What does 'The Crash' mean in % or £'s terms?

[Twenty Something]

Here's a question - at what % or £ value would you consider the market to have 'crashed', and by which index? There are countless posts here from allegedly wealthy and successful investors / entrepreneurs who are all sitting this one out because 'the crash' is coming, but at what figure do you say yes I am vindicated? Is it if the Halifax index drops by xx%? Is it if prices fall by more than you have paid in rent for the past decade? 

I ask this as I would be 99% certain that assuming I live another 40 - 50 years or so, I will see a fall in prices. But presumably a crash is going to mean different things to different people? Was the 2007/8 financial crisis a crash? Would a loss of the 10 - 15% gains made in the past year or so be a crash? Can anyone define what a crash would be? 

[Si1]

4 minutes ago, Twenty Something said:

Is it if prices fall by more than you have paid in rent for the past decade? 

What a financially and mathematically illiterate thing to say!

[Twenty Something]

33 minutes ago, Si1 said:

What a financially and mathematically illiterate thing to say!

So our first respondent can't define what 'a crash' would mean to them. Anyone else? 

[Si1]

2 minutes ago, Twenty Something said:

So our first respondent can't define what 'a crash' would mean to them. Anyone else? 

If you say so.

[Twenty Something]

1 minute ago, Si1 said:

If you say so.

Well it's a pretty irrefutable statement - the question was can anyone provide some sort of objective measure as to what 'the crash' means to them. So far it's a no.

[Former postman]

1 hour ago, Twenty Something said:

Well it's a pretty irrefutable statement - the question was can anyone provide some sort of objective measure as to what 'the crash' means to them. So far it's a no.

I will accept nothing less than a 50% nominal decrease in prices.

[Pmax2020]

To me a ‘crash’ is greater than 20-25% because that represents a substantial fall. 
 

Anything less will just cancel out the last 2/3 years of rises so hardly a crash for the millions of people who will still be quids in. 

[Si1]

1 hour ago, Twenty Something said:

Well it's a pretty irrefutable statement - the question was can anyone provide some sort of objective measure as to what 'the crash' means to them. So far it's a no.

And yet you went on to refute it yourself by confusing yourself with incomplete comparisons to rental costs. But hey knock yourself out.

[Pebbles]

A crash for me would be a real 25% fall. It has to be real so inflation adjusted because no other representation is relevent in a devaluing fiat currency.

[Patfig]

23.752%

[Orb]

For me, a crash would mean a 50% nominal fall in a relatively short time. 

 

[Bob8]

I joinded this forum in about 2007

Back then, this graph showed a crash was due and it happened, by about 20%. We essentially had a second crash around the brexit referendum. I can say I predicted the second one, but it did not make houses more affordable, just people who rely on th eUK poorer.

I think some people on the forum believe there is a natural order, in which people like them should be ableto afford a house and there is an abberation that they cannot. I would suggest that it was an abberation that many young, working people could afford a home. If there is a system, those with the wealth and power will know how to work it and we are peons.

I left the UK, that worked for me.

God is not on your side with this one.

[14stFlyer]

I believe to be a successful society long term we have to move back to a position where the majority of young working people/ families can afford their own home.
 

To do this I agree it has to be measured in real terms (adjusted for inflation / relative to wages). I also agree it has to be time limited (<5 years?). 

We could create a definition for the site if you like?  Here is a starter position 

0-5% Minor Correction 

5-10% Major Correction 

10-20% Significant Fall

20-30% Substantial Fall 

>30% Crash?

[winkie]

All depends what and and where buying......and when buying.

[Gush]

Crash depends on region. Crash has occurred when people stop thinking house as a financial asset. In some regions it may already be the case, in SE so many VI so will take time for people to realise.

[Si1]

52 minutes ago, Pebbles said:

A crash for me would be a real 25% fall. It has to be real so inflation adjusted because no other representation is relevent in a devaluing fiat currency.

This, in my opinion. And short of a massive exogenous influence like a depression I don't think it can go much further than this because in a finite time central bank policy will respond to underpin it.

[Badhairday]

1 hour ago, Si1 said:

And yet you went on to refute it yourself by confusing yourself with incomplete comparisons to rental costs. But hey knock yourself out.

Honestly, I thought that was a very interesting take on things... which is not discussed often enough. What exactly is your beef with this take on things?

[Young Turk]

3 hours ago, Twenty Something said:

Here's a question - at what % or £ value would you consider the market to have 'crashed', and by which index? There are countless posts here from allegedly wealthy and successful investors / entrepreneurs who are all sitting this one out because 'the crash' is coming, but at what figure do you say yes I am vindicated? Is it if the Halifax index drops by xx%? Is it if prices fall by more than you have paid in rent for the past decade? 

The relevant decision will probably be more complicated than if prices fell by more than rent paid. That is probably a good rule of thumb for someone who has all of their assets in cash or property though.

 

I am selling to rent (completing on 30th). I think there is quite likely to at least be a small correction due to the stamp duty holiday ending. Maybe changes to furlough and evictions will put further downward pressure on prices.

Another question is whether buyers will continue to shun flats and place high value on houses with gardens. If this continues there could definitely be a crash in flats, and if it reverses itself, there could be a crash in houses.

[scottbeard]

In financial markets typically 10% fall in a short period is a correction and 20% a crash. 

[Si1]

11 minutes ago, Badhairday said:

Honestly, I thought that was a very interesting take on things... which is not discussed often enough. What exactly is your beef with this take on things?

It misses out alternative employment of capital and also depreciation.

[Si1]

9 minutes ago, Young Turk said:

.

Another question is whether buyers will continue to shun flats and place high value on houses with gardens. If this continues there could definitely be a crash in flats, and if it reverses itself, there could be a crash in houses.

Yeah that's a really interesting pattern

[HomeAlone2]

20% drop over a year or two would be how I'd describe a crash.

[Badhairday]

4 minutes ago, Si1 said:

It misses out alternative employment of capital and also depreciation.

 

meh... Investments can go up as well as down, and it's also not everyone's cup of tea, nor does it HAVE To be.

If you calculate how much time you have to spend reading various publications/sites/videos etc to stay on top of things, unless you have a lot of money to invest, it probably isn't worth the effort.

 

 

[Si1]

2 minutes ago, Badhairday said:

 

meh... Investments can go up as well as down, and it's also not everyone's cup of tea, nor does it HAVE To be.

If you calculate how much time you have to spend reading various publications/sites/videos etc to stay on top of things, unless you have a lot of money to invest, it probably isn't worth the effort.

 

 

That's true for some people. For someone who personally would not invest in anything apart from cash savings then a house is an appropriate purchase pretty much irrespective of cost.

[Young Turk]

1 hour ago, Bob8 said:

I think some people on the forum believe there is a natural order, in which people like them should be able to afford a house and there is an abberation that they cannot. I would suggest that it was an abberation that many young, working people could afford a home. If there is a system, those with the wealth and power will know how to work it and we are peons.

Whether or not there is a natural order, we have a very short historical period on which to draw upon, so it's hard to have much of an idea about what is likely in the long run.

So we could conclude that the increasing home ownership in the post-war to 1970s/80s was an aberration. But we have to acknowledge that interventions like HTB and the tax and regulatory changes which enabled BTL (AST etc.) are not part of the natural order either. 

On the one hand, the rich have a lot of influence and moderately wealthy are more likely to vote, so they could continue to direct housing policy which leads to HPI. On the other, those harmed by high house prices are a very big majority, so it does seem possible they became electorally significant, or even decisive.

1 hour ago, Bob8 said:

I left the UK, that worked for me.

Are you still in the USA? (I think I gathered from the other thread you went there... for a PhD or academic position?)

I remember saying to a few people, including a fellow Brit who had spent some time working in the USA that "they have the healthcare crisis and we have the housing crisis" but I think they may have been sceptical.