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AteMoose

Hpc - The Realistic Worst Case Senario

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Just a thought but what is the maximum prices of houses will crash in real actual money terms from peak to trough? what is the average price what will the average price be, what will fall the most, what will hold the most value? and why do you think it will fall by the amount? over how many years? and what the effect on jobs and the economy will be?

ie average price of 160k, will drop to 120k.....

Edited by moosetea

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Historically, and if the Nationwide chart is right, the fall tends to be about 50% of the previous peak. HPI has been around 130% which suggests a nice cutback of 60% of the rise.

Thus, a 100k house goes up by 130% to become a 230k house.

HPC comes along and drops it 60% of the rise or 78k leaving the investor with just 152k. Still not a bad profit?

If things get really bad and interest rates double that 60% drop may be on the entire "value" of the house pushing it down to 92k, or 8k less than the original price.

If history repeats those who bought in around 1996 should lose about half of the gain. The losses get worse the later you bought into the rise. So if you bought last year at 230k and sell for the post crash price of 152k the loss is far greater.

That is why now is not a good time to buy.

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Just a thought but what is the maximum prices of houses will crash in real actual money terms from peak to trough? what is the average price what will the average price be, what will fall the most, what will hold the most value? and why do you think it will fall by the amount? over how many years? and what the effect on jobs and the economy will be?

ie average price of 160k, will drop to 120k.....

It wont, it will go up and house prices will be up about 7% this year, lead by London.

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Just a thought but what is the maximum prices of houses will crash in real actual money terms from peak to trough? what is the average price what will the average price be, what will fall the most, what will hold the most value? and why do you think it will fall by the amount? over how many years? and what the effect on jobs and the economy will be?

ie average price of 160k, will drop to 120k.....

A great way to demonstrate how it is that the way a question is asked affects the outcome. Where can you vote for a flat market or for a rise?

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A great way to demonstrate how it is that the way a question is asked affects the outcome. Where can you vote for a flat market or for a rise?

You cant even vote for a nine percent fall :D

A Ukrainian poll :P

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A great way to demonstrate how it is that the way a question is asked affects the outcome. Where can you vote for a flat market or for a rise?

The question was intentially bearish.... whats the WORST outcome a worst outcome isnt flat or a rise.... Im after the worst possible outcome that people feel could happen....

Most bulls would say the worst possible outcome is a small crash/levelling, if you feel the market wont rise or rise slowly please choose 0%-10% (EDITED : Ok i made a mistake on the poll, one of the options should have been 0 to 10% ;o)

Edited by moosetea

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It wont, it will go up and house prices will be up about 7% this year, lead by London.

Sure, they may seem like it in the stats due to the sale data or lack of, but I doubt the reality will be quite as comforting, anyway we can all dream :rolleyes:

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Historically, and if the Nationwide chart is right, the fall tends to be about 50% of the previous peak. HPI has been around 130% which suggests a nice cutback of 60% of the rise.

Thus, a 100k house goes up by 130% to become a 230k house.

HPC comes along and drops it 60% of the rise or 78k leaving the investor with just 152k. Still not a bad profit?

If things get really bad and interest rates double that 60% drop may be on the entire "value" of the house pushing it down to 92k, or 8k less than the original price.

If history repeats those who bought in around 1996 should lose about half of the gain. The losses get worse the later you bought into the rise. So if you bought last year at 230k and sell for the post crash price of 152k the loss is far greater.

That is why now is not a good time to buy.

I've been over this before but this maths is so bad it obscures your point completely. Why does 50% of the previous peak = 60% of the rise. That is just nonsense. A fall from £230K to £152K would be a 33% fall, full stop.

I know what you're trying to say is that about half of the absolute rise will be wiped out by the falls as in previous (RPI-adjusted) cycles (in absolute terms this is likely to mean about 20-25% falls over 5 years, assuming 2-3% inflation pa as you need to allow for inflation on the way down as well as the way up) - but the way you are explaining it makes no sense at all. And if it is about half of the rise that is lost, then that will be 50% of the increase (65% of 130% does not = half of 130% even if £65K = half of £130K) meaning you should on this basis be expecting it fall to £165K - inflation adjusted that would mean after five years prices falling to about £180K, which would be a 22% fall in absolute terms. That would still be pretty big, and you have a good case that it is likely, but you are obscuring it with bad math.

And then for no reason at all at the end you elide the "60%" fall to apply to the whole value to suggest that the entire value may fall back to £92K??!!

Sorry I bitch about the maths, but the post is full of false leaps of logic and the conclusions you reach don't match the facts you have started from.

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The question was intentially bearish.... whats the WORST outcome a worst outcome isnt flat or a rise.... Im after the worst possible outcome that people feel could happen....

Most bulls would say the worst possible outcome is a small crash/levelling, if you feel the market wont rise or rise slowly please choose 0%-10% (EDITED : Ok i made a mistake on the poll, one of the options should have been 0 to 10% ;o)

Moosetea, I think it was the use of the word "realistic" in the title that fooled me ;)

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Moosetea, I think it was the use of the word "realistic" in the title that fooled me ;)

Yes but bear in mind that this is a community where the word Realist is associated with Realist Bear. A bit like calling Lewis Carroll a realist...

Edited by Magpie

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Seems most people are going for 50% fall as Realistic

If that happened, say over four years then average rental yields would be about 11% (5.1% ARLA and add on wage inflation)

Base rates would probably be lower than they are now (As we woldn't get falls without a recession), let's say 3.5% (Although it could be lower.

Now before that happens

1) How many BTLers will jump in (I know I would be buying way before it reaches this level

2) How many FTB would not already have moved from rental to OO.

50% falls indeed :lol:

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I've been over this before but this maths is so bad it obscures your point completely. Why does 50% of the previous peak = 60% of the rise. That is just nonsense. A fall from £230K to £152K would be a 33% fall, full stop.

I know what you're trying to say is that about half of the absolute rise will be wiped out by the falls as in previous (RPI-adjusted) cycles (in absolute terms this is likely to mean about 20-25% falls over 5 years, assuming 2-3% inflation pa as you need to allow for inflation on the way down as well as the way up) - but the way you are explaining it makes no sense at all. And if it is about half of the rise that is lost, then that will be 50% of the increase (65% of 130% does not = half of 130% even if £65K = half of £130K) meaning you should on this basis be expecting it fall to £165K - inflation adjusted that would mean after five years prices falling to about £180K, which would be a 22% fall in absolute terms. That would still be pretty big, and you have a good case that it is likely, but you are obscuring it with bad math.

And then for no reason at all at the end you elide the "60%" fall to apply to the whole value to suggest that the entire value may fall back to £92K??!!

Sorry I bitch about the maths, but the post is full of false leaps of logic and the conclusions you reach don't match the facts you have started from.

You are thinking too deeply! I am not a mathematician and just use simple figures and percentages. If the last rise was 130% from the baseline a 60% fall back on the profit is simple to understand.

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Seems most people are going for 50% fall as Realistic

If that happened, say over four years then average rental yields would be about 11% (5.1% ARLA and add on wage inflation)

Base rates would probably be lower than they are now (As we woldn't get falls without a recession), let's say 3.5% (Although it could be lower.

Now before that happens

1) How many BTLers will jump in (I know I would be buying way before it reaches this level

2) How many FTB would not already have moved from rental to OO.

50% falls indeed :lol:

that depends on interest rates, yeilds need to be higher with higher interest rates....

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that depends on interest rates, yeilds need to be higher with higher interest rates....

Indeed, but if house prices were falling the economy would not be doing too well, and the BOE would be cutting rates. Or if this isn't the case perhaps you could give me an example of when house prices were falling and interest rates were rising, for any length of time?

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I find it incredibly that (so far) six people have voted for falls greater than 60pc :huh:

Can anyone who ticked this box give me some insight into your logic?

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1) How many BTLers will jump in (I know I would be buying way before it reaches this level

2) How many FTB would not already have moved from rental to OO.

50% falls indeed :lol:

But what would sentiment be like? You're completely ignoring the psychology angle. Noone likes to buy in a sharply falling market.

Does anyone know if rents tend to fall in a falling property market? I feel rents are hugely inflated where I am at the moment and should probably fall significantly. They've been falling in real terms for the past while, staying flat in nominal terms.

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But what would sentiment be like? You're completely ignoring the psychology angle. Noone likes to buy in a sharply falling market.

Does anyone know if rents tend to fall in a falling property market? I feel rents are hugely inflated where I am at the moment and should probably fall significantly. They've been falling in real terms for the past while, staying flat in nominal terms.

Well, I am way before the time you can borrow the money at 3.5% and rent out at 11%. Who cares if prices rise or fall at that level, you will have paid the house back in about 13 years.

Rents rise in a falling market, because people don't want to buy. It happened in the early to mid 1990's. Therefore if prices do fall rents will, in all probability rise faster than earnings

Even in the 1930's recession (and we had low inflation then), houses prices only fell 15%.

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You are thinking too deeply! I am not a mathematician and just use simple figures and percentages. If the last rise was 130% from the baseline a 60% fall back on the profit is simple to understand.

Fair enough, but best be a bit careful when you bandy %ages about as they can make your argument sound worse than it is - remember the value of %ages depends on what they are a %age of. I think what you're trying to say would be most clearly expressed by saying that half of the rise in prices tends to be lost in the falls - so if £100K house goes up to £230K, it might well fall to £165K on this basis. Even that ignores inflation, but at least it's less befuddling than the other way of saying it.

Remember that %ages on the way down don't need to be as big as %ages on the way up. If prices go up 100% (£100K to £200K) then fall 25% (£200K to £150K), that's actually half of the rise wiped out - I think that is one of the reasons there are so many people predicting improbably massive falls in %age terms.

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Well, I am way before the time you can borrow the money at 3.5% and rent out at 11%. Who cares if prices rise or fall at that level, you will have paid the house back in about 13 years.

Why do you assume IR's will be at 3.5%? Why do you assume the banks will lend you the money to do BTL so easily in a falling market? There'll be an enormous credit crunch. Your strategy will only work if you're sitting on a very large pile of cash, enough to buy outright or put up a very large deposit. Using property as collateral won't work anymore, the banks will laugh at you and rightly so.

And factor in the opportunity cost of tying up all your big pile of cash in an investment that you can't liquidate for the amount you paid for it.

I don't think it's a fantastic idea really. Buy at the bottom by all means, or buy if you can afford to and plan to live there, but not for investment purposes while it's on the way down.

Property really isn't the only investment out there, folks.

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I find it incredibly that (so far) six people have voted for falls greater than 60pc :huh:

Can anyone who ticked this box give me some insight into your logic?

Was there any logic in 300% HPI over 10 years? Exactly, logic is irrelevant psychology isn't.

BTW, I voted for 40-50% falls (over 5 years or so)

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Worst case scenario would be further increases in prices.

Best case scenario is huge drops in prices.

Please get your 'worst/best' descriptions right.

I am not sure that is the case for everyone. A large crash is only beneficial for those sitting on a large deposit and an ultra-secure job. A crash of the magnitude discussed will only come on the back of full economic meltdown.

The only real advantage of a crash is that nominal house prices will be much lower. Affordibility will not be improved for most ftbs.

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I am not sure that is the case for everyone. A large crash is only beneficial for those sitting on a large deposit and an ultra-secure job. A crash of the magnitude discussed will only come on the back of full economic meltdown.

The only real advantage of a crash is that nominal house prices will be much lower. Affordibility will not be improved for most ftbs.

So bring on the full economic meltdown I say. Probably not my best reasoned-out response ever but hey, I'm in an angry mood. I couldn't give a rat's-toss-cloth whether I am wealthy or not, my current state of mind at this very minute dictates that my happiness will derive it's fortitude from the misery of the currently smug rip-off merchants who have ‘greeded’ the future from the honest, hard working family man, and given him the future aspirations of no home, no pension, no hope and more importantly no stable economic base for his children, who, through the innocence of their precious youth have no clue as to the misery and destitution they face in the moralistic haemorrhaging decades of their future selves. Sick to my back molars of the self-serving, back-stabbing takers who seize with one hand, steal with the other, knee you in the happy-sacs and then bill you for the privilege. Yes, huge reductions on house prices is a good thing if only to watch the f*****s boil.

One apologies profusely for one’s anger.

I'm not smart, nor am I an economist, but I know when I'm being humped.

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  • 301 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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