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ronnie

Economic Model Predicts Falling House Prices In Uk

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Lets hope the model is wrong. The two conclusions from the graph are quite alarming and undermine much received wisdom on this site. Another 4-5 years of HPI doesn't bear thinking about. And 30 years of falling prices would do for many people on this site like me who are hoping to buy a few years after the crash in the belief it would be a good time to do so.

:unsure:

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Demogrpahics point to a dismal future for houses from an investment perspective. The Baby Boomers are to be replaced by a much smaller generation and the boomers will be starting to unload their larger houses soon to trade down to smaller properties. Younger people have smaller familes these days and will not be as keen to have the big 4-5 bedroom gaffs of the boomer generation chosing instead to spend more on other pursuits as is more common in Europe. Further, the huge increases in heating etc. will be a deterent for owning the large houses just as big cars are becoming less valuable due to fuel costs. We will, in essense, have to go Japanese.

The prospects for renting for ever will not seem so bad after Great Crash 2 has worked itself through and laid waste to many a dream of future security and a safe as houses investment. It will be interesting to see what emerges from the rubble in a few years time that is for sure. But for now, I would not invest a penny in anything real estate other than a monthly rent cheque.

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Guest wrongmove

Well you can buy the way I have - as a permanent home, not an investment, with the money written off, like buying everlasting socks. Handy, but not something you could ever sell.

It might be quite refreshing for everyone to start thinking of houses as just a waste of money, but useful.

Well that's my plan now - but in inland rural Spain. I'll carry on renting in uk until I can afford to semi-retire to Spain, or maybe even buy a cheap hovel in cracksville, uk if I can find something for less than my rent (i.e. 1.5-2x income), and just write off the dosh. I'll give the uk dive to my daughter to do what she wants with when I emmigrate, so profit/loss on it will be of no interest to me. I'm certainly not borrowing 4x or more and sinking all my savings into houses round here at the moment, or anytime soon.

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I've pasted a screen grab here:

untitled.JPG

It's interesting. Two things stand out:

1) There might be a few more years left for people to sell, and for people here to hold out and rent.

2) Property will be a terrible invesment in the long term from this point on. So maybe renting should be a lifetime option. I know that after the 1929 Wall Street crash (which was also a drawn out 90% nominal property crash in Manhattan) rents nominally fell for two decades.

Hmmm. I'd be surprised if prices fell ~80%.

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as humanity dies out demographically, and as we are automated and replaced long-term with "things" that don't need houses

Still, in fifty years time maybe there'll be robot EAs selling 'executive apartments' to robot workers?

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Another point worth noting is that they predict that prices in the us will START falling in 2013 (see figure 8a)

I think even the bulls will admit that their falling NOW.

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Hmmm. I'd be surprised if prices fell ~80%.

Never again will the average unskilled human be able to earn a decent salary in this country: that was a temporary blip for a few decades of industrialisation that's now coming to an end. Even if their jobs aren't exported, they'll increasingly be automated... some will still be needed over the next few decades, but nowhere near as many as we have today.

Think about that for a moment, and then think about the implications for house prices. If the unskilled workers who still have a job are earning minimum wage, what do you think is going to happen to the housing market? How will they pay a 200k mortgage on a 10k salary?

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Looks like a slow downward movement to me - suggesting house price stability (balance of supply/demand) with actual values being eroded by other factors such as inflation (?)

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I've pasted a screen grab here:

untitled.JPG

It's interesting. Two things stand out:

1) There might be a few more years left for people to sell, and for people here to hold out and rent.

2) Property will be a terrible invesment in the long term from this point on. So maybe renting should be a lifetime option. I know that after the 1929 Wall Street crash (which was also a drawn out 90% nominal property crash in Manhattan) rents nominally fell for two decades.

Tell me if im wrong(and i usually am) but on the graph predictions......still a few yrs growth....then nearly twenty yrs till nominal loses showing at todays rate......but wont most mortgages be nearly paid in todays market by then.....negative equity maybe....but no rent to pay as mortgage completed.

As stated bright spark i aint.

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Bit concerned about the vertical axis labelling...

Is this graph nominal or real prices?

The dips look too large to me (like the HPC front page "normalised" graph) for it to be nominal prices...

Anyone care to verify what we're looking at?

Could it imply rampant inflation and a falling GBP?

AF

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I liked the 'Ireland' graph.

Seamus house prices to peak at 600k in 2008 and stay there or 20 years.

So all the BTL landlords will spend 2 decades subsidizing their tenants.

Seriously folks, fortune telling is impossible.

Even for the Fed.

If that wasn't true, they wouldn't be in the mess they are now.

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Lets hope the model is wrong. The two conclusions from the graph are quite alarming and undermine much received wisdom on this site. Another 4-5 years of HPI doesn't bear thinking about. And 30 years of falling prices would do for many people on this site like me who are hoping to buy a few years after the crash in the belief it would be a good time to do so.

:unsure:

This model is correct, but not detailed. It is only wrong about Ireland - as prices there will decline soon (but author of thus work underlined, that some factors are simplifed in his model).

UK, USA and other West countries have terrible population structure, so after THIS crash the prices will not recover, as there is not enough young people to buy those properties. Moreover, presently we have terrible structure of wealth distribution - vast majority of wealth is hold by old people, debts - by young.

If someone would like to earn on property, should go to Asia after coming crash - where population structure is different.

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{The counter-argument of the bulls is that property is the only sort of investment where institutions will extend huge leverage to a small-time investor}

"Currently".

Food for thought, there.

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YES.

But the 1930's were a deflationary period.

It is still possible that we could see a period of hyperinflation before defaltion/ or a depression

It is the most probable, moreover.

1. Money supply.

2. High energy prices

3. Raising costs of Chinese and generally Asian products (due to high energy prices and wage inflation there).

will up inflation strongly.

Than interest rates will crush it (like in Great Depression times, first inflation, than deflation).

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Guest mattsta1964

It's all coming together ... a bit like noticing that the US has occupied Iraq and Afghanistan, and then looking at them on a map in relation to Iran.

untitled.JPG

:lol:

Nice one Durch!

I hadn't noticed that geography!

George Bush World Tour! Next stop Tehran!!!

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Before anybody gets too excited about this, I think it's worth pointing out that it's very easy to make a model fit current trends but much harder to get it to predict the future. Even Excel does a reasonable job of modelling past trends in house prices but does a more questionable job of predicting the future.

To show what I mean, attached is a screen dump from a spreadsheet of the house price data from the HPC front page. The black line is a trend line created in Excel based on a power series fit of the data. It manages to fit current data OK, but I think that even the most bearish of the posters here would agree that house prices becoming less than zero in a few years' time is slightly unrealistic.

Excel_HPC_Forcast.JPG

post-5397-1156706616_thumb.jpg

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I think that even the most bearish of the posters here would agree that house prices becoming less than zero in a few years' time is slightly unrealistic.

Depends on whether Bush manages to start WWIII. However, from what's been posted here, I don't believe this study is a simple curve-fitting exercise, but is based on demographic changes?

Edited by MarkG

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Good point: I've been amazed at how much property tax some Americans on the web say they pay each year... if you're in a minimum wage job after you're sacked from your well-paid manufacturing job that's been shipped to China, and the local government want $1k a month in tax on your McMansion, you're in deep crap.

And as property is the easiest thing to tax -- either you pay or the government confiscate the house -- I can't help but feel that those taxes are only going to increase from here until Western governments finally declare bankruptcy.

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However, from what's been posted here, I don't believe this study is a simple curve-fitting exercise, but is based on demographic changes?

Which is exactly the problem - its trying to predict house prices by predicting future demographic trends. In particular, assuming some long run 'normal' rate of population growth that we will return to without any further spikes, baby booms, immgration influxes, etc.

Build pretty much any economic model then feed in dwindling demand and you'll get falling prices... :ph34r:

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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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