Wednesday, March 11, 2009

The dawn of the truth…….

House prices 'could drop another 55%' and leave Britain bankrupt

''House prices could slump by another 55 per cent, a respected City forecaster warns. It also predicts a deep recession lasting throughout next year and a 'very real probability' that Britain will go bankrupt''

Posted by hpwatcher @ 11:26 PM (2108 views)
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29 thoughts on “The dawn of the truth…….

  • Congratulations hpwatcher.

    I think you have just posted the most bearish mainstream media article ever on this blog (?) This is going to be hard to beat.

    Another 55% !!!

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  • little professor says:

    Woot! Great to see this bearfest in a mainstream paper like the mail. 55% off peak prices is beyond what most of the bears on this site predict, so to see the mail quoting 55% off current prices is astounding.

    Great article.

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  • Finally, a mainstream city economist/institution not afraid to speak the truth unlike other economists who never publically say what they think in private because they have to go with the official view of the banks who employ them.

    “Crazy” was what I said to myself when the government announced they wanted to get lending/credit back to the same levels at the peak of the bubble in 2007, exactly what caused house prices to get out of sink with the economic fundamentals in the first place! Have to say though, personally another 55% from here seems excessive given all the things the government have resorted to doing to sweeten the poison. But had they not intervened and left it to market forces as they did in the run up to the bubble then it could well be that bad.

    But even if there is some sort of minor economic recovery next year, prices will continue to fall as unemployment is likely to keep rising for at least two/three years. And as was the case in last recession, economic recovery itself will not be enough to halt the downward spiral in prices, then technically the economy had recovered by 93 yet prices kept falling till around 96. What will be needed is the feel good factor to come back and that will take years to re-surface especially given that we will all be paying so much more higher taxes in the long term to pay for the government’s current policy mistakes.

    So I’m thinking at least another 25% fall from here over the next 2-3 years to go with a few small blips upwards in-between that will lure unsuspecting first time buyers to buy. But when they find themselves in negative equity they will only have the government to blame for seducing them into purchasing a property when the consensus is for prices to continue falling for at couple of years even if it may not be at the 55% level. Quite sad really.

    And I’m not sure were going to need a 55% crash to make us bankrupt, with all the crazy amount of money Brown and his Darling are spending, we are already looking insolvent.

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  • What gets me is that a small 2 bed bungalow near to me, sold for £78k in 2000, is still priced at £240k!
    Even if they reduced this by 55%

    I would still not buy it, as I genuinely belive it would be overpriced! OF COURSE IT IS!

    Another house near to me sold for £167k in 2007, was recently put on the market for 229k!!!

    Estate Agents are an absolute joke!

    I have one stipulation when talking to estate agents now. I am only interested in purchasing my fist home, and paying whatever the house was sold for in 2000.

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  • its edging in

    next we need this on the fron tpage of the sun

    then on the main bbc news ..(no hope there ….or is there?)

    🙂

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  • japanese uncle says:

    Remember, I have kept saying 85% in London, 75% in Edinburgh, and 65% elsewhere from the peak.

    This report says further 55% drop from now that we have seen 21% drop from the peak, meaning 79% (ie100 – 21) x 45%(ie100 – 55) = 35.5% meaning 64.5% from the peak. Fair enough figure for UK overall, but London and Edinburgh will have to see severer drop than this forecast. It cannot be helped.

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  • If it drops that far, we’ll have bigger problems to worry about.

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  • As much as I’d like to see cheaper property, the “very real probability that Britain will be bankrupted” scares this life out of me. This would lead to rioting, war, famine… you name it.

    This government MUST stop borrowing money and encouraging us to get further into debt. We must ACCEPT that house prices will fall, millions will lose their jobs, GDP will collapse. No amount of borrowing will stop it – it will only make it worse!

    First, accept the reality, then go back to basics – hard work, innovate, save instead of borrow, consume quality instead of quantity.

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  • I think it will happen…it’s just going to take a little while longer.

    UK plc will inevitable go bust, so those HPC’s with savings in sterling….you have been warned!

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  • The only problem I have with this prediction, and although for most of us a 55% drop from here would be a good thing, it is that so many people will be in hock to the very banks who helped manufacture this problem in the first place and will therefore be tied to their jobs/ properties for a very long time, and also Numis Securities is an investment bank so therefore cannot be trusted, except to look after themselves and their investors best interests. The longer this crisis goes on the less I trust anything I am told by an investment banker/ economist working for a bank, or the banks themselves…..and don’t get me started on politicians.

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  • Confused1234 says:

    hpwatcher @ 5.

    For the simple minded like me, if I have savings in sterling, what should I do with it?

    Your advise will be most welcome.

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  • But JU, we know you to be such a lukewarm bear…having predicted that GBP/JPY would hit 140 in 2008, when in reality it was targetting 119. Making adjustments for your inherent bullishness 🙂 it looks like they will be giving homes away in London…

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  • mark wadsworth says:

    hpw, that is an excellent find.

    I don’t see how it would make Britain go bankrupt, though.

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  • Justanotherftb says:

    HAHA!

    If I’d seen an article like this in the mainstream press a year or two ago I would have wet myself!

    FINALLY the sheeple are waking up to the reality!

    Bring it on 🙂

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  • Mainstream Crash at last.

    Now let’s see what the David Smiths are now paid to say!!!!!!!

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  • LP,
    It would be nice to see houses drop. For a start, lots of younger folk I know, who are currently priced out, could buy an affordable house.

    That said, I reckon that another 15% drop could cripple another bank. Continued bailing out of banks would leave the government bankrupt – it can’t go on bailing out forever, can it? As for a 55% drop, the article says:

    “‘The bankruptcy of the UK is a very real probability as the UK government is trying to stimulate a greater debt burden in a grossly over-indebted economy,’ .

    I think the UK would suffer severe failings well before a 55% drop took place. Careful for what you wish for….

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  • ”It calculates that the average house price should be just £96,000, based on average earnings and the old lending limit of three times salary plus a 25 per cent deposit. ”

    Which is fair enough and would lead to average prices of £96k I’m sure.

    However, lenders require less than 25% deposit and lend more than 3 times salary to one occupant and also lend against the second wage in the household.

    I’m glad they put that in the article as often the way the calculation is reached is missed out making the article pointless.

    Now the government own/control a good proportion of the mortgage lending banks and also the printing press.

    Whilst I’d like to see interest rates back upto sensible levels and the over indebted the ones to suffer through this crisis instead of the savers and more careful among us.

    Hand on heart do any of you think that banks will return to lending 3 times salary as a maximum and demand 25% deposit as a minimum ?

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  • hpwatcher @ 5.

    For the simple minded like me, if I have savings in sterling, what should I do with it?

    Your advise will be most welcome.

    I would say to diversify: buy some gold, keep some sterling, some euros, some dollars, some commodities and possible some shares etc. That would be the safest approach, in my view.

    There may be some other HPC’ers who may also have some suggestions.

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  • ANY QUESTION ABOUT BANKS NOT RETURNING TO 3X’S LENDING IS BASED ON DENIAL. Of course banks HAVE to return to sensible lending, not doing so broke the banks, why do people have so much trouble understanding this even now with articles in mainstream press confirming 55% falls from here, which to be honest is a shock even to me, as that would be something like 75% from peak. THE UK COULD NOT AFFORD TO SUPPORT AN INFLATED PROPERTY BUBBLE IT BROKE THE BANKS.

    The report itself says the government OR ANYONE asking for a return to 2007 levels IS “CRAZY” ITS WHAT BROKE THE BANKS.

    Hopefully someone will start a thread on the forum related to this and explain what it will mean when BTL’s start selling their portfolios as this article predicts, and also where to put money if the UK is about to go broke.

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  • Jake

    UK bankrupt – well what it really means is they have to go beg a loan from the IMF to cover the bills, lets say £100 billion to tide things over, the IMF will lend this but insist UK PLC set IRs to say 5% to recover the money ( as they did set IRs in the 70s ).

    It wont lead to riots but will drop house prices further and put up costs

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  • Daniel said

    “I have one stipulation when talking to estate agents now. I am only interested in purchasing my fist home, and paying whatever the house was sold for in 2000.”

    I wouldn’t waste your breath as you have zero chance of buying from an estate agent. You need to go to repo auctions where you might get lucky if you are brave enough to commit when the hammer falls and stump up 25%

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  • japanese uncle says:

    d’oh

    I predicted 120-130 jpy/gbp as overshoot. Latest rate is 133 jpy/gbp.

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  • 20. hpwatcher

    I am no expert, but if you go by the principle of buy low sell high oil looks like a pretty safe buy.

    I can’t imagine oil @ 0 bucks. As always it depends on how long you are prepared to wait for a return.

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  • JU – I was thinking back to the beginning of 2008 – at the time you were saying 170 with a 140 overshoot by end 2008. It was a brave prediction at the time and a very good one.

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  • well this had to happen,the rate at which property was rising was unsustainable. we sold our house early last year as we are heading for australia, just hope things arent so bad in the land of milk and honey!

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  • This country is in such a mess….
    I just received an offer for my house at 10k below asking price giving me a tidy capital sum of 165k
    My original plan was to stash it somewhere safe and offset the interest against the rent until the situation becomes clearer and I might be able to afford something bigger after HPC.
    But…give all the unknowns, inflation/deflation, interest rates, HPC, banks/UK bankrupcy…what the hell do I do ?

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  • I am no expert, but if you go by the principle of buy low sell high oil looks like a pretty safe buy.

    I can’t imagine oil @ 0 bucks. As always it depends on how long you are prepared to wait for a return.

    There are a couple of very good oil stocks that I have been quietly watching for the last year.

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  • mmm I’m not sure about validity of the statement: “falling house prices will make us bankrupt” – I think a few things like the government reducing interest rates to near zero ammounts so we are forced to go into more debt and stop investing, allowing rediculous bank bonuses and pensions and giving billions of pounds in benefits to those that dont deserve it, might just do it though…..

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