When Are You Calling The Bottom And By How Much

[sam]

Just out of interest when do you see the bottom of this property cycle and how much, my estimate is now a little less over a longer period than it was 18 months ago.

I am calling the bottom 2015 with a fall of 20% in real terms

Sam

[Twopper]

Just out of interest when do you see the bottom of this property cycle and how much, my estimate is now a little less over a longer period than it was 18 months ago.

I am calling the bottom 2015 with a fall of 20% in real terms

Sam

What are you basing your estimate on?

[teddyboy]

I think estimates are based on GUT FEELING but I think if its 2015 then there is a LOT of stagnation there. Market sentiments are neutral for a little while but they are mostly BULLISH or BEARISH. Sam's scenario, to me, is stagnation not a crash (sorry SAM).

The most important factor in this is sentiment.

Even if the banks dropped IR to 2% and the economy was on TOP FORM - If people didnt buy then they would have to entice is in to buy. This is not a real-world scenario I know, but the point is if people DO NOT BUY HOUSING then its the people who control the market and the market direction.

When the drops are COMMON KNOWLEDGE and people are talking about their PRECIOUS properties FALLING in price and they are worried because the MEW'D. Then people will not want to touch property. These people will not be moving as they may be in NE or struggling to make payments. THis gets worse and worse.

I personally believe, from previous crashes, that people will try to get this over and done with AS SOON AS POSSIBLE. If they dropped 5% the media will say - HOUSES BOUNCE BACK. When they are -10% they say, CONFIDENCE IN HOUSING IS BACK.

So to say the bottom is hard one to call - WHAT IS THE BOTTOM?

If we are to use the graph on the front which is average price about £170K then I will say, the bottom will be £135K by 2010. This is based on a NEW Government coming in. I reckon they will try and get houses back on the uptrend by this time. Economic conditions mean that they wont get it back to today until at least 2014 imho. This is based on IR going to 6% and stalling here for at least a year!

TB

[expatowner]

Virtual stagnation in prices until 2011. (losing say 3% to inflation yearly)

[Time to raise the rents.]

The bottom was in 1995. I don't know when the top will be, but maybe the Olympics offers a good target date.

[jonathan trees]

Just out of interest when do you see the bottom of this property cycle and how much, my estimate is now a little less over a longer period than it was 18 months ago.

I am calling the bottom 2015 with a fall of 20% in real terms

Sam,

The trough in house prices will be reached in twenty years time in the year 2026 when house prices are expected to fall by two percent. Well worth the wait. Enjoy the wait.

[Pablo-silver or lead?]

Market Peak S east, S west, E/W midlands 2004.

Market Peak N E + N W 2005

Market Peak NI/Scot 2006

The differential between prices in many areas of the north and south have become almost none existent. Prices in many areas of the south have been bobing along the 'top' for a couple of years now, whilst the north has almost caught up. This crash (unlike the last one) will be led from the north. The places that have gone up the most will come down the most. The die is cast.

We've had property inflation due to artificially cheap money post 9/11. Now we have general global inflation which only means one thing hire IR the longer the MPC delay (out of step with everone else) the higher and longer they'll have to go. Oil at crippling prices and massively rising unemployment. Its always hard to seeit as its happening, it here now.

Pablo Silver or Lead?

[Bingley Bloke]

As with every bottom that has occured before, when the average house price is three times the average salary. When that will be? I don't know. How much of that will be down to house prices falling, and how much will be down to wages rising, again, I don't know.

[laurejon]

Recession to be declared last quarter of 2007, and countered with a rapid rise in interest rates. Real rate rises, that show a determination to counter the effects of inflation, and that bring enough money into the Governments Coffers they repay the stupendous national debt rather than is the case at present rolling up the interest, without making any capital repayments.

2014 will see rock bottom, I am thinking of a correction of around 45% on average, but 60% in some areas where the boom has been fuelled simply by over optimistic speculation with a complete disregard for Geography and Local Economics. Properties in areas such as the case on the South Coast, where the average wage is 14k, yet properties are selling on average for 250k.

[New Bear]

How about 2035?

For the evidence and argument see "The Baby Boom: Predictability in House Prices and Interest Rates"

Robert F. Martin, November 2005.

I don't have the link but you can Google it and see the PDF.

Abstract: This paper explores the baby boom's impact on U.S. house prices and interest

rates in the post-war 20th century and beyond. Using a simple Lucas asset pricing model,

I quantitatively account for the increase in real house prices, the path of real interest rates,

and the timing of low-frequency fluctuations in real house prices. The model predicts

that the primary force underlying the evolution of real house prices is the systematic and

predictable changes in the working age population driven by the baby boom. The model

is calibrated to U.S. data and tested on international data. One surprising success of the

model is its ability to predict the boom and bust in Japanese real estate markets around

1974 and 1990.

The UK is one of the economies used to test the model. See Figures 14, 15, 16.

[Realistbear]

West Midlands peaked in 2004. Last Q detached fell 8.2% according to the government figures (Stratford area). I am monitoring a decent detached that peaked at around 350k. When the price falls to around 225k I will be buying. How long? Well that 350k house is now about 300k or so since the peak with a sharp drop of 24k last Q according to the figures. My estimate is the bottom will be around 2008 provided there are no economic disasters such as a spike in IR due to the Yen carry trade and provided employment does not accelerate more to the downside than it already is (Jaguar may close down for example if Ford cannot a-FORD to prop it up again).

Note that each peak and trough has been growing for several decades according to the NW chart and the amount of debt is more extreme this time around which suggests a sharper commensurate drop.

[debtfree]

The bottom was in 1995. I don't know when the top will be, but maybe the Olympics offers a good target date.

good shout.

if wembley is anything to go by it could be a couple of years later.

[aussieboy]

Recession to be declared last quarter of 2007, and countered with a rapid rise in interest rates. Real rate rises, that show a determination to counter the effects of inflation, and that bring enough money into the Governments Coffers they repay the stupendous national debt rather than is the case at present rolling up the interest, without making any capital repayments.

SNIP

Too funny... central banks raising interest rates to counter a recession.

How's the ganja where you are, laurejon?

[laurejon]

Too funny... central banks raising interest rates to counter a recession.

How's the ganja where you are, laurejon?

I know you are an Australian but I am sure you dont live in the outback detatched from Society.

Inflation is countered with high interest rates, there is no other tool. This stops people spending and thus sends the country into a recession, a recession being three consequative months of zero growth.

I suspect that is the same in Australia, even in places like the outback where most petrol is consumed via the nostrils and not the carburettor.

[aussieboy]

I know you are an Australian but I am sure you dont live in the outback detatched from Society.

Inflation is countered with high interest rates, there is no other tool. This stops people spending and thus sends the country into a recession, a recession being three consequative months of zero growth.

I suspect that is the same in Australia, even in places like the outback where most petrol is consumed via the nostrils and not the carburettor.

Read your own crap, mate:

Recession to be declared last quarter of 2007, and countered with a rapid rise in interest rates.

[Flat Bear]

Just out of interest when do you see the bottom of this property cycle and how much, my estimate is now a little less over a longer period than it was 18 months ago.

I am calling the bottom 2015 with a fall of 20% in real terms

Sam

You could be right

I see it as 2011 with nominal falls of around 20% but I think there will be a long period of stagnation 10 years plus after this

Not much different to your thoughts really

Edited May 19, 2006 by Flat Bear