Tuesday, October 9, 2007

Only 3% per year!

House prices 'set to fall by thousands'

House prices are likely to fall in the next two years, wiping thousands off prices, while a full-blown bust is possible, claim economists. They believe the impact of higher interest rates and the global credit crunch will fuel a property market squeeze. They forecast that prices will fall by 3% in 2008 and by the same amount in 2009, taking the average cost of a home down by almost £13,000 to £205,000. The claims come from Capital Economics, which is led by Roger Bootle, a former chief economist at HSBC and one of the Bank of England's committee of 'wise men' under the last Conservative Government. He has not ruled out a repeat of the 1990s crash that ruined thousands of buyers who were repossessed or owed more on their homes than they were worth...

Posted by should of banked it @ 08:59 AM (1142 views)
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9 thoughts on “Only 3% per year!

  • hang on a mo – wasn`t it Bootle who said only a month ago that prices could not fall because of the supply/demand situation?
    maybe he was got at temporarily by the VIs but then realised the futility of his position and has now come out with his hands up.

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  • Oh I wondered where Rodge had got to. I understood Roger was forcasting lower property prices for some time (2004 or 2005 I think – although i might be corrected). In my view his wrong 20% reduction prediction at the time doesnt make him stupid etc. Its a fact that no one knows when a bubble will end or how inflated it will get. At the same time the people that predict a fall (e.g. people on this site) get villified, and told how stupid they are for missing out on a boom. They look more and more stupid the higher the prices and the more inflated the bubble gets. Eventually in hindsight the catalyst was “obvious” and then everyone back tracks.( E.g ending of MIRAS double taxation relief in 89) In the meantime the bears or short sellers get killed (e.g. Dot Com asset bubble). (personally i have had so much pressure put on me to buy in the last year or so). I’m surprised about the falls of only 3% forecast for 2008 and 2009. This time due to the iliqudity of the market, and the BTL impact it may be a lot worse. like the way the Mail finishes with the :

    “Capital Economics and Mr Bootle have a history of forecasting property market slowdowns and busts that have failed to materialise. However, the organisation believes economic conditions mean the predictions are more likely to be accurate this time.”

    The fact is the bigger the bubble, the bigger the bust or perhaps we are just entering an Elliott 4th wave correction with a 5th wave (and even bigger bubble) still to come. I’m think its all over, and the 90s (“crash”) was the 4th wave correction. Money is out of property (ownership) so it is where my mouth is!

    I found this interesting (but not for the faint-hearted): http://www.kwaves.com/kond_overview.htm

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  • I like this reader’s comment

    “The guy who predicted the US sub-prime collapse AND the global credit squeeze (English guy in Hong Kong, forget his name) says that UK house prices will drop significantly.
    And no, it is not mostly supply that is the problem. Over 30% of all sales now go to BTL: stamp out that market and you increase stock for sales to real homebuyers by at least 50%!
    As for those BTLers who say they provide a valuable service to those who cannot afford to buy, I say this: they cannot afford to buy because people like you have bought more than a third of all properties on the market since 2002 and inflated the market. You are the cause, not the cure.”

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  • Well said Confused76 , as soon as we get rid of these BTLers which the govt has encouraged through relaxed lending up until now , the better
    It is crazy when people who earn 18-25K can own 10 houses as is the case – crazy lending!!! they deserve all they get and the crooked mortgage brokers who arrange these deals !! If I was in power I would limit home owning through a ” multilpler” CGT policy to really hit those who own more than say 2 houses.

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  • David Smith's Sub Prime. . . says:

    Manjit,

    You can’t do it no matter how much you would like. Let the market speak…

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  • the more articles like this start to appear the more btl’s will start dumping their stock ,
    more and more buyers will wait to see where the markets going, result
    hpc here we come

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  • Fall by only 3% a year?

    Why such a small figure? If the economic conditions once prevailed that enabled rises of 10-20-30%, then why not significant falls if those conditions have disappeared?

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  • The socioeconomic side effects of runaway house prices in recent years have been woefully underestimated by the current government, all too happy to pat themselves on the back and watch the tax revenue roll in.

    The consequences of falling home ownership (the first time this has happened in over 50 years) are a brain drain of young knowledge workers and a squeezing of other enterprise vehicles, as everyone ploughs their excess cash into property not productive wealth generating investment.

    A 3% drop is wildly optimistic. Interesting how commentators are continually changing their forecasts now to keep up with the worsening outlook.

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  • Paul, you are damn right. Where I work in London, the best engineers have walked out due to ever-rising living costs and I will be following them in the new year. Some have gone north, others have gone abroad. This but-to-let fantasy land is fucking destroying the economy. Not worried about my swear words because my comments never get posted anyway!

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