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No Trigger For A Crash


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My understanding is that high interest rates at the time of the last crash caused many people to sell up/be repossedd. Why would you seel your property for a lower amount now if you didnt have to, wouldnt you just sit tight. Surely there needs to be a trigger as in the last crash

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http://www.housepricecrash.co.uk/forum/ind...373entry40373

Yawn. From the above link:

Miles said. 'It does not require some trigger such as a rise in interest rates or unemployment. Expectations of a degree of overvaluation becoming widespread can itself be a factor driving prices down.'

http://www.cracker.com.au/Viewthread.aspx?...ategoryid=11061

House prices 'could tumble 25%'

Jane Padgham, Evening Standard

12 November 2004

FEARS of a housing crash escalated today after a top City economist said a fall of between 20% and 25% in property prices could not be ruled out.

Professor David Miles, chief UK economist at Morgan Stanley and author of the Treasury-commissioned report into long-term fixed-rate mortgages, said the growing perception that housing is overvalued could be sufficient to tip the market into a sharp slide.

'A significant fall in nominal house prices is not implausible,' Miles said. 'It does not require some trigger such as a rise in interest rates or unemployment. Expectations of a degree of overvaluation becoming widespread can itself be a factor driving prices down.'

Miles, who is also a visiting professor at Imperial College and a former adviser to the Bank of England, stressed that uncertainty surrounding the housing market was huge. 'A single point forecast showing a particular outcome is next to useless,' he said. 'If people remain as confident as they have been, there is no reason why prices will fall at all. But an adjustment to overvaluation could come very suddenly. A fall in prices is pretty likely, frankly.'

Miles is the latest economist to warn that the housing market could be on the brink of collapse. Martin Weale, head of the respected National Institute of Economic and Social Research, said yesterday: 'There is a significant risk of house prices returning to more normal levels very rapidly. I wouldn't bet my money on there not being a 20% to 30% fall over the next three years.'

The majority view, including that of mortgage lending giants Halifax and Nationwide, remains that the market will continue to slow, but not crash. They argue that low interest rates, robust economic growth and a strong jobs market will underpin prices.

'The current moderation in price growth expectations will not translate into widespread panic. Instead, the market will experience subdued levels of turnover and price growth,' Nationwide's group economist Alex Bannister said yesterday as the building society unveiled a 0.4% drop in prices.

Even if prices do fall significantly, Miles believes the knock-on effects will be less severe than in the early 1990s, and fewer will be hit by negative equity. He said: 'Since there is no compelling evidence that this most recent appreciation fuelled consumption to any great extent, the argument that its reversal would necessarily slow consumption spending markedly is not compelling.'

http://www.thisismoney.co.uk/news/a...97&in_page_id=2

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My understanding is that high interest rates at the time of the last crash caused many people to sell up/be repossedd.  Why would you seel your property for a lower amount now if you didnt have to, wouldnt you just sit tight.  Surely there needs to be a trigger as in the last crash

Lack of first time buyers able to buy caused the last crash. You can actually time the crash to the date that the chancillor charged the mortgage interest relief rules to be £30,000 per mortgage / property rather than £30,000 per name on mortgage per property.

The shock interest rate rises were three years later (September 16th 1992 was black wednesday). Houses prices had fallen considerably by that point.

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Surely there needs to be a trigger as in the last crash

I'd say that the rapid drop off in mortgage approvals is a trigger. It may not be as dramatic sounding as a sudden spike in interest rates, but it's got to have an impact.

Hopefully IRs will rise to 5% next month which will be a good psychological blow.

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My understanding is that high interest rates at the time of the last crash caused many people to sell up/be repossedd.  Why would you seel your property for a lower amount now if you didnt have to, wouldnt you just sit tight.  Surely there needs to be a trigger as in the last crash

I think this is an important point. It will be different this time because there will not be the scale of forced selling. However, market values are determined by the edges of the market, by those that do sell. Very many people can drop prices and still congratulate themselves on massive equity gains so maybe we're in for a long slow decline.

On the other hand if anything crops up to cloud an apparently perfect economy then the market will collapse. How about dollar devaluation and rising unemployment ?

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House prices in London fell by about 5% last year in real terms (nominal fall + rpi) not a crash but a good start.

TTRTR the mortgage approval figures for December are even worse than the ones for November whiich were incredibly bad. No mortgages = no buyers = market falls. The Spring bounce will be more like a spring thud this year.

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I'd say that the rapid drop off in mortgage approvals is a trigger. It may not be as dramatic sounding as a sudden spike in interest rates, but it's got to have an impact.

Undoubtedly, people will turn on the news today, see items about a BIG fall in people taking out mortgages and worry about the house they intend to put on the market in the Spring.

You don't need to be a genius to work out that less people buying means a more competitive environment for sellers.

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What happened to Crash 2004?

Will there be a Crash 2006 or a Crash 2007?

:lol:  :lol:

Also what happened to the 'coming DEPRESSION' written in 1993 by Lord Rees - Mogg ('How To Protect Yourself Against The Coming Depression')?

The complete opposite outcome in fact.

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House prices in London fell by about 5% last year in real terms (nominal fall + rpi) not a crash but a good start. 

TTRTR the mortgage approval figures for December are even worse than the ones for November whiich were incredibly bad.  No mortgages = no buyers = market falls.  The Spring bounce will be more like a spring thud this year.

= the way I prefer it. We won't see any rate drops if the market takes off & rate drops are what puts cash in my pocket!

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TTRTR the mortgage approval figures for December are even worse than the ones for November whiich were incredibly bad.

STOP PRESS*******STOP PRESS*********

Mortgage approvals in December (Xmas holiday period) were lower than November!!

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My mortgage costs are 35% higher than they were. But you knew that, I'll leave the specifics up to your imagination. But just to help, I still buy champagne & avoid sparkling wine!  :D

I always start the rent below market prices but gradually increase them. So far no complaints and no tenants wanted to leave (I avoid crappy property). Effectively, my rents have gone up enough to cover 80% of the IR increase. If IR go down my rents wont!

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When I think about it, the rate I gave was related to my own circumstances. In all honesty I think a base rate of 5.5% is where I'd really be concerned about the market in general.

Thing to remember it is not just about the base rates - the differential that the lenders charge is important - as they face falling transaction numbers the pressure will be on to discount less and to ramp up their SVR rates over and above any underlying base rate - especially if defaults start rising.

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When I think about it, the rate I gave was related to my own circumstances. In all honesty I think a base rate of 5.5% is where I'd really be concerned about the market in general.

Hmm, I'm expecting to hit that round about October this year (nothing to June then probably one increase then, another in September and another in October). Thats just based on exchange rates and the generally economy mind the BOE are not going to care too much about house prices when other factors start becoming important.

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Guest Charlie The Tramp
If base rates went to 7.5% I'd be worrying.

If base rates went to 7.5% and prices dropped just 20%, most borrowers would be suicidal. :blink: A man just like me TTRTR alway plan for the unexpected. :D

With the above scenario could go back to Barbados for the holiday as in the eighties and early nineties. <_<

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Still affordable and still cheaper than renting.

Rent money remains dead money even on the following scenario.

You are considering buying a property for £118,000 with a deposit of £10,000 and a mortgage interest rate of 4.50%, as an alternative to renting a property for £650 per month. You anticipate that property inflation will average 2.00% per year and retail price inflation will average 2.00% per year.

Results

Based on the above figures, after the 10 year period you will be £55,254 better off buying. You would be better off buying from the end of year 1.

Year by Year Analysis

Year End Property equity less expenses Investment value less expenses Better off.. Better off by

1 £5,280.00 £3,375.00 buying £1,905.00

2 £2,602.80 £-4,401.12 buying £7,003.92

3 £-30.74 £-12,331.36 buying £12,300.62

4 £-2,619.76 £-20,418.76 buying £17,799.00

5 £-5,163.35 £-28,666.43 buying £23,503.07

6 £-7,660.62 £-37,077.53 buying £29,416.91

7 £-10,110.63 £-45,655.30 buying £35,544.66

8 £-12,512.45 £-54,403.02 buying £41,890.58

9 £-14,865.10 £-63,324.07 buying £48,458.98

10 £-17,167.60 £-72,421.87 buying £55,254.27

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  • 439 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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