Wednesday, Jun 21, 2006

Bank headed off property crash, says OECD

Telegraph: Bank headed off property crash, says OECD

Homeowners can breathe a sigh of relief - the UK housing market is now less likely to crash than most other Western countries, according to authoritative new research....

Posted by Stefan Harris @ 03:08 PM (600 views)
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30 Comments

1. Waiting For The Crash said...

well now i feel better - how about you guys?
i best get out and buy more goods on tick.........
data, data, data - how can you predict a crash where was the OECD at the last one? anyway sounds like the Blair Broadcasting Corp has got to them too!

Wednesday, June 21, 2006 03:14PM Report Comment
 

2. talking rot said...

without wishing to sound smug, this article supports my belief that there will be no HPC - as much as I would like one. Sadly, it is a poor quality article because it does not outline the method of prediction and does not give statistical variation. It is, at best, worthy of the grade "Intelligent Comment."

I am at a loss to understand why the likelihood of a crash is 5.4% even if, firstly, interest rates rise in the UK and, secondly, a US house price crash occurs. Such an event would lead to a global economic downturn and might precipitate a UK crash.

The only thing that is certain, is that fewer people are commenting on this Blog's articles. It has gone quiet, and went quiet before the world cup started. Is this a sign that the Bear's are giving up?

Wednesday, June 21, 2006 03:31PM Report Comment
 

3. sebastian said...

What do they say? "When the last bear turns bull" ?

Wednesday, June 21, 2006 03:52PM Report Comment
 

4. uncle chris said...

I'm sorry, there's just no way one can assign a probability to whether or not the housing market will crash (although |'ve seen falls of around 10% in my area) - there are just too many parameters and variables involved. The fact remains the UK (on average) is in debt up to its eyeballs and the banks are running out of ways to milk more money out of people. The whole economy in the UK is built on a very feeble stack of cards, nd is only being keep aloft by institutional spin, deception and Crash Gordon's long standing desire to hide the truth until he gets into No. 10.

Wednesday, June 21, 2006 04:00PM Report Comment
 

5. Markd said...

It would be very interesting to know how these figures are arrived at given how over blown the market is in this country compared to many others. At the end of the day all you can do is apply simple common sense to the situation which tells you that the current market is unsustainable. It is encouraging to see a hint more red creeping in to the Statistics section on this page.

Wednesday, June 21, 2006 04:06PM Report Comment
 

6. Flubber said...

'Using complex economic tools, the Paris-based OECD discovered that the probability of house prices "peaking", or slumping, is currently only 4.6pc'

Sounds like a load of patronising old tosh. ...will be fascinating to see how this is engineered in the UK in the years to come.

Wednesday, June 21, 2006 05:03PM Report Comment
 

7. Nelson said...

How come Australia is below the UK - I thought they were already experiencing the beginnings of a crash - 12% drop in prices etc?

Wednesday, June 21, 2006 05:12PM Report Comment
 

8. Jimmy James said...

"the likelihood of a crash is 5.4%" - as the joke goes, economic modellers use decimal points to show that they have a sense of humour...

The housing market is far too complicated and effected by too many variables for these models and predictions to be of much value (as well as disregarding the biggest factors - sentiment and momentum). But good to see the OECD has fine tuned its sense of the absurd.

Wednesday, June 21, 2006 05:31PM Report Comment
 

9. Gruppenfuhrer said...

I am, depressingly, inclined to agree with Talking Rot. It seems unlikely, to my humble mind, that prices will significantly change in the near future and yet such a switch seems more necessary than ever.

In answer to your poiont TR, I think this site may however be busier than it seems.
I have been reading every article, every comment for months now and this is my first posting. I think it is true that we should be more vocal, and should make this forum more vibrant, to show the number of people who are waiting for some form of correction.

I am in my late twenties and increasingly resigned to the idea that I may not be able to afford a house for a good few years yet. I have two degrees, a good job and pleanty of freelance work and yet because I live in the south east I am, I think, scuppered.

I hope I am wrong, I hope prices make a switch.

Everyone I know who owns a house has bought with help of a huge loan from parents and an interest only mortgage at four or five times combined salaries when inflation is rock bottom.

That is a crazy situation. If this is the alternative bring back boom and bust, all is forgiven.

Now that I have broken my silence I shall write much more.

Wednesday, June 21, 2006 05:35PM Report Comment
 

10. Markd said...

Gruppenfuhrer-you are correct. This site is indeed very busy-what has happened over recent weeks which TR hasn't taken into account is the increased number of items being posted (some of which have appeared twice) meaning that at busy times articles quickly fall off the most prominent part of the news blog. Commiserations with your position but hold on-change will come, many of us in the mid to late nineties never thought that we would see a boom again after years of slump but it arrived nonetheless, and the situation can and will reverse itself again.

Wednesday, June 21, 2006 05:55PM Report Comment
 

11. Paul said...

Hang on.

This is based on "a 1% rise in interest rates and another years steady house price growth" as the legend says.

If you have "steady price growth" then by definition it's not crashing. The problem is, in real terms, house prices haven't grown ahead of inflation since around October 2004!

Wednesday, June 21, 2006 06:20PM Report Comment
 

12. Tangara said...

Be patient, the demography U-turn starts now & should be seen on house price from 2010 on...

Patience is our virtue.

Tangara (french bear)

Wednesday, June 21, 2006 06:58PM Report Comment
 

13. tyrellcorporation said...

As the situation currently stands, I think a 1% increase in interest rates would equate to roughly 20% increase in monthly payments. Surely this would sink thousands of people up and down the country. I think the figures banded around in this article are fanciful in the extreme.

Wednesday, June 21, 2006 07:03PM Report Comment
 

14. Autopilotengage said...

This is the same OECD which issued a report last year saying that UK house prices were "30% overvalued" and perhaps the most overvalued in the world. I won't be getting a mortgage any time soon, right or wrong, the risk of buying a dilapidated hovel for a small fortune at the top of the biggest housing bubble in history only to pay it back for the rest of my life, even having to expand the term when rates go up, and they will, just doesn't attract me away from much safer investments; call me Mr. "cold feet" if you will. I'm even prepared to wait until a significant enough proportion of those bothered enough to vote can't afford a house and it becomes an even hotter political issue if it takes that long, my money will be in safer places.

Wednesday, June 21, 2006 07:50PM Report Comment
 

15. uncle chris said...

The only prediction we can make here is that every time "Talking Rot" mentions that things have gone quiet on the blog front, there's a 92.8% probablility (prediction from reputable source ... honest) that said blogs will be the hottest in town.

Wednesday, June 21, 2006 09:48PM Report Comment
 

16. Paul said...

I suppose people should really be asking since when has it been the Bank of England's policy, jurisdiction or remit to intervene in the housing market too?

Wednesday, June 21, 2006 09:50PM Report Comment
 

17. bidin'matime said...

Don't worry - we're all (well, mostly..) still here! This OECD report is, well... Talking Rot! Just stand back and look at the graphs on this site, in particular the ratio of prices to wages, which dates back to 1953 and reflects all the booms and busts since.

Lucky enough to buy first in 1978, I didnt really notice the peaks before the late 80s due to rabid (and rapid) wage inflation. But the crash in the 90s was very, very real, even to us with what we had thought was substantial equity. We spent many years in the 90s living modestly to recover our finances and have (this time round) had no temptation to spend any of our equity which is now tucked away as we rent, awaiting the crash.

So you youngsters who start to wonder if there is such a thing as a crash, take it from me there is. And the longer it is fended off, the more likely and deeper it will be. I agree with those who say you cant model a crash prices simply keep going up until they fall. If you continue to build the latest results into your model, eventually it predicts that prices will rise inexorably forever which is what the report suggests has happened at the OECD

Wednesday, June 21, 2006 10:58PM Report Comment
 

18. Preguioso said...

I agree with Biddinmatime. When I came back to England 13 years ago it was at the tail end of a crash. I remember a friend who purchased a 2 bedroom flat in Bournemouth for 50000 and then it crashed and he could not sell it for 25000. Doom was rife and many people told me that they would never borrow or have mortgages again.

Well 13 years later and here we are again..the sheep simply havent learned. I have another friend who has just sold a 1 bedroom flat in Winchester for 160000!!! The difference between 13 years ago and now is not only the astronomical levels people are borrowing for mortgages but the massive levels of debt borrowed for trivia/ equity releases etc.

Call me a doom monger but personally I think the next crunch when it happens is going to make all others since the great depression pale into insignificance. The banks are already recording significant increases in bad debt, bankruptcy followed by rising unemployment, uncertainty of oil prices and other commodities..these things take time to materialize.

My wife and I sold our house and live in rented accommodation and stashed the money away. We live simply, have no debts and watch what we spend. Even we are finding our salaries being challenged by rising costs. I have been speaking to others about these costs and we have all noticed how our supermarket prices have subtly risen, costing at least an extra 10 15 per week on the bill.

For us we can handle it, but for those who are squeezed to find a 100 per month they will delay the inevitable until next month or the moth after until they can borrow no more.


Thursday, June 22, 2006 08:57AM Report Comment
 

19. Twopper said...

I'm surprised that the accuracy of these probabilities are only given to 1 decimal place!!

Thursday, June 22, 2006 09:11AM Report Comment
 

20. talking rot said...

Thanks Chaps

And I was starting to think this Blog was going stale - I even had a look at www.pricedout.org.uk for comparison. The "Priced Out" FTB forum appears not to have the experts and intellectual rigour found here. It is a good place to have a rant though. There is, however, an idea on PricedOut that only Gruppenfuhrer has touched on in this Blog. Rather then sharing our thoughts between ourselves, why not try and do something about the house price situation. PricedOut suggest writing to your MP and stating your thoughts about the housing market. I intend to do this and will keep you informed should I get a reply. I think my letter will be based around the long term economic costs of a generation saddled by high mortgages. (Costs being both financial and social). Sadly I do not believe any politican will bother to reply to a letter which advocates polices to lower house prices - until the majority of the voting public have to rent.

For all the expertise of this Blog's commentators, despite how dire economic predictions become, the UK property market is not crashing today and it will not be crashing tomorrow. Given that I'm 36, I can not wait for a crash in 10 years time. And what constitutes a crash anyway. House prices have risen phenominally over the last 5 years. So a drop of 20% means they drop from being astronimcally unaffordable to merely somewhat unaffordable. The key word "unaffordable" remains though.

Thursday, June 22, 2006 10:00AM Report Comment
 

21. Autopilotengage said...

I think talking rot is, for once, not talking rot ;-) Get involved, exercise your democratic right and write to your elected representative, i'll be doing the same.

Thursday, June 22, 2006 11:24AM Report Comment
 

22. Devil's Advocate said...

I have to agree with Talking Rot, Personally i'd love a crash. Pulled out of the market late 2003 and have only seen house prices rise in London since. For some reason I have got into ready the articles on this site and have kept putting off a repurchase. All that anyone he can do is bad mouth critics who mention that there won't be a crash and pat each other on the back. Can't help thinking that this forum is far too biased and does not offer constructive viewpoints, rather a deluded opinion of a bunch of people who lived through the last crash and believe it will happen again (a bit like 1966 world cup syndrome).

So, rather than just saying its going to happen, were in too much debt can someone tell me what factors will bring the crash about and a rough idea when??

Thursday, June 22, 2006 11:28AM Report Comment
 

23. Devil's Advocate said...

Also, where is the best place to kepp your money if your not investing in property.

Thursday, June 22, 2006 11:29AM Report Comment
 

24. Preguioso said...

To the Devils advocate.putting bias aside (obviously there is an element of bias on here because most of us we believe it will happen)keeping it simple economic crashes are not some modern invention. I was surprised to learn from trawling the internet that a huge economic downturn hit Europe in the 14th Century due to over speculation/ corruption from merchants in Venice.well, well isnt that a surprise..nothing changes.

Economic downturns are necessary in order to balance payments and bring some normality back to the markets. Upturns and downturns are as natural as the tides going in and coming out and have happened for hundreds perhaps thousands of years in some form or other. Keep in mind that the market place now is an immensely complex environment and is more prone than ever to disaster.

My father came from a council estate as a child and is now very well off in his retirement. One of his mottos is that the majority of people out there are financial idiots and some of the biggest idiots are those that work in the financial sector. He has always maintained that the pricks that drive around in expensive cars, living the high life are the ones most likely to not to own a single penny.

One or two of these types the economy can survive, but these buggers are everywhere now and whats worse is that they believe in their illusions. My landlord is one of these types that works in the bank handing out millions in credit to companies. He owns around 10 properties. In conversations with him it turns out that he doesnt own anything at all. He simply used the growing equity from one house to use as a deposit on the next. His houses, his car, his boat are all illusions.

Its all gambling other peoples money like hedge betting funds etc. All these assets are paper and not worth the paper they are written on. Now here is the interesting part the average person in the Far East manages to save around 25% of their income. Something like 20% of the worlds gold is owned by peasants in India. In Vietnam people are now buying houses with gold.

Meanwhile here in the Western world people are selling the family silver to finance this illusionary lifestyle. It reminds me of the French Aristocracy before the revolution..the sheep live in ivory towers. The scale of it is so terrifying I can see pain of Great Depression magnitude on the horizon. I have already set things into motion (my own sources of income/ business) to enable me to move and live abroad.

I hope to be out of here in two years.

Thursday, June 22, 2006 12:35PM Report Comment
 

25. Fair_deal said...

I agree with TR and DA. I missed the boat in 2001 and every year i am going closer to retirement and hpc seems to go further and further. Don't have much hopes after 40. Just arguing on a website is not going to help us bring the crash earlier. We need some concrete action plan. We must also take into account that we are minority. If 70 plus percent own home it would be hard for us to fight against the majority. So we need a very good strategy. I thought of writing to MPs in my local area but may be it would be just another piece in the litter bin for the somnambulist politicians who pretend to snooze while the country suffers.
First of all we need to list the factors that could cause a crash in a short time not in another 5 years........
Then we need to work out what we should do to influence these factors, again in given time.
Then implement it.
In short, it is time for action not justification.
There is such a creative engergy flow and we really have soem very intelligent brains here on this blog. Let us channelize our energies into intelligent actions.

Thursday, June 22, 2006 12:50PM Report Comment
 

26. devil's advocate said...

I can see your viewpoint, but I cannot see anything changing with out large interest rate increases and the MPC simply are not going to let that happen. They have a vesting interest in keeping the property bubble from popping.

Thursday, June 22, 2006 01:01PM Report Comment
 

27. devil's advocate said...

I can see your viewpoint, but I cannot see anything changing with out large interest rate increases and the MPC simply are not going to let that happen. They have a vesting interest in keeping the property bubble from popping.

Thursday, June 22, 2006 01:02PM Report Comment
 

28. Preguioso said...

Best of luck trying to convince the "establishment".....my thought are rather than trying to buy some poxy 2 bedroom Victorian Hovel for 250K in a dump like London why not consider trying to move to somewhere like Chile or even Argentina where one can buy a rauch for US$60000 and a better lifestyle. All countries have problems but I simply refuse to play this English property game anymore.....its a lie and people are going to pay for it by pain.

Thursday, June 22, 2006 01:10PM Report Comment
 

29. Fair_deal said...

DA,

So the MPC and IR is our first target. Now need to think what can we do to pressurise the MPC to increase the IR. Let us invite some ideas on that. I am pretty sure there must be some way we can break through. It probably is just a questions of looking inthe right direction.

Thursday, June 22, 2006 02:44PM Report Comment
 

30. Fair_deal said...

Preguioso, As you say yes all countries will have some problem or the other. Now this problem is making you leave this country. Tomorrow some other problem will make you leave some other country. It really depends on how much you want to keep moving around. If you enjoy the move then by all means you should ! However the situation is not same for everyone. Especially for some of us here who have children studying in schools. Move is not an easy option.
Believe me, i tried moving some time but ran into worst problems than this. So why not stay here and fight for my right. The point is all of us are forgetting that we have right to have a roof , espcially with all those heavy taxes we are paying. And if some VIs have gathered together and have started drowning the country, this doesn't mean we should walk away. That is escapism.
Agreed the battle is hard for us as the opponent is much stronger but think it as a challenge to your wisdom. You will often notice crisis brings the best out of people.

Thursday, June 22, 2006 02:54PM Report Comment
 

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