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House Prices 'will Keep Falling' - Bbc

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http://news.bbc.co.uk/1/hi/business/7515088.stm

House prices in the UK and the US are likely to fall for another two years, the chairman of one of the world's most powerful banks has warned.

Sir Win Bischoff of Citigroup told BBC Business Editor Robert Peston he expects it will take two years for the markets to "stabilise".

Sir Win also expected the credit crunch - fraught conditions in financial markets - to continue through 2009.

But Wolverine could be right, this could be the bottom. He may know something that Sir Win Bischoff doesn't.

2 years of drops like we have seen in the last 6 months takes us to a very good place! :lol:

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We've had an 18% drop from peak already.

Add on another two years of 30% drops and that would mean a 60% drop from peak.

I think at the peak, the average house price in NI was about £220K. A 60% drop would bring the average price to about £90K - just over 4 times the average full-time wage.

However, I think it will take longer than 2 years for house prices in NI reach the bottom.

Edited by JoeDavola

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We've had an 18% drop from peak already.

Add on another two years of 30% drops and that would mean a 60% drop from peak.

I think at the peak, the average house price in NI was about £220K. A 60% drop would bring the average price to about £90K - just over 4 times the average full-time wage.

However, I think it will take longer than 2 years for house prices in NI reach the bottom.

Summer 2007 was the peak - with the average house costing £225,447, based on the Nationwide reports. So we are already 1 year into the bust phase, of the 18 year boom/bust economic cycle. Looking at the history of other housing bubbles; the bust phase usually takes 3-5 years for prices to reach and undershoot the fundamentals. So prices will start to stagnate in another 2-4 years. Looking at the history of house price fundamentals; based on current average incomes - house prices will fall to between 3-4 times average income = between £60k - £80k. Though the final figures will depend on wage inflation (if there is any).

Do I honestly believe what I have just written? Hmmm... I would not bet against history repeating itself. Would you?

Edited by Belfast Boy

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Summer 2007 was the peak - with the average house costing £225,447, based on the Nationwide reports. So we are already 1 year into the bust phase, of the 18 year boom/bust economic cycle. Looking at the history of other housing bubbles; the bust phase usually takes 3-5 years for prices to reach and undershoot the fundamentals. So prices will start to stagnate in another 2-4 years. Looking at the history of house price fundamentals; based on current average incomes - house prices will fall to between 3-4 times average income = between £60k - £80k. Though the final figures will depend on wage inflation (if there is any).

Do I honestly believe what I have just written? Hmmm... I would not bet against history repeating itself. Would you?

Im not sure if they would get this low, there is far more woman in full time work than in previous decades and recieving better pay. So there is often two good wages coming into a house rather than the previous one main bread winner! so the average price will in my opinion be closer to 120k

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Im not sure if they would get this low, there is far more woman in full time work than in previous decades and recieving better pay. So there is often two good wages coming into a house rather than the previous one main bread winner! so the average price will in my opinion be closer to 120k

I'm talking about the historical averages. You are refering to above average dual income homes.

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Summer 2007 was the peak - with the average house costing £225,447, based on the Nationwide reports. So we are already 1 year into the bust phase, of the 18 year boom/bust economic cycle. Looking at the history of other housing bubbles; the bust phase usually takes 3-5 years for prices to reach and undershoot the fundamentals. So prices will start to stagnate in another 2-4 years. Looking at the history of house price fundamentals; based on current average incomes - house prices will fall to between 3-4 times average income = between £60K - £80k. Though the final figures will depend on wage inflation (if there is any).

Do I honestly believe what I have just written? Hmmm... I would not bet against history repeating itself. Would you?

So the next boom will be coming soon. If the bubble/bust cycle is so reliable.

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I'm talking about the historical averages. You are refering to above average dual income homes.

Im not questioning the historial average.

But I believe the average is now to have dual income households, before it was a single income for a family, now its quite common to have dual income. So this will equal a higher average!

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Im not questioning the historial average.

But I believe the average is now to have dual income households, before it was a single income for a family, now its quite common to have dual income. So this will equal a higher average!

Unfortunately it may become quite common to have no income if things keep going the way they're going.

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Im not questioning the historial average.

But I believe the average is now to have dual income households, before it was a single income for a family, now its quite common to have dual income. So this will equal a higher average!

but i thought one of the reasons why we needed so many new build flats etc was the ever increasing number of single person households

or will they all have to rent?

http://www.euromonitor.com/One_person_hous...goods_companies

rock on!

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Im not sure if they would get this low, there is far more woman in full time work than in previous decades and recieving better pay. So there is often two good wages coming into a house rather than the previous one main bread winner! so the average price will in my opinion be closer to 120k

Thats assuming the banks will lend 3 x salary to two borrowers, is anyone still offering those deals? it's equivalent to 6x salary if either one stop working for any reason.

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Thats assuming the banks will lend 3 x salary to two borrowers, is anyone still offering those deals? it's equivalent to 6x salary if either one stop working for any reason.

The conventional pre-2000s boom lending criteria were usually 3 / 3.5 x single income .... or 3 / 3.5 x partner with highest income + 1 x partner with lower income i.e. to lend 3 x joint income would have been considered extremely aggressive.

I remember reading in one of the NI newspapers (must have been back in late 2005 or so) that First Trust gave a single customer a mortgage for 10 x salary which, after mortgage and related expenses of rates + insurance were accounted for, left him with less than £100 of disposal income each month !!!! I'm assuming that there was a story behind it i.e. a wealthy parent going guarantor and / or he may have been expecting his salary to increase significantly over the years ..... but it still staggered me !!!

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So the next boom will be coming soon. If the bubble/bust cycle is so reliable.
Define soon? 2-4 years of falling prices, followed by 3-5 years of stagnating prices. So under normal circumstances, the next boom may start in 5-9 years. Though, I have a feeling, the government will make things worse. They already made the bubble bigger than it should be. So they may prolong the crash with measures that they think will stimulate the market. Ultimately, these measures will only slow down the correction, not prevent it. Just like Japan.

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Im not sure if they would get this low, there is far more woman in full time work than in previous decades and recieving better pay. So there is often two good wages coming into a house rather than the previous one main bread winner! so the average price will in my opinion be closer to 120k

This is a fair arguement but its validity is far from certain. I cannot comment beyond anecdote but the vast majority of those I know who wish to purchase a property, are single. So in my experience, the base of the market must drop so that lower end properties can be easily afforded by a single multiple. Fair enough, the next rung on the ladder can incorporate that 'second salary' but that is pointless if the lowest rung is out of sync.

There are many possible takes on this. In any case, if the average property did make it to £120k, I would be a happy man.

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This is a fair arguement but its validity is far from certain. I cannot comment beyond anecdote but the vast majority of those I know who wish to purchase a property, are single. So in my experience, the base of the market must drop so that lower end properties can be easily afforded by a single multiple. Fair enough, the next rung on the ladder can incorporate that 'second salary' but that is pointless if the lowest rung is out of sync.

There are many possible takes on this. In any case, if the average property did make it to £120k, I would be a happy man.

Dont forget their will be property below the average price, which will suite a single person.

Edited by trebor21

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But I believe the average is now to have dual income households, before it was a single income for a family, now its quite common to have dual income. So this will equal a higher average!

Dual income is common now compared to the 1980's. Aside from the recent woes disposable income is still better. As predicted wheat has fallen, oil has followed. So cost push inflation should hopefully contain [crystal ball stuff]

Gold will rocket unfortunately due to American problems continuing. Based on the Fed and banks fractional lending positions, gold is going to upswing, oh god someone shoot Paulson. Vedanta – is this the primary reason you advise avoiding financials? Gulp

http://www.federalreserve.gov/releases/h3/Current/

Unfortunately it may become quite common to have no income if things keep going the way they're going.

Now that's a new level of doom mongering. Single incomes - single property. Apartments, terraces etc.

That’s assuming thee banks will lend 3 x salary to two borrowers, is anyone still offering those deals? it's equivalent to 6x salary if either one stop working for any reason.

Look, the market is toast presently and there is no point trying to get a mortgage. But for the right property with the right income, 4 x's main and 2x's secondary is still available. The LTV's are a bit nuts based on 75%+

Though, I have a feeling, the government will make things worse. They already made the bubble bigger than it should be.

In what way is the government to blame? Owing a house in any economy is encouraged, it creates wealth. Labour got rid of MIRAS. So what have they done worse than any other country? People are to blame pure and simple, they make rational decision supposedly.

So they may prolong the crash with measures that they think will stimulate the market. Ultimately, these measures will only slow down the correction, not prevent it. Just like Japan.

This is ambiguous. Can you explain?

P.S. It flattering for Vedanta that you use his quote in your signature. A bit weird though considering economic circumstances are always changing, constantly, nothing new in that.

Edit - italics

Edited by md23040

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Dont forget their will be property below the average price, which will suite a single person.

That was the reason I made differentiation between 'average' and 'base'. The prices of these properties still have to get to a level at which people are willing to jump in. Given the vast number of these lower end properties, there is going to be very little leverage for the sellers; much less so than for an 'average' property.

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Vedanta – is this the primary reason you advise avoiding financials? Gulp

What reason because gold is going to go up?

No - nothing to do with gold. You are correct about a contrarian strategy into financials being a suicide process to undertake presently. Irrespective of the Vix bounces where there maybe money to make. Overall financial positions look extremely vulnerable considering my link to the Feds latest data, where intervention alone in June was to the tune of $111bn so banks could balance the books.

Would love to know more about your hedging. Commercial property has always been my main foray but only on yields of 7%+ plus & the ability to add value through extension and renovation. I'm away on holidays for 3 weeks, might pm you for advice if that's okay??

Edited by md23040

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No - nothing to do with gold. You are correct about a contrarian strategy into financials being a suicide process to undertake presently. Irrespective of the Vix bounces where there maybe money to make. Overall financial positions look extremely vulnerable considering my link to the Feds latest data, where intervention alone in June was to the tune of $111bn so banks could balance the books.

Would love to know more about your hedging. Commercial property has always been my main foray but only on yields of 7%+ plus & the ability to add value through extension and renovation. I'm away on holidays for 3 weeks, might pm you for advice if that's okay??

Sure no problem. Lucky you to be away for a while. I m going to write a piece why I think this banking crisis will be L-shaped and not u or v shaped.

Have a good holiday :D

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md23040, I thought we were leaving each other alone? I have not commented on one of your posts in ages. Even then it was only to defend an opinion, in one of my posts that you commented on AFAIR.

P.S. It flattering for Vedanta that you use his quote in your signature.

Ok, I'll put one of your quotes in my signature to keep you happy.

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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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