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mikefluk

Which Way Is Next For Property Prices

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Take a very close look at the graph on the front page. The 3 peaks pattern shown on the chart is very significant in statistical pattern formation terms.

A chartist will tell you that property prices are currently trading around a very small range of levels of "support" and "resistance". They show that the property market currently cannot make up its mind about where prices are heading. Neither the Bulls nor the Bears are in charge

At the bottom we can see that the average property price gets support from the Bulls at about £155k (the lowest part of the peak,) but equally meets resistance from the Bears at the top of the peak (about £160k) This is an incredibly small range to be bouncing in between and the likely reason in my view is that we have reached the top of the market and have been there for some time.

My advice is to keep watching and monitoring the graph. It is clear that up until these 3 peaks formed the bulls were in control and property kept rising (since 1996 in fact). It is also clear, however, that the Bears are now fighting back and a battle is currently taking place.

What you need to monitor on the graph is for a breaking of the chart pattern.The charts show for example that the Bulls have taken average prices to £160k on 3 occasions now only for the Bears to take over and take the average price down to £155k. At this level the Bulls re-emerge to take the price back up to £160k where again it meets resistance.

The future direction depends on who becomes dominant enough to break this pattern. If it drops below the current support level of £155k the likely future direction is downwards make no mistake about that. If, however, the graph breaks through its current resistance level then prices will keep rising in the future

I am more in support of the chart breaking through its support levels and prices falling which its what usually happens with this pattern formation but I am making no predictions

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When I look at the sheer height of the mountain that the graph shows I can only come to one conclusion: its going to be a fast and deep ride going down the other side. The peaks have been getting higher and the troughs deeper during each boom and bust for decades and this time everything is in place for more of the same but exacerbated by:

1. The level of idebtedness.

2. Proliferation of IO mortgages

3. The culture shift that makes it easier to "walk away" from debt

4. The Yen carry trade and worldwide trend toward tightening

I agree that the triple top shows a market resisting what comes naturally after a long period of inflation that has extended well beyond the fundamentals.

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The market is lubricated by creative lending, or maybe even chaos lending, with the banks devising anything possible to keep the ball rolling.

I agree.

Some of the loans on offer simply defy belief; I can only assume that competition in the lending industry is now so cut-throat that caution is being thrown to the winds in a desperate attempt to retain market share and prop up this three-legged table.

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I agree.

Some of the loans on offer simply defy belief; I can only assume that competition in the lending industry is now so cut-throat that caution is being thrown to the winds in a desperate attempt to retain market share and prop up this three-legged table.

It does look quite mad. I've heard other people on this forum saying that banks don't want defaulters - but why is this? If you miss the payments, the home is simply repossessed by the bank and resold. I would imagine it would be far worse for them to miss out on market share than to have the last crop of purchasers default - especially as they are all essentially in the same boat. Is there a big downside for lenders to offer secured loans irresponsibly?

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Is there a big downside for lenders to offer secured loans irresponsibly?

I think the answer is not much; the lender ultimately has recourse to re-possession to recover the debt and they can still pursue the mortgagee thereafter for any shortfall. Because a mortgage is a deed they have up to twelve years to recover the debt before they are out of time. Scarey.

You are correct I believe; they are more interested in market share and will accept defaulted loans as a cost of sales.

Edited by Red Baron

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When I look at the sheer height of the mountain that the graph shows I can only come to one conclusion: its going to be a fast and deep ride going down the other side.

I agree. If you look on the graph you can see the symmetry between previous bull and bear runs. This bull run looks the spikiest yet, so when the bear run does come you don't want to be there

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For goodness sake stop looking at the charts for inspiration or salvation. Look out of the window at the real world, where the economy is doing well, there is little reason to raise interest rates and there is mega-wads of cash sloshing round the country.

The 'graph' is not going to crash any time soon.

We are in a new paradigm, whether you like it or not. You need to start looking at how you change your outlook on life.

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I am more in support of the chart breaking through its support levels and prices falling which its what usually happens with this pattern formation but I am making no predictions

It looks like very much like prices have reached some sort of plateu and are now moving up and down within a fairly narrow range. The various House Price reports have pointed to this in the last year.

From the ground, however, it looks very confusing. I live in Rossendale, 'Sold signs' are going up all over the place at the moment. Same in the Calder Valley along which I travel to work. However, during last winter, the whole market seemed to grind to a halt. The local paper recently reported serious debt problems in Rossendale. The BBC have published data (from the Land registry stating that house prices in Rossendale fell by 12.6% in the last three months).

http://news.bbc.co.uk/1/shared/spl/hi/in_d...s/html/30um.stm

I believe that Rossendale is a microcosm of the the UK as a whole at the moment. This is typified by 'conflicting reports'; 'Changing demand (that makes the place look like a boom town one month and a bust town another month); confusion; greed; desperation and MARKET VOLATILITY.

House Prices will only resume their sharp upward trend if new money comes into the market. The question that the bulls need to address is this: Where is that new money going to come from?

First time buyers are struggling to save for a deposit and many will not want to commit themselves to a mortgage. It does not take a genius to see that houses are extremely poor value for money at the current price levels.

Buy to let investors may also be wary since they will need to ensure that rent yields cover the mortgage repayments. This is becoming increasingly more difficult with such high house prices.

People exiting the Stockmarket in the last couple of months. Could they now be ploughing the money, from their share sales, into housing? Not if they have any sense. The stock markets have been spooked by the likelyhood of continued rising world interest rates. If global interest rates keep rising, the UK will eventually have to follow suit. Money going into the housing market at the moment is 'dumb money' indeed.

Money from overseas investors. I cannot really see this being a source of large scale money coming into the UK Housing Market in the short term future. Rising interest rates, inflation worries, and declining House prices in other countries(e.g.Austrailia and parts of the USA) will discourage this.

In short the continous flow of money, that has helped sustain the housing boom, is now slowly petering out. Many UK citizens are overstreached; banks are begining to tighten credit; world interest rates are spooking the markets; and leading world figures (e.g. the Governer of the BOE) are sending out warning messages.

In time, there will be a shortage of liquidity as people pay their debts off. It could be two or three years before we see the full extent of this. However, when liquidity has tightrned, and people are not so flush, I believe we will then see a significant downturn in the housing market that will last for a number of years.

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House prices don't have to rise or fall - there is a thrid way and that is they just stay roughly where they are.

That is the story of the last two years and is highly likely to continue for the next two years at least.

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For goodness sake stop looking at the charts for inspiration or salvation. Look out of the window at the real world, where the economy is doing well, there is little reason to raise interest rates and there is mega-wads of cash sloshing round the country.

The 'graph' is not going to crash any time soon.

We are in a new paradigm, whether you like it or not. You need to start looking at how you change your outlook on life.

Arhh were it so but, sadly, the economy is no longer on a winning streak. Employment is down, more are seeking the dole and the deficits are widening. As Mervyn King said there are bumpy roads ahead for the economy not the easy years on borrowed Asian money. There are indeed mega wads of money sloshing around and that is why Gordon has admitted that its problematic for inflation. The Japanese began mopping some of the cash up on 20th March when the big banks began to tighten and the BoJ will soon follow.

To top it all off the latest Q figures from the ODPM shows house prices are getting grimmer Upnorth:

Northumberland £149,225 -8.8%

Cumbria £143,851 -1.6%

Tyne And Wear £132,526 -0.3%

Stockton-On-Tees £128,643 -5.0%

Darlington £125,556 -5.6%

Durham £114,329 -4.3%

Redcar And Cleveland £109,289 -11.2%

Middlesbrough £108,982 4.7%

Hartlepool £98,770 -5.2%

That said, things are not much better in my neck of the woods:

Herefordshire £208,672 2.2%

Worcestershire £184,936 -3.3%

Warwickshire £184,860 -3.4%

Shropshire £184,664 -3.1%

Staffordshire £161,232 -0.1%

West Midlands £146,903 0.3%

Wrekin £140,819 1.2%

Stoke-On-Trent £89,910 -5.6%

I may a move coming up to Sussex and a quick check there and it seems the same applies--pretty grim Downsouth:

Brighton And Hove £222,241 0.6%

Rother £215,578 -4.9%

Lewes £213,745 -6.8%

Eastbourne £173,906 -6.4%

Hastings £143,088 -4.1%

Even my former home area is a bit shaky:

Cambridgeshire £197,085 -2.0%

Suffolk £176,077 -2.7%

Norfolk £166,062 -0.8%

I suppose London is okay--as long as the bull run for stocks continues, but hang on................

The Scottish EAs say things are doijg well way Upnorth but when I checked the ODPM figures:

East Ayrshire 92,883 -10.3%

Orkney Islands 88,463 -10.3%

West Dunbartonshire 88,299 -7.4%

Shetland Islands 83,663 4.4%

Eilean Siar 75,640 -8.2%

Crash time there it would seem with 10+falls.

As we look out there in the real world we find HPC is on the way with negative figures in almost every area of the North and West Midlands. The only new paradigm I see is a triple top to the graph which is a little odd.

Edited by Realistbear

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For goodness sake stop looking at the charts for inspiration or salvation. Look out of the window at the real world, where the economy is doing well, there is little reason to raise interest rates and there is mega-wads of cash sloshing round the country.

The 'graph' is not going to crash any time soon.

We are in a new paradigm, whether you like it or not. You need to start looking at how you change your outlook on life.

LOL, I just love new paradigms, but out of interest, has there ever been a new paradigm that lasted, or did things revert to normal after the excitement faded?

I accept that things slowly shift, but has there ever been a major shift in anything in such a short period of time (10 years for the last bull run on housing, & five of those were recovering from a bear market) that has become a permanant change in the way of things?

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Would you care to dig out the stats for Yorkshire and Humberside as a whole - perhaps you can break them down to North, West and South Yorks just out of interest.

This might be a bit more revealing than cherry picking a few towns that fit your bill.

And as a matter of interest, i haven't a clue about South Yorkshire, because I never look it up. So you never know RB, you might just cathc me out. Go on my son. :D

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Would you care to dig out the stats for Yorkshire and Humberside as a whole - perhaps you can break them down to North, West and South Yorks just out of interest.

This might be a bit more revealing than cherry picking a few towns that fit your bill.

And as a matter of interest, i haven't a clue about South Yorkshire, because I never look it up. So you never know RB, you might just cathc me out. Go on my son. :D

South Yorks is not too bad:

South Yorkshire Local Authorities

Sheffield £138,531 -1.8%

Rotherham £124,581 2.6%

Doncaster £119,130 -1.4%

Barnsley £110,117 -6.7%

Bit grimmer for cheaper terraced properties though:

Sheffield £108,466 -0.3%

Rotherham £85,253 0.9%

Doncaster £82,828 -4.8%

Barnsley £79,615 -10.2%

West Yorks not so good:

Leeds £156,499 -0.2%

Kirklees £135,713 -0.6%

Wakefield £128,490 -5.1%

Bradford £125,079 -0.8%

Calderdale £124,591 -5.7%

Looks like the cherries are nearly all bad?

Edited by Realistbear

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House prices don't have to rise or fall - there is a thrid way and that is they just stay roughly where they are.

That is the story of the last two years and is highly likely to continue for the next two years at least.

IMupNorth

It is great to see that you you have conceded that the House Price Boom has ended. I agree that "that is the story of the last two years". I also agree that there is a strong possibility of this continuing for the next two or three years.

The feelgood factor is still with us.

Many people are still feeling flush. Even people with significant debts still feel flush. There are also a number of FTB's out there who feel that they must get onto the ladder before the next great House price push (the fear factor). Others see housing as a great cash generator. They believe that because house prices are always rising all that they need to do is buy a house, wait for the price to rise, and withdraw some equity (The greed factor - it's really taking out a loan but who cares in a growing market).

Another great influence on the economy, that should help Housing prices over the next two or three years, is that the 'Baby Boom Generation' are at their 'Peak Spending level'. A large proportion of people earn their highest wages towards the end of their working lives. The baby boom generation is a very large generation that is a significant influence on the economy as a whole. It has been at it's Peak spending level for about ten years. Much of the economic prosperity, over the last ten years has been a result of this.

However, in three to four years time, things might look very different. Baby boomers start to retire (Paul McCartney is 64 today) causing a drop in their incomes. This will result in less spending power in the economy and less demand for goods and services. A downturn in demand means that people will have to be laid off. This results in less spending power in the economy and so on. Further to this, people in debt, once they come to the realisation of their predicament will also significantly reduce spending. Result: Recession.

Recession leads to a reduction in incomes for many households. Some through losing their jobs others through less overtime and lower pay increases. The households that are oversteched with debt will then be in trouble. Many will get out of this by selling their houses. Others will be less fortunate and will be re-possessed. The result of this will be a greater supply of housing in an economy with less demand. The result could be a long a deep recession with a slump in house prices. Japan has just been through a similar recession. Their baby boom generation was about twenty years earlier than ours. It has taken them fifteen years to puu out of recession. Housing prices have fallen between 40% and 80% depending upon location.

Any money being invested in housing at the current time, in my opinion is 'DUMB MONEY'.

People who have gained from investing into housing, over the last ten years, should now be carefully considering what they are going to do. The 'SMART MONEY' always gets out of the market just before the final peak. Do the bulls really think that the bandwaggon will keep rolling? Do they think that the economy will never go into recession again? What will happen to the housing market if we do go into a recession? Are we in a truly new paradigm or will the new paridigm go the way of all the other New Paradigms? Is it possible that the success of the last ten years has made many of us comlplacent thus blurring our vision? Can they afford to ride out the storm if housing prices do crash?

IMupNorth and all other Bulls. I wish you well.

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For goodness sake stop looking at the charts for inspiration or salvation. Look out of the window at the real world, where the economy is doing well, there is little reason to raise interest rates and there is mega-wads of cash sloshing round the country.

The 'graph' is not going to crash any time soon.

We are in a new paradigm, whether you like it or not. You need to start looking at how you change your outlook on life.

Thats exactly how I felt in 1988 when the doom mongerers were around and I had already seen a welcome rise in my greenwich BTL house. I wish I had listened to them as interest rates rose and property prices fell and I ended up subsidising my ungrateful tenants. Beacuse I wasn't heavily geared I survived to tell the tale. I then went back to the drawing board and did my research.

In the city where bonuses alone account for more than we earn in 5 years we come across 2 types of traders; they are the fundamentalists and the technical traders. The fundamentalists rely on published economic data and research entirely; they ignore chart patterns and everything else. They look at employment, government deficits, inflation, high street sales, liquidity - anything thats published they examine and make judgements solely from that.

The technical traders on the other hand pay lip service to the fundamentals and look for chart patterns and in particular breaks from lines of support and resistance and they then bet on following that break pattern. Their primary belief is you cannot change the market you have to go with it and put yourself in a position to exploit it. They are all very successful; judge for yourself from the bonuses you read about.

Occasionally both the fundamental traders and the technical traders converge and agree. I think we are in that scenario with property. You don't need me to repeat what other fundamentalists are saying on this forum about inflation, interest rates, liquidity debt etc etc.

When you combine this with my comments on the chart patterns you have a very powerful indicator of where things are heading. If you are not concerned by this up north good luck to you; but if I were TTRTR I would be monitoring the charts very carefully indeed

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For goodness sake stop looking at the charts for inspiration or salvation. Look out of the window at the real world, where the economy is doing well, there is little reason to raise interest rates and there is mega-wads of cash sloshing round the country.

The 'graph' is not going to crash any time soon.

We are in a new paradigm, whether you like it or not. You need to start looking at how you change your outlook on life.

Did somebody mention 'Dumb' ?

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The market is lubricated by creative lending, or maybe even chaos lending, with the banks devising anything possible to keep the ball rolling.

Thanks to the deregulation of the FS industry (which happened quite some time ago), lenders can lend basically whatever they want, and after being fairly cautious for a few years they are coming back again to the realisation that the more money they lend the more money they can make from interest. But if they push it too much it will go over the edge, and big increases in defaulters will cost money to chase and clear up.

there is little reason to raise interest rates

and

there is mega-wads of cash sloshing round the country.

You contradicted yourself without even starting a new sentence - congratulations.

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Did house prices fall suddenly & dramatically during the last crash or was it a slow gradual process?

Speaking from memory prices peaked in the summer of 1988. then on 1st august 1988 the chancellor abolished multiple borrower MIRAS's which was the then tax relief on the first £30,000 interest. Overnight the number of property transactions fell through the floor.

It took several months to unwind in lower prices but once they started falling they never stopped falling for about 5 years. Nothing dramatic maybe 5, 6 , 7% a year. Then they remained static for another 3 years before they started to rise again. All in a period of inflation a lot higher than we have now so the falls in real terms were much higher.

What we have here though looks even more ominous. Most of these mortgages (which are IO) are supplied via the money markets of Japan China and other countries at interest rates of less than 1% (translated into 5% mortgages here) once the middlemen have taken their cut. These countries have all given clear signals this liquidity tap will at some point in the not too distant future be turned off, then you can see the fundamentals are all in place.

Don't blame the Banks and Building Societies; they are operating a standard business model. Borrow from this tap very low, lend much higher and take out insurance to protect you against defaulters. Its the perfect money spinner and they will persist until there are no borrowers left.

As always the ones who will pay the price will be those most motivated by fear and greed just like it was back then. The problem is that this time the price they pay will be on a scale thus far unprecedented.

And I haven't even referred back to the chart patterns and what they are saying

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Is anyone prepared to put some timescales on it.

The market where I am in outer London has turned again and supply is building after the spring rally.

However, some stuff is still selling, more than I would like and there appears to be a few more fools. When will the tap be turned down a bit? I know it has been happening for a while, with fixed rates rising, but it seems to be taking soooo long.

I was really hoping and still do think we will see some signs of negative MOM's later this year.

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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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