Jump to content
House Price Crash Forum
Trampa501

Is It Possible There Will Never Be A Correction?

Recommended Posts

With the steady rise in world population, could it just be we have to get used to ever rising property prices, regardless of price to earnings ratio history?

Share this post


Link to post
Share on other sites

We are living through the correction, where have you been.

If the UK cost of living goes up (even) more, benefits are cut, standards of living fall (even) more....the immigrants will leave/stop coming. At that point the who ponzi economy will collapse.

If the UK voters vote UKIP and nothing changes the UK votes will start voting for more extreme right wing parties ( I forecast this 3 years ago now ) and the UK could become a nasty place for any immigrant to live. The indigenous popualation of the UK feels threatened and it's time the politicians started listening....before it's too late.

Nothing lasts forever...certainly not a housing mega bubbel

Share this post


Link to post
Share on other sites

I do wonder the same. Did countries where renting more the norm have housing bubbles that never corrected, so permanently altering the housing landscape?

I also worry that if we do get a major correction institutional investors will step in and clear up the reduced price inventory, so carrying on the trend towards decreased ownership even though prices have dropped.

Neither very pleasant thoughts.

Share this post


Link to post
Share on other sites

It a new normal

It's a new paradigm!

When something with a better return than houses comes along, btl will sell off and housing will become cheap again. In the past when the country had economic growth, the last thing you wanted to do was tie your money up in unproductive housing! There were much bette investments out there.

You could reverse the question - will there ever be any investment with a larger return than property? On a side note, if UK planning was reformed and people were allowed to build there own houses then property as a long term investment would be cack.

Share this post


Link to post
Share on other sites

trees grow to the sky.....but wait...they stop at some point....but not this time of course...

Share this post


Link to post
Share on other sites

It a new normal

It's a new paradigm!

When something with a better return than houses comes along, btl will sell off and housing will become cheap again. In the past when the country had economic growth, the last thing you wanted to do was tie your money up in unproductive housing! There were much bette investments out there.

You could reverse the question - will there ever be any investment with a larger return than property? On a side note, if UK planning was reformed and people were allowed to build there own houses then property as a long term investment would be cack.

Interesting - thanks for those points.

Share this post


Link to post
Share on other sites

Nominal falls in house prices are extremely rare.

house-prices.jpg

I believe this is nominal prices.. From which I'd count exactly 2 years (for the UK) in which prices dropped fast enough to register.

If this graph extended back into higher inflation times to the end of WWII I doubt you'd see any more.

It's much easier to inflate the rest of the economy than it is to deflate house prices..

Share this post


Link to post
Share on other sites

Nominal falls in house prices are extremely rare.

I believe this is nominal prices.. From which I'd count exactly 2 years (for the UK) in which prices dropped fast enough to register.

If this graph extended back into higher inflation times to the end of WWII I doubt you'd see any more.

It's much easier to inflate the rest of the economy than it is to deflate house prices..

They are the norm, its only in nations where the government does all it can to prop up the prices that this doesnt happen.

Share this post


Link to post
Share on other sites

The short answer is no. Eventually prices will outstrip the ability of anyone at all to buy them. Even BTL will stop at some point when it is obvious to even the most stupid punter that it doesn't pay. By 2050 IIRC one in four people will be over 65. As these people end up in residential care or a wooden overcoat then demand will fall unless there is massive immigration to counter it. There appears to be little enthusiasm for massive immigration from the current population.

Nothing lasts forever. The correction must come at some point. What is possible is that it may still yet be some time away. Personally I doubt that looking at the papers and the general mood. The big unknown is the effect of the collapse of the Chinese bubble which looks to be due any time now.

Share this post


Link to post
Share on other sites

Nominal falls in house prices are extremely rare.

house-prices.jpg

I believe this is nominal prices.. From which I'd count exactly 2 years (for the UK) in which prices dropped fast enough to register.

If this graph extended back into higher inflation times to the end of WWII I doubt you'd see any more.

It's much easier to inflate the rest of the economy than it is to deflate house prices..

you would be correct about a nominal market in general, but we have in housing, a LEVERAGED market, where the real cost is measured at the borrowing end, not the price end,

Share this post


Link to post
Share on other sites

With the steady rise in world population, could it just be we have to get used to ever rising property prices, regardless of price to earnings ratio history?

As you point out, it is a ratio. You can also look at the rent to price ratio to get an idea of how overpriced houses are. The price is just a number and doesn't really show how cheap or expensive a house is, unless you compare it with something else. If my wage were going up by 20% a year, compared to 5% HPI, how long would it take before houses didn't seem expensive to me?

We are living through the correction, where have you been.

If the UK cost of living goes up (even) more, benefits are cut, standards of living fall (even) more....the immigrants will leave/stop coming. At that point the who ponzi economy will collapse.

If the UK voters vote UKIP and nothing changes the UK votes will start voting for more extreme right wing parties ( I forecast this 3 years ago now ) and the UK could become a nasty place for any immigrant to live. The indigenous popualation of the UK feels threatened and it's time the politicians started listening....before it's too late.

Nothing lasts forever...certainly not a housing mega bubbel

You keep saying this? I live in the southeast. The correction in 2009/2010 was barely noticeable to most people and there is certainly no correction taking place currently!

It a new normal

It's a new paradigm!

When something with a better return than houses comes along, btl will sell off and housing will become cheap again. In the past when the country had economic growth, the last thing you wanted to do was tie your money up in unproductive housing! There were much bette investments out there.

You could reverse the question - will there ever be any investment with a larger return than property? On a side note, if UK planning was reformed and people were allowed to build there own houses then property as a long term investment would be cack.

I've come to believe the ROI from rents is key. We need to see rents falling for some time yet before potential BTL'ers stop thinking that HPI makes buying property a one way bet.

As for other investments with better returns, I believe there already are!

Share this post


Link to post
Share on other sites

Watching a programme on world population growth it said that it would peak around about 11bn. So if this happens there will be a correction but it could be several decades off yet.

Declining fertility rates suggest a much smaller peak of around 8bn.. perhaps as soon as 2030.

Share this post


Link to post
Share on other sites
snip

You keep saying this? I live in the southeast. The correction in 2009/2010 was barely noticeable to most people and there is certainly no correction taking place currently!

snip

indeed, THIS particular episode is very reminiscent of the 1990 ish crash, where all the price action was mainly in this area, and of course, it was this area which suffered the crash mostly too.

I beleive it will happen again.

Share this post


Link to post
Share on other sites

indeed, THIS particular episode is very reminiscent of the 1990 ish crash, where all the price action was mainly in this area, and of course, it was this area which suffered the crash mostly too.

I beleive it will happen again.

I dont believe it wont.

Share this post


Link to post
Share on other sites

There won't be a correction. There will be further mistakes. You will be on the right side of some of them.

That's absurd. Aggregate debt-to-GDP is 530%, a monstrous bubble by any standard, held up currently by out-of-control govt borrowing. Either asset prices sharply correct or current prices sharply inflate, or both. The status quo is unsustainable.

Share this post


Link to post
Share on other sites

Maybe, but here's an example of a biggy.

Hmmm.. Should probably have added 'In the UK'.

I'm not saying it can't happen.. the interesting thing is what we see now - flattish nominal prices (people refusing to 'give it away') but stock and transactions dropping to very low levels. If we had proper wage/price inflation going on, this would persist for a few years until 'real' prices had dropped back down.

Share this post


Link to post
Share on other sites

There was plenty immigration in 2007-2008...prices collapsed...now why was that ?

Immigration into the US never stops....prices collapsed...now why was that ?

The availability of land and ever increasing immigration arguments do not hold water. Prices collapse regardless of these things.

Share this post


Link to post
Share on other sites

It a new normal

It's a new paradigm!

When something with a better return than houses comes along, btl will sell off and housing will become cheap again. In the past when the country had economic growth, the last thing you wanted to do was tie your money up in unproductive housing! There were much bette investments out there.

You could reverse the question - will there ever be any investment with a larger return than property? On a side note, if UK planning was reformed and people were allowed to build there own houses then property as a long term investment would be cack.

I think you've hit the nail there - all about relative returns.

But I reckon returns across all assets will be low for a long time, so UK property looks relatively attractive - unless we get a government that frees up supply to meet demand from occupiers rather than rentiers.

So at this stage it's not about a free market, but brute politics and tax policies.

Share this post


Link to post
Share on other sites

I think you've hit the nail there - all about relative returns.

But I reckon returns across all assets will be low for a long time, so UK property looks relatively attractive - unless we get a government that frees up supply to meet demand from occupiers rather than rentiers.

So at this stage it's not about a free market, but brute politics and tax policies.

what, 3% GDP and no returns?>...how is this possible?

Share this post


Link to post
Share on other sites

With the steady rise in world population, could it just be we have to get used to ever rising property prices, regardless of price to earnings ratio history?

It could depress prices. All those extra people with limited prospects asking for handouts, and expecting well paid jobs to be magicked up for them.

The only thing you have to look at is future. How many of these extra people will be able to afford current prices. Meet sellers asking prices when sellers come to market. Those buyers are my main competition for houses.

(Although growth in US investment firms paying high prices for loads of inventory to turn to rentals for investors, wouldn't be good if it continued)

Ever more people by themselves don't create increasing capital. Radio 4 yesterday had a guy on saying future projections of 40% of jobs at risk from IT/tech advances.

Share this post


Link to post
Share on other sites

"Never" is a bit strong. But it's perfectly possible that there won't be a significant fall in house prices for many years, perhaps a generation.

House prices are driven by a huge range of factors, but the main two, which swamp everything else, are affordability and supply & demand.

Given that wages don't look like they'll be shooting up or down all that much, affordability is really all about interest rates. They're unlikely to go any lower, but with a sputtering economy (secular stagnation seems to best capture it) and little inflation pressure, there's nothing to take them all that much higher either. I'd guess base rates will stay below 2% right out to 2020 and beyond.

Supply & demand is an even clearer bet. Even if UKIP were to miraculously win a general election and turn off the immigration tap they still couldn't repatriate the immigrants that are already here and multiplying enthusiastically, so we're almost certainly looking at a rising UK population. Right now there's about 250,000 new households being formed every year, but we're only building a little over 100,000 new homes each year. Despite the encouraging noises in the press and parliament about relaxing planning regulations I see nothing that will materially ease that pressure, especially in the south-east, for the next decade or two.

Yes there's lots of other factors in play, from H2B to BTL and rent controls, but they're all small beer compared with the massive drivers of ultra low interest rates allied to restricted supply in a time of growing demand. So even though I'm not expecting much in the way of further house price inflation (we're pretty much stuck at the upper end of the affordability spectrum which means buying a house now is likely to be a poor investment), neither am I expecting any significant fall in nominal prices.

The bottom line is that if you're priced out today then you're more than likely to be priced out tomorrow too. Any other conclusion is just wishful thinking.

Share this post


Link to post
Share on other sites

James Rickards author of 'The Death of Money' was on the Bacon show on Fivelive this afternoon (not yet available on iPlayer). He reckons there will be a hyper inflationary reset in 5ish years. Leverage (debt), and paper assets including cash will be liabilities. He reckons we should all be 10% in gold.

Dunno if he is right, but he seemed very plausible.

http://www.amazon.co.uk/gp/aw/d/0670923699/ref=mp_s_a_1_1?qid=1399480863&sr=8-1π=AC_SX110_SY165

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • Recently Browsing   0 members

    No registered users viewing this page.

  • The Prime Minister stated that there were three Brexit options available to the UK:   215 members have voted

    1. 1. Which of the Prime Minister's options would you choose?


      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

    Please sign in or register to vote in this poll. View topic


×

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.