builds?!?!

[slacker]

The 'crash' when it comes, the one where the prices drop back to average multiples of salary, will likely come with so much collateral damage you either won't be able get funding - anywhere - or that deposit you saved won't even cover the gas bill next month.

It will likely be followed by years of unemployment, inflation, currency collapse, misery and declining nominal property values.

We'll all be on foodpricecrash.co.uk talking about how we wished we bought more canned food before the rapture.

[workingpoor]

foodpricecrash lol

Someone once said to me that if house prices fall interest rates will rocket so I will still pay through the nose for a hose either way, I guess they're right.

I won't be an outright cash buyer I'd still need a small mortgage but repayments could still be high in this scenario.

Also I thing large scale social unrest would break out in event of a currency collapse so possessing anything material like property or food stocks could prove difficult to hang onto.

[Gigantic Purple Slug]

The 'crash' when it comes, the one where the prices drop back to average multiples of salary, will likely come with so much collateral damage you either won't be able get funding - anywhere - or that deposit you saved won't even cover the gas bill next month.

It will likely be followed by years of unemployment, inflation, currency collapse, misery and declining nominal property values.

We'll all be on foodpricecrash.co.uk talking about how we wished we bought more canned food before the rapture.

I fear this scenario too.

it's a matter of being careful what you wish for.

I'm not sure that it is possible now for the UK to have a housing crash without serious economic disruption, and that any losses will be socialised because otherwise it will send the whole system down the crapper.

The irony of course being that we have had 7 years since 2007 to unwind this and bring prices back down towards sustainable levels, and the government has done jack shit about doing so. Idiocy at its finest.

[cybernoid]

The tripling of prices started in the early 2000s, that is quite recent, and the rise was very steep. So those that will be caught out should value return to the market are in the minority. Those that borrowed against some fictional future value of their house will just have to pay the money back by working for it like everyone else. Those that purchased fairly recently will be in negative equity so will just have to knuckle down and pay back that debt instead of passing it on to a greater fool. Those that bought before the bubble will see their paper worth drop but so what, if theyre sensible theyre not relying on it returning.. many are in that situation. And of course those that haven't been able to buy will welcome the return of value.

So I don't think its that big a deal when value returns to the market. Those who borrowed irresponsibly will suffer, and so they should. The alternative is that we all suffer instead. Brief pain to the deserving and then improvement in the longer term is better than pain for all of us into the foreseeable future. Choice 2 is what the politicians have chosen as they have an election to win, but when choice 1 stops being a choice and becomes whats coming we will all be the better off for it in the longer term.

Let's hope it comes soon so the unnecessary and unjust suffering can end.

[silver surfer]

Welcome to the forum.

This chart is instructive,

http://www.economicshelp.org/blog/wp-content/uploads/2012/10/house-price-inflation-1970-2013-500x468.png

These are nominal house prices, without any adjustment for inflation. It shows that actual house price declines when measured in hard cash are fairly rare and fairly short in duration...plus we've just had one!

So the chances of you waking up any morning soon and finding the house or flat of your dreams for 40% or 50% less than it is today? Well, it's not zero, but neither is it something you should base your life plans on.

More likely in my view is a long period of nominal price stagnation, prices pretty much stick where they are today and inflation does the grunt work of restoring a measure of affordability. But that's not going to be a quick process.

Edited November 3, 2013 by silver surfer

[Bloo Loo]

Welcome to the forum.

This chart is instructive,

http://www.economics...013-500x468.png

These are nominal house prices, without any adjustment for inflation. It shows that actual house price declines when measured in hard cash are fairly rare and fairly short in duration...plus we've just had one!

So the chances of you waking up any morning soon and finding the house or flat of your dreams for 40% or 50% less than it is today? Well, it's not zero, but neither is it something you should base your life plans on.

More likely in my view is a long period of nominal price stagnation, prices pretty much stick where they are today and inflation does the grunt work of restoring a measure of affordability. But that's not going to be a quick process.

thats a Nationwide chart.....beware.

[wish I could afford one]

...

Someone once said to me that if house prices fall interest rates will rocket so I will still pay through the nose for a hose either way, I guess they're right.

...

The larger the deposit in % terms, the less impact interest rate increases will have, so the better off you will be. The extreme of this is paying cash with no mortgage (effectively a 100% deposit).

[dances with sheeple]

The 'crash' when it comes, the one where the prices drop back to average multiples of salary, will likely come with so much collateral damage you either won't be able get funding - anywhere - or that deposit you saved won't even cover the gas bill next month.

It will likely be followed by years of unemployment, inflation, currency collapse, misery and declining nominal property values.

We'll all be on foodpricecrash.co.uk talking about how we wished we bought more canned food before the rapture.

Can you expand on how this will be the case?

[bearwithasorehead]

Hi everyone

I am a new poster but have been reading for a little while now and I find the conversation on this forum so refreshing when constantly fed the rubbish from the media about how great house price rises are.

A little about myself - I moved to London for work around a year ago and am in my mid twenties. Job is going well and I can see good career progression over the next few years and firmly want to stay in London as opportunities in all sorts of ways are much better. So obviously for me if we had a crash in the next couple of years it would work out perfectly. However I am well aware some people had the same idea years ago and 6 years on nothing has changed.

I may be naive but I do sense change. The open talk of a gains tax in the autumn statement is hugely encouraging, as is the noise from Labour that they are putting together policies to help beat the 'scary' London house bubble. Sentiment towards hpi has also hugely changed, I don't know anyone who thinks it is a good thing nor is it sustainable.

I know everyone has been kicked in the teeth on here so much and I even see a few people buying which at current prices seems madness but I understand if life dictates you can no longer hang on.

So the question is - am I hopelessly naive to believe thinks could fall nicely into place for me over the next few years or does everything think the current situation can be maintained for the next few years or even become worse. Surely the bubble cannot survive an election and various policies that will undoubtedly be thrown at it as the cost of living oressure builds?!?!

welcome to the site - take what you read on here with a pinch of salt.

However for my own tuppence worth I would say be careful what you wish for! A crash ain't gonna do you any good if it is accompanied by everyone under 30 losing their jobs - look at youth unemployment in the S of Europe.

[Bruce Banner]

welcome to the site - take what you read on here with a pinch of salt.

However for my own tuppence worth I would say be careful what you wish for! A crash ain't gonna do you any good if it is accompanied by everyone under 30 losing their jobs - look at youth unemployment in the S of Europe.

Agreed. There are a lot of undercover estate agents and mortgage brokers posting here to talk up the market.

[dances with sheeple]

I agree with looking at nominal rather than 'real' house prices. But during that time frame we never had 0.5% base rates and even with these emergency rates nominal prices are just holding on (bar London of course) so if and when interest rates rise the situation may well be different and hence the reason why Osborne and Carney will not raise interest rates no matter what happens in the economy, Falling nominal house prices will be a disaster for them in terms of getting elected. Also there were schemes to promote HPI then most notable being MIRAS but nothing like the scale of today with interest free taxpayer funded deposits and FLS.

Having said that TPTB will do anything absolutely anything to prevent nominal falls and that includes Labour as well as the Con Libs.

They can`t help volumes though, meaning there are a ton of pent up sellers just desperate to cash out?

[goldbug9999]

I fear this scenario too.

it's a matter of being careful what you wish for.

I'm not sure that it is possible now for the UK to have a housing crash without serious economic disruption

Such a "bust" will be pretty much as illusory as the current "boom" as in the macro economic numbers will look bad but most people will still plod on with their daily lives. Anyway I'm happy to role the dice, bring it on ....

[frederico]

Welcome to the forum.

More likely in my view is a long period of nominal price stagnation, prices pretty much stick where they are today and inflation does the grunt work of restoring a measure of affordability. But that's not going to be a quick process.

There is a problem with this theory, it is ignoring wage inflation or a lack of it.

Price inflation is slowly but surely eroding disposable incomes and productivity.

So inflation will not erode debt but will make it harder to bare.

[dances with sheeple]

From 2002 to 2008 the ave # sales per month 100,000 There was a dip down to 35,000 in 2009

From 2009 to now ave # sales per month 55,000

Maybe 55,000 is a normal # of sales in a static (price) market and 100,000 is the' joy of home owners' being able to trade up as they gain equity. 55% of sales today from a toppy frothy hyper market could be seen as healthy, OK MSM seem to believe the peak numbers in terms of prices and transactions need to be the norm.

100,000 was FTB`ers charging into the party drunk on cheap credit, take that away and people can`t sell for peak price anytime they like anymore. A few areas in London doing "well" doesn`t compare to what happened in the run up to 2008 all across the UK?

[Bruce Banner]

There is a problem with this theory, it is ignoring wage inflation or a lack of it.

Price inflation is slowly but surely eroding disposable incomes and productivity.

So inflation will not erode debt but will make it harder to bare.

And interest rates have only one way to go.

[frederico]

And interest rates have only one way to go.

Exactly

[dances with sheeple]

Year

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20081

Transactions in England and Wales '000s

1,267 1,351 1,542 1,669 1,760 1,743 1,801 1,937 2,148 1,580 1,398 1,306 1,136 1,196 1,274 1,135 1,242 1,440 1,347 1,469 1,433 1,458 1,586 1,341 1,786 1,529 1,777 1,793 892

Sorry not well formatted but essentially from 1980 property transactions per year was always 1,200,000 plus ie 100,000 per month plus with a peak of 2,100 in 1988 (just before Miras withdrawal at a guess). So 55,000 could be seen as low driven by high prices and the high cost of moving.

Ok, in that case 55,000 is a bit scary for the PTB, hence all the HTB nonsense? The DIY shops must be taking a pounding just now as well?

[wish I could afford one]

Ok, in that case 55,000 is a bit scary for the PTB, hence all the HTB nonsense? The DIY shops must be taking a pounding just now as well?

Here's a non-cyclically adjusted visual representation of it since 1995:

[silver surfer]

I agree with looking at nominal rather than 'real' house prices. But during that time frame we never had 0.5% base rates and even with these emergency rates nominal prices are just holding on (bar London of course) so if and when interest rates rise the situation may well be different and hence the reason why Osborne and Carney will not raise interest rates no matter what happens in the economy, Falling nominal house prices will be a disaster for them in terms of getting elected. Also there were schemes to promote HPI then most notable being MIRAS but nothing like the scale of today with interest free taxpayer funded deposits and FLS.

Having said that TPTB will do anything absolutely anything to prevent nominal falls and that includes Labour as well as the Con Libs.

I agree that any significant increase in base rates at the moment would depress house prices, nominal as well as real. All things are possible, but personally I don't see base rates going over 1% for a very long time.

But more than an increase in base rates what I would most like to see is an increase in house building, up from the current 100k per year to the 300k per year that this country achieved in the 1930's. If we could manage that for a decade or two then we'd have affordable housing that would likely stay affordable.

[gf3]

But that would mean house prices would not rise and TPTB need HPI to win elections. TPTB have no interest in affordable housing, see how Labour are pontificating on energy which costs a family £1,200 per year whereas housing costs £12,000 per year.

TPTB will still be in charge doesn't matter who wins the election.

[dances with sheeple]

I agree that any significant increase in base rates at the moment would depress house prices, nominal as well as real. All things are possible, but personally I don't see base rates going over 1% for a very long time.

But more than an increase in base rates what I would most like to see is an increase in house building, up from the current 100k per year to the 300k per year that this country achieved in the 1930's. If we could manage that for a decade or two then we'd have affordable housing that would likely stay affordable.

The interest rate shocks could come at any time from numerous sources? Base rate is not running mortgage rate as BTL`ers are finding out? 300k houses a year for a decade or two, no way! They would be giving them out free if they did that, which is why there will be no mass building program. If there was real demand houses would already be being built IMO.