The economic cycle

[bear.getting.old]

I don't think you can predict anything based on the patterns of the past because there is very little in the situation of today that resembles the past.

The mere fact we are all even here today discussing the continued insane prices is a sign we are not in a normal market or times. At the moment there looks like no end to ZIRP, QE and other props.

[JB1981]

 

Dear All, 

I am neither a bull nor a bear and I do not care if house prices go up or down, however I do find this forum interesting as part of my general passing interest of articles in relation to economics and house prices.

This will probably make you jump up and down but this centuries old proven property cycle suggests that the property bull market is due to run until 2025.

http://www.phillipjanderson.com/18-year-real-estate-cycle/

Whilst this is an American study it does show a clear pattern generally in Western Society that has only ever been interrupted by Word War I and World War II. Short of World War III, are you guys prepared to wait until 2026 for your house price crash? Or is it really different this time?

Please respond in the intention this post has been submitted, as I am very interested to see what people think of this apparent cycle which exists in property and that house prices, despite how unaffordable they are, may continue to go up for another 9 years!

[crashbaby]

You already started an identical thread yesterday: 

 

The only new thing here is a different link. It's best to avoid starting multiple threads on the same topic, it looks a lot like spam.

Maybe the mods can merge this into the previous thread.

[JB1981]

I know  but I had to remove the link from the previous thread as it revealed my email address. I have made a new thread with the best of intentions because I had to remove the link from the last thread. It is definitely not spam and I can only apologise for the previous thread in which I had to remove the link

I am happy for the mods to close the other thread or delete it completely and simply leave this thread open

[RickyD]

The 18 year cycle article you linked seems to refer to the US property market. I'm not sure if the same cycle applies to the UK market, but digging around, I found this chart which seems to imply that it does not fit the historical data for the UK.

 

[RickyD]

Checking the RICS website, they have this to say on property cycles:

"Measured by peaks and troughs in performance, property cycles have durations ranging from 4 to 12 years, with an average of 8 years, although there are some authorities who refer to 18-year property cycles.

Property cycles are usually used as a measure for commercial property, but in the UK, where the volatility of the housing market plays important factor in the economy, the peaks and troughs of the residential market are commonly referred to as boom and bust.

There have been examples of boom and bust in the 1970s, 1980s and 1990s. Following the economic downturn from 2008 onward, there are signs of economic recovery and growth in the real estate market, illustrating how the market fluctuates in a relatively short period of time."

Source: http://www.rics.org/uk/knowledge/glossary/property-cycles/

[winkie]

Not say I agree but interesting.....what are the other options?

 

[crashmonitor]

Has pretty much followed an 18 year Harrisonian cycle in the UK but with mid term mini corrections. We are 9 years into the cycle so who knows. The most notable mid term slump was 1981-1985 taking house prices to post war lows.

1972 peak

1989 peak (17 years)

2007 peak (18 years)

2025 ?

Edited December 2, 2016 by crashmonitor

[frederico]

Err, no, we are not in the middle of a cycle we are just reaching the limit of being able to expand by borrowing more money and selling of assets.

 

[Wayward]

I just don't understand how these 'cycles' can have any meaning when the market is so terribly distorted...we all know that policies that support prices could be removed (with the political will) and prices would slide...what does that mean for the 'cycle'?

[crashmonitor]

14 minutes ago, frederico said:

Err, no, we are not in the middle of a cycle we are just reaching the limit of being able to expand by borrowing more money and selling of assets.

 

I am just saying what has happened not what will. Meanwhile the 1972 to 1989 period, in particular, shows prices have dipped during thr historic cycle.

I'm with you the past is no guarantee of what may happen this time and may be the cycle is undone by a debt overhang this time.

Edited December 2, 2016 by crashmonitor

[Wayward]

A bit off topic but I thought I would post it here...a colleague (late 40s single lady) told me she is moving out of her rented flat and in with a friend as a lodger...she can no longer afford to rent her own place (same salary).  I guess this is progress.  The point is that prices and rents can inflate dramatically if occupants per dwelling increase...presumably the mass immigration is being absorbed on this basis.  If the norm becomes not just young people sharing but large proportions of the population then rents may become multiples of incomes based on many occupants...this is how it works I believe in cities in India and Bangkok for ordinary working folk.

[Lord D'arcy Pew]

It's a cycle, a 1930's clown cycle.

 

[mattyboy1973]

I do remember on this forum back in 2007 that Fred Harrison was being hailed as something of a guru. Just saying

[crashmonitor]

3 minutes ago, mattyboy1973 said:

I do remember on this forum back in 2007 that Fred Harrison was being hailed as something of a guru. Just saying

A prophet not a guru...you will find topics in 2006 ( I think I started one). We charted back to the previous peak July 1989 and reckoned on a crash 2007/8. It came...18 years to the month on the Halifax index July 2007.

[mattyboy1973]

3 minutes ago, crashmonitor said:

A prophet not a guru...you will find topics in 2006 ( I think I started one). We charted back to the previous peak July 1989 and reckoned on a crash 2007/8. It came...18 years to the month on the Halifax index July 2007.

Indeed (at least - it kind of came). But does that really mean its going to be another 9 years until the next one?

Edited December 2, 2016 by mattyboy1973

[200p]

I don't think you can "time" the economic cycle and just get rich off it. If you look at the rich list, these people are working towards building their asset base through the up and down cycles. It's not a binary bet to try and time the top and bottom of the cycle. They chip at it all the way through.

However, they might keep some powder dry and seize on the opportunity when it comes along. When it is difficult to borrow, you might come along and slam down a 25% deposit, and beat off the competition with wads of cold hard cash.

[crashmonitor]

1 minute ago, mattyboy1973 said:

Indeed (at least - it kind of came). But does that really mean its going to be another 9 years until the next one?

Frederico is probably right the cycle is broken. Central bankers messed with the cycle, didn't allow price discovery and we have a massive debt overhang. God knows  if the cycle is that resilient.

Btw Ricky Ds chart fails to show the 1972-1989 cycle because it is nominal and fails to factor ball crunching inflation.

[Inoperational Bumblebee]

Surely it's only cyclical if it's a closed system i.e. no additional inputs. Given the legislative changes that affect BTL are new, why would anyone expect a simplistic cyclical view to prevail?

[RickyD]

14 hours ago, crashmonitor said:

Btw Ricky Ds chart fails to show the 1972-1989 cycle because it is nominal and fails to factor ball crunching inflation.

Thanks for the clarification. Interesting stuff. 

[RickyD]

This article is worth a read:

http://www.nuwireinvestor.com/understanding-property-market-cycles/

[frederico]

No one expected the extreme measures used to prop-up the system.

So any talk of a cycle or pattern has to take into account the interference of something outside the ecosystem itself.

[JB1981]

So what you seem to be saying is that the system has never had measures before to prop up the system and it really is different this time? I don't buy that.

Help to buy has been around since the 80s. The Marshall Plan was one of the biggest ever government stimuluses after the second world war. Low interest rates have been around before. Shared ownership also has a considerable history from well before the financial crash. Government debt has been as high as 250% of GDP before and is currently only 90% so plenty more room for the government to stimulate. There is a shortage of property being built and as the boomers, many of whom have no mortgage, are expected to live on average another 25 years, the supply side is not due to dramatically increase any time soon.

The fact is the old saying that markets can stay irrational longer than you stay solvent is more appropriate than ever.

Say you were living in London and was 25 in 2003 and then waited from 2003 to 2007 for the crash. The crash happened - great, but did not drop as far as you thought or hoped it would so you decided to carry on waiting to see if it would drop even more. Now it is nearly 2017 and prices are now 50odd% higher than before the crash. You are now nearly 40 and soon will struggle to get a mortgage and have been even more priced out. If this cycle remains true to the past 200 years, you will still be waiting until 2025 or age 47 until the next crash hit, and allowing 4 years for the full crash to occur before prices start rising again you will be 51, too old to get a morgage, start a family etc. 

[RickyD]

Here's a thread on another forum about the 18 year cycle:

https://www.propertychat.com.au/community/threads/the-18-year-real-estate-clock.10873/

[RickyD]

And another: 

http://www.greenenergyinvestors.com/index.php?showtopic=19927