Tuesday, December 23, 2008

Another -35% prodiction yipee

House price fall 'will be 35% before rising'

The property market collapse still has two years to run and will not bottom out until prices are 35% below their peak, a leading City forecaster warned today.

Posted by dantheman @ 04:20 PM (712 views)
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6 thoughts on “Another -35% prodiction yipee

  • I saw a comment made by Little Professor on another thread and I was struck by a phrase that he used which was “price to earnings ratio”. This is a much better phrase than income multiples. When as first time buyers, Mrs Yorkshireman and I bought our first house in the mid 1980’s, we could work on a maximum price to earnings ratio of 3.25. In fact, we borrowed only 2.3 times, but were able to buy a modest house. Based on local earnings figures, you would need to work on a ratio of about 7.0 to 1 to buy the same first time buyers house today So, to get back to near reality, house prices need to fall by a minimum of 50%, or of course, wages need to double, which we all know will not happen, unless I happen to be a failed merchant banker (pun intended).

    Very best wishes for Christmas and for a peaceful 2009.

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  • Don’t you mean mrs Yorkshirewoman?

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  • ym – I think wages will double. The speed at which the Clown is printing money is going to cause massive wage inflation.

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  • Hi Inbreda. Even though Mrs Yorkshireman’s tongue will kill a grown man at 50 metres, I have to admit she is female.

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  • Yup, price-to-earnings ratio is the best way of looking at this. I did a chart going back to 1952 (which looks the same as other charts I’ve seen) and it always dips back to around four times earnings, or as low as three in the mid-1990s. So a 50% overall fall looks realistic.

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  • @4: yorkshireman

    I know what you mean, mate. Yep, I have one of those!

    As to the incomes multiple, or whatever you want to call it, I still find it worrying that once we get to the bottom of this trough, what has just come around will come around again, but with different first time buyers in the frame. What is to stop another bubble from growing?

    Isn’t part of the problem that there are too many people wanting to own their own home, and too few homes for them to buy? The other part of the problem, that money was too easy to come by, is currently under control — no bugger wants to lend to anyone, and the BTL brigade are really feeling the pinch (why does that always make me smile?). Once we get back to some sort of normality, won’t this speculative nonsense just start all over again.

    I can’t point my finger at anything that has been put in place to control this over the longer term.

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