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Michael

How Much Will It Crash?...and Over How Long?

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I'm going for a 40% drop over 5 years......or 50% in inflation-adjusted terms....

This would mean average drops of 0.8% a month over the 5 years......I predict bigger drops at the beginning and smaller later on

Edited by Michael

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I'm going for a 40% drop over 5 years......or 50% in inflation-adjusted terms....

This would mean average drops of 0.8% a month over the 5 years......I predict bigger drops at the beginning and smaller later on

Well, I think that the survivors will be able to live in the few remaining palaces once the zombies have been cleared out. There will be plenty of space in buck palace for the 30 or so of us who survive I would have thought and possibly even some room for our jars of pickles in the corgi kennel.

I'll give you two out of date packets of monster munch for hertfordshire..how does that sound?

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Well, I think that the survivors will be able to live in the few remaining palaces once the zombies have been cleared out. There will be plenty of space in buck palace for the 30 or so of us who survive I would have thought and possibly even some room for our jars of pickles in the corgi kennel.

I'll give you two out of date packets of monster munch for hertfordshire..how does that sound?

Yes, that. And then some.

p.s. i'll offer you two packets of MM & a polo.

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We've had a thread like this before back in October 2006 when I was just a newbie. Now lets see what I predicted:

1. Start of the crash = Q1 2008

2. It will last for 8 to 10 years

3. When prices finally bottom, they will be 40% less in nominal terms

Pretty accurate on on 1. so far ;)

http://www.housepricecrash.co.uk/forum/ind...ic=36530&st

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Accurate to within about 6 months as it was the US which triggered it all of about June/July 2007?

How much and how long depends on the responses from govt?

The ability to prevent major damage has long since passed, what I think your looking at now is major debt writeoffs for govt, companies and individuals.

If the wrong decisions are taken it could be 20-30 years to get out of this.

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A long time. Property ownership tax, the replacement for the discredited council tax, levied at 10% of August 2007 estimated value will make ownership highly unattractive.

Most people will leave when Laurajon takes over from Mr Cameroon as Tory leader. Equatorial New Guinea will be the destination of choice.

p-o-p

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50% nominal over 4 years.

Our market is showing 2% falls with no distressed sales in the mix and this is the start of the slide.Sentiment has turned on the housing market and is turning on the economy.We will see double digit house price falls by October.

Banks are going back to 3x earnings and 10% deposits and are demanding borrowers have to prove their income.

Seems like a high figure to some but I am erring on the side of optimism for the home owner ;)

edited typo

Edited by equitystasher

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I'm going for a 40% drop over 5 years......or 50% in inflation-adjusted terms....

This would mean average drops of 0.8% a month over the 5 years......I predict bigger drops at the beginning and smaller later on

It will crash - lots.

Time period - it will bottom out in 2.5 years exactly.

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I'm afraid I'm too much of a newbie to start a thread, so I'm just going to hijack this one with a bit of fun for all HPCers who like playing on rightmove. I call it "The 8% Rental Return Game".

Basically if I had a wad of cash to invest just now looking for a bit of income and not caring about capital appreciation, BTL looks reasonably attractive if you can get about an 8% or better annual return in rental on your cash purchase. The game is to look on rightmove for properties which are up for both sale and rent (or similar properties in the same street), you take the monthly rent and multiply by 150 to get a sensible cash purchase price for the property, then compare that to the asking price. I know it's all a bit crude, but it can be an awful lot of fun.

Here's an example near me in Glasgow:

Reasonable rent for a 2 bed flat

That's £575/m for a 2 bed flat, gives a value of £86,250 as a sensible cash purchase price for BTL

Ridiculous asking price for a 2 bed flat

They're asking £215,000 to buy one of these flats, so for that to come down to the sensible price would be a 60% drop crash.

If any of the HPC veterans think this would be a fun new thread, feel free to add it ;)

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Sensible Banking lending practice, historically, was pegged at 3.5 x income

If we return (I think we will) to that. it’s gonna hurt badly.

Most areas are currently over 9 x income. Average house, average wage.

100% agreed, guaranteed.

Except some areas will hurt more. The London Commuter Belt semis up for sale in my street are currently asking 5 1/2 times my salary, and I reckon I earn about twice what the average on my street does, so say 11x (which still assumes the average wage on my street is way above national average - if were just talking averages we're talking about 15x ). People on my street are typically taxi driver/nurse/driving instructor/teacher, so they earn average.

It's gonna hurt.......

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I'm going for a 40% drop over 5 years......or 50% in inflation-adjusted terms....

This would mean average drops of 0.8% a month over the 5 years......I predict bigger drops at the beginning and smaller later on

I reckon house prices need to fall around 20% from today's level on the Halifax / Nationwide index to reach long-term fair value. If that happens overnight, then obviously the required nominal fall would be around 20%. If it happens over a number of years, then the required nominal fall would be less - maybe around 10% over 3-4 years.

However, I reckon we will go below fair value in the short term. The roughly 9% fall from peak we have seen so far is a partial response to the credit crunch and nothing else. Credit availability is likely to get worse before it gets better. And house prices always adjust slowly, so the full effect of the credit crunch could push prices substantially lower than they are already. All this has happened with unemployment near to record lows. If unemployment takes off, then we could see really big falls in the short term at least.

Bottom line: I think house prices could fall by a further 30%-40% in nominal terms over the next 2-3 years with the bulk of it coming through in the next 12 months as the credit crunch combines with a period of recession. Once we come out of recession I suspect there will be a modest bounce back, but nothing to write home about. Most of the adjustment then would come about through flat nominal house prices and a rise in the price of other goods and services.

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To understand how far we're going to fall, you need to understand where we've been and the conditions which have led us to where we are now.

All the dodgy off balance lending should be history, for at least the next 20 years. Credit therefore should go back to the sensible levels it was first

mooted around, though if IR's do stay low, it could mean we get back to say 3.5x earnings as a floor, rather 3x or even less.

All depends what happens with real inflation rates, and how the govt and public deal with the albatross around their necks of all this debt.

If mass defaults are encouraged, the banks will simply not want to know unless you have a 25% deposit and relatively secure job.

There's also a small chance the banks will simply walk away from all mortgage lending for some considerable period of time, if, as I suspect, we haven't seen

the last of the sub prime losses.

The choice will be simple....look to the future and diversify the economy, and to hell with house prices, or trash the currency even more and let inflation go...

Anyway, regardless....it's all gone wrong now....so....FWIW, a very quick 25-30% nominal drop between now and 2010, with all the emotional fallout and economic repercussions that'll bring with the hangover for another 5yrs after that. So, from Q3 07 which is when lending dried up, I'd say 8yrs from that point.

Nominal amount, 40-45%, so inflation adjusted, around 60-65%.

We really do need to fall that far to get back to see houses as places to live, rather than cash machines.

GT.

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When I bought my first flat, about 30 years ago, the typical loan was 2.5 times main income and once times secondary income - not 3.5 of joint. You also needed a minimum 10% deposit and proof that you had been saving.

Interest rates were typically 12%. When I and all my friends moved into our first homes none of us could afford any furniture (Habitat floor cushions) and begged and borrowed old furniture from relatives.

You moved up to something larger when you had paid off some of what you owed and had a better job.

I don't recall anyone ever having problems paying their mortgages or being repossessed.

Property prices should be at that level again - so a three bed semi should be about 85 to 90k ish.

I guess prices need to drop around 60 to 70% and then houses would become homes and not investments.

I hope the market never 'recovers' to the detriment of normal families.

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When I bought my first flat, about 30 years ago, the typical loan was 2.5 times main income and once times secondary income - not 3.5 of joint. You also needed a minimum 10% deposit and proof that you had been saving.

Interest rates were typically 12%. When I and all my friends moved into our first homes none of us could afford any furniture (Habitat floor cushions) and begged and borrowed old furniture from relatives.

You moved up to something larger when you had paid off some of what you owed and had a better job.

I don't recall anyone ever having problems paying their mortgages or being repossessed.

Property prices should be at that level again - so a three bed semi should be about 85 to 90k ish.

I guess prices need to drop around 60 to 70% and then houses would become homes and not investments.

I hope the market never 'recovers' to the detriment of normal families.

The problem with that is in your days, young people could almost guarantee they would have a stepped payscale as they progressed through their career. Maybe starting of making tea, then cleaning the tools and so on until they had progressed to a level whereby they could afford to buy a house.

Today, you start day one as either a cleaner, or a superstar, and New Labour do not want you messing up their statistics by changing your mind at a later date and making something of yourself.

Strange as it may seem, the people who champion social mobility are the very same people that styfle and supress it as they are clearly frightened of the people.

No other party has setup so much surveillance, so much investigation into what is nothing than the labour party.

Edited by laurejon

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I'm going for a 40% drop over 5 years......or 50% in inflation-adjusted terms....

This would mean average drops of 0.8% a month over the 5 years......I predict bigger drops at the beginning and smaller later on

50-60% down from the peak over the course of the next 24 months. I.e., the 400k house becomes the 160-200k house.

That is assuming we do not have a structural problem* in the world financial system. If we do, then all bets are off. We could see a meltdown.

______________

Some brilliant minds have come up with the idea that what we are seeing is not a cyclical correction but an unwinding of the last 200 or so year's of doing business based on deficit lending by banks.

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50% nominal over 4 years.

Our market is showing 2% falls with no distressed sales in the mix and this is the start of the slide.Sentiment has turned on the housing market and is turning on the economy.We will see double digit house price falls by October.

Banks are going back to 3x earnings and 10% deposits and are demanding borrowers have to prove their income.

Seems like a high figure to some but I am erring on the side of optimism for the home owner ;)

I agree with this, except I think it will be quicker, more like 2-2.5 years, then years of stagnation which will effectively erode values further. I think we will see one or two months with 3-5% drops in among all the 1-2% months. Stressed sellers won't really appear until autumn, and then I believe we will see the worst quarter of the crash when YOY will be 10-15% at least.

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I bought my first flat in London when I was a 23 year old graduate in about 1979. My salary was around £4000. I'd left Uni with debts of about £300. The flat cost about £13000.

My kids will start graduating in a couple of years. I'll be interested in what their salaries, debt and house prices look like!

(edit to remove quote from a previous post that was not the one I thought it was!)

Edited by pepsi

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I'm going for a 40% drop over 5 years......or 50% in inflation-adjusted terms....

This would mean average drops of 0.8% a month over the 5 years......I predict bigger drops at the beginning and smaller later on

it all depends on whether the 'tipping point' is reached or not. The tipping point being mass reposessions following increased unemployment/fixed rate going on to svr's and not being able to affiord new monthly payments. It's looking good at the moment with redundancies up and wages being suppressed by the economic squeeze. If the tipping point is reached, all bets are off and average house prices could halve in a year or so.

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90% down over 5-10 years. The banks will be zombified, few will be eligible to get a mortgage, or want one. Property will be extremely undervalued (a state that it didn't reach in the 90s), that combined with depression and deflation will bring the 90%.

Edited by domo

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When I bought my first flat, about 30 years ago, the typical loan was 2.5 times main income and once times secondary income - not 3.5 of joint. You also needed a minimum 10% deposit and proof that you had been saving.

Interest rates were typically 12%. When I and all my friends moved into our first homes none of us could afford any furniture (Habitat floor cushions) and begged and borrowed old furniture from relatives.

You moved up to something larger when you had paid off some of what you owed and had a better job.

I don't recall anyone ever having problems paying their mortgages or being repossessed.

Property prices should be at that level again - so a three bed semi should be about 85 to 90k ish.

I guess prices need to drop around 60 to 70% and then houses would become homes and not investments.

I hope the market never 'recovers' to the detriment of normal families.

Good post. Let's get back to sanity. The last 20 years have seen a childish, greedy UK populace sleepwalking into a debt-laden nightmare.

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  • 399 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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