Friday, Jan 23, 2015

The Great Unwinding

MoneyWeek: UK house prices could fall 50%

"We’ve seen price falls in the housing market in the past in the early ‘90s and they went down 50%, and I think that we’re at the start of that kind of decline now – as I think, indeed, fairly soon we will be at the start of that in the stock market as well. As I say, I’m not depressed about this, because it’s just something that we have to go through to get to reality."
Bold prediction, but we deported reality from these shores a long time ago, and I'm not sure she will ever be allowed back in.

Posted by debtserf @ 12:07 PM (8931 views)
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1. i remember the 90`s said...

I hope they do drop 50% (I`ve lost faith in it happening though)and we own our house outright ,but we all have family who are going to want to buy .

Friday, January 23, 2015 12:18PM Report Comment

2. libertas said...

With the stock market having consolidated at a trading range since about 1998, the recent breakout suggests that global QE and ZIRP will finally send it soaring above that consolidation zone, with the Dow topping out somewhere between 25,000 and 30,000. European stocks have responded to QE by rising. Consider that unlike deposits, they pay dividends.

likewise, the bond "bubble" is not abating.

Can house prices really fall 50% whilst rates are falling and employment is rising?! Certainly, UK prices could fall 50% in US Dollar terms, but not nominally for UK consumers. Frankly, they look set to rise 25% for European investors, vs the Euro in the next year or two.

As I keep reminding people, I just bought a property and am paying 30% less mortgage repayments than those who rent on my street, plus 50% or so is re-payments that I see back again and which reduce my interest payment obligations. As we move towards negative rates, these prices begin to look increasingly good value. Those who calibrate their expectations against expensive parts of town should recognise that there have always been expensive sides of town. Simply look at the cheaper side of town to somewhere you can afford, do it up, and then move to the expensive side of town in 10yrs time after paying down the whole mortgage with early re-payments.

In other predictions, renters will loose 110% of the value of their "investment" in BTL properties whilst the cost of rental and fitting out unfurnished properties surges above the rate of inflation. Well, fitting out a house with nice stuff will rise, though fitting it out with IKEA crap could fall, but then again, your units will also fall down within a few years time. Now, that is a certainty. 50% drop in housing prices is not. Even in 2008, prices only fell a third or so at worst, so this call for 50% fall is total BS, and these reporters most likely have shares in BTL.

Comments about the "great unwinding" just do not wash. QE is picking up, rates continue to fall. Oil is down a lot due to technological advances in oil extraction and production, continued taxation of petrochemicals and ongoing efficiency of new products and alternatives to oil accelerating.

Friday, January 23, 2015 12:53PM Report Comment

3. hpwatcher said...

As I keep reminding people, I just bought a property...

What? You haven't stopped boasting about that for months and months.

Friday, January 23, 2015 03:02PM Report Comment

4. Eddielomax said...

I don't agree with oil being cheaper, the UK northsea is in crises with prices below $60 a barrel as 80% of new projects are unviable. Goldman Sachs and others had the US fracking industry in the red with prices between $60 and $80 dollars a barrel, below 50 I think means everyone is bust.

The problem with oil has been two fold, first the original spike collapsed weak economies (arab spring etc), and it is just too critical a resource to not buy it, but the subsequent high price did slowly cause people to change their usage, e.g. Italy is down significantly on 2008. For a while we had oil at any price, now we have an oversupply with large backlogs of wells to complete in the US, we will see carnage in the US this year, large amounts of investment cancelled and a spike likely a year or two later.

As for the great unwinding, I don't see it either, the QE money went to governments who spent it, I think we've seen the inflation from that already, and there are record amounts of cash being borrowed and placed on the stock market. A crash/reset is inevitable, but the bankers can always print so I think we'll see earnings stagnate while prices slowly increase. Property assets will be kept artificially high, but they will deflate in terms of oil/gold/real things that can be traded.
In that case buying a house is good as you minimise costs, but holding savings in (companies that pay dividends, international assets such as gold etc) would be the way to go for savings as cash, properties and other £ denominated assets deflate.

Friday, January 23, 2015 03:13PM Report Comment

5. killer bunny said...

Bull market in housing bear predictions. The market will decide and so far it's deciding to tell the bears to growl away but go hungry

Friday, January 23, 2015 03:52PM Report Comment

6. hpwatcher said...

Bull market in housing bear predictions. The market will decide and so far it's deciding to tell the bears to growl away but go hungry

What could possibly go wrong?

Friday, January 23, 2015 06:09PM Report Comment

7. icarus said...

"Oil is down a lot due to technological advances in oil extraction and production, continued taxation of petrochemicals and ongoing efficiency of new products and alternatives to oil accelerating".

Gosh, those technological advances, efficiency improvements and alternatives to oil must have happened pretty quickly. I don't think so. The only thing that deflates that quickly is a bubble. As the interviewee says, financial players got into, and out of, the oil markets.

Friday, January 23, 2015 06:47PM Report Comment

8. reticent said...

Good old Moneyweek. The first sign of trouble and they double down on their previous, continually disproven predictions.

20% in 1989-95, 20% in 2008-09, my gut says... 20% next time, with the biggest falls coming in London.

Obviously, some London property will sell for 50% less than peak. It always does. All the more so now that there is so much internationally-mobile capital speculating upon London property. But the nationwide aggregate will not go much further than 20%, barring a perfect storm of financial collapse, sterling crisis, foreign exodus and political paralysis.

Friday, January 23, 2015 07:00PM Report Comment

9. vinrouge said...

"barring a perfect storm of financial collapse, sterling crisis, foreign exodus and political paralysis"

You mean soon after May 7th then.....

Saturday, January 24, 2015 08:50AM Report Comment

10. iguana said...

Makes sense to me, artificially high asset prices are falling noticeably, property must follow and the BOE and Camborn have used up their range of props.

Saturday, January 24, 2015 11:11AM Report Comment

11. stillthinking said...

This reminds me of the choice of cheap housing when you are unemployed, or expensive housing when you have a job.

Saturday, January 24, 2015 11:13AM Report Comment

12. reticent said...

@8 Definitely seems the next crucial moment for UK HPs.

But I remember last election when people on here were certain the Tories would trigger a dead-cat bounce. Instead they dithered for 2 years before launching FLS and HTB, thus ending the post-crash stagnation.

Saturday, January 24, 2015 09:03PM Report Comment

13. clockslinger said...

If anyone who was thinking of buying in the south east followed Moneyweek's Mystic Meg on property prices over the last five years, the results would suggest it's way past time to end the subscription.
I find that I mostly agree with Libertas' reasoning (but not his politics) and, yes, I can see why he is unpopular on a site called HousePriceCrash! The name gives one a clue.

Monday, January 26, 2015 10:13AM Report Comment

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