12 Years To Break Even!

[Sourman]

It is with some remorse that I must tell my GF this week that the 2 bed flat she bought last August in SW4 is probably now worth £30K less than when she bought it. I can feel a massive argument coming... and me sleeping in the living room.

Looking for evidence to back up my reasoning was one of the reasons I started to revisit HPC forums here, and after reading lots of threads over the past few days, it looks even gloomier than I had imagined. Perversely though I am enjoying watching the coming disaster take shape, seeing the players take their positions and set out their stalls, reading between the lines of the upbeat stories that are getting more and more ludicrous in the national press, looking out for clues anywhere and everywhere. It really is like watching a massive car crash in super slow motion.... great fun!!

back to the GF though... Looking for a silver lining I was hoping to tell the GF that as long as she can afford to pay the mortgage, then she'd probably break even again in a few years time , 4 at the most!! and then she could sell up and move on, well that was until I read this...

http://goldnews.bullionvault.com/how_not_t...bprime_collapse

The graph halfway down reveals the true story behind the last HPC which started in '89. It took those that bought at the peak a staggering 12 years just to break even.. holy sh*t on a popsicle stick!! How on earth am I gonna explain that one??

So what do you reckon?? Is this one gonna be as long, brutal and drawn out as the '89 crash, or will there be any good news in the next 10 years??

[Belfast Boy]

It is with some remorse that I must tell my GF this week that the 2 bed flat she bought last August in SW4 is probably now worth £30K less than when she bought it. I can feel a massive argument coming... and me sleeping in the living room.

Then why tell her? This is one thing I would let her find out herself!

I do not talk to my girlfriend about the stuff I have learned on here. I don't want to worry her.

Ignorance is bliss

[EmpiricalBear]

No... its really not that bad.

Those graphs show 'real' house prices (inflation adjusted). I think you will find that in nominal terms things don't look nearly as bad.

Real prices only matter if there is no wage inflation, back from 89-95 there was plenty of this. This time its a bit different as we are going to see assets fall in real terms but wages won't rise to make this a great advantage for buyers. I think we will will see nominal price falls around 30% and real around 50%.

The question is then, how long will it take prices to recover this time?

My gut feel is that it won't be that long, but I'm sure many will disagree.

[Abteilung]

Bought flat in December 1987 for £36,950, sold it for £32,500 in May 2000, I didn't break even over 12 years AND we had a shed load of inflation during those years.

It can happen again.

[Guest DissipatedYouthIsValuable]

Bought flat in December 1987 for £36,950, sold it for £32,500 in May 2000, I didn't break even over 12 years AND we had a shed load of inflation during those years.

It can happen again.

That's ******ing terrible. I expect you live in rented accommodation and hoard gold now?

[Guest muttley]

Those graphs show 'real' house prices (inflation adjusted). I think you will find that in nominal terms things don't look nearly as bad.

A house I sold in June 1992 for 50k was resold in 2001 for 51k. Not a very good return, but you could still argue that house prices only ever go up.

[Sourman]

Then why tell her? This is one thing I would let her find out herself!

I do not talk to my girlfriend about the stuff I have learned on here. I don't want to worry her.

Ignorance is bliss

good point... I think I will play the chivalrous and supporting boyfriend not the harbinger of doom!!

[Panda]

Oct 88 to Oct 89 - Rented a 0 bedroom studio apt - value around 32k - Rent £200.00 per month

Oct 88 to Oct 89 - Wanted to buy a one bedroom apt on same road, could not afford to because asking price and selling price was 36k to 38k.

Sept 90 - Bought the one bedroom apt on same road from B and B, reposseion, asking price 32k, i offered and paid 28k - thought what a bargain, i was a happy bunny!

March 95 - Sold the one bedroom apt on same road for 23k, what a great decision.

It took till Sept 2001 to get back up to 38k.

Phew, houses only go up, whereas flats can sometimes fall?

[grey shark]

May 1988 bought 3 bed semi in Watford for 97.5k.

Summer 1989 houses in this road now selling for 110k.

August 1992 sold my house for 81k , swallowed the loss of 16.5 k to buy ,

Large but a wreck of a 3 bed detached for 127k , originally on for 165k , the market was so dead Stamp duty wasn't paid.

Winners and losers in every asset class including property .

[bobthe~]

That's ******ing terrible. I expect you live in rented accommodation and hoard gold now?

I do.

Bought '87 for 44500.

Sold '99 for 45500.

Felt very pleased when I bought it cos I managed to knock 500 quid off the asking price. I didn't realise I had just doubled my "profit".

[Tucksy]

It is with some remorse that I must tell my GF this week that the 2 bed flat she bought last August in SW4 is probably now worth £30K less than when she bought it....

... Looking for a silver lining I was hoping to tell the GF that as long as she can afford to pay the mortgage, then she'd probably break even again in a few years time , 4 at the most!!

2 year, 4 years, 10 years?

If the banks keep withdrawing mortgage deals at the rate they're going and (for the ones that stay in business) they revert to sensible lending practices (as they will), it could be A LOT longer.

IMHO, there are factors such as overvaluation, availability of credit & excessive personal debt which may make this slump even more severe and prolonged than the one that preceded it.

A MAJOR correction is inevitable and long overdue...

[DrBob]

It is with some remorse that I must tell my GF this week that the 2 bed flat she bought last August in SW4 is probably now worth £30K less than when she bought it. I can feel a massive argument coming... and me sleeping in the living room.

Tricky one. This depends on your 'intentions'. Remember, if you marry her you'll be sharing all her assets and (more likely) debts! If you plan to stay together forever, you should probably persuade her to sell before prices fall further. I understand there are still buyers around in London.

Unless, of course, you love the flat and will be happy to live in it for the next decade (possibly with young kids).

[notthereyet]

It is with some remorse that I must tell my GF this week that the 2 bed flat she bought last August in SW4 is probably now worth £30K less than when she bought it. I can feel a massive argument coming... and me sleeping in the living room.

Looking for evidence to back up my reasoning was one of the reasons I started to revisit HPC forums here, and after reading lots of threads over the past few days, it looks even gloomier than I had imagined. Perversely though I am enjoying watching the coming disaster take shape, seeing the players take their positions and set out their stalls, reading between the lines of the upbeat stories that are getting more and more ludicrous in the national press, looking out for clues anywhere and everywhere. It really is like watching a massive car crash in super slow motion.... great fun!!

back to the GF though... Looking for a silver lining I was hoping to tell the GF that as long as she can afford to pay the mortgage, then she'd probably break even again in a few years time , 4 at the most!! and then she could sell up and move on, well that was until I read this...

http://goldnews.bullionvault.com/how_not_t...bprime_collapse

The graph halfway down reveals the true story behind the last HPC which started in '89. It took those that bought at the peak a staggering 12 years just to break even.. holy sh*t on a popsicle stick!! How on earth am I gonna explain that one??

So what do you reckon?? Is this one gonna be as long, brutal and drawn out as the '89 crash, or will there be any good news in the next 10 years??

A workmate of mine bought in 1991 and did not see his purchase price raise untill 2000.

[Sourman]

So if this HPC is anything like the last one, chances are it'll be 2020 before she'll be in the black again!!! And I guess that goes for just about everyone who has bought in the past 6 months...

I hope everyone is very patient!

[Lander]

House prices will never return to current levels, the era of cheap and easy credit is over

[Method Man]

souteast london kent borders.

bought 2/3 bed flat for 60 k in 89. in 92 was valued at 30. in 2001 was valued at 89k. so i imagine break even was in about 1999 . so 10 years. After reading HPC finally sold in 2008 for 145k.

[md23040]

was valued at 30. in 2001 was valued at 89k. so i imagine break even was in about 1999 . so 10 years. After reading HPC finally sold in 2008 for 145k.

I think im the buyer. can i have my money back?

[Bubble&Squeak]

So if this HPC is anything like the last one, chances are it'll be 2020 before she'll be in the black again!!! And I guess that goes for just about everyone who has bought in the past 6 months...

I hope everyone is very patient!

At least your girlfriend has bought in a reasonable part of town where it would be bearable to wait-out the negative equity and has a spare room for guests etc. Imagine if you had recently bought a place in an "up and coming" area with future redevelopment potential... in a worsening economy these places will be going down the toilet very quickly, not a situation in which I would want to spend the best years of my life trying to raise a family

[Panda]

And I guess that goes for just about everyone who has bought in the past 6 months...

6 months???? 3 or 4 years depending on your demographics!!!

[AteMoose]

souteast london kent borders.

bought 2/3 bed flat for 60 k in 89. in 92 was valued at 30. in 2001 was valued at 89k. so i imagine break even was in about 1999 . so 10 years. After reading HPC finally sold in 2008 for 145k.

so the 2008 price on your flat wasnt much above the inflation adjusted average (or the place was seriously overvalued in 89 ;p)?

[Wad]

I lived in SW1 and rented a big flat on a garden square in the late 1990s.

The landlord had tried to sell it in 1989 for £650k but the market cooled down and like many retired people people today with no mortgage - he refused to take any offers and ended up holding on to it and renting it out - to me!

He rented it for a yield of about 3% after costs and I had it for 5 years.

Eventually he sold it for £650k in 2001.

[Mr Yogi]

So what do you reckon?? Is this one gonna be as long, brutal and drawn out as the '89 crash, or will there be any good news in the next 10 years??

My experience also of the crash which started in 1989 is that a house purchased at the peak was not worth the same again in nominal terms until at least 1997.

Allowing for inflation you can add a few years on to that, making 12 years sound about right.

All evidence would suggest that the crash now getting under way will be at least as severe as that, and possibly a lot worse.

[Uriah Heap]

My experience also of the crash which started in 1989 is that a house purchased at the peak was not worth the same again in nominal terms until at least 1997.

Allowing for inflation you can add a few years on to that, making 12 years sound about right.

All evidence would suggest that the crash now getting under way will be at least as severe as that, and possibly a lot worse.

I bought a house for £55K in 1990 and sold it in 2001 for £98K. I had spent a fair bit of money on it and had quite a bit of hassle. It felt like I was just about breaking even. I guess I probably made a miniscule profit if you take inflation into account. But having negative equity preyed on my mind and prevented me making purchases I might otherwise have made for the whole decade. 12 years of falling house prices might also make for 12 years of people not spending very much too.