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Mikhail Liebenstein

A Theory To Sustain The Crash

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One very important factor in HPI and HPC is sentiment.

In my mind this is heavily influenced by the prevailing wisdom of the day.

During HPI the prevailing wisdom was "house prices can only ever go up" , "it about supply and demand", "there's a shortage of houses", "what about all the immigrants, they will need somewhere to live" etc etc.

On the way down, the prevailing wisdom is "house were overvalued", "people have borrowed too much", "the banks have leant too much", "prices are set at the margins" , "there will be distressed sellers and many repossessions" etc etc.

Now here is a question? What is likely to be the next prevailing wisdom?

I think we can except that the crash will worsen, but that is covered by the theories above.

What we are now seeing is an attempt the the property industry VIs to create the next prevailing wisdom eg the recent NHF report saying that as house building has slowed down it is sowing the seeds of the next boom. So we need a good counter theory that will kill the seeds of a new HPI.

In my mind it could run something like this. People have been so indebted and the banks have seen so many bad loans, that they are actually repulsed by the idea of further risky borrowing and lending, ultimately they now realise that debt does have to be repaid and that hoping for another house prices madness is actually wishful thinking. Besides at the moment increases in wages are been kept restrained and now that we have permanent sensible lending multiples, there is little chance of seeing roaring house price inflation in our lifetime. It is now clearer that tarting up houses to sell to a greater fool is not sustainable as ultimately houses are places to live and right now we still have a glut of unsold flats.

I think my words above are a bit too idealistic. So does anyone have a better set of words or a theory?

Edited by mikelivingstone

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One very important factor in HPI and HPC is sentiment.

In my mind this is heavily influenced by the prevailing wisdom of the day.

During HPI the prevailing wisdom was "house prices can only ever go up" , "it about supply and demand", "there's a shortage of houses", "what about all the immigrants, they will need somewhere to live" etc etc.

On the way down, the prevailing wisdom is "house were overvalued", "people have borrowed too much", "the banks have leant too much", "prices are set at the margins" , "there will be distressed sellers and many repossessions" etc etc.

Now here is a question? What is likely to be the next prevailing wisdom?

I think we can except that the crash will worsen, but that is covered by the theories above.

What we are now seeing is an attempt the the property industry VIs to create the next prevailing wisdom eg the recent NHF report saying that as house building has slowed down it is sowing the seeds of the next boom. So we need a good counter theory that will kill the seeds of a new HPI.

In my mind it could run something like this. People have been so indebted and the banks have seen so many bad loans, that they are actually repulsed by the idea of further risky borrowing and lending, ultimately they now realise that debt does have to be repaid and that hoping for another house prices madness is actually wishful thinking. Besides at the moment increases in wages are been kept restrained and now that we have permanent sensible lending multiples, there is little chance of seeing roaring house price inflation in our lifetime. It is now clearer that tarting up houses to sell to a greater fool is not sustainable as ultimately houses are places to live and right now we still have a glut of unsold flats.

I think my words above are a bit too idealistic. So does anyone have a better set of words or a theory?

I've said it before on here, it all comes down to money.

"You only ever lose money on property" springs to mind as a likely consensus.

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  • 395 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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