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Yorkshire Lad

House Price Rises Unsustainable - 2001

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Flicking through the BBC website on wayback machine came across:

http://web.archive.org/web/20010925185530/...000/1465678.stm

When I look at the graph showing HPI on the front page of HPC.co.uk, from the year 2001 HPI had a long way to go before it fell off a cliff.

homepage.png

Took a long time coming for the headline to become true....

Edited by Yorkshire Lad

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It's interesting isn't it, we talk about percentage drops a lot but perhaps the big question is what year are we going back to?

Personally, I reckon prices will wind back to 2003.

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Interesting find.

I remember 2001 well. I'd recently split up with my then partner and had left the family home which we had bought in 1994 for £62k.

I had to go to court to force her to agree to sell. I heaved a huge sigh of relief when it was all over and we'd got £180k for the house in 2002, just before the inevitable crash.

The house sold again last year for £350k!

Ah well! :rolleyes:

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Looking at that graph I've just made a very amateurish observation. If you look at the last 3 peaks you will see that they roughly equal the lows following the next peak in each case. What I mean is if you look at the 70's peak the bottom following the 80's peak was the same level, the bottom folowing the 90's peak was the same level as the 80's peak etc. On a very rough extrapolation it follows that the bottom following this last peak will be roughly the same as the top of the last peak......could that mean we're heading for a bottom roughly equal to 1989/90 prices ( adjusted for inflation ) ?

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W12 #2: Dot.com bust + 9/11 > fears of recession > interest rate cuts > house price inflation

Managerialist monetary policy.

The reason interest rates were reduced during the early years of this century -- and the root cause of the debt bubble -- is the fashion for managerialist monetary policy where interest rates are set in order to meet an output target for 'inflation' as measured by a selective index of consumer prices (which in reality are a lagging symptom of real monetary inflation). This is like driving an economy by looking in the rear view mirror -- by the time one observes the inflationary curve, it's too late to stay on the road.

There were seven interest rate reductions in 2001 -- four before 9/11 and three after. Reading the MPC's minutes after 9/11 suggests that one and possibly two quarter point cuts may have been brought forward from early 2002. There were no interest rate reductions in 2002. The need to keep RPIX within its target range provides a full and complete explanation of why interest rates were reduced during this period. Had the MPC not done so then RPIX would almost certainly have dropped below its target range (it almost did so on two occasions in the following years). There is no need to look for any other explanation.

Edited by Jeff Ross

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This pushes the price of the average home up to just under �90,000, almost 11% higher than a year ago.

Wow, so the average price in 2000 was only around £80,000. By 2007 it was nearly £190,000, while wages have probably only risen by around 30% i.e a job paying £20,000 in 2000 would pay around £26,000 in 2007 - although some wages have risen even slower. By this rule, we could be looking at average house prices around the £100,000 mark by 2011/12.

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Wow, so the average price in 2000 was only around £80,000. By 2007 it was nearly £190,000, while wages have probably only risen by around 30% i.e a job paying £20,000 in 2000 would pay around £26,000 in 2007 - although some wages have risen even slower. By this rule, we could be looking at average house prices around the £100,000 mark by 2011/12.

This is a good insight.

Obviously sentiment is involved, back then prices were rising from a low base, whereas this time they are falling from a high base and may overshoot. But in terms of the income ratio, £80k +30% is spot on. That would give us an average of £104k, which is 44% off last summer's peak, and as a fall is just above the current worst level predictions that seem to be publicly acceptable enough to get press and TV coverage (35%).

In fact now that everyone thinks 35% is possible, it will no doubt go past that.

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Guest DissipatedYouthIsValuable
Wow, so the average price in 2000 was only around £80,000. By 2007 it was nearly £190,000, while wages have probably only risen by around 30% i.e a job paying £20,000 in 2000 would pay around £26,000 in 2007 - although some wages have risen even slower. By this rule, we could be looking at average house prices around the £100,000 mark by 2011/12.

Too expensive, try lower.

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This is a good insight.

Obviously sentiment is involved, back then prices were rising from a low base, whereas this time they are falling from a high base and may overshoot. But in terms of the income ratio, £80k +30% is spot on. That would give us an average of £104k, which is 44% off last summer's peak, and as a fall is just above the current worst level predictions that seem to be publicly acceptable enough to get press and TV coverage (35%).

In fact now that everyone thinks 35% is possible, it will no doubt go past that.

If inflation over the same period was taken into account would even £104K actually be 'affordable' ?

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And yet the banks kept lending....

They were saying that the rate of rise was unsustainable, not that house prices were unsustainable.

And yet, the rate of rise did carry on, roughly at the same rate for the next 4-5 years.

There again, Nationwide`s track record on house price predictions doesn`t seem to be too clever. Last year its was something like "price rises will slow in 2008". Then it was "prices will be flat in 2008". I might be wrong, but whatever they predicted, it hasn`t been correct, or anywhere near correct.

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It's interesting isn't it, we talk about percentage drops a lot but perhaps the big question is what year are we going back to?

Personally, I reckon prices will wind back to 2003.

Really Paddles? That doesn't sound particularly bearish. If you look on the graph we're almost there.

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Really Paddles? That doesn't sound particularly bearish. If you look on the graph we're almost there.

You sure? The recent HaliWide data suggests we're back at last summer at the moment. What makes you think we're back at 2003 prices already?

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its easy to figure what prices will fall to.

look at your wage. times it by 3.5k. that should buy you a 2-3 bed semi in your area.

+ a little under before it levels off. bargain seekers. thats if theres still a banking system.

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Guest KingCharles1st
Interesting find.

I remember 2001 well. I'd recently split up with my then partner and had left the family home which we had bought in 1994 for £62k.

I had to go to court to force her to agree to sell. I heaved a huge sigh of relief when it was all over and we'd got £180k for the house in 2002, just before the inevitable crash.

The house sold again last year for £350k!

Ah well! :rolleyes:

Yes- by 2002 - 2003 I thought it couldn't go up anymore. How wrongwe were- probably because we put our own sense, values and morals onto a situation we had no control over

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I could draw a red line acros the graph that links the busts and that would sugest that during the pending bust the lows will be well below 100k average prices.

You know the old saying about the bigger the boom the bigger the bust

10% off the asking price is normal when the market is ticking along and 20% is the norm during a bust and anyone that simply looking for a 30% off from peak need only attend an aution to achive this tomorrow.

its easy to figure what prices will fall to.

look at your wage. times it by 3.5k. that should buy you a 2-3 bed semi in your area.

+ a little under before it levels off. bargain seekers. thats if theres still a banking system.

3.5 X Income comes from an age where we got MIRAS and did not have this so called peak oil and stealth taxes coming out our ears.

Are you sure 3.5 X income is not too high

Yes i too can see the chance for a total meltdown and in that case all bets are off,

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And yet, the rate of rise did carry on, roughly at the same rate for the next 4-5 years.

There again, Nationwide`s track record on house price predictions doesn`t seem to be too clever. Last year its was something like "price rises will slow in 2008". Then it was "prices will be flat in 2008". I might be wrong, but whatever they predicted, it hasn`t been correct, or anywhere near correct.

I can recall the predictions on future house price growth from both the Nationwide and the Halifax, going as far back as 2002, were generally that house price growth would slow over the coming 12 months to slightly above inflation. This is an anecdotal recollection, but I can clearly remember the trend of such predictions at around that time and beyond. This was a period when prices had already risen well above trand and the "doom-mongers" had been predicting a hard landing for some time.

Clearly, it transpired that both these money lenders were completely wrong about future growth, which begs the question on what basis they came to their conclusions that HPI would moderate.

If the basis was that they were aware that prices were already approaching an unsustainavle level, which is a reasonable conclusion, then surely questions must be asked of the lenders who continued to be part of the machine pumping money into the system well beyond the point, by their own implied admission, that they thought was the limit.

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This is a good insight.

Obviously sentiment is involved, back then prices were rising from a low base, whereas this time they are falling from a high base and may overshoot. But in terms of the income ratio, £80k +30% is spot on. That would give us an average of £104k, which is 44% off last summer's peak, and as a fall is just above the current worst level predictions that seem to be publicly acceptable enough to get press and TV coverage (35%).

In fact now that everyone thinks 35% is possible, it will no doubt go past that.

The only thing your missing there is the fact that prices are not going to crash overnight, many are openly stating 2 years to the bottom but I am in the 3-4 year camp.

By this time I feel £120k will be closer to the figure, a total fall of 30% from current average prices, obviously inflation adjusted the real fall is going to be more like 50%.

I think we still have another 6 months for the majority to realise that the prices they were asking late 2007 are not going to sell, there is still alot of denial out there at the moment, this is why from 2009 on the falls will be seen across the whole of the country, but it will happen in stages with different counties, towns and cities falling at different rates, depending on the local employment and demand for property in those respective areas.

One must also remember that the average price is the selling price and not the asking price, so those who say now that they have seen 10-20% falls are only seeing the froth being removed from the overly ambitious asking prices, there are many properties that you would class as average and in an average earning town / city currently 10-20% above the official average house price.

2009 will see real falls in prices, which I like I say will continue until late 2011, falling 15% next year and then followed by 10% in 2010 and 5% in 2011.

A number of reasons for £120k by 2012....Average wage I expect to be £30k by 2012, at least that will be the official figure. This would allow an average earning single person to buy an average property with a 3.5x income mortgage with a decent 10% deposit.

Mortgage required £108k 3.5x £30k = £105k.

It will not be easy but it is affordable and possible, when ever I speak to my parents about their days of buying property they always say it was never easy, I don't think property ever has been for one reason or another.

There are also the 2 earning adult households that average property is better suited as many single persons as the example above would opt for an apartment or smaller below average 2 bed link type property.

Average household incomes I think will rise to around £45k making average property priced around £120k even more affordable for 2 persons co habiting.

IR and how quickly we return to normal lending condition will also be key to how much the prices fall.

I personally think that inflation will be short lived with oil and other commodities going pop middle of next year as the global economy slows, this will keep IR fairly low as the inflation we see at the moment is not consumer led but more to do with worldwide conditions.

Oil will still be higher than what we have been used to over the last 10 years, but will fall back to levels more sustainable ($100 barrel) whilst we all adapt to living without a reliance on oil, this will lower Gas prices and stabilise food prices for a few more years.

The short of it is, a few tough years ahead that will bring a bit of normality back to society and remove those who have lived off property without doing a proper days work by not allowing property to be seen as a one way bet.

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And yet the banks kept lending....

They were saying that the rate of rise was unsustainable, not that house prices were unsustainable.

the rate of rise was unsustainable because it was higher than wage increase.

that is the same thing as saying house prices are unsustainable at current wages.

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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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