Wednesday, April 9, 2008

Return to saner prices after Decade of Debt

Return to saner prices after Decade of Debt

Even a 30pc fall in house prices would only get us back to 2004 price levels.

Posted by david20040_0 @ 12:21 PM (1574 views)
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24 thoughts on “Return to saner prices after Decade of Debt

  • David?

    Is that you?

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  • david20040_0 says:

    Yep.

    A 30% fall whilst making headlines would only take us back too 2004 prices though and that is a sobering thought.

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  • Nice one Dave, try telling that to the peeps who have MEW’d or will be in large lumps of negative equity. I’m sure they will be consoled.

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  • david20040_0 says:

    Maybe but I am not really bothered, bring on the crash.

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  • That is a sobering thought.

    It means that this crash could have much further to run than we think – after all credit has been cheap since at least 2002.

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  • I bought my house in 1999, if houseprices fell 50% I still wouldn’t be anywhere near negative equity. It just goes to show how balistic houseprices have been in the last 9 years.

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  • Anyone else noticed how moderate and civil people here have been since things started exploding into mainstream?

    Hope it lasts.

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  • david20040_0 says:

    It is crazy though even if there is a 40 – 50% crash house prices have risen so much some people who bought in 1999 – 2001 will still be OK. It just shows how crazily they have risen.

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  • C'mon Correction says:

    Whilst 30% would mean a return to only 2004 prices, if you rented since 2004 compared to buying you would have benefitted from cheaper rents for a nicer property compared to the high cost of an interest only mortgage, no stamp duty and solictor fees etc if moved in that time (most my friends stayed in their starter home 3-5 years max), no maintenance and building insurance over the last 4 years etc,etc; all that extra saving would also be getting compounding interest too. Plus whilst renting you’re funds would have been more liquid, so you’d have less likely have taken out additional loans to fund a new car, boiler repair, etc.

    Plus a factor that not many people ever mention on this site is the fact that the pure rise seen over the years also masks the costs spent by home-oweners improving their home in that time – extensions, loft conversions, new flooring, decking, landscaping gardens etc etc. Just look at the DIY and building boom that happened along with the house price boom – it all cost money and is within the price increases.

    So really, in real terms if prices fall 30%, then you stop renting and buy – you’d get a better deal (less debt etc) than someone who had bought like-for-like house in 2004.

    All things considered, I’d say a drop of 30% would equal you to having bought in 2002-03.

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  • “even if there is a 40 – 50% crash house prices have risen so much some people who bought in 1999 – 2001 will still be OK.”

    Yes. There is a lesson there isn’t there? A house is a place you buy to live in. Those who didn’t MEW and aren’t unlucky with their personal circumstances will be fine. Anyway, let’s see how the market performs now that a bit of fear has been injected.

    Is the “2004 price level” after a 30% drop notional or compensated for inflation? I’m working on the assumption that it is notional.

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  • japanese uncle says:

    It’s about time to introduce more rational/rigorous regulation including the ban on all ‘teaser rates’ whether called as such or not, and prohibition of major financial transactions by those who cannot prove to have higher than average IQ, for the sake of protecting their own interest, career and life. It would be as reasonable as the straitjackets for preventing self-inflicting wounds.

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  • Daft comment.

    Someone who bought last week will still be OK. If they can afford the mortgage they will have a house to call a home and the estimated value of the property is not a concern to them.

    What we are really saying is that those greedy BTLers that bought in 99 are laucghing all the way to the bank no matter what happens. My opinion is “whatever”. At least if prices come down things get better for FTBs

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  • Charlie Brooker says:

    Hey I’ve just invented a new word : ‘debtcadence’ . This new word is a portmanteau of debt and decadence. Or how about ‘decadense’, a portmanteau of decadence and dense (thick, stupid) refering to irrational exuburence, as seen in,say, the UK property market.

    Reet, I’ll get mizeluf doon to wor Patent Office like, so’s all ’em wreeters and journo’s ‘ave ta pay us fur yoozin mah new words.

    (BTW a portmanteau is when you bring two apparently difference things together to form something new, such as mockney; someone trying to speak in a cockney like manner. Ah divvnt nah what the jurdee ekwivlunt is thur’)

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  • Some of the stats in that piece were lifted from the Halifax release yesterday – some reflect Halifax’s market share rather than the market as a whole.

    Looking at the old chestnut of a shortage creating a safety net, I’m pretty satisfied that this is wishful thinking.

    We have record low levels of occupancy in UK houses, and the onset of recession will not only persuade many young people to return to living with their parents, but also dissuade others from leaving home. Many home owners, faced with a dramatic rise in mortgage payments will seek to take in lodgers.

    Historically, economic downturns have seen an exodus of foreign nationals. There is little reason to suppose this will not happen again; indeed, it could well be on a much greater scale.

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  • mark wadsworth says:

    Back to the future! Let’s go back to 1999 prices (and party like it’s …)!

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  • What does it take to be a good financier ? Gordon does not know, the banks don’t know ! I find it hard to understand how simple arithmetic can baffle so many and its not as if they do not understand maths, able to count their high salaries and bonuses. The whole industry seemed to work hard at creating this problem to earn more without any consideration to the inevitable situation we have now. This problem will cause a recession, jobs will be lost especially those associated with housing and finance. We all know that true inflation is quite high especially if you include house prices and the ever rising costs are becoming unaffordable to the extent that mortgages will not be paid and repossessions will accelerate creating a serious housing problem because social housing does not exist and private landlords will overprice their properties and this type of housing is not a longterm solution. In fact I have done some research and there is a shortage of properties that are suitable for families and most do not accept pets and it is quite common to see 3 beds for £1000 per month.

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  • @ Uncle Tom
    It’s interesting that as the vested interests call for lower interest rates they are devaluing the pound and encouraging the exodus of foreign workers on which the repayments of many of their BTL clients rely on.

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  • Like Uncle Tom, I mistrust the house and land shortage argument. As others here have pointed out, rents have not shot up along with house prices as one would expect if there were not enough places to house people.

    And we are not seeing big increases in the numbers of people living on the street or in tents. Contrast this with the US. With all their land and (empty) houses, there are plenty of homeless in tent cities, as they call them. The demand for housing is there. The shortage is money in their pockets.

    It’s the money stupid.

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  • Irrespective of where prices have been at any stage as long as they return to the long-term average that will allow all those who should comfortably be able to afford somewhere to live to do just that. I think that’s all that matters really.

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  • 15. str 2007 said……Indeed, also inflation will soar ever upwards as imported goods (just about everything for sale in the UK) rise against a weaker pound. This point seem to go straight over the head of the man on the street.

    Rents are rising in Edinburgh, but this is been driven by higher lending costs and BTLer’s realising that capital gains no longer exists, therefore they are less comfortable subsiding the mortgage on the BTL.

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  • Geed,

    Without substantial capital gains what is the sense of renting houses to people who can’t afford to buy them. I think that there is a limited amount of extra rent landlords can ask for, You will always find one who wants to do a deal once his flat has been vacant for a month and more.

    My rent has risen from £625 to £650 in the last 4 years, hardly kept in touch with capital values. Now my divorce is through i am in a position to buy

    C

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  • Only 7 out of 10, but I didn’t know the etymology of the word ‘mortgage’ though ‘dead pledge’ seems quite appropriate.

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  • Inbreda

    Those who bought last week will be OK if they have no intention of selling for the foreseeable future.

    I bought in 1989 and didn’t get my money back until 1999. I wasn’t in negative equity having doubled
    my money on the previous house (1986 to 1989) but seeing my equity drop from £25K down to £8K
    (in 1996 I couldn’t sell at a 25% loss) certainly removed the feel good factor. Instead of buying a new car etc
    I just kept trying to pay off the mortgage as quickly as I could to try and maintain some equity in the house.
    I was certainly bad news for all the DIY stores etc. In nine years I spent about £100 on the house. When
    prices are falling there is very little incentive to throw good money after bad.

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  • Charlie

    Reet, I’ll get mizeluf doon to wor Patent Office like, so’s all ’em wreeters and journo’s ‘ave ta pay us fur yoozin mah new words.

    excellent! but wasted on this lot – they’re either southerners, manchurians or Scotts.

    exiled Geordie – I know, I have to live with them

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