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Will We Be Smug Or Splattered?

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I had always assumed there'd be an all-mighty HPC, prices would fall by, say 40%, and I'd be able to enter the housing market, buy somewhere nice, and watch lots of people struggle with over-inflated mortgages and negative equity. My pity for them would be moderated by how much I remembered their smugness while prices were going up....

But now, two more scenarios are dawning on me. First, the danger that prices just slide slowly or stagnate - no real opportunity to enter the market at a cheap price.

And second, the danger that the HPC wreaks collateral damage on all, including people like me who haven't bought property.

What do you all think? :o

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I had always assumed there'd be an all-mighty HPC, prices would fall by, say 40%, and I'd be able to enter the housing market, buy somewhere nice, and watch lots of people struggle with over-inflated mortgages and negative equity. My pity for them would be moderated by how much I remembered their smugness while prices were going up....

But now, two more scenarios are dawning on me. First, the danger that prices just slide slowly or stagnate - no real opportunity to enter the market at a cheap price.

And second, the danger that the HPC wreaks collateral damage on all, including people like me who haven't bought property.

What do you all think? :o

Yes. :)

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There will be collateral damage. The UK economy has been underpinned by HPI and the MEW culture that it has spawned. Even a small reversal in House prices will lead to a measure of recession and higher unemployment (where we are today as retail sales suffer and related industries cut back such as B & Q, MFI etc). I am expecting to see panic selling as unemployment levels increase simply because there will be too much property on the market at the same time as negative sentiment expands into all sectors of the economy.

There are a number of triggers lining up not least of which will be the Bank of Japan's dramatic switch from 0% rates to an actual IR. That will force other countries who have benefited from the Trillions of cheap Japanese money to hike the rates to pay for it all.

House prices are a bloated assett with values that have become detached from the fundamentals (people's ability to pay for them without incurring massive debt). They are the most likely to suffer when the correction sweeps through.

IMHO, of course.

Not forgetting the greatest potential trigger that the Fed are now taking extremely seriously:

:

http://wireservice.wired.com/wired/story.a...storyId=1173594

US: banks should prepare in case bird flu spreads

Wednesday, March 15, 2006 11:32 a.m. ET

WASHINGTON (Reuters) - U.S. bank regulators on Wednesday advised financial institutions to have contingency plans in place in case avian flu becomes pandemic.
"Financial institutions and their service providers supply essential financial services and, as such, should consider their preparedness and response strategy for a potential pandemic," the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in a statement.
Edited by Realistbear

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When it happens (HPC/Recession/Financial system or market shock/realignment) there will be huge fallout I think.

Debt will one day in the future become unfashionable and people will revert to balance between saving and borrowing. One day people will say taking on too much debt is stupid because of the long term effects etc etc (ie for all the reasons we have discussed on HPC). Property will also become cheap again and I mean cheap. But do not underestimate how difficult it will be to buy then, either because of lending criteria, (un)employment prospects or sheer unwillingness to acquire/invest in assets which are declining in price. In the early 90s property sold for prices well below trend but people who did buy were thought to be mad.

Be it 2006/7/8/9 or whenever, it will happen. The only difference this time IMO is that the cycle up again will be longer and slower due to demographic factors, belated pensions saving, globalisation and competing economies etc. I remember the thread last year about property never (or at least not for 20-25 years) achieving these relative price levels again. Someone should dig it out it was excellent (may have been Bubb's).

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  • 302 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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