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Bob

It Takes Two To Tango

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New poster, long time voyeur.

It strikes me that the majority of posters on this site point to affordability as a reason for a crash occuring in the not too distant future. Just because fewer people can afford to buy property doesn't mean a crash is inevitable. Another possible outcome is that sales volumes simply reduce. The key to a crash occuring is a significant number of people being unable to service their debt and being compelled to sell quickly, either through repossession or privately, at auction or by private treaty and without a reasonable period for marketing. Repos and fire sales at auction are not high enough (yet!) for a crash to occur.

Despite the increasing number of houses advertised for sale on websites such as Rightmove and the current reduced demand, I think house prices will remain resilient to catastrophic falls. I forsee a period of static prices or a small fall in prices in real terms and low sales volumes. Remember, just because the market can't afford the price that the seller wishes to realise doesn't mean that the seller has to sell at a reduced price - they may well be inclined to take the property off the market if they have no compulsion to sell.

The majority of the market is owner occupied so most sellers will just sit tight until (they hope) demand increases and sales volumes increase thus freeing up the market. The only sector who could trigger a minor crash are the BTL fraternity, but personally I think they will hold their nerve - I think most are in it for the long term to top up their pensions and are willing to take some short term pain for long term gain.

The above is assuming that we are approaching the top of this current cycle of interest rate rises! Clearly if they keep on climbing the number of repos and forced sales will rise in tandem and then you may get what you wish for!

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New poster, long time voyeur.

It strikes me that the majority of posters on this site point to affordability as a reason for a crash occuring in the not too distant future. Just because fewer people can afford to buy property doesn't mean a crash is inevitable. Another possible outcome is that sales volumes simply reduce. The key to a crash occuring is a significant number of people being unable to service their debt and being compelled to sell quickly, either through repossession or privately, at auction or by private treaty and without a reasonable period for marketing. Repos and fire sales at auction are not high enough (yet!) for a crash to occur.

Despite the increasing number of houses advertised for sale on websites such as Rightmove and the current reduced demand, I think house prices will remain resilient to catastrophic falls. I forsee a period of static prices or a small fall in prices in real terms and low sales volumes. Remember, just because the market can't afford the price that the seller wishes to realise doesn't mean that the seller has to sell at a reduced price - they may well be inclined to take the property off the market if they have no compulsion to sell.

The majority of the market is owner occupied so most sellers will just sit tight until (they hope) demand increases and sales volumes increase thus freeing up the market. The only sector who could trigger a minor crash are the BTL fraternity, but personally I think they will hold their nerve - I think most are in it for the long term to top up their pensions and are willing to take some short term pain for long term gain.

The above is assuming that we are approaching the top of this current cycle of interest rate rises! Clearly if they keep on climbing the number of repos and forced sales will rise in tandem and then you may get what you wish for!

all true for the USA, yet they are crashing

how do you explain that?

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Guest Bart of Darkness
It strikes me that the majority of posters on this site point to affordability as a reason for a crash occuring in the not too distant future.

I would have thought that a credit cruch was currently the more favoured reason for a HPC.

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Sub Prime market in the US has been criminally unregulated - people taking out mortgages with advice and submitting false financial details. Whilst you may argue that that has happened to a degree over here I believe that its not on the scale of the US.

Credit crunch won't force you to sell your property so long as you can service your current debts - sales volumes will reduce.

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Neither!

Don't have me pegged as a bull! I'm merely calling it as I see it at this moment in time. House prices will fall in the future - just not yet. All markets are cyclical.

To be honest I wouldn't like to predict when a correction worth getting excited about will occur but, in my opinion, not within the next 12 months and I doubt within 2 years. Its futile to look beyond that as its not predictable that far ahead.

Many people try to predict markets and the majority get it wrong or get lucky.

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Credit crunch won't force you to sell your property so long as you can service your current debts - sales volumes will reduce.

And there in lies the rub. A credit crunch may squeez borrowing/investment to such an extent that Uk jobs are lost as demand dries up, manufacturing declines, mortgages are unaffordable etc etc. Not saying its my view, but its certainly a view of many - wheras you assume the decision to sell or not is simply the same decison as whether to move house for voluntary reasons.

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all true for the USA, yet they are crashing

how do you explain that?

The main cause of US problems was massive oversupply of new-build properties. Likewise with Spain. We still have historically low levels of house building in the UK

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Left or right? :rolleyes:

I like it! But my guess would be more like this:

houses.jpg

Note the 'bull traps' in late 2008 ("it was just a temporary credit crunch") and again in 2011 (in the run up to the London olympics). I also doubt that the base will be as low.

post-5211-1184967480_thumb.jpg

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HPC convert - Jeez if a credit crunch has that effect then of course house prices will fall. But still no one on this site will be able to afford a house as you'll all be out of work!

A recession i a recession but we aren't there yet and Gordon will stick a fork in his eye if it delayed one until after the next election.

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I would have thought that a credit cruch was currently the more favoured reason for a HPC.

Undoubtedly the "house view" but I was wondering if the OP might actually be right, in terms of sheer numbers. Might make an interesting poll.

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HPC convert - Jeez if a credit crunch has that effect then of course house prices will fall. But still no one on this site will be able to afford a house as you'll all be out of work!

A recession i a recession but we aren't there yet and Gordon will stick a fork in his eye if it delayed one until after the next election.

Dont disagree at all.

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Interesting point about oversupply wishful thinking.

I personally wouldn't touch new build units in city locations - way too many in the pipeline at the moment with too few family houses going up. Perhaps a two sped market with falls in units and resilient house market?

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New poster, long time voyeur.

It strikes me that the majority of posters on this site point to affordability as a reason for a crash occuring in the not too distant future. Just because fewer people can afford to buy property doesn't mean a crash is inevitable. Another possible outcome is that sales volumes simply reduce. The key to a crash occuring is a significant number of people being unable to service their debt and being compelled to sell quickly, either through repossession or privately, at auction or by private treaty and without a reasonable period for marketing. Repos and fire sales at auction are not high enough (yet!) for a crash to occur.

Despite the increasing number of houses advertised for sale on websites such as Rightmove and the current reduced demand, I think house prices will remain resilient to catastrophic falls. I forsee a period of static prices or a small fall in prices in real terms and low sales volumes. Remember, just because the market can't afford the price that the seller wishes to realise doesn't mean that the seller has to sell at a reduced price - they may well be inclined to take the property off the market if they have no compulsion to sell.

The majority of the market is owner occupied so most sellers will just sit tight until (they hope) demand increases and sales volumes increase thus freeing up the market. The only sector who could trigger a minor crash are the BTL fraternity, but personally I think they will hold their nerve - I think most are in it for the long term to top up their pensions and are willing to take some short term pain for long term gain.

The above is assuming that we are approaching the top of this current cycle of interest rate rises! Clearly if they keep on climbing the number of repos and forced sales will rise in tandem and then you may get what you wish for!

Ahh....the 'permanent plateau' defence so beloved of those in deep, deep fear and denial.

"Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months."

- Irving Fisher, Ph.D. in economics, Oct. 17, 1929

"Anyone who bought stocks in mid-1929 and held on to them saw most of his adult life pass by before getting back to even." - Richard M. Salsman

(Sort of like the US stock market now which, in spite of the headlines, has never recovered above its real 1999 highs.)

I like it! But my guess would be more like this:

houses.jpg

Thats more like it.

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It strikes me that the majority of posters on this site point to affordability as a reason for a crash occuring in the not too distant future. Just because fewer people can afford to buy property doesn't mean a crash is inevitable. Another possible outcome is that sales volumes simply reduce. The key to a crash occuring is a significant number of people being unable to service their debt and being compelled to sell quickly, either through repossession or privately, at auction or by private treaty and without a reasonable period for marketing. Repos and fire sales at auction are not high enough (yet!) for a crash to occur.

It's actually going to end up being a number of factors but let's look at the scenario I think you are painting. Affordability reaches the limit, prices plateau, no crash occurs. I don't see this as the actual outcome myself. HPI has occurred for two reasons. Affordable credit is the first. The second is good old fashioned gold rush style greed. The plateau of prices, if held steady for six months is enough to signal the end of the gold rush. The fact that credit is now more expensive is a second nail in the coffin. The speculators who have generated the bubble will run away. Just like musical chairs, the last one to dispose of their property will be the worst affected.

For a market to grow or contract you only need the demand to go a couple of percent either side of the equilibrium. So often we assume that for strong growth or for problems the swing must be large but in reality we're talking 1-2% either side being very very significant. If the BTL gang stop fuelling the market with dumb speculation that alone could be sufficient to hurt prices.

As has been mentioned here before, housing bubbles tend to deflate slowly compared to stocks as the liquidity of the assets is very low. We're all debating if the crash has actually started but I suspect you need to wait a year or more after the actual start to be able to have enough data to extrapolate back to pinpoint the actual point the curve kicked downwards.

My two penneth.....

Bertie

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Needle - do you actually read posts or do you have attention deficiency disorder? Read it again, including the last sentence and my other subsequent posts.

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Interesting point about oversupply wishful thinking.

I personally wouldn't touch new build units in city locations - way too many in the pipeline at the moment with too few family houses going up. Perhaps a two sped market with falls in units and resilient house market?

New builds are always going to be at risk from oversupply. hence why I opted for a victorian semi when I bought last year! (OK, there was other reasons, like the fact that new builds are a pile of cr*p that will only be fit for demolition in 30 years time, plus the tiny rooms, low ceilings).

I think there is a possibility of another ripple from London over the next year. London prices now up a whopping 18% (and 30 odd percent in my borough, Haringey, according to Halifax) that must ripple out. The question is, how far? I reckon parts of East Anglia (with train links to London) are still looking a good buy.

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New builds are always going to be at risk from oversupply. hence why I opted for a victorian semi when I bought last year! (OK, there was other reasons, like the fact that new builds are a pile of cr*p that will only be fit for demolition in 30 years time, plus the tiny rooms, low ceilings).

I think there is a possibility of another ripple from London over the next year. London prices now up a whopping 18% (and 30 odd percent in my borough, Haringey, according to Halifax) that must ripple out. The question is, how far? I reckon parts of East Anglia (with train links to London) are still looking a good buy.

Interesting that you mention these 2 places. One is an environment given over to drugs and petty crime and madly overpriced properties where families cannot afford to buy. The other is just past central london.

What always amazes me is why London ghettos like Haringey have anyone at all wanting to buy homes there. I am even more astonished at anyone wanting to live in norfolk/suffolk/essex/ cambridgeshire - bloody awful places.

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Victorian or older definitely the best bet partly due to period features and build quality, partly due to typical location.

I'm in Manchester so can't claim to know the London / SE housing market - you may be right about the ripple effect - depends on the weight of money leaving the city boundaries.

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Interesting that you mention these 2 places. One is an environment given over to drugs and petty crime and madly overpriced properties where families cannot afford to buy. The other is just past central london.

What always amazes me is why London ghettos like Haringey have anyone at all wanting to buy homes there. I am even more astonished at anyone wanting to live in norfolk/suffolk/essex/ cambridgeshire - bloody awful places.

Prices in east anglia are no where near as high as they were in the 80s boom, relative to other areas. They were the last to boom back then, which makes me think that they will be the last to boom this time.

Haringey is not that bad. in the year or so I have been there it has improved dramatically (possibly because the higher prices are drawing in a 'better' crowd.) At least it is on the tubes, unlike most of east and south london. HPI plays a large part in regenerating otherwise overlooked areas, but that is a whole different thread.

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Prices in east anglia are no where near as high as they were in the 80s boom, relative to other areas. They were the last to boom back then, which makes me think that they will be the last to boom this time.

Haringey is not that bad. in the year or so I have been there it has improved dramatically (possibly because the higher prices are drawing in a 'better' crowd.) At least it is on the tubes, unlike most of east and south london. HPI plays a large part in regenerating otherwise overlooked areas, but that is a whole different thread.

Have not been up that way (Haringey) for 2 years. The thing that always put me off was the general air of menace whenever you walked around the place. If that is changing, then I say excellent.

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Have not been up that way (Haringey) for 2 years. The thing that always put me off was the general air of menace whenever you walked around the place. If that is changing, then I say excellent.

It isn't.

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Guest Charlie The Tramp
Haringey

OMG it is now the in place, has the country gone mad. Driving through on call-outs I would lock my doors and keep a club hammer by my feet. :blink:

Also known as the University for feral youth.

Haringey is not that bad. in the year or so I have been there it has improved dramatically (possibly because the higher prices are drawing in a 'better' crowd.)

Get out before it is too late, the best advice you will ever be given, nothing improves in an area like Haringey in one year.

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Guest Bart of Darkness
It's actually going to end up being a number of factors

If we had a poll, that would get my vote.

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