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Ft: King Predicts 4 Years Of Falling House Prices

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http://www.ftadviser.com/dt_general.aspx?m...amp;amid=127485

In yet another blow for the housing market, Mervyn King, the governor of the Bank of England, has issued a sober assessment of UK house prices.

The governor warned that UK house prices may fall in real terms for as long as the next four years, as prices largely stayed the same or fell.

He was speaking following the release of the Bank's quarterly inflation report, in which he dampened market hopes of a series of interest rate cuts. He said: "Looking several years ahead, there is no reason to expect house prices to be markedly above where they are now, and it is conceivable there might be falls in house prices.

"But broadly speaking, we are looking for quite a long period now of stability in house prices."

Mr King predicted that 2008 would be the Bank's most challenging year since it gained independence in 1997.

Challenges would come as a result of a combination of a slowing economy and inflationary pressures, and warned that UK residents could expect a reduction in their standard of living, as higher energy and food prices began to bite.

The Bank would not follow the US's lead in creating a facility to buy mortgages from lenders in order to free up capital for new lending, Mr King said, noting that US authorities had regretted taking this approach.

The quarterly inflation report predicts that inflation may end up above the 2 per cent target in two years if the Bank goes ahead with cuts to bring rates down to 4.5 per cent, as some in the market hope it does, though hopes of at least one more cut were sustained. The rate currently stands at 5.25 per cent.

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The governor warned that UK house prices may fall in real terms for as long as the next four years, as prices largely stayed the same or fell.

This is from a man who needs them to keep going up! And remember kids, an investment that isn't making money is useless as an investment ;)

UK residents could expect a reduction in their standard of living, as higher energy and food prices began to bite.

Yeah, like the standard of living hasn't been plunging for years, due to people being unable to afford shelter. Tit.

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Shame the head of the Bankrupt of England can't be honest about inflation and its primary cause.

The public will pay though in their pocket and will be a lot worse off because of it and already are.

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What I don't understand is what he means by "house price stability".

If prices might fall, that doesn't sound too stable to me.

My personal definition of price stability in any asset class is a gradual increase at the rate of inflation.

Can I be Guv'nor of the BoE now, please?

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Challenges would come as a result of a combination of a slowing economy and inflationary pressures, and warned that UK residents could expect a reduction in their standard of living, as higher energy and food prices began to bite.

Isn't this an admission that CPI is a load of a crap?

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Much as I do respect Mervyn King, this is the same man who stood up in 2004 and said that the Bank expected house price inflation to "moderate" over the next year.

I'd be happy to trust his judgements when he's talking about the bond markets. But I would take anything he says about the housing market with a pinch of Her Majesty's finest sodium chloride.

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This is from a man who needs them to keep going up! And remember kids, an investment that isn't making money is useless as an investment ;)

Yeah, like the standard of living hasn't been plunging for years, due to people being unable to afford shelter. Tit.

He is part of the establishment. This statement is to encourage any of us to get our property on the market to revive this dead horse ! It is his last chance to try and get the market going again and help the banks out.

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Much as I do respect Mervyn King, this is the same man who stood up in 2004 and said that the Bank expected house price inflation to "moderate" over the next year.

But, it did in 2004/5, didn't it? It then went crackerjack again.

Have we established why it went crackerjack in 2005/6? Presumably a final "wall of money" from Asia and oil-rich nations?

Peter.

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But, it did in 2004/5, didn't it? It then went crackerjack again.

Have we established why it went crackerjack in 2005/6? Presumably a final "wall of money" from Asia and oil-rich nations?

Peter.

The BOE dropped rates in the hope the lemmings would carry on borrowing to maintain their mirage economic growth. They did big time. It also became one of the easiest conduits for fraud in history as lenders were falling over themselves to lend out as much cheap money as they possibly could, regardless of risk.

Of course it also led directly to the first major UK bank collapse in decades and handing the taxpayer with the bill.

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He expects real prices to fall and perhaps nominal a little. That doesn't sound like the HPC we are waiting for. Why is this good news ?

That's all I am expecting,mainly flat-lining with the odd bad year with nominal falls.Pretty much what happened 1989-1996 and was enough to secure a 30%-35% inflation adjusted crash.2014 seems a hell of a long way off.

Edited by crashmonitor

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King will not stand up and say ,the housing market is set to tank' he would be lynched, this is as clear a warning as he can give, if Mervyn King is warning about house prices and telling us IR are NOT going to be massively reduced in a futile attempt to prop up this sham, this is possibly as good a news as we could expect at this stage of the proceedings.

No one really knows how far they will fall but if the market gains downward momentum I feel big double digit reductions will be on the cards.

He expects real prices to fall and perhaps nominal a little. That doesn't sound like the HPC we are waiting for. Why is this good news ?

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The BOE dropped rates in the hope the lemmings would carry on borrowing to maintain their mirage economic growth. They did big time. It also became one of the easiest conduits for fraud in history as lenders were falling over themselves to lend out as much cheap money as they possibly could, regardless of risk.

Of course it also led directly to the first major UK bank collapse in decades and handing the taxpayer with the bill.

Dropping rates as the cause is "accepted wisdom", but I think that when it was looked into more closely, e.g. Spline's graphs, the beginning of the take off was before the rate drop. Plus, we have the arguments of whether the BoE rate leads or follows bank rates. Certainly at that time, it looked like the BoE followed, rather than led. All of which suggests that it was lenders falling over themselves to lend cheap foreign money which was the real cause of the renewed boom, and which would also explain why Merv got his prediction wrong, because it was an external factor,

Peter.

P.S. Has spline been around to update his graphs wth yesterday's approvals' figure?

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Merv will have as much idea who will win the 3.30 at Sandown this aftenoon as he has about the future of house prices. Just because he wears specs doen not mean that he is blessed with intelligence or foresight.

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Merv is doing what he has always done. He is trying to calm inflation with words rather than interest rates so that he has more freedom to cut. Doesn't work in my opinion. People only understand one thing and that is cold hard cash.

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King will not stand up and say ,the housing market is set to tank' he would be lynched, this is as clear a warning as he can give, if Mervyn King is warning about house prices and telling us IR are NOT going to be massively reduced in a futile attempt to prop up this sham, this is possibly as good a news as we could expect at this stage of the proceedings.

No one really knows how far they will fall but if the market gains downward momentum I feel big double digit reductions will be on the cards.

Very True - Meryn King has a duty to promote stablity, he can hardly come out and say we're all doomed .. the market will tank by 30% over the next three years. Can you imagine what would happen!

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Merv is doing what he has always done. He is trying to calm inflation with words rather than interest rates so that he has more freedom to cut. Doesn't work in my opinion. People only understand one thing and that is cold hard cash.

How can you calm inflation with words ? Oh, pretty little inflation, go on be a good boy, go back to sleep.

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So he says that AFTER house prices start falling, great these armchair theorists aren't they?

Problem is, they can't say it until it is inevitable.

Look at the stick that Roger Bootle got for being right but early, and Merryn gets those sorts of comments as well.

You do your career no good at all by being right at the wrong time. Best to go with the flow until you can see it has already happened.

And as has been said, it would be reckless of him to announce the HPC as he would then be blamed for starting a run on houses...

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Problem is, they can't say it until it is inevitable.

Look at the stick that Roger Bootle got for being right but early, and Merryn gets those sorts of comments as well.

You do your career no good at all by being right at the wrong time. Best to go with the flow until you can see it has already happened.

And as has been said, it would be reckless of him to announce the HPC as he would then be blamed for starting a run on houses...

I have more respect for people who stick their necks out. That's why I like cgano and RB.

Edited by Minos

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Shame the head of the Bankrupt of England can't be honest about inflation and its primary cause.

The public will pay though in their pocket and will be a lot worse off because of it and already are.

Government will hide it anyway they can, until the public find out and moan about it.

Its the government duty to hide inflation figures from you.

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  • 294 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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