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How Many Years Will Property Prices Fall Back?

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As a very general guide - to which years level do people think property prices will reasonably fall back to/in line with? 2005, 2004, or earlier?

I ask as an aid to pricing up an unfinished project I'm looking at. I need to try and figure out what it's going to be worth when finished and in a sensible market - assuming 75%-80% mortgages are reasonably readily available again.

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As a very general guide - to which years level do people think property prices will reasonably fall back to/in line with? 2005, 2004, or earlier?

I ask as an aid to pricing up an unfinished project I'm looking at. I need to try and figure out what it's going to be worth when finished and in a sensible market - assuming 75%-80% mortgages are reasonably readily available again.

75-80% LTV mortgages are readily available now, provided of course there's an equally prudent income multiple also present in the mortgage application. Where do people get the idea that the credit tap has been turned off? It's the irresponsible credit tap that has gone, and that has been "welded shut for a generation" rather than "turned off".

So without surging unemployment, without BTL lenders bolting for the exit, and without sky-high interest rates, we've seen house prices drop 9% in just 9 months. All that's actually happened is the lunatic fringe of the credit market has sobered up, but just that one tiny adjustment is driving nominal house prices down faster than they've ever fallen before.

So what do you think when the next shoe drops? What do you think will happen when the recession starts to really bite? Which will put two or three points onto the unemployment figures, which will send the Polish builders and Australian bar tenders home, which will see tens of thousands of repossesed properties cascade into the current fragile market, and which will see rents driven down because no tennant can pay more than they have left after paying for food and heating.

Nobody knows where this will end, but in inflation adjusted terms we're already back to 2005 prices. So with rivers of pain still to swim, any sensible person will increasingly be thinking in terms of last century comparables rather than your multiple choice question of 2005 or 2004!

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I presonally recon we'll see prices around the 2002/2001 bracket durin the overshoot, I expect prices to average out at early 2003 though, which puts the average house at around £130,000

Edit: to add the average price

Edited by Mr Goodcat

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As a very general guide - to which years level do people think property prices will reasonably fall back to/in line with? 2005, 2004, or earlier?

I ask as an aid to pricing up an unfinished project I'm looking at. I need to try and figure out what it's going to be worth when finished and in a sensible market - assuming 75%-80% mortgages are reasonably readily available again.

It's a difficult question to answer. I think that a 40-50% reduction will put prices back to around 2002-3. This is the most touted figure from the bears.

If things get desperate and we get 60-70% falls then we could be back to 1998-2000 wiping out most of the gains from the last decade.

Just to make a point about the availability of mortgages. The worse the falls the less equity will be available for buyers to trade up. At 60-70% falls a substantial number of people will actually go into negative equity. If only 75-80% mortgages are available most people are going to have to rely on savings regardless of whether they are FTB or trading up. With the prospect of a recession and probably a depression over the next few years saving is not going to be easy for many and I expect the cumulative impact will keep prices low.

My advice is to turn your project round at least cost asap and get the best price you can. Don't get caught with an unsaleable depreciating asset.

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I was sticking to 1998 until a few weeks ago.

Now I think it will be so bad different that property prices will become irrelevant after 2015. ...........

& what would be the measure of value/use? Paper money??

Think survival, & avoiding the herd.

At least this way we wont get Krusty back ..................... will we? :(:unsure:

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I was sticking to 1998 until a few weeks ago.

Now I think it will be so bad different that property prices will become irrelevant after 2015. ...........

& what would be the measure of value/use? Paper money??

Think survival, & avoiding the herd.

At least this way we wont get Krusty back ..................... will we? :(:unsure:

But, how "different" can the situation get from what we have now? Why would property prices become "irrelevant"? People will always need a roof over their head so property is still going to be bought and sold at some level.

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Property is a deprediating asset. End of. It requires capital expenditure just to maintain.

Land is an ultra durable. Immune to theft and fire.

Land value however is tied to the resources in the locality, not just natural resources but also including labour, ammenities, etc.

Due to existing demographics, the baby boom, the UK labour market is going to deteriorate for the next 20 years. Ala Japan.

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But, how "different" can the situation get from what we have now? Why would property prices become "irrelevant"? People will always need a roof over their head so property is still going to be bought and sold at some level.

Different?

Social breakdown?

Supermarket supply chain?

Yes, housing is a need, but mass unemployment & a currency that wont buy much will play havoc with any previous system of comparative order.

I used to think 'it could happen'

Now I'm thinking 'why wont it happen?'

I had not heard the term 'demand destruction' until recently.

I'm beginning to understand it.

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Due to existing demographics, the baby boom, the UK labour market is going to deteriorate for the next 20 years. Ala Japan.

I dunno I think we are in a worse boat that Japan, Japan still manufactures plenty of things and and China on its door step to buy its things like bulldozers and other construction machinery.

Japanese motorcycles, cars , tech like phones MP3 players, etc....

they also have a fair bit of nuclear power too..

The UK is the reverse, we don't make any thing significant anymore, we rely heavily on gas oil and coal and anybody who makes any money tends to vanish off pretty quickly like Dyson and his hoover company...

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You seem to have missed my use of the word "reasonably" in my post.

You seem to have missed the humour in my post ;) Ok, I think maybe to 2000/2001. Slightly off topic, but my parents bought their first house in 1963, for £2,300. More recently, they told me that the one they really wanted was at the other end of the terrace, because it had a much bigger garden. They could not afford that one though, because it was £50 more expensive !

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What methods are there for tying in all of the data if you were looking at a particular price, in a particular area and wanted to calculate what you consider to be a reasonable price post-crash?

There is a lot of talk about average house prices, from the different sources, average pay and specific locations, a lot to deal with!

Take for example a street in our area. Terraced, 2 reception, kitchen, back yard, 3 bedroom. 2000-2001 @ 45k-55k, 2003 @ 90k, 2006-2007 peaked at 145k. Personally I think we're looking at around 35% from peak, so if you were looking at one of these houses would you assume a value of £94k once it was all done (assuming your estimate is correct!)?

If this is correct how does this tie-in with the average house price/wage factors? And what about income multiples?

I'm not looking to buy at present just to clarify some of these points as there is always a lot of talk around the different factors but no clear-cut method of tying it all together.

Cheers.

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If things get desperate and we get 60-70% falls then we could be back to 1998-2000 wiping out most of the gains from the last decade.

My guess would be about 1999.

The next recession is going to be bad and long.

It might take 6 years for real house prices to reach bottom and after that they may stay the same for many years.

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75-80% LTV mortgages are readily available now, provided of course there's an equally prudent income multiple also present in the mortgage application. Where do people get the idea that the credit tap has been turned off? It's the irresponsible credit tap that has gone, and that has been "welded shut for a generation" rather than "turned off".

So without surging unemployment, without BTL lenders bolting for the exit, and without sky-high interest rates, we've seen house prices drop 9% in just 9 months. All that's actually happened is the lunatic fringe of the credit market has sobered up, but just that one tiny adjustment is driving nominal house prices down faster than they've ever fallen before.

So what do you think when the next shoe drops? What do you think will happen when the recession starts to really bite? Which will put two or three points onto the unemployment figures, which will send the Polish builders and Australian bar tenders home, which will see tens of thousands of repossesed properties cascade into the current fragile market, and which will see rents driven down because no tennant can pay more than they have left after paying for food and heating.

Nobody knows where this will end, but in inflation adjusted terms we're already back to 2005 prices. So with rivers of pain still to swim, any sensible person will increasingly be thinking in terms of last century comparables rather than your multiple choice question of 2005 or 2004!

Great great post Silversurfer.

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75-80% LTV mortgages are readily available now, provided of course there's an equally prudent income multiple also present in the mortgage application. Where do people get the idea that the credit tap has been turned off? It's the irresponsible credit tap that has gone, and that has been "welded shut for a generation" rather than "turned off".

So without surging unemployment, without BTL lenders bolting for the exit, and without sky-high interest rates, we've seen house prices drop 9% in just 9 months. All that's actually happened is the lunatic fringe of the credit market has sobered up, but just that one tiny adjustment is driving nominal house prices down faster than they've ever fallen before.

So what do you think when the next shoe drops? What do you think will happen when the recession starts to really bite? Which will put two or three points onto the unemployment figures, which will send the Polish builders and Australian bar tenders home, which will see tens of thousands of repossesed properties cascade into the current fragile market, and which will see rents driven down because no tennant can pay more than they have left after paying for food and heating.

Nobody knows where this will end, but in inflation adjusted terms we're already back to 2005 prices. So with rivers of pain still to swim, any sensible person will increasingly be thinking in terms of last century comparables rather than your multiple choice question of 2005 or 2004!

'Rivers of pain still to swim', agree with all of your post, but this line most of all .

edited for missing word.

Edited by eightiesgirly

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The price is gauged by the amount someone will lend on.

There are still banks/mortgage companies out there prepared to lend on rates which allow for depositless transactions.

Bottom feeders, call them what you will but they are still doing business and anyone can still buy......

This crisis still has some legs in it yet.

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The price is gauged by the amount someone will lend on.

There are still banks/mortgage companies out there prepared to lend on rates which allow for depositless transactions.

Bottom feeders, call them what you will but they are still doing business and anyone can still buy......

This crisis still has some legs in it yet.

ah, bless!

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Nobody knows where this will end, but in inflation adjusted terms we're already back to 2005 prices.

2004 from my look at the Nationwide real quarterly prices graph.

Nice post btw.

Edited by mirage

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Well round my way asking prices arnt budging that much to date. They are so loony that you cant talk of it being back to this year or that year, they have gone to planet la la and havent come back. :( Someday I hope I dont live in a rented room but im not getting over excited here.

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  • 396 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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