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Tokyo House Prices - A Cautionary Tale For London And The Se

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Check out this graph of house prices in Japan since 1977. I think it's interesting because I believe that the UK is lagging Japan by roughly 30 years, in terms of its housing market bubble. According to this graph, the Japanese property market peaked in 1991. I believe the UK property market will peak around 2021, if not a few years before.

Perhaps the events experienced by Japan can give us a rough indication of what we can expect to experience in the UK. Of course, any potential correction in the UK will not be exactly the same as Japan in either duration or volume, but it may well be similar.

japan-and-us-home-prices.png

Interestingly, the housing market in Japan fell from roughly 240 at its peak to 140. That's nearly a halving in value in just 6 years! (and the correction may not be over yet; it could still potentially go lower.).

There's also a good article about the recent history of property prices in Tokyo at the following link. Some of the causes and effects are scarily similar to that of the UK.

https://housingjapan.com/2011/11/10/a-history-of-tokyo-real-estate-prices/

Some of the figures are related to commercial property, but it's still very interesting information.

What this graph highlights for me is a very simple maxim: Nothing goes up in price forever, not even property. It just feels like it at the moment, that's all. History is the ultimate judge of economic realities. The UK is no exception to this, although it might not feel like it right now!

Stay patient. All of you out there waiting for a significant price correction in the UK housing market will be rewarded, eventually. But it might take a while!

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Interesting. Fred believes the next crash will be around 2016 based on the 18 year land cycle.

China also is subject to an 18 year cycle of land boom and bust.

http://www.theepochtimes.com/n3/2000510-economists-explain-why-our-economy-crashes-every-18-years/?photo=6

Weird, because you'd think the West and China would follow the example of Taiwan which believes in taxing land, not wages

The next big crash could be so severe it could lead to war.

Edited by RentierParadisio

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Check out this graph of house prices in Japan since 1977. I think it's interesting because I believe that the UK is lagging Japan by roughly 30 years, in terms of its housing market bubble. According to this graph, the Japanese property market peaked in 1991. I believe the UK property market will peak around 2021, if not a few years before.

Perhaps the events experienced by Japan can give us a rough indication of what we can expect to experience in the UK. Of course, any potential correction in the UK will not be exactly the same as Japan in either duration or volume, but it may well be similar.

japan-and-us-home-prices.png

Interestingly, the housing market in Japan fell from roughly 240 at its peak to 140. That's nearly a halving in value in just 6 years! (and the correction may not be over yet; it could still potentially go lower.).

There's also a good article about the recent history of property prices in Tokyo at the following link. Some of the causes and effects are scarily similar to that of the UK.

https://housingjapan.com/2011/11/10/a-history-of-tokyo-real-estate-prices/

Some of the figures are related to commercial property, but it's still very interesting information.

What this graph highlights for me is a very simple maxim: Nothing goes up in price forever, not even property. It just feels like it at the moment, that's all. History is the ultimate judge of economic realities. The UK is no exception to this, although it might not feel like it right now!

Stay patient. All of you out there waiting for a significant price correction in the UK housing market will be rewarded, eventually. But it might take a while!

Might be too late for a lot of people if it were to peak in 2021. And waiting until 2027ish for the crash to start to level out for fair value. Another 10-12 years to buy a house at a reasonable price on that time model. Unfortunately if this bubble doesn't end soon, then a lot of people in the 20-45 bracket may really struggle to set themselves up for a reasonable retirement. Generally speaking (most on this board probably aren't your average folk) people can't really afford to wait 10 years of their peak earning years gifting everything they earn to parasitic landlords. It is critical wealth building stage that has been robbed from people.

Edited by SillyBilly

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Might be too late for a lot of people if it were to peak in 2021. And waiting until 2027ish for the crash to start to level out for fair value. Another 10-12 years to buy a house at a reasonable price on that time model. Unfortunately if this bubble doesn't end soon, then a lot of people in the 20-45 bracket may really struggle to set themselves up for a reasonable retirement. Generally speaking (most on this board probably aren't your average folk) people can't really afford to wait 10 years of their peak earning years gifting everything they earn to parasitic landlords. It is critical wealth building stage that has been robbed from people.

2021?

Have you seen he f&&king prices today...the last 2 year rises south of Leicester have been double that of 1999 to 2007. The mega bubble will be lucky to make it to easter!

Edited by TheCountOfNowhere

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2021?

Have you seen he f&&king prices today...the last 2 year rises south of Leicester have been double that of 1999 to 2007. The mega bubble will be lucky to make it to easter!

I hope so Count. It is absolutely mental where I am (BStoke/Reading). I was just pointing out the OP's time projections would sink a lot of people, a price bottom a decade from now won't cut it for a lot of people.

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I do think there are some parallels, but worth bearing in mind that the Japanese population is expected to shrink by a third over the next 50 years. It's a weird place.

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The next big crash could be so severe it could lead to war.

Or an absolute celebration. Work should pay for a good standard of housing; renting or buying.

Who is going to fight your HPI mad-values protection war? Bomad's Army. Majority of them can't be tempted out to sell, with house prices this mad high.

Buy-To-Let letter-writer platoons?

Young are up against very high house prices, and many renter-savers taken it on chin. Banks spent last few years getting in position to handle wider correction.

Indeed, but is this a question of death? Or about ensuring market participants bear consequences of their decisions without any artificial fiddling that makes the final reckoning much harder and destroying the standards of living of large swathes of the populace along the whole process. No, you said nothing about your beliefs explicitly indeed, but I can read between the lines. That "nobody died" argument is another one from that league where bureaucrats can make arbitrary decisions of whom needs bailing out at the expense of whom and for what underlying purpose...

The day always comes when they have to pay the piper if the intent is to defy the working of a market place.

HPI questing to the extent we've seen, with all the passion for it, and smugness, really is so messed-up in the head. Needs a big HPC in the most HPI+ frenzied markets, to bring about a lasting realisation. Painful lessons to echo into long future, but at the very same time, opportunity for those who've been locked out of the HPI+ mad compounding market on renter-saver side. As has occurred time and time again in history.

Mr.Nakashima - an adult, and you got what you wanted. Buyers pushed prices up, helping to hurt (not ruin as such) renter-savers who wanted no part of your mad bubble. You chose to indulge in the speculation. Market participant. You got what you wanted.

2005. "There is a whole generation of homebuyers stuck out in far suburbs," ..."It was déjà vu," Professor Noguchi said. "People were in a rush to buy, and at extraordinary prices. I saw this same haste psychology in Japan" in the 1980's. "The classic definition of a bubble," he added, "is people buying on false expectations about future prices, and buying with the hope of selling in the future."

(Mr. Nakashima vs Mr. Nakajima)

He rues the idea that homes came to be seen as just another investment. "Homes should be different from stocks," he said. "They shouldn't be the object of speculative investing. If home prices move too much, they can ruin your life."

Some economists say that there are probably millions of people like Mr. Nakashima, trying to make the best of life in homes that are distant from work and for which they grossly overpaid.

Mr. Nakajima said he had barely missed being stuck out there himself. In 1991, he was looking at a 100-square-meter apartment (1,080 square feet) for about $600,000 about two hours outside Tokyo. He said his wife stopped him. Six years later, he spent the same amount to buy a more spacious house in a downtown neighborhood. "Maybe my wife should be the economist," he said.

http://www.nytimes.com/2005/12/25/business/yourmoney/take-it-from-japan-bubbles-hurt.html

Edited by Venger

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Might be too late for a lot of people if it were to peak in 2021. And waiting until 2027ish for the crash to start to level out for fair value. Another 10-12 years to buy a house at a reasonable price on that time model. Unfortunately if this bubble doesn't end soon, then a lot of people in the 20-45 bracket may really struggle to set themselves up for a reasonable retirement. Generally speaking (most on this board probably aren't your average folk) people can't really afford to wait 10 years of their peak earning years gifting everything they earn to parasitic landlords. It is critical wealth building stage that has been robbed from people.

Well what position would they be in for retirement/pension, if they buy at peaky prices in this market? A far worse position imo (if we get the HPC... and I'm pleased with the move against BTL as a catalyst for it over the next few years). You have to make your own decision in the market. Don't expect the family renting a smaller house in lessor area, waiting for HPC, to bail you out for your nice house with big mortgage, imo. Market. You're right about the 'robbing' - but all I can do is wait.

Also run some rent-vs-buying calcs.

Affordability Backwards

....the initial interest payment on a £100,000 repayment loan at a 15 per cent interest rate is the same as that for a £300,000 loan at 2 per cent.

HPC: Bear Hug - Becomes more interesting when capital repayments are considered. £15k wipes out 15% of 100k loan and only 2% of £300,000k. Or very roughly, doubling payments compared to interest-only will clear your debt in 6 years at 15% or 50 years at 2%!

The genuine problem (which you might want to gloss over) is that if prices fall people who already own may well not be able to trade up, either because their equity has shrunk to a level that won't even cover the loan-value-ratio on their current house, never mind a bigger one, or because the fall has been precipitated by a a more widespread economic malaise which has screwed their finances in other respects.

Many boomers bought the houses that they'd live in for the rest of their lives, and raise their families in, at the beginning of their working lives, before they had families.

I feel that the kind of laddderism that you're assuming here is part of a perhaps unwitting attempt by society at large to turn a blind eye to the failure of the boomers to build sufficiently to ensure that their children, and pretty soon their children's children, enjoy the access to housing that boomers did nothing to earn but enjoyed nevertheless.

I think the other rather insidious idea lurking in your thinking is that it is somehow a problem if somebody pays too much for a house and ends up stuck in it. When so many hard working young people are totally excluded from even having the option to purchase property expecting any sympathy for people who not only had that option but acted on it is a dog that won't hunt as far as I am concerned.

We cannot have a housing market where there is no downside to paying too much, that way lies madness. If these people paid too much and were relying on calm economic waters forever so that they could build up some equity and trade up, f**k 'em. Houses are for living in. Taking on debt is about making and keeping promises. Some people will have bad luck; we can't protect people from the vagaries of chance, the idea that we can is stupid fantasy. The whole idea of starter homes and ladders strikes me as total boll0cks, cut from the same idiotic cloth as much of the rest of the apparently endemic HPI+++ for-f**king-ever madness

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I do think there are some parallels, but worth bearing in mind that the Japanese population is expected to shrink by a third over the next 50 years. It's a weird place.

They weren't even that tall to begin with were they?*

* Standard "I'm not a racist but..." disclaimer, wiki suggests average Dutch male is 6ft, in Japan it's 5'7", (I'm not saying that Dutchmen shrink when they go to Japan).

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Wonderful concept for a thread but I do have to say it falls a little short on the graph front. It's not hard to find descriptions of 25 years of price reductions and your graph shows the first few years. I will however confess it's almost impossible to find some sort of graphed index that shows anything like the whole story from different points of view and I don't have bloomberg anymore and it would likely need some odd scale to fit anyway. I guess I shouldn't be surprised as we're already way past the point of hunting down the shorts and torturing them to death for crimes against "humanity," just for another 50 minutes of bubble.

It's all so predictable ... tweedle dum and tweedle dee chicken out the millisecond a broad index of activity starts to dip and the broad index is dominated at the margin by housing (and basically has been since Thatcher gaves us an industry-o-mectamy). This selects out non-housing industry especially that which tries to operate through international currency markets as these are wildly manipulated and price shocks become at best unpredictable and at worst extremely poorly timed. I don't think the Japanese got to the point of actually deliberately making this mistake like us - but I wasn't on the ground predicting that one for 15 years before it happened.

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Interesting. Fred believes the next crash will be around 2016 based on the 18 year land cycle.

China also is subject to an 18 year cycle of land boom and bust.

http://www.theepochtimes.com/n3/2000510-economists-explain-why-our-economy-crashes-every-18-years/?photo=6

Weird, because you'd think the West and China would follow the example of Taiwan which believes in taxing land, not wages

The next big crash could be so severe it could lead to war.

Fred Harrison? It was 2010 10 years ago. Then ah let's make it 2016.

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They weren't even that tall to begin with were they?*

* Standard "I'm not a racist but..." disclaimer, wiki suggests average Dutch male is 6ft, in Japan it's 5'7", (I'm not saying that Dutchmen shrink when they go to Japan).

Lol of the day award

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I do think there are some parallels, but worth bearing in mind that the Japanese population is expected to shrink by a third over the next 50 years. It's a weird place.

Lucky them!

What will London be like with twice as many people. The place can't cope as it is.

Or 100 million people in Britain. Given our porous borders I can see it.

Edited by MARTINX9

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Lucky them!

What will London be like with twice as many people. The place can't cope as it is.

I've driven in central London half a dozen times lately. Apart from it being an office/property building site, the main issue is movement.

Try getting out by road after 1pm and it's gridlock. Three times in six trips it took over four hours to get from EC4 to outside the north M25.

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Well what position would they be in for retirement/pension, if they buy at peaky prices in this market? A far worse position imo (if we get the HPC... and I'm pleased with the move against BTL as a catalyst for it over the next few years). You have to make your own decision in the market. Don't expect the family renting a smaller house in lessor area, waiting for HPC, to bail you out for your nice house with big mortgage, imo. Market. You're right about the 'robbing' - but all I can do is wait.

Also run some rent-vs-buying calcs.

+1

You have to deal with the situation as it stands. There are other opportunities out there instead: cheap rentals in so so areas; other assets to invest in. Complaining that it's impossible to buy a reasonably priced family home and then saying you financial future is therefore over is the worst kind of conformism.

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I've driven in central London half a dozen times lately. Apart from it being an office/property building site, the main issue is movement.

Try getting out by road after 1pm and it's gridlock. Three times in six trips it took over four hours to get from EC4 to outside the north M25.

I've not driven in London for a long time now, but I've heard that the increasing number of cycle lanes (Boris' "Cycle Superhighway") is making the situation worse for cars because they're being squeezed into fewer and narrower driving lanes.

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2021?

Have you seen he f&&king prices today...the last 2 year rises south of Leicester have been double that of 1999 to 2007. The mega bubble will be lucky to make it to easter!

Well let's hope it doesn't take until 2021 for prices to start declining (or at least stop rising!).

I'm just trying to set expectations because I know how much the government just loves to intervene to keep the market inflated. Remember as well that the next General Election is 2020, so it's going to be in the government's interest to at least attempt to keep the homeowners happy until then; they are the core voting block after all.

Perhaps it's more likely that the rate of price increases will gradually slow between now. I think you're right - I can't see the price increases going at the same rate continuously for the next 5 years. I think some of what we're seeing is panic buying as buy to letters try to get purchases in before the tax hikes, and FTBs let fear drive them because they want to buy before "prices run away from them".

But prices might sit tight for a while before the inevitable decline. A bit like sitting on the Oblivion ride at Alton Towers right at the top, waiting for the inevitable descent! Except that the housing market can sit there for a bit longer than a few seconds!

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Well let's hope it doesn't take until 2021 for prices to start declining (or at least stop rising!).

I'm just trying to set expectations because I know how much the government just loves to intervene to keep the market inflated. Remember as well that the next General Election is 2020, so it's going to be in the government's interest to at least attempt to keep the homeowners happy until then; they are the core voting block after all.

That's a premise so many market participants have, on both sides of the market. There is the risk of painful complacency. Answering misleading premises. Also your 'core voting block after all'. HPC might bring about many more Conservative voters.

Your premises here possibly explain one of the motivations the BTLers kept on dancing into it, why you get owner-smug side telling you about natural HPI inflation ("buy now - can't lose cause inflation").

Has been all about steadying the banks, imo. Getting the banks ready. Smoothing risk out onto . The Gov doesn't care who it throws under the bus, when it comes down to it.

Suspect that premise will be tested - we take our positions and make choices. You might find the happy-happy doesn't last until 2020. Look at the BTLers squealing. How do you explain that one. And values are found through transaction at the margin, in an active market. There will be rapid HPC opportunities, without 15 year wait, imo. Although didn't see many opportunities 2009-12, one standout one was in 2012 (before HTB announced in 2013) and an inheritor slashed and slashed asking price, and to my surprise, accepted a chunk below that (from FTBs). Price I would have been happy with. Seeing that occur once gives me confidence it will occur again, when market turns. And now this move against the BTLers (C.24), and stamp duty hike on would-be second-home buyers and FTBs. Non linear event. Straws that break camels backs.

This imo, is true for Gov, not just BoE. Just my view you have to be careful with the strong assumption Gov stands fully behind HPI++ seeking, and doesn't have alternative motives.

Where does everyone get this idea that the Bank of England want to avoid a house price crash from?

ZIRP isn't here to ensure that some mug punter avoids negative equity. House prices (and mortgage credit) are a big deal, but they are not the UK economy, (and UK housing and mortgage credit is not driving the world economy FFS). The role of ZIRP in the housing market since about 2009 is that it is enabling mug punters to pay their mortgages (and hence helps maintaining an appearance of banking sector solvency which would be rather more difficult to pass off if half the Lloyds Group loan book was in arrears). ZIRP thus allows the over-leveraged mortgage prisoners to try to hang on whilst hoping for a miracle (though of course it doesn't force them to do that) and this affects house prices because it lessens the motivation to sell, but still its express purpose is not to hold up house prices.

The Bank have been totally clear that they believe that they banks can now take a massive HPC without any attendant threat to their solvency. It's also blindingly obvious that they are far more concerned about house prices staying at this level and transactions increasing (driving up LTIs and DSRs) than they are about house price falls.

[...]You may want to brow beat people into anxiety about missing the boat and losing their one shot at happiness, I just think that near the zero rate bound, people are right to be cautious about the future path of SVRs over a 5-10 year time scale. Remember that even though the rate at which they are changing is anaemic, the trend is robust; SVRs have been tracking up and away from the policy rate ever since the policy rate dropped.

You might want to jump into somebody else's MEW/HEW grave, (or maybe you're looking for a greater fool to jump into yours), I'm not so keen. If the game is rigged, sometimes the only way to win is to not play. The government is trying to manage its insolvency. If circumstances change and there comes a time for a few owner-occupiers and BTLers to join the corpses of the savers thrown under the bus, then under the bus they will go, depend on it.

I think buy-to-let (meaning lenders and borrowers both) is coming into the limelight simply because it's one of the most significant remaining problems. BTLers are the largest segment of speculators still acting in the market. Much of the previous speculation by owner occupiers - in the form of liar loans, interest-only lending, and 100%+ LTVs - has already been knocked on the head.

Help to Buy is an issue but the volumes are so low that I don't think it can hold up prices without speculators taking up a significant portion of the market. It's mainly a sentiment driver and speculators are likely the strongest reactors to sentiment drivers, hence without the speculators it has substantially less teeth to drive prices. MMR has limited loans to income for owner occupiers and Carney has indicated he expects to see an increased spread between base rates and market rates due to lenders meeting the increased costs of higher regulatory and capital requirements, so low base rates should also be less of an issue. This is especially true if the amount of speculators in the market is reduced, as this would seriously curtail the other consequence of low base rates on the housing market: yield chasing. Supply of actual physical homes is arguably meeting direct demand but falling short of speculative demand, and thus reducing speculative demand would also help with this issue.

Equally there are BTL landlords who have and will get out with massive unearned gains, just as there are other speculators of all stripes who stand to lose it all and more in a BTL-induced correction. The world is not just. While it's good to try and work out the truth of what's happened what's most important is that the situation gets solved and people who are not to blame at all stop having to suffer the consequences of the actions of those who do share in the blame and are currently living the life of Riley.

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2021?

Have you seen he f&&king prices today...the last 2 year rises south of Leicester have been double that of 1999 to 2007. The mega bubble will be lucky to make it to easter!

2021 as peak Osborne-Carney?

Seems familiar...

screen%20shot%202016-03-18%20at%2010.15.

Edited by zugzwang

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This Japan housing theme comes up every few years.

There are differences, among them:

  • Japan does not have the same restrictive planning laws
  • its population is getting older and is less inclined to take on new debt
  • there are not the same levels of immigration
  • the system of money creation and credit is not the same

For London to do a Tokyo we would need:

fewer young people coming to London

fewer immigrants coming to London

less restrictive planning

overseas investment to dry up

London to no longer be the global financial/artistic hub that is

and a few other things I can't think of at the moment.

Also all our monetary intervention - QE, ZIRP etc - has boosted house prices. In Japan, for whatever reason, the money didn't flow into housing in the same way it has here.

Thread from a few years back: http://www.housepricecrash.co.uk/forum/index.php?/topic/198709-planning-laws-in-japan/

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This Japan housing theme comes up every few years.

There are differences, among them:

  • Japan does not have the same restrictive planning laws
  • its population is getting older and is less inclined to take on new debt
  • there are not the same levels of immigration
  • the system of money creation and credit is not the same

Hi Frizzers,

yes I agree that Japan has its own unique situation which means that any correction in London won't be simply a carbon copy.

Perhaps I didn't explain myself very well, but the point I was really trying to make was that by looking at the bursting of speculative property bubbles in other regions, we can get a very rough idea of volume and duration for any future decline in the UK property market also. I agree that it will be different when London inevitably declines. But perhaps it's the reasons for the decline that will be the most different, rather than the volume/duration.

For example, I think it's interesting that quite a bit of the value in the Tokyo market dropped within 6 years, but the declines continued! In other words, these "crashes" don't happen overnight and it can take a while to unwind speculative bubbles. 10 years+ seems to be a fairly good estimate, although of course, prices won't go down in a linear way.

Actually, I think it's probably wider external macro monetary and fiscal policy that will be the triggers for the London decline (e.g. drying up of mortgage finance, rising interest rates, increasing tax burden on buy to letters, significant increase in housing stock etc), rather than the more micro elements that you describe.

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2021 as peak Osborne-Carney?

Seems familiar...

screen%20shot%202016-03-18%20at%2010.15.

Interesting chart, seems debt to income is flattening, obviously the forecasts are rubbish, but ignoring them,

The graph needs some thought.

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