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Like most on here, I hope for this ridiculous asset bubble to correct itself, not least so I can buy my own property at a reasonable price.

I initially thought that the process would be as follows (and this was looking good until July 2007)

inflation > interest rate hike > HPC > recession > unemployment > perpetual HPC (a bit like 1990-1995)

What I didnt account for was the credit crunch which has killed demand and availability of credit an thus slowed the economy in a way that hikes in IRs are no longer deemed necessary, indeed cutting to preserve growth is needed.

All this I think will mean that we are in a house price standoff for a while because there are not enough distressed sellers really driving the market south. Prices will continue to drift south slowly until one of the main drivers (IRs or Unemployment) are at levels to really crash the market.

Please do not be mistaken - I do think these factors will come - with recession will come unemployment and at some point the rate setters will have to stop chasing the economy down and tackle inflation.

Perhaps 2008 will see housing market perform like a car with no oil before all the gaskets blow in 2009

Anyone else with an opinion on this?

It is in the Guardian linked from the front page

http://www.guardian.co.uk/business/2008/fe...et.creditcrunch

first paragraph

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Anecdotal i know but, friends of mine are selling, best offer they had was £10k below asking price of a £160k house, they were insulted and rejected the offer outright. The people who own the house my friends want to buy heard via the agent about this story and said they would knock off £10k from thier £200k house so that my friends effectively wouldn't lose out on the £10k offer from theirs.

Friends then went back to geezer with original offer (about a month later) he said offer still stood, but withdrew it a week later. It was interesting to see my friends change their mind so quickly, but it was about what they could afford to accept, anyway, the interesting thing is the domino effect it started, and that my friends will likely consider an offer now that they rejected out of hand initially.

I think they should have accepted the offer straight away, I'm worried they'll be chasing prices waaaayyyy doooowwwwn now, but can't help posting this;

way down

P.S. This is a great thread.

Edited by macfarlan
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All this I think will mean that we are in a house price standoff for a while because there are not enough distressed sellers really driving the market south. Prices will continue to drift south slowly until one of the main drivers (IRs or Unemployment) are at levels to really crash the market.

High IRs and Unemployment are not causing the crash in the US.

Why are they a prerequisite for a crash here?

The other thing you are overlooking is that distressed sales have a cumulative effect.

When there are no buyers and sales are distressed prices must chase downwards because a sale must be achieved.

Thus each distressed sale lowers the average price in a particular area.

This is what is meant when people say 'markets, and prices, are set at the margins' (ie the extremes).

Please do not be mistaken - I do think these factors will come - with recession will come unemployment and at some point the rate setters will have to stop chasing the economy down and tackle inflation.

With any luck they will not come and the housing market can be allowed to sink on its own.

But its a stupid idea that you will then be able to buy a house 'on the cheap'.

Houses may become more affordable but thats because they will be actually worth less - you wont be getting a bargain.

You will not be able to pick up a cheap house and make a profit (any more than picking up cheap shares in Enron, Worldcom or a DotCom company would make you rich) after the crash.

Like these shares, the profit or investment motive in owning a house will be gone and it wont be back for a long, long time.

If you think different why dont you go and invest in some Lastminute.com shares?

300px-Lastminute.com_stock_price.png

Thinking any other way about this is a one way ticket to sh1tsville.

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Demand for houses still outstrips supply. If things get more difficult, then some of the actual demand will become latent demand.

But there are levels of latent demand - realistic latent demand, like people who seriously aspire to something, and unrealistic latent demand - people who dream of having something they're unlikely to ever afford.

So maybe when you have a situation where suppy is greater than actual demand plus REALISTIC latent demand, prices might crash.

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It is in the Guardian linked from the front page

http://www.guardian.co.uk/business/2008/fe...et.creditcrunch

first paragraph

I think the trigger in the US was higher interest rates - not that they went that high (5.25% was it?) - more that they started from such a low base (1%) - this coupled with teaser / starter options for NINJAs meant the crash hit hard when rates rose and resets kicked it (still more of those to come too :o )

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Demand for houses still outstrips supply. If things get more difficult, then some of the actual demand will become latent demand.

But there are levels of latent demand - realistic latent demand, like people who seriously aspire to something, and unrealistic latent demand - people who dream of having something they're unlikely to ever afford.

So maybe when you have a situation where suppy is greater than actual demand plus REALISTIC latent demand, prices might crash.

Yes very important to separate DEMAND and DESIRE. One of the reasons mortgage approvals have fallen so sharply is the criteria now being applied and the premium now applied if you are deemed 'sub prime'. It would be interesting to note how many failed mortgage applications there are monthly.

Given the increase in properties on websites such as rightmove.co.uk and the like, it is likely that we are already in a situation where supply far outstrips 'achievable demand'. The reason the market hasn't responded is perhaps more to do with the psyche of the average seller than anything else - no one wants to lose money when they have been on a 12 year winning streak.

reason for edit - I am a tw@t who can't write properly

Edited by BearNecessities
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Couldn't agree more. Just about everyone I know is now in "belt-tightening mode". Already we have high petrol prices, higher food prices and higher re-mortgage costs. Even if interest rates come down people are still going to feel it in their pockets, as inflation kicks in as the value of the pound surely drops. People have quite rightly lost faith in Gordon Brown and all the talk of mortgage fraud, increased repossessions, and the credit crunch is going to have even more BTLers ditching their properties come April to benefit from the CGT changes.

IMHO the sheeple realise the party is over and we are past the point of a 2005 style re-ignition to the property market (thank God).

I was chatting with my brother this afternoon and was very surprised when he started to talk about tightening the belt a little, he never talks money and has always had high paid jobs for the last 10 years.

However what did surprise me more was how much money he was wasting, I am going round his house next week to sort a few things out for him.

I am not saying this applies to everyone but for many it will just be a matter of reassessing the finances.

A few examples here:-

He pays £40/month broadband I pay £15 for same product

He pays around £300 a year more for energy than me because he has never switched tariffs

Never shopped around for car or home insurance so will probably save him a packet here as well

and finally all his electrical equipment he buys from Currys,books holidays at the same travel agents. I could save him a fortune online......Nevermind

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Demand for houses still outstrips supply. If things get more difficult, then some of the actual demand will become latent demand.

But there are levels of latent demand - realistic latent demand, like people who seriously aspire to something, and unrealistic latent demand - people who dream of having something they're unlikely to ever afford.

So maybe when you have a situation where suppy is greater than actual demand plus REALISTIC latent demand, prices might crash.

Yes very important to separate DEMAND and DESIRE. One of the reasons mortgage approvals have fallen so sharply is the criteria now being applied and the premium now applied if you are deemed 'sub prime'. It would be interesting to note how many failed mortgage applications there are monthly.

Given the increase in properties on websites such as rightmove.co.uk and the like, it is likely that we are already in a situation where supply far outstrips 'achievable demand'. The reason the market hasn't responded is perhaps more to do with the psyche of the average seller than anything else - no one wants to lose money when they have been on a 12 year winning streak.

Wot they said...

There is huge demand for ferraris from 12 year old boys....yet.....so few sales!

Why?

Because (with houses) demand is a function of available credit.

As credit contracts, the 'demand' falls too.

Easy-peasy......

1.

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All this I think will mean that we are in a house price standoff for a while because there are not enough distressed sellers really driving the market south. Prices will continue to drift south slowly until one of the main drivers (IRs or Unemployment) are at levels to really crash the market.

im half agreeable to this skenario'

though, the btl crowd are shot to bits, i guess the first part of this holy crash will be them (god willing).

they were in it to make money, and there isnt any anymore. they are holding a hot liability, and the term 'in it for the long term will be best described by adding the word "right" before yyou say the rest of the statement.

so, btl now, normal crash later.

Edited by right_freds_dead
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im half agreeable to this skenario'

though, the btl crowd are shot to bits, i guess the first part of this holy crash will be them (god willing).

they were in it to make money, and there isnt any anymore. they are holding a hot liability, and the term 'in it for the long term will be best described by adding the word "right" before yyou say the rest of the statement.

so, btl now, normal crash later.

Good point on btl - all those people that bought off plan of city centre developments must be feeling it - also, I am led to believe that the CGT changes will lead to longer terms players at least being tempted to cash in on their equity and get out of the market.

Oh well, if you allow speculative elements into a market, you have to be accept the downside I suppose

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Higher unemployment ?

Just how many students, economicaly inactive people and those on incapacity benifit do we need.

The 1 million figure spouted out does not have legs and the true figure is very close to 10m people and yet they still insist on flooding the UK with more and more immigrants.

The people are not driving the car but will get hurt when it crashes

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A lot of people I know are in the process of looking for / buying a new home. They honestly do not even mention crash or credit crunch.

As ever I think the doom sayers have expelled a lot of noise but thats all it is, noise.

Again this demonstrates the sharp distinction between those that obsses on fear of loss of tickets (money) and those with the simple confidence to get on with life without fear of loss.

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A lot of people I know are in the process of looking for / buying a new home. They honestly do not even mention crash or credit crunch.

Are you counting prospective buyers coming through the door of your estate agency prior to September, or is this a more recent anecdotal?

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A lot of people I know are in the process of looking for / buying a new home. They honestly do not even mention crash or credit crunch.

I don't think it's statistically correct to use your rich BTL friends and your posh mates as a fair reflection of the population as a whole.

As ever I think the doom sayers have expelled a lot of noise but thats all it is, noise.

I feel a bit like Dorothy in Wizard of Oz. Guess I'm going to wake up any minute and realise that those sub-prime losses didn't really occur, the government deficit is actually tuppence, mortgage approvals haven't slumped, the economy isn't drastically slowing, inflation isn't rocketing and first time buyers can easily afford houses...

Again this demonstrates the sharp distinction between those that obsses on fear of loss of tickets (money) and those with the simple confidence to get on with life without fear of loss.

One to can along with the 'get on the ladder before you miss out' and 'house prices only ever go up' sayings. Thank you for your wisdom DB.

Edited by RajD
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I feel a bit like Dorothy in Wizard of Oz. Guess I'm going to wake up any minute and realise that those sub-prime losses didn't really occur, the government deficit is actually tuppence, mortgage approvals haven't slumped, the economy isn't drastically slowing, inflation isn't rocketing and first time buyers can easily afford houses...

A proportion of all populations at all times believe things are about to get worse.

Surely the only rational position to take is this;

Sub prime is re adjusting but wont go away

Government deficits are always targeted by those of a gloomy disposition, yet France had a far larger defict as a % since the 1970s and.............. and what? And life went on.

Mortgage approvals are taking a breather, is all. Happens from time to time.

The economy slowing, means what exactly? Lets have low growth for a while, no worries. Still the same amount of money in the economy.

Inflation - bears always say its rocketing, always. Again just normal sloshing about, nothing to get excited about.

FTB - my bin Man just bought his first house on his wage alone with a small deposit. A £150,000 IO mortgage costs £20.50 per day. A tiler wants to charge me £250 per day. A plasterer wants £150 per day.

I just think pessimism gets in the way of a rational debate.

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A proportion of all populations at all times believe things are about to get worse.

Surely the only rational position to take is this;

Sub prime is re adjusting but wont go away

Government deficits are always targeted by those of a gloomy disposition, yet France had a far larger defict as a % since the 1970s and.............. and what? And life went on.

Mortgage approvals are taking a breather, is all. Happens from time to time.

The economy slowing, means what exactly? Lets have low growth for a while, no worries. Still the same amount of money in the economy.

Inflation - bears always say its rocketing, always. Again just normal sloshing about, nothing to get excited about.

FTB - my bin Man just bought his first house on his wage alone with a small deposit. A £150,000 IO mortgage costs £20.50 per day. A tiler wants to charge me £250 per day. A plasterer wants £150 per day.

I just think pessimism gets in the way of a rational debate.

Sometimes the whole is greater than the sum of the parts. I actually agree with you DB - each of the signs on their own can be dismissed with a wave of the hand, but add them together and you have a very convincing argument for a severe recession which would inevitably lead to a HPC.

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FTB - my bin Man just bought his first house on his wage alone with a small deposit. A £150,000 IO mortgage costs £20.50 per day. A tiler wants to charge me £250 per day. A plasterer wants £150 per day.

I just think pessimism gets in the way of a rational debate.

ooh a sub 5% IR on an IO mortgage, *scratcheschin*. Hope you trousered a good commission for that one and fingers crossed he doesnt come back and fill your face in once he realises you just stitched him up proper.

Again this demonstrates the sharp distinction between those that obsses on fear of loss of tickets (money) and those with the simple confidence to get on with life without fear of loss

Emphasis added

Also known as reckless disregard, but hey still waters run deep, huh boss?

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Like most on here, I hope for this ridiculous asset bubble to correct itself, not least so I can buy my own property at a reasonable price.

I initially thought that the process would be as follows (and this was looking good until July 2007)

inflation > interest rate hike > HPC > recession > unemployment > perpetual HPC (a bit like 1990-1995)

What I didnt account for was the credit crunch which has killed demand and availability of credit an thus slowed the economy in a way that hikes in IRs are no longer deemed necessary, indeed cutting to preserve growth is needed.

All this I think will mean that we are in a house price standoff for a while because there are not enough distressed sellers really driving the market south. Prices will continue to drift south slowly until one of the main drivers (IRs or Unemployment) are at levels to really crash the market.

Please do not be mistaken - I do think these factors will come - with recession will come unemployment and at some point the rate setters will have to stop chasing the economy down and tackle inflation.

Perhaps 2008 will see housing market perform like a car with no oil before all the gaskets blow in 2009

Anyone else with an opinion on this?

A number of factors that were not present during the last CRASH

1) CREDIT CRUNCH

2) PERSONAL DEBT at its highest recorded. (Last Crash it was the mortgage, this crash its the mortagge and all credit cards, personal loans that almost equate to a mortgage in itself etc)

3) NEW FTBs are debt ridden with student loans and credit card debt, they already have a 30K debt and no savings and crap wages

4) Last Crash we had high interest rates, In the 80s the avergae interest rate was at 8-9% so they were always historically high then. The experts fail to tell people this . Remember Interest rates dropped from 15% to 6% the lowest in decades and property still fell. The housing confidence was stuffed and took years to turn around.

5) BTL the joker in the pack have created the dot.com style bust of property. We are seeing drops of 100K+ in weeks and this is now becoming the norm it just shows how over priced the bubble is, noone really knows the price now as it could be 70K less next year . Last Crash it took higher interest rates and 3/4 years to get a 20K drop.

Edited by joey
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A number of factors that were not present during the last CRASH

1) CREDIT CRUNCH

2) PERSONAL DEBT at its highest recorded. (Last Crash it was the mortgage, this crash its the mortagge and all credit cards, personal loans that almost equate to a mortgage in itself etc)

3) NEW FTBs are debt ridden with student loans and credit card debt

4) Last Crash we had high interest rates, In the 80s the avergae interest rate was at 8-9% so they were always historically high then. The experts fail to tell people this . Remember Interest rates dropped from 15% to 6% the lowest in decades and property still fell. The housing confidence was stuffed and took years to turn around.

5) BTL the joker in the pack have created the dot.com style bust of property. We are seeing drops of 100K+ in weeks and this is now becoming the norm it just shows how over priced the bubble is, noone really knows the price now as it could be 70K less next year . Last Crash it took higher interest rates and 3/4 years to get a 20K drop.

6. The internet. Price falls were anecdotal last time or you had to make a visit to the EA window (if it hadn't been stoved in by a brick - and I saw that a few times). Now the falls are there for all to see.

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6. The internet. Price falls were anecdotal last time or you had to make a visit to the EA window (if it hadn't been stoved in by a brick - and I saw that a few times). Now the falls are there for all to see.

Also I recall we didn't really know about the Crash until it was over as the Press was Tory dominated and each year the so called experts kept saying property will increase 10-15% next year and it kept doing exactly the opposite dropping 10-15% and the so called property experts (who had vested interests of course) never wavered and looked like idiots after a few years.

Yes we all have online coverage now plus we can check sold prices and have forums like this.

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Also I recall we didn't really know about the Crash until it was over as the Press was Tory dominated and each year the so called experts kept saying property will increase 10-15% next year and it kept doing exactly the opposite dropping 10-15% and the so called property experts (who had vested interests of course) never wavered and looked like idiots after a few years.

Yes we all have online coverage now plus we can check sold prices and have forums like this.

I'm not so sure about that.

In the HPC resources section there's a library of cuttings from The Times taken during the 1989-95 crash, sure there was plenty of hopeful EA and Building Society articles, claiming to have spotted the "first green shoots of recovery", but the majority of reporting was just increasingly gloomy forecasts. In fact towards the end of the last crash there were supposedly scholarly articles speculating that house prices might not recover for another generation!

As to t'internet being a new force that accelerates the correction process, I'm a bit sceptical. The really big news on this forum generally revolves around all the stuff that was in the press during the last crash, Nationwide and Halifax house price indices, interest rate changes, unemployment figures, mortgage approvals, etc. These are the real meat and two veg of any property crash, the additional statistics that the internet will bring (like Find A Property data) are certainly tasty bear snacks, but I'm not convinced they're the real meal. Plus we shouldn't forget that, fun as it is, we're largely talking to ourselves on this forum; the site traffic here is really pretty trivial when compared to The Sun's circulation or Ten O'Clock News audience figures.

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The other thing to remember about the last crash was that there were big differences in timing for various regions. That is one of the reasons why we only ever saw nothing worse than a 10% YOY fall - One area crashed, others held it together - certainly London and the South east saw about 30% wiped out in 12-18 months, but some areas in the north were enjoying the last knockings of the boom.

What the internet may help contribute with is ensuring that the downturn is faster and more evenly distributed purely from an information availability point of view.

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  • 444 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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