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Pensive

Boom To Bust, The Great 1990's Slump

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Boom to Bust, the great 1990's slump.

I found this book in the library written by John McQueen of the Bankruptcy Ass of GB, in 1994.

It gives an interesting insight to the situation back then reading it I fear things will be worse this time.

I'll give some of the key points and dates mentioned in the book which were contributed by a Borough Engineer

"1975 Inflation which started to rise after decimalisation 4 yrs earlier was now rampant under Labour. There was hesitancy in the housing market and land prices were static.

1978 Inflation continued to rise. No development in Green Belt. building land rose to 80,000 pounds an acre

1980 Now Conservative administration, Thatcher policy was home ownership for all. Building land rose to 100,000 pounds an acre.

1981 Council tenants given opportunity to purchase their houses. Building land rose to 200,000 pounds an acre

1982 Increase in building land had pushed up the price of new houses so much that existing houses were becoming more attractive and their values were rising. Building land 300,000 pounds an acre.

1983 Economy growing, building land 400,000 pounds an acre.

1884-1987 Housing bonanza continued and planners still refusing planning permission in green belt areas, building land now 800,000 pounds an acre. Houses built in 1960's for 10,000 now selling for 130,000

1988-89 Crucial years, economy booming. House values had risen so much that 2nd mortgages were readily available for new cars, home improvements, holidays etc. In Spring budget Nigel Lawson announced 1 mortgage relief per property instead of 1 per person from 1 Aug 1988 this created a mad rush to get on housing band wagon. The huge demand sent house prices soaring, gazumping was rife.

The sudden surge in borrowing prompted the PM to declare this was inflation which cost jobs and base borrowing rates started rising. 7.5% in June to 15% by October 1989.......The housing bubble burst and collapsed in on itself like a punctured balloon.

1989- 1994 House prices tumbled, EA's go bust in droves. Properties worth 250,000 at the height of the boom struggle to find buyers at 80,000. Millions find themselves caught in negative equity......

Property developers and builders went down first. An economic atom bomb had exploded. Imaginary money ie constantly rising property values which had been propping up business expansion and a consumer boom, were no more. The booming 1890's were shown to be what they really were an illusion and a confidence trick, perpetrated on the people by the financial institutions and those in power. Everyone had fallen for it.

As the dust settled complete panic struck the major banks as their balance sheets showed major losses and they began pulling in overdrafts at the 1st sign of trouble, cutting off cash flow. The domino effect set in as businesses collapsed.

In acts of unparalleled self mutilation, the goverment with its policies, the financial institutions by their panic actions, and the planners in their stupidity decimated the British economy"

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I'm quoting from the book which was written at the time. The author John McQueen ran the Bankruptcy Association therefore he was in contact with many people in dire straights from all over the country.

An example I know about : Friends of mine bought a small holding in Anglesey for 175,000 in 1988 which was repossessed and sold for 90,000 in the mid 90's.

I do remember there was alot of property going to auction and if sold going very cheap.

Edited by Pensive

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I'm quoting from the book which was written at the time. The author John McQueen ran the Bankruptcy Association therefore he was in contact with many people in dire straights from all over the country.

Are you sure it wasn't 180?

That was about the level of collapse, not 70%!

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Guest The_Oldie

Are you sure it wasn't 180?

That was about the level of collapse, not 70%!

I remember Docklands flats dropping by huge amounts. Not sure if it was as much as 70% though.

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Guest The_Oldie

In 1994 I bought our present house for 175k. It had sold for 250k in 1989.

I'm sure he left out a digit!

That sounds about right for the suburbs, but flats in Docklands had been bought by yuppies for silly money and when prices went into reverse, they dropped like a stone. I considered buying one on the spur of moment in the mid 90s as they were so cheap, about £40K if I remember correctly. I thought it might be fun to have a Central London base, wish I had now :lol:.

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On the tv doc looking at victims of the 90s crash, an offplan 1 bed flat inThe Tower Bridge area of London went from £185K to £95K. The guy kept repeating hauntingly 'if only I hadn't gone into that site office that day' .

Reminds me, I've just found a book called 'Crashes' 'why they happen-what they do' 1988-90 by Robert Beckman author of 'the Downwave'. Looks interesting. Apparently an hpc'er Triumvate1 mentioned in 2005

"If you can a copy of it, Bob Beckman's book 'Crashes' has a whole chapter on property slumps in the US, including Florida where prices took 40 years to recover!"

http://www.housepricecrash.co.uk/forum/ind...w=&st=&

http://www.bookfinder.com/search/?author=b...st=sr&ac=qr

http://www.amazon.co.uk/gp/product/0283996...ce&n=266239

Edited by Saving For a Space Ship

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They didn't fall by that amount!

In percentage terms I seem to recall they did - I was at the receiving end of such a percentage fall. I bought for £36500 in 1988 and the estimate to sell 8 years' later came to £12-15k. Some people may be thinking so what, this is old hat/old history - but I can tell you £36500 in 1988 was a real lot of money in those days. I was on a medical/professional wage somewhat above my peers and I still came a cropper!

Greylocks

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They didn't fall by that amount!

Tens of thousands of properties did in london and south of the M4.

I was a Branch Manager of Connells EAs at the time hundreds of thousands of properties

35-50% down, tens of thaousands unsellable unless dropped 50-55%.

pablo Silver or Lead?

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They didn't fall by that amount!

If there were repo'd they did!

The cheapest home I know was valued @75K in 1989 and was sold at auction for 24K (my sisters)

The most expensive home I know was valued @ 2.5 million and was sold for 850K (my business partner)

The last house I almost bought in 1989 (I bought a few) was valued @ 170K, I offered 150K which was declined and that was eventually sold for 80K

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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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