Londoner Posted December 28, 2005 Share Posted December 28, 2005 I think some degree of tunnel vision exists on both sides of the house price debate. To put this to the test, I'd like to ask everyone what it would take for them to change their minds re: their stated predictions for the property market? i.e. If you are a bear and pro-HPC, what would it take for you to change your mind? And likewaise, for those who are anti-HPC and bullish, what would it take for you to revise your opinion? I suggest that those for whom there is *nothing whatsoever* that could possible make thems change their minds and switch positions, that those people have tunnel vision and that their judgments may not be totally rational. What do you think? Quote Link to comment Share on other sites More sharing options...
MarkG Posted December 28, 2005 Share Posted December 28, 2005 To put this to the test, I'd like to ask everyone what it would take for them to change their minds re: their stated predictions for the property market? Well, if the average wage went up 20% next year or aliens landed on Earth with space-ships made of gold and started buying up all the houses, that would be a good start. Until then, either houses need to at least halve in price or wages need to at least double to return any kind of sanity to the market. I don't see any sign of the latter, which means we'll see the former. Quote Link to comment Share on other sites More sharing options...
Guest Bart of Darkness Posted December 28, 2005 Share Posted December 28, 2005 If by the time I've saved up my deposit (at least another 18 months yet) prices haven't gone down significantly, I'll have to decide whether to wait or buy. At the moment I'm still saving, so the decision can be put off until I have a deposit I'm happy with. Quote Link to comment Share on other sites More sharing options...
the don Posted December 28, 2005 Share Posted December 28, 2005 (edited) im with mark g the basic problem is that prices are out of kilter with earnings. overall debt levels are very high( mortgage, credit card, overdrafts, student loans) any further increase in interest rates ( which i expect) will make it worse. cant see wages jumping at 15%-20% p.a to resolve affordability issues. only 2 possibilities: a) drop of 25% from todays prices over 3 years or so prices stagnate for about 10-12 years. cant see that is realistic. aso, with the drop in tranactions because of affordability, the construction sector( apart from goverment work) will go into recession.(its probaby already ther now) this will knock on and cause further loss of confidence. the governement hasnt got the cash to afford more public sector job creation to take up these people. energy prices just exacerbate the conditions for the crash/ correction. with regards to bull conditions: to raise prices further will require more conning of the public and/or genuine shortages of properties. the conning of the public has been going on for ages but ths has not prevented the recent down turn in prices. dont believe there is any shortage of properties overall i therefore have to conclude that market reality is setting in and will continue until past a point of equilibrium. Edited December 28, 2005 by the don Quote Link to comment Share on other sites More sharing options...
Johnny Posted December 28, 2005 Share Posted December 28, 2005 (edited) I'm just going to keep plodding along , putting my hard earned money in investments / savings. I can not see myself buying in the next year due to the number of uncertainty's being issued in the media and also internally through a number of large IT operations. Yes, the IT industry and possible outsourcings over the coming year. Yes I work in IT and yes a lot of people in this line of work are very, very worried about job security over the coming year. The worried people are at both the bottom and top end of the scale. I'm just going to batten down the hatches and just let 2006 roll along, if anything drastic happens I'll be able to use my savings to enjoy life unlike a lot of other IT people out there, up to their eyeballs in debt. 2007 will be the year when we all will know which way the market has turned, it will be then I decide whether it is a good time to buy in the UK. Edited December 28, 2005 by Johnny Quote Link to comment Share on other sites More sharing options...
slater14 Posted December 28, 2005 Share Posted December 28, 2005 I think some degree of tunnel vision exists on both sides of the house price debate. To put this to the test, I'd like to ask everyone what it would take for them to change their minds re: their stated predictions for the property market? i.e. If you are a bear and pro-HPC, what would it take for you to change your mind? And likewaise, for those who are anti-HPC and bullish, what would it take for you to revise your opinion? I suggest that those for whom there is *nothing whatsoever* that could possible make thems change their minds and switch positions, that those people have tunnel vision and that their judgments may not be totally rational. What do you think? When you say 'change their minds' do you mean what would it take for me to be convinced there WONT be a crash or that property prices will keep RISING? For a crash to be averted, personally I think its too late and with transaction levels at their lowest for 30 years I think most of the public has now seen through the scam. Time on market has risen from six weeks to many months (anecdotal evidence suggest a year is not uncommon) Prices have risen too fast and too high to be sustainable and a correction is the only way to get it back on track. The debts racked up against properties wont just disapear - they need to be repaid and to think that the only way you are going to do this is by selling it at a higher price than you bought it for is getting us into a pyramid scam mentality.....eventually there must be 'the last man holding the baby'....I think we're already at this stage. To keep prices rising - with North Sea oil coming to an end, credit card and personal debt at frightening levels, personal bankruptcies up 30% in one year, unemployment rising, businesses issuing profit warnings like never before, interest rates looking unsustainable at these levels, a serious black hole in the chancellors coffers, another £7bn added with the EU rebate hand back, Rentokil setting the lead closing its pension scheme, Sipps fiasco....Look into the eyes, not around the eyes, look into the eyes Quote Link to comment Share on other sites More sharing options...
Come On Down Posted December 28, 2005 Share Posted December 28, 2005 (edited) Strange question Londonder. What would it take to change our minds? Erm, housing becoming more affordable? I earn a well above average salary, and I can only just afford an average house. Ask yourself one question, would you buy a house now? And why have the prices gone up so much over the last 6/7 years? Edited December 28, 2005 by Come On Down Quote Link to comment Share on other sites More sharing options...
Goat Posted December 28, 2005 Share Posted December 28, 2005 Is this another London Landlady alias? Quote Link to comment Share on other sites More sharing options...
Spring Bounce????? Posted December 28, 2005 Share Posted December 28, 2005 I think there is another tunnel vision that exists. Many people particularly the bulls believe that we are all waiting for a crash so we can start with a big property or jump a few rungs on the ladder. There is a growing number of us that can't afford anything and I mean anything. Ok if we lied on our self cert mortgage and took it out interest only we might get a one bedroom flat. Fact lot of good that is to me as I have a child. Plus my wife is no longer working as she needs to look after him. It's all well and good saying people in their twenties should max out their mortgage borrowing on a joint salary but how the hell are they ever going to be able to afford a family? Yes most people start their families in their twenties or very early thirties. You can't raise a family in a one bedroom starter home or pokey studio flat. You also will not be able to climb the so called ladder any further on one salary. This is going to be the reason for a major correction in my mind. If it doesn't happen then watch the amount of children born drop dramatically over the next ten years. Quote Link to comment Share on other sites More sharing options...
assetpriceinflation Posted December 28, 2005 Share Posted December 28, 2005 In order to consider buying a house I require the money supply to be tightened to a point where I can guarantee that changes in prices are not reflective of any bubble mentality - that and a zillion% pay rise. Quote Link to comment Share on other sites More sharing options...
Shamus Posted December 28, 2005 Share Posted December 28, 2005 I'm looking for small 3-bed detached house priced at £180k-£210k to fall to £150k or less!! Quote Link to comment Share on other sites More sharing options...
Guest Bart of Darkness Posted December 28, 2005 Share Posted December 28, 2005 Houses such as this one in the S20 area were usually £165k or higher for most of this year, but I'm starting to see more like this at the £150k price point. http://www.rightmove.co.uk/viewdetails-873...pa_n=1&tr_t=buy Another 20k fall would give a price that was just about bearable (no pun intended!) Quote Link to comment Share on other sites More sharing options...
zorn Posted December 28, 2005 Share Posted December 28, 2005 i.e. If you are a bear and pro-HPC, what would it take for you to change your mind? And likewaise, for those who are anti-HPC and bullish, what would it take for you to revise your opinion? If the Land Registry quarterly figures (as mix-adjusted and seasonally adjusted by Acadametrics for the FT) drop to 10% below their peak value, I'll admit that it looks like there's a crash happening. Quote Link to comment Share on other sites More sharing options...
doogie Posted December 28, 2005 Share Posted December 28, 2005 i.e. If you are a bear and pro-HPC, what would it take for you to change your mind? With first-time buyers priced out and buy-to-let no longer making financial sense, for me to turn bullish I need to be convinced that there is another group of buyers out there to support the market at current levels. Quote Link to comment Share on other sites More sharing options...
CrashedOutAndBurned Posted December 28, 2005 Share Posted December 28, 2005 I think there is another tunnel vision that exists. Many people particularly the bulls believe that we are all waiting for a crash so we can start with a big property or jump a few rungs on the ladder. There is a growing number of us that can't afford anything and I mean anything. Ok if we lied on our self cert mortgage and took it out interest only we might get a one bedroom flat. Fact lot of good that is to me as I have a child. Plus my wife is no longer working as she needs to look after him. It's all well and good saying people in their twenties should max out their mortgage borrowing on a joint salary but how the hell are they ever going to be able to afford a family? Yes most people start their families in their twenties or very early thirties. You can't raise a family in a one bedroom starter home or pokey studio flat. You also will not be able to climb the so called ladder any further on one salary. This is going to be the reason for a major correction in my mind. If it doesn't happen then watch the amount of children born drop dramatically over the next ten years. Very true - when we were just two people in modestly paid yet skilled jobs, we could not afford a thing, even though we had a few savings and little debt. We'd couldn't not have afforded a one-bed flat with a 9' 10" bedroom, 10' lounge and kitchenette. One ex-colleague bought her flat five in 1999 while earning 11k McJobbing at a bookstore for £45k - flats like that go for over 120k now. When we'd saved up a bit more, and had taken on extra work in our spare time, we could look at the most cramped 2 bed terraced houses going - y'know, no hallways or landings, every room 10'x10' with a 6'x5' kitchen. We saw one where the couple were the same age as us, little kid, another on the way, Dad a van driver and Mum looking after the kid full time while doing an college course. They'd been there five years. No way could they have afforded to buy it a few years on (had probably gone from 55k to 165k), especially not with a luxuary of a parent not working. With two incomes maxed out, we'd have probably had to rent out the spare room of that tiny place. There's no property ladder for us. We can only save, hope for an okay payrise and price falls. As we're not 23 year olds, when we buy it has to be a medium-term home that will do us for a fair while.. Quote Link to comment Share on other sites More sharing options...
tonification Posted December 28, 2005 Share Posted December 28, 2005 (edited) Despite being a property bear, I do have some nagging doubts about a large (20%+) crash. To play devils advocate, here are some reasons: 1. We do live in a densely populated yet rich, small country. Whilst this remains true, property will never be 'cheap'. 2. Dual income households. Virtually all households are dual income now, which means everyone has twice as much to spend on a house. This is why it is almost impossible for a single FTB to compete in the market. 3. Manufactured goods, food and some services (e.g. flights) are getting cheaper than ever in real terms. This is a tribute to farming efficiency, IT systems, asian manufacturing, etc. This means people have more money to spend on other things: commodities and property. Also, people have also piled into these sectors for investment because they are finite and their value cannot be squeezed like manufactuing and services. Edited December 28, 2005 by tonification Quote Link to comment Share on other sites More sharing options...
FollowTheBear Posted December 28, 2005 Share Posted December 28, 2005 (edited) Despite being a property bear, I do have some nagging doubts about a large (20%+) crash. To play devils advocate, here are some reasons: 1. We do live in a densely populated yet rich, small country. Whilst this remains true, property will never be 'cheap'. 2. Dual income households. Virtually all households are dual income now, which means everyone has twice as much to spend on a house. This is why it is almost impossible for a single FTB to compete in the market. 3. Manufactured goods, food and some services (e.g. flights) are getting cheaper than ever in real terms. This is a tribute to farming efficiency, IT systems, asian manufacturing, etc. This means people have more money to spend on other things: commodities and property. Also, people have also piled into these sectors for investment because they are finite and their value cannot be squeezed like manufactuing and services. Dual income households? Er, hang on, I thought one of the principle reasons given for the explosion in house prices was more people living alone?? Edited December 28, 2005 by FollowTheBear Quote Link to comment Share on other sites More sharing options...
tonification Posted December 28, 2005 Share Posted December 28, 2005 Dual income households? Er, hang on, I thought one of the principle reasons given for the explosion in house prices was more people living alone?? Thats another reason, from divorces especially. But within family units, dual income is certainly a big factor. Quote Link to comment Share on other sites More sharing options...
slater14 Posted December 28, 2005 Share Posted December 28, 2005 Despite being a property bear, I do have some nagging doubts about a large (20%+) crash. To play devils advocate, here are some reasons: 1. We do live in a densely populated yet rich, small country. Whilst this remains true, property will never be 'cheap'. 2. Dual income households. Virtually all households are dual income now, which means everyone has twice as much to spend on a house. This is why it is almost impossible for a single FTB to compete in the market. 3. Manufactured goods, food and some services (e.g. flights) are getting cheaper than ever in real terms. This is a tribute to farming efficiency, IT systems, asian manufacturing, etc. This means people have more money to spend on other things: commodities and property. Also, people have also piled into these sectors for investment because they are finite and their value cannot be squeezed like manufactuing and services. Despite owning property I cant see anything other than a large (way above 20%) correction. 1. We live in a country that produces very little and sells even less.....we consume. 2. Most households were dual income before the last crash (which I remember only too well) which made it that much more certain a crash would happen....most people today (as then) borrowed beyond the 3.5 + 1.5 multiples for a couple and there was no slack in the budget for pregnancy, unemployment etc etc. 3. Manufactured goods which are imported into this country suck money away from us. As IT systems improve and farming becomes more efficient and Asian manufactured goods are imported....we lose jobs. 4. People DO NOT have 'money to invest' in property. They have borrowed against an imaginary gain in one property and used that 'gain' to buy another. They havent earned or 'made' more money. They have increased their debt and exposure to that market. That 'value' can be squeezed and wiped out.....you only need to cast your mind back to the 90's Quote Link to comment Share on other sites More sharing options...
Shooter McGavin Posted December 29, 2005 Share Posted December 29, 2005 I think some degree of tunnel vision exists on both sides of the house price debate. To put this to the test, I'd like to ask everyone what it would take for them to change their minds re: their stated predictions for the property market? i.e. If you are a bear and pro-HPC, what would it take for you to change your mind? And likewaise, for those who are anti-HPC and bullish, what would it take for you to revise your opinion? I suggest that those for whom there is *nothing whatsoever* that could possible make thems change their minds and switch positions, that those people have tunnel vision and that their judgments may not be totally rational. What do you think? I guess I'm similar to many people on this site in the sense that I have some savings, a salary above the national average, yet can get nowhere near affording a property without exposing myself to a level of debt and risk that I feel is uncomfortable. For me to change my mind that property is drastically overvalued, I'd have to see the level of transactions in the market rise, and more importantly for more first time buyers to enter the market. I can only see this happening if lending becomes significantly cheaper (doubtful based on the current economic picture), salaries rise by 25% to catch up with property inflation (again doubtful imho) and for there to be a freeze on new properties being built so that supply is restricted (almost impossible based on the Government's plan to build a number of new properties each year). Quote Link to comment Share on other sites More sharing options...
Guest Bart of Darkness Posted December 29, 2005 Share Posted December 29, 2005 I'll have a go at these "devils advocate" points tonification. 1. We do live in a densely populated yet rich, small country. Whilst this remains true, property will never be 'cheap'. If people are so rich, why do they need to borrow so much money to fund their lifestyle? Why are they so petrified of even minor interest rate rises? Why are so many families dual income through necessity rather than choice? 2. Dual income households. Virtually all households are dual income now, which means everyone has twice as much to spend on a house. This is why it is almost impossible for a single FTB to compete in the market. As a single FTB who plans on buying a 3 bed detached I should perhaps take exception to that. Most people with kids often need a dual income to make ends meet. I have two married friends with good jobs and two kids. Tonight I (with no kids) offered to lend them the money to replace their wonky bathroom suite because otherwise they couldn't afford to replace it (due to debt, student loan payments etc.) until much later in the year. 3. Manufactured goods, food and some services (e.g. flights) are getting cheaper than ever in real terms. This is a tribute to farming efficiency, IT systems, asian manufacturing, etc. This means people have more money to spend on other things: commodities and property. Also, people have also piled into these sectors for investment because they are finite and their value cannot be squeezed like manufactuing and services. Manufactured goods made elsewhere (no jobs created in the UK, profit goes abroad). How was that? Quote Link to comment Share on other sites More sharing options...
Londoner Posted December 29, 2005 Author Share Posted December 29, 2005 Well, if the average wage went up 20% next year or aliens landed on Earth with space-ships made of gold and started buying up all the houses, that would be a good start. Until then, either houses need to at least halve in price or wages need to at least double to return any kind of sanity to the market. I don't see any sign of the latter, which means we'll see the former. Hmm. You see, for me saying that only something extremely outlandish such as 'aliens landing' etc would make you change your mind is the same as saying nothing (realistically) would ever change your mind which to me suggests some degree to fixed, tunnel-like vision. When you say 'change their minds' do you mean what would it take for me to be convinced there WONT be a crash or that property prices will keep RISING? For a crash to be averted, personally I think its too late A lot of people are simply restating why they believe there will be a crash. To clarify, what I am asking is this: If you are a bear and are convinced there will be a crash - what would it take (in terms of REALISTIC market data) for you to change your mind and think "OK, actually maybe there won't be a crash after all."? What if we wait 3 months and prices are level or rising? What about 6 months? A year? How about 2 years? At what point do you revise your opinion? Because if there is absolutley nothing (in terms of REALISTIC market data) that would make you change your mind then I fear we have left the realm of rational thinking. Is this another London Landlady alias? No! This question applies equally to the bulls: If you are adamant there will be no crash, what would it take (in terms of realistic market data) for you to change your mind and think "OK, I was wrong, it looks like there WILL be a crash after all."? 3 months of +2% drops, say? 6 months? Like I said, I think we need to be wary of tunnel vision on BOTH sides. For the record, I am a confused bear! Quote Link to comment Share on other sites More sharing options...
Being_Patient Posted December 29, 2005 Share Posted December 29, 2005 Hmm. You see, for me saying that only something extremely outlandish such as 'aliens landing' etc would make you change your mind is the same as saying nothing (realistically) would ever change your mind which to me suggests some degree to fixed, tunnel-like vision. A lot of people are simply restating why they believe there will be a crash. To clarify, what I am asking is this: If you are a bear and are convinced there will be a crash - what would it take (in terms of REALISTIC market data) for you to change your mind and think "OK, actually maybe there won't be a crash after all."? What if we wait 3 months and prices are level or rising? What about 6 months? A year? How about 2 years? At what point do you revise your opinion? Because if there is absolutley nothing (in terms of REALISTIC market data) that would make you change your mind then I fear we have left the realm of rational thinking. No! This question applies equally to the bulls: If you are adamant there will be no crash, what would it take (in terms of realistic market data) for you to change your mind and think "OK, I was wrong, it looks like there WILL be a crash after all."? 3 months of +2% drops, say? 6 months? Like I said, I think we need to be wary of tunnel vision on BOTH sides. For the record, I am a confused bear! For me 2006 will be the pivotal year. The last 18 months has seen around 20% HPI reduced to zero. Anecdotally we are seeing more realistic pricing, ie asking price reductions. Markets (of any type) rarely, if ever, plateau out, but they can and do correct , often with a vengeance. I expect prices to trend downwards in 2006, if they do I shall remain a bear. Will it be a short sharp shock, or a long drawn out affair Japanese style? I don't know, but the former is prefered to "get it over with". If by the end of 2006 the price trend has been upwards (in real terms), I will revise my views. Quote Link to comment Share on other sites More sharing options...
foxytrader Posted December 29, 2005 Share Posted December 29, 2005 Despite being a property bear, I do have some nagging doubts about a large (20%+) crash. To play devils advocate, here are some reasons: 1. We do live in a densely populated yet rich, small country. Whilst this remains true, property will never be 'cheap'. 2. Dual income households. Virtually all households are dual income now, which means everyone has twice as much to spend on a house. This is why it is almost impossible for a single FTB to compete in the market. 3. Manufactured goods, food and some services (e.g. flights) are getting cheaper than ever in real terms. This is a tribute to farming efficiency, IT systems, asian manufacturing, etc. This means people have more money to spend on other things: commodities and property. Also, people have also piled into these sectors for investment because they are finite and their value cannot be squeezed like manufactuing and services. Just on these points 1/ Holland is a highly populated yet rich little country but doesn't have the same ridiculous bubble mentality. A 3 bedroom duplex overlooking Singel canal in beautiful Amsterdam for £350k or a 3 bed Barratt box in Hemel Hempstead. Mmmm. 2/ The dual income is out of necessity not a new source of wealth. People bought together before - in summer 1988. A pair of single FTBs have the same clout as a couple. The couple may also have the complications of childcare, maternity etc I also understood there were many more single parent families now than ever. 3/ The annual tax "take" rises every year and the amount of disposable income is actually shrinking. Besides 10 years ago people didn't buy £1500 plasma screen televisions on 23.9% credit cards. Any consumer boom that has taken place has been at the price of UK jobs, Asian sweatshops etc The rise in commodity prices has not assisted the consumer in any way. An investment does not depend on individuals suspending rational thought in the pursuit of speculative gains. That is gambling. A house ceases to be an investment if you live in it or if the rent generates less income than the costs of ownership including the opportunity cost of the equity. Thanks for bringing those up Tonification. I feel a lot better now. The Fox. Quote Link to comment Share on other sites More sharing options...
Darth_Calculus Posted December 29, 2005 Share Posted December 29, 2005 For me 2006 will be the pivotal year. The last 18 months has seen around 20% HPI reduced to zero. Anecdotally we are seeing more realistic pricing, ie asking price reductions. Markets (of any type) rarely, if ever, plateau out, but they can and do correct , often with a vengeance. I expect prices to trend downwards in 2006, if they do I shall remain a bear. Will it be a short sharp shock, or a long drawn out affair Japanese style? I don't know, but the former is prefered to "get it over with". If by the end of 2006 the price trend has been upwards (in real terms), I will revise my views. I am a bear, and currently think that if the US and EU continue to raises interest rates, then the UK will be forced to follow suit, else face a run on the pound. I also believe that the poor retail trading of 2005 will result in job losses, and big firms going under in 2006. I think that the cost of petrol is set to rise again, to levels similar to those at the time of the US hurricanes. I think that Gordon Brown will be forced to introduce higher taxes to make up for the lower growth in 2005 (and lower expected growth in 2006). Because of the above reasons, I think that many people who are living just within their means at the moment will become forced sellers. A forced seller cannot wait for the 'right price' they may have to accept a lower price. Once house prices start going YoY negative, the slide will accelerate, as people will not want to buy a house now, if it will be cheaper in x months time. This will be a catalist for greater falls. I believe that house prices will fall by maybe 10% (nomimal) in 2006. HOWEVER, if houses are priced at the same levels in a years time as they are today (nominal), then I will have to start to think of a correction occuring through many years of stagnation, rather than a 3 or so year crash. Quote Link to comment Share on other sites More sharing options...
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