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Michaeld

"1989-1990 Housing Crash In Britain"

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Hello,

Im new to your site.

Im currently doing a project on the 1989-1990 Housing Crash and what caused it for my college course in Development Economics. I have tried using the search engine on the site but iut is returning no matches.

Would some one please be able to give me some information, or links to websites that have information on the above crash ??

Any help is greatly appreciated.

Thank you

Michael.

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Hello,

Im new to your site.

Im currently doing a project on the 1989-1990 Housing Crash and what caused it for my college course in Development Economics. I have tried using the search engine on the site but iut is returning no matches.

Would some one please be able to give me some information, or links to websites that have information on the above crash ??

Any help is greatly appreciated.

Thank you

Michael.

There is stacks of info on why it happend, its across loads of threads on here. Ill see if i can dig some out whilst im waiting for the washing machine to finish :lol:

EDITED:

http://www.housepricecrash.co.uk/forum/ind...c=18580&hl=1989

http://www.housepricecrash.co.uk/forum/ind...c=17548&hl=1989

Now this thread can prove most insightful for a essay, consider the role of the media on economic perception and how sentiment drives market. The media's responsibilities and investigate why they SHOULD always talk to markets up to maintain an equilibrium which is biased to the government generated revenues due to the economy being driven by the housing market.

What the papers said back then - http://www.housepricecrash.co.uk/forum/ind...topic=14997&hl=

http://www.housepricecrash.co.uk/forum/ind...topic=13470&hl=

Now stop being so lazy and do your own research :lol: (or learn how to use the search facility properly :) )

Edited by theChuz

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Hello,

Im new to your site.

Im currently doing a project on the 1989-1990 Housing Crash and what caused it for my college course in Development Economics. I have tried using the search engine on the site but iut is returning no matches.

Would some one please be able to give me some information, or links to websites that have information on the above crash ??

Any help is greatly appreciated.

Thank you

Michael.

Yes, the legendary HPC of 89 ! Actually bit of a myth really and for most people in the UK I suspect it had little practical effect. Basically house prices had shot up 30% in a few quarters (to around £60K) and then came back down 15% (to around £51K) over the next few, where they stayed for a while - very few people actually bought or sold at anywhere near the top and prices never fell below 1988's prices!

I guess that the shock for most was that they had been used to constantly rising HPI over the previous decade and it was some time before HPI took off again.

There's the data

http://www.nationwide.co.uk/hpi/downloads/..._since_1952.xls

Edited by ILikeBigBoobs

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Hello,

Im new to your site.

Im currently doing a project on the 1989-1990 Housing Crash and what caused it for my college course in Development Economics. I have tried using the search engine on the site but iut is returning no matches.

Would some one please be able to give me some information, or links to websites that have information on the above crash ??

Any help is greatly appreciated.

Thank you

Michael.

Welcome to the insanity. Have you tried PMing certain key intellectual members on this forum for assistance, such as TTRTR?

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Hello,

Im new to your site.

Im currently doing a project on the 1989-1990 Housing Crash and what caused it for my college course in Development Economics. I have tried using the search engine on the site but iut is returning no matches.

Would some one please be able to give me some information, or links to websites that have information on the above crash ??

Any help is greatly appreciated.

Thank you

Michael.

Hi,

It is an older article but commented by several emminent economists or pundits ;

http://www.moneyweek.com/file/2276/uk-prop...roundtable.html

In some ways, the summary of UK economist James Ferguson makes a lot of "broader picture" sense to me. We often focus on small details and stats month to month, it's an inetresting, longer term proposition about the uk economy, the importance of housing to UK people and it's link to economic-recessionary cycles.

James Ferguson: I think we all agree that all families in this country aspire to house ownership, and probably to the best, biggest, most southeasterly house they can afford. The real question is at what point can they no longer afford to buy. It isn’t what they want, but what they’re capable of. When they can’t pay any more, the market crashes. That’s what caused the crash at the end of the 1980s.

And :

JF: I think you are all getting this the wrong way around. What do you think caused the recession of the early 1990s? Do you know that unemployment was at a decade-low at the top of the last housing bubble? Unemployment is always low before a crash. House prices go down first, not last. And before housing goes down, what happens? Liquidity plummets. The first sign of a housing crash is a year of transactions diving. Like this one, for instance. Mortgage approvals are down 40% year on year, and houses that were on the market for £800,000 last year now won’t sell for £700,000. You haven’t seen that fall in the statistics yet, because that house at £700,000 is still not in the data. And it won’t be until it sells. Then it will be clear that prices are falling and everything else will follow. Every time housing collapses, within 12 months unemployment goes up by at least 40%. Why? Because suddenly we have fewer house purchases, which means fewer white good sales. Not only that, but any money from mortgage equity withdrawal used to finance consumption disappears completely. All these supports to the economy go

He also did an interesting followup article recently showing how stats and figures are being skewed by lenders in an attempt to hide the bubble and shoehorn in the soft landing scenario. I'll try to dig up a link if it's online, i know the scotsman publication did a commentary on the subject just recently in their business section.

Edited by boom_and_bust

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Hi,

It is an older article but commented by several emminent economists or pundits ;

http://www.moneyweek.com/file/2276/uk-prop...roundtable.html

In some ways, the summary of UK economist James Ferguson makes a lot of "broader picture" sense to me. We often focus on small details and stats month to month, it's an inetresting, longer term proposition about the uk economy, the importance of housing to UK people and it's link to economic-recessionary cycles.

I really like James Ferguson, he talks a lot of sense.

He's dead right about housing leading the economy,and unemployment rising at the end of the housing boom.

Just bear in mind the last housing crash lasted from about 89 to 96.

Although prices had stopped falling in nominal terms by about 93, they continued falling in real (inflation adjusted) terms until about 96.

Edited by BandWagon

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Welcome.

I think you will find the best information revolves around the the pulling of double MIRAS - MIRAS should be easy to look for both on this site and elsewhere on the net. The desperate attempt by couples to attain double taxation relief (i.e. on both their incomes) caused the final blow-off top of the market, after which there were hardly any actie buyers in the market. There's all the other ususal suspects, prices never go down, you can't beat housing, lenders turning to ever more lax lending to keep/gain market share, investors fleeing from one market (1987 Stock market crash) to "safe" haven of property. Actually just write about this one instead and change a few dates :lol:

The list of historical press releases - in the reference section on this site (womehwere) is also highly enlightening - year after year of supposed return to boom times and also turning a toal blind eye to what had actually happened i quite stunning and worth a report on its own.

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Utter nonesense that 89-90 was the crash that never was!

It was huge. I bought a flat in central bristol for 47,000 in 93 that had sold for 80,000 in 88. I bought a house in Bristol in 96 for 43,000 that had been marketed for 80,000 in 89.

One of my sisters saw her Surbiton flat drop by more than 33% in value in one year. People who worked for me were still in negative equity in 96 having bought in 89. They were desperate to move but couldn't.

That crash seriously affected a lot of people. Anyone who bought late, or who was investing in the market.

Rest assured, we are about to see the same thing happen all over again.

Lucky

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Indeed, i was lucky enough to enter the housing market fairly clueless as to where prices were at. As it happened, i bought a studio flat in central Brighton for 25k in 1994. A few years earlier it had been 'worth' 80k :o:)

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ILikeBigBoobs,

Which data are you talking about - the lender's data that says there was only something like a 10-15% fall?

Well the North and Scotland must have kept on going up or not have fallen at all because most areas in the South prices dropped 30%+ from what I remember, Hence the leves of negative equity, hence why some people were still in negative equity up until 2000 after 4/5 years of a rising market.

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The Great Crash lasted from 1989-96. I bought a house in Surrey for 189k in 1990. The seller had paid 280k for it in the mid 1980's. That was the extent of the devastation that the Great Crash wrought on prices in that area.

We were living in California immediately prior to that and bought a house in 1988 for $274k. Sold it in April 1989 for $374k. One year later it was back on the market for $275k.

The Great Crash was a very serious property price correction both in the UK and in certain hotspot markets in the US. The history of house price crashes since WW2 shows:

1. The troughs are roughtly equal to 50% of the preceding peak.

2. The UK market mirrors similar bubble markets in the US both in timing and extent of losses.

3. There has NEVER been a soft landing.

4. Oil prices hikes preceded each crash.

5. The present bubble has seen house prices rise about 130% overall which means we could see history repeat itself with a precipitous drop of 65%.

Edited by Realistbear

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No, over the country as a whole and not just the South, it wasn't - look at the data!

Agree totally, big boob liker :lol:

HOWEVER - I would be worried much more about how much *my* house was worth rather than looking at the national picture. It's all every well if the drop is only "10 - 15%" only a national level: if in the SE it is 40 - 45% that will cure every case of constipation in the home counties!

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A word of warning – although much of what is posted on the Internet is factual and true, a substantial amount is either factually incorrect, spun by vested interests, or downright lies. So be careful to check your sources and only use “reputable” data – for example, you should treat anything said by RealistBear (particularly the post above :D ) as highly unreliable.

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A word of warning – although much of what is posted on the Internet is factual and true, a substantial amount is either factually incorrect, spun by vested interests, or downright lies. So be careful to check your sources and only use “reputable” data – for example, you should treat anything said by RealistBear (particularly the post above :D ) as highly unreliable.

Truth is scary isn't it? :lol::lol::lol:

For the facts take a look at the chart on HPC.co.uk home page that charts the troughs and peaks. How many "soft landings" do we see? From the peak to the bottom of the trough what percentage drop do we see?

For a few more charts:

http://www.housepricecycle.com/

If (if) history repeats itself: 65% down

You have to ask yourself, will the pattern since WW2 remain consistent through the next crash?

Edited by Realistbear

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Michaeld - You need to read the posts and follow up the original sources – then make up your own mind, but remember – you’ll have to be selective to get through even a small fraction of the stuff out there. Try to identify sources that you can trust and then look for more material by the same people. Avoid anything that appears deliberately biased or promoting a particular point of view.

The facts are scary enough themselves without embellishment. :D

HBOS (Housing Research, historical prices)

http://www.hbosplc.com/economy/HistoricalDataSpreadsheet.asp

Nationwide house price statistics and download

http://www.nationwide.co.uk/hpi/historical.htm

ODPM website (Live tables on Housing Market, Prices / volumes / lending)

http://www.odpm.gov.uk/index.asp?id=1156110

inflation and earnings data from ONS (AEI time series data, and others)

http://www.statistics.gov.uk/statbase/tsdt...s1.asp?vlnk=emp

BOE statistical releases and base rates

http://213.225.136.206/mfsd/iadb/Repo.asp?Travel=NIx

http://213.225.136.206/statistics/rates/baserate.pdf (see graph, page 2)

CML statistics page – lending, MEW, repossessions

http://www.cml.org.uk/cml/statistics

Lots of other links on HPC.

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Michaeld - You need to read the posts and follow up the original sources – then make up your own mind, but remember – you’ll have to be selective to get through even a small fraction of the stuff out there. Try to identify sources that you can trust and then look for more material by the same people. Avoid anything that appears deliberately biased or promoting a particular point of view.

The facts are scary enough themselves without embellishment. :D

HBOS (Housing Research, historical prices)

http://www.hbosplc.com/economy/HistoricalDataSpreadsheet.asp

Nationwide house price statistics and download

http://www.nationwide.co.uk/hpi/historical.htm

ODPM website (Live tables on Housing Market, Prices / volumes / lending)

http://www.odpm.gov.uk/index.asp?id=1156110

inflation and earnings data from ONS (AEI time series data, and others)

http://www.statistics.gov.uk/statbase/tsdt...s1.asp?vlnk=emp

BOE statistical releases and base rates

http://213.225.136.206/mfsd/iadb/Repo.asp?Travel=NIx

http://213.225.136.206/statistics/rates/baserate.pdf (see graph, page 2)

CML statistics page – lending, MEW, repossessions

http://www.cml.org.uk/cml/statistics

Lots of other links on HPC.

well said that man

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Michaeld - You need to read the posts and follow up the original sources – then make up your own mind, but remember – you’ll have to be selective to get through even a small fraction of the stuff out there. Try to identify sources that you can trust and then look for more material by the same people. Avoid anything that appears deliberately biased or promoting a particular point of view.

The facts are scary enough themselves without embellishment. :D

HBOS (Housing Research, historical prices)

http://www.hbosplc.com/economy/HistoricalDataSpreadsheet.asp

Nationwide house price statistics and download

http://www.nationwide.co.uk/hpi/historical.htm

ODPM website (Live tables on Housing Market, Prices / volumes / lending)

http://www.odpm.gov.uk/index.asp?id=1156110

inflation and earnings data from ONS (AEI time series data, and others)

http://www.statistics.gov.uk/statbase/tsdt...s1.asp?vlnk=emp

BOE statistical releases and base rates

http://213.225.136.206/mfsd/iadb/Repo.asp?Travel=NIx

http://213.225.136.206/statistics/rates/baserate.pdf (see graph, page 2)

CML statistics page – lending, MEW, repossessions

http://www.cml.org.uk/cml/statistics

Lots of other links on HPC.

"you’ll have to be selective "

Selectivity might suggest bias? What you are really saying is to avoid any opinions because they may be based on selected materials? Charts showing the history of HPC since WW2 are not "embellishment" but a method of showing peaks and troughs over a period of time.

An opinion that these charts are embellishment may be bias toward a Bullish point of view.

How can you tell if a source is "deliberately biased? Aren't all VIs biased toward the bull point of view? Is your opinion that the Chart is embellished more than just an opinion? After all that is what "vested interest" is all about. The test as to whether the bias is accurate is history and that's why I used history of peaks and troughs as my example. Which of the 5 points do you claim is embellished? :blink:

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Michaeld,

Prepare to be gobsmacked by what you read if you start rooting around on the web. Unfortunately one of the best sites for repossession info and the scale of the falls that DID occur last time round (home-repo) no longer lists the many individual cases - some where the repo'd houses were even sold to personnel INSIDE the banks at a fraction of the price - I am talking a very very low fraction at that.

So everybody, tell me which year this was? No cheating and looking on Google, you simply won't believe this. PS it is post '89, so in the era of interest and not way back in the 70's.

"Following the repossession of the above property it is anticipated that when the property is sold there will be an estimated amount outstanding of #17416.80.

.......

The Halifax haven't even sold the house yet! I know that they are putting it up for sale for #16,950 whereas I paid #29,000 for it 3 years ago.

Edited by OnlyMe

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I started a thread back in Oct 05 ( http://www.housepricecrash.co.uk/forum/ind...ic=16880&hl=cml ) which linked this article ( http://www.fanniemaefoundation.org/program...0503_boleat.pdf ) by a guy from CML for fanniemaefoundation.

Its a cracker and is (being CML based) probably as good a summary of the reasons for that crash. It was reasonably fresh too as the crash had not bottomed out when issued.

For reference/contrast purposes you might also look at some of the other papers that have been published not just about the UK crash but the Japan real estate crash at the same time (for very different reasons - and which are more similar to those I think will cause our next crash (ie low interest rate period with small absolute increases triggering crash, excessive valuations, loose lending, declining demographic etc) and the US property decline around the same time.

eg http://www.housepricecrash.co.uk/forum/ind...hl=demographics

and http://www.housepricecrash.co.uk/forum/ind...=22092&hl=japan

Edited by Tempest

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RealistBear - This is the graph from the HPC front page [Nationwide, House Prices adjusted for inflation; ONS RPI used to convert nominal prices to current prices], but this time with the y-axis reproduced large enough to see that it doesn’t start at zero on your version!

nmd9ac.jpg

source: http://www.nationwide.co.uk/hpi/historical.htm

Once we can see this more clearly, your 65% DOWN during 1989-1995 is revealed as a blatant nonsense - hence the health warning about stuff you read on the Internet. :D

Edited by spline

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ILikeBigBoobs,

Which data are you talking about - the lender's data that says there was only something like a 10-15% fall?

Well the North and Scotland must have kept on going up or not have fallen at all because most areas in the South prices dropped 30%+ from what I remember, Hence the leves of negative equity, hence why some people were still in negative equity up until 2000 after 4/5 years of a rising market.

Yes, I think (and seem to remember in my own area) that the last rise in HPI ('89) reached or rippled to many areas very late in the cycle and no sooner did prices rise in those areas than they fell again, hence catching only a limited number of buyers in those areas in negative equity. In fact I only knew one personally and I was in the property game at the time! I do appreciate that some areas were hit quite badly though!

What can we learn from that? Well, one point is that house price falls and rises can be quite area specific. At the moment we have had raging HPI throughout the whole of the UK and now even some of the North's grottiest areas have homes selling for close to Southern prices. I believe that when/if the crash comes official UK house prices will probably fall 15 to 20% from the peak - however that may hide some pretty spectacular falls in the less salubrious areas of the UK.

Edited by ILikeBigBoobs

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Utter nonesense that 89-90 was the crash that never was!

True.

My parents bought in the SE in 1988. By 1992 their house value had dropped by 30%. It was not until the late 90s that the price recovered to equal the purchase cost.

Edited by Red Baron

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True.

My parents bought in the SE in 1988. By 1992 their house value had dropped by 30%. It was not until the late 90s that the price recovered to equal the purchase cost.

30% drop is about right. Our experience with houses in Surrey reflect that level of crash. Prices had risen by 60% hence the true to form drop of 50% of the previous spike. HPI has risen about 130% in this last spike which is why there is a possibility that the pattern will repeat with a fall of 65%. Not sure what Spline is trying to say in his post as his chart (similar to the HPC chart) shows the last trough at somewhere around 65k and the peak at 160k. My calculator says this is a rise of about 140%. The fall will accordingly be 70% IF history repeats.

A historian once said the only thing we do not learn from history is that we do not learn from history.

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    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


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