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Oxfordite

My Prediction - House Prices Will Rise By 15%

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Let me firstly say that I believe house prices are overvalued by 30% already and eventually there will be a crash in values, but not yet.

I am mystified that the people around, my work collegues, friends and even economically more literal people on HPC.co.uk can't see that we're at the point of the cycle in which low inflation is moving into deflation. In fact we should be in the deflation stage if it wasn't for Fed money printing and the Asian support of the dollar giving the American econmony (American economy is the engine of the world) the last gasp of growth before it goes into deflationary depression.

Before this happens inflation will drop to 0% and so will interest rates. During this point the BTLers will go on another property binge raising house prices by about 15%. Then it will go pop. 40% HPC in 2010.

Sorry must go to work now won't be able to respond until 6pm.

Edited by Oxfordite

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Before this happens inflation will drop to 0% and so will interest rates. During this point the BTLers will go on another property binge raising house prices

I have just posted something similar on another thread. Yes, IMPO deflation is still the real problem and that we will see IR falls resulting in a VI rise in UK HPs... before we go down the long road of deflation trying to find Japan.

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Guest Charlie The Tramp
Before this happens inflation will drop to 0% and so will interest rates

Ah, I now understand why they say it`s different this. Nice thought though banks lending out free money. :ph34r:

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Do we really risk deflation?

I thought the BofE was basing everything on the CPI which is already close to the cost of goods production. The economy can probably still support a bit more price cutting but not much. The cost of raw materials on the other hand will go up due to demand unless we have quite a big world wide recession as most of the raw materials producers are close to maximum production without more investment in plant / mines etc.

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Let me firstly say that I believe house prices are overvalued by 30% already and eventually there will be a crash in values, but not yet.

I am mystified that the people around, my work collegues, friends and even economically more literal people on HPC.co.uk can't see that we're at the point of the cycle in which low inflation is moving into deflation. In fact we should be in the deflation stage if it wasn't for Fed money printing and the Asian support of the dollar giving the American econmony (American economy is the engine of the world) the last gasp of growth before it goes into deflationary depression.

Before this happens inflation will drop to 0% and so will interest rates. During this point the BTLers will go on another property binge raising house prices by about 15%. Then it will go pop. 40% HPC in 2010.

Sorry must go to work now won't be able to respond until 6pm.

I hope not, but, yes, this looks like a real possibility. If this really happens then property will get a lot more expensive before the whole thing pops. :angry:

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You seem to share one of my greatest fears. Even if deflation is avoided I am concerned that the government may ignore the MPC and reduce interest rates in an attempt to increase inflation with the intent of reducing the burden of consumer debt.

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agree with the OP. Watch 2006 in Ireland- i reckon price growth will surprise everyone on the upside. Theres still enough grist for the property mill left... the 'correction' event horizon is not here yet.

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I think Oxfordite makes some good points. I'm becoming more convinced that the Federal Reserve's binge printing of Dollars was an attempt on their part to delay deflation. Why is it that with all this extra money sloshing about in the world economy, inflationary pressures are pretty benign; it goes completely against monetarist theory.

Of course, the Fed is merely delaying the inevitable Japanese style deflation, which is far worse that the usual inflationary cycle. 0 interest rates, are a distinct possibility, though it won't save the housing market.

Oxfordite could well be rightin his prediction of a 15% rise, if one is a contrarian. There are those who think there will be a crash, those who think it will stagnate and those who think there will be moderate rises. However, hardly anyone thinks property prices will boom, which makes me think they could well chalk up significant gains.

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Let me firstly say that I believe house prices are overvalued by 30% already and eventually there will be a crash in values, but not yet.

I am mystified that the people around, my work collegues, friends and even economically more literal people on HPC.co.uk can't see that we're at the point of the cycle in which low inflation is moving into deflation. In fact we should be in the deflation stage if it wasn't for Fed money printing and the Asian support of the dollar giving the American econmony (American economy is the engine of the world) the last gasp of growth before it goes into deflationary depression.

Before this happens inflation will drop to 0% and so will interest rates. During this point the BTLers will go on another property binge raising house prices by about 15%. Then it will go pop. 40% HPC in 2010.

Sorry must go to work now won't be able to respond until 6pm.

I do hope you are wrong Oxfordlite I'm not sure I can cope with 5 more years of this.

Presumably sterling will be plummeting like a stone in the interim?

Not sure BTLs are quite that sensitive to long-term interest rates but be assured that mortgage lenders will widen the differential between base rates and mortgage rates. The lenders won't be taking deposits in that environment and the gold bugs will be out in force.

Thing is I am not completely convinced we are in a low-inflation environment at the moment. Think that is yet to come.

The Fox

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Have Unwins been having a fire sale?

The VI's are now admitting that prices are falling and you all start to think that prices are going to go up by 15%.

Forget all this talk about inflation, interest rates & similar. House prices are a 25 year commitment, any small short term fluctuations are not going to have a major effect.

Prices are going to fall because they are too high relative to incomes so there is simply not enough money to pay for them. They are too high because people have bought expecting them to go ever higher, people are now slowly realising that this is not the case, result: the house of cards collapses.

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What about inflationary pressures such as rising energy costs, rising oil prices, rising taxes etc?

What about the Fed's plans to print more and more dollars?

A few weeks ago everybody was talking about inflation being much higher than the official figures suggest, and now this?

I'm not getting it...

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Let me firstly say that I believe house prices are overvalued by 30% already and eventually there will be a crash in values, but not yet.

I am mystified that the people around, my work collegues, friends and even economically more literal people on HPC.co.uk can't see that we're at the point of the cycle in which low inflation is moving into deflation. In fact we should be in the deflation stage if it wasn't for Fed money printing and the Asian support of the dollar giving the American econmony (American economy is the engine of the world) the last gasp of growth before it goes into deflationary depression.

Before this happens inflation will drop to 0% and so will interest rates. During this point the BTLers will go on another property binge raising house prices by about 15%. Then it will go pop. 40% HPC in 2010.

Sorry must go to work now won't be able to respond until 6pm.

Sorry Oxfordite, I'm still in the inflation camp. I know there are many regular visitors to Financial Sense.com on this forum and Jim Puplava presents the case for inflation very well in his weekly broadcasts. Deflation will follow, but it is a question of timing. We know that we are due another attempt at asset bubble inflation with the Fed announcing that it will no longer publish the M3 money supply figures.

The printing of money has always resulted in inflation throughout history, yet so far, despite all the printing of money, this time we have not had runaway inflation if you believe the official figures. What I think confuses the issue, and what is different this time, to coin that well worn phrase, is the fact that the propagada, spin, and outright lies that are used to create the illusion of low inflation is now so well done, will we ever know that we have runaway inflation? We know the figures are fiddled, in the USA they do it so well it's an artform.

You may be right in that when they come to re-flate the economy, house prices will go up again, the extra money printed will need to find a home. The big question we need to ask however, is if the VI's manage to continue to hide inflation how will this play out. I assume that eventually people will know from their own personal cost of living that everything is not as it seems. People will then stop spending as they will have no choice, prices will fall. Then you will get your deflation, but it may be some way off.

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Sorry Oxfordite, I'm still in the inflation camp. I know there are many regular visitors to Financial Sense.com on this forum and Jim Puplava presents the case for inflation very well in his weekly broadcasts. Deflation will follow, but it is a question of timing. We know that we are due another attempt at asset bubble inflation with the Fed announcing that it will no longer publish the M3 money supply figures.

The printing of money has always resulted in inflation throughout history, yet so far, despite all the printing of money, this time we have not had runaway inflation if you believe the official figures. What I think confuses the issue, and what is different this time, to coin that well worn phrase, is the fact that the propagada, spin, and outright lies that are used to create the illusion of low inflation is now so well done, will we ever know that we have runaway inflation? We know the figures are fiddled, in the USA they do it so well it's an artform.

You may be right in that when they come to re-flate the economy, house prices will go up again, the extra money printed will need to find a home. The big question we need to ask however, is if the VI's manage to continue to hide inflation how will this play out. I assume that eventually people will know from their own personal cost of living that everything is not as it seems. People will then stop spending as they will have no choice, prices will fall. Then you will get your deflation, but it may be some way off.

We'll know because the pound in our pocket won't stretch as far, and consumer spending will decrease...

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You seem to share one of my greatest fears. Even if deflation is avoided I am concerned that the government may ignore the MPC and reduce interest rates in an attempt to increase inflation with the intent of reducing the burden of consumer debt.

unlikely. An inflation spiral in this country would quickly result in substantial job losses as the cost of labour soars further beyond that in the far east. Either that or there would be a real fall in living standards if prices rose but wages did not.

Whichever way you look at it, inflation targeting must retain its integrity as the alternative would be far, far worse for the UK - and probably far worse than it was in the 70s, when the unions protected employment and we had fewer and more local international competitors. (although the govt did go bankrupt!)

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Guest muttley

Let me firstly say that I believe house prices are overvalued by 30% already and eventually there will be a crash in values, but not yet.

Before this happens inflation will drop to 0% and so will interest rates. During this point the BTLers will go on another property binge raising house prices by about 15%. Then it will go pop. 40% HPC in 2010.

You're being very specific,Oxfordite.

I agree with your theory about deflation and falling interest rates,but a 15% rise in house prices??I can't see banks being willing to lend in this environment.

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unlikely. An inflation spiral in this country would quickly result in substantial job losses as the cost of labour soars further beyond that in the far east. Either that or there would be a real fall in living standards if prices rose but wages did not.

Isn't that exactly what is happening now?

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Very interesting, I suppose it all depends on how far the BOE are prepared to let things go? Letting IR's get even close to 0%, I think is unlikely. But on the other hand the BOE took a lot of battering for increasing IR's in 2004 and seem to bow to retail/manufacturing pressure more easily in 2005. After all the work last year to get inflation and spending down, they seem to be lowering IR's again and happy to stick with inflation above the 2% target.

Not forgetting of course that we are going to get a new PM in the next 3 years, one that will want nothing to get in the way of him winning a general election. Repossesions and redundancies will not be what the 'new' PM will want hanging around his neck until he is safely in office with an election win under his belt.

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Presumably sterling will be plummeting like a stone in the interim?

Yes and surely that is why we will not have IRs that low. The econony is between the devil and the deep blue sea. Lowering IRs will, as you say, send sterling down and put inflation up - as we import so many of our goods that are priced in US dollars.

For years the economy has teetered on fed by ever decreasing prices on consumer items like white goods, TVs, DVD players, cars etc - while things like Gas, Electricity, Council Tax, Tax, car servicing, building services etc have gone through the roof.

There isn't any more fat on on the consumer price bone. When DVD players are £15 (having been manufactured, shipped, stored, import duty and warehousing paid for, shipped to a wholesaler, marked up, then to a retailer, marked up etc. etc) - as I say - there is nowhere else for this stuff to go. It will now stay at the same price or start inflating as people in China want better living standards. From here on in I see inflation as the problem - and the only solution to inflation has always been rising Interest Rates.

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Yes and surely that is why we will not have IRs that low. The econony is between the devil and the deep blue sea. Lowering IRs will, as you say, send sterling down and put inflation up - as we import so many of our goods that are priced in US dollars.

For years the economy has teetered on fed by ever decreasing prices on consumer items like white goods, TVs, DVD players, cars etc - while things like Gas, Electricity, Council Tax, Tax, car servicing, building services etc have gone through the roof.

There isn't any more fat on on the consumer price bone. When DVD players are £15 (having been manufactured, shipped, stored, import duty and warehousing paid for, shipped to a wholesaler, marked up, then to a retailer, marked up etc. etc) - as I say - there is nowhere else for this stuff to go. It will now stay at the same price or start inflating as people in China want better living standards. From here on in I see inflation as the problem - and the only solution to inflation has always been rising Interest Rates.

This is what gets me, all you've said is true but still the BOE seem more interested in keeping the retailers and manufacturers off their backs than controlling inflation, it's almost as if they are expecting it to sort it self out. China's inflation was huge this year and will continue to be next year, labour costs will have to rise and soon that £20 DVD player I bought my Mum from Tesco will be costing £30+. Also, I don't think the BOE are even thinking about the possibility that the European Central Bank could raise rates further.

I can see the BOE continuing to bow to retail and manufacturing pressure for certainly the first half of this year (possibly the second half too).

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agree with the OP. Watch 2006 in Ireland- i reckon price growth will surprise everyone on the upside. Theres still enough grist for the property mill left... the 'correction' event horizon is not here yet.

Bears in Ireland have had a bad run in the past few years. I often brace myself for the worse when I pick up the Irish Sunday Newspapers ready to face the usual "House prices set to soar 20% in next 6 months" headlines.

Setting up bad expectations is a protective behavior. Bad expectations mean less chance for disappointment--even from a negative outcome.

Are you sure you're not preparing yourself to feel better next year by expecting something extreme that is not likely ?

You might be right (hope you're not!) but surely the Irish borrower/buyer after so many national and international warnings and facing the reality of ECB interest rate rises will slow down in 2006 ?

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I'm in the "threat of hyperinflation" camp.

Inflation will probably not materialise to a great extent in the states.

basically because the fed will use it as an excuse to crank up the interest rates even more.....as ammo against the deflationary bit when the boomers retire.

...the UK however may be looking at a much more inflationary route....but as there is no such thing as a free lunch this will probably mean a much higher IR spike in the long term,similar to that seen in the 80's....but with a period of relatively benign IR's(but very sneaky stealth taxes...which will probably be cut by the tories when they get in...to be followed by a spike in IR's)

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  • 338 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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