How far will house prices fall [volume 4]

How far will house prices fall [volume 4]

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okgo

37,858 posts

197 months

Thursday 28th August 2014
quotequote all
princeperch said:
we have been v v lucky. we are both 29 and its sort of (pending any disasters) fallen into place.

even if the chain falls apart I'm still selling the flat, even if I have to pay 5k on ERCs on the mortgage..
Ideal.

Good luck.

AstonZagato

12,652 posts

209 months

Thursday 28th August 2014
quotequote all
vescaegg said:
AstonZagato said:
gibbon said:
AstonZagato said:
From a recent report I read:

Note the UK property (London and regions).
Not sure I agree.
Apologies, what exactly is this showing us?
It is a stylised view of the phases through which pretty much every boom-and-bust mania goes:
Phase 1: Bull Run
Phase 2: Pullback & Asymmetric Beta
Phase 3: Parabolic Upleg
Phase 4: Correction & Failed Bounce
Phase 5: Crash
Phase 6: Revulsion

That much I'd agree with - most investment manias exhibit those types of trends/emotions. I suppose it is a little like the financial markets version of the "five stages of grief" (denial, anger, bargaining, depression and acceptance) that are often discussed

The scale of the moves is not meant to be accurate but more the trend/emotion/reaction.

They have then mapped on to that where, in their opinion, various asset classes currently are in that cycle. They have put London residential property near the peak and non-London property past the peak.

They are suggesting that Japanese equities (far right) are set for a huge bull run.

Gold has further to fall on their view.
Im not sure London ever leaves 'Phase 3'? Has it ever peaked and come down or does the rise just slow?
I think it takes an exogenous shock - wealth tax, dirty bomb, war with Russia, etc. - to make the market correct.

The thing about London property at the top end is that, from what I hear, there is so little leverage and speculation. They are bought by people who pay cash, rarely live here and really wouldn't be arsed if the thing they paid £30mio for were to be valued at £3mio the next day.

What makes things seriously correct (in my view) are leveraged unwinds - forced sellers needing to get out whatever the pain. No leverage, no unwinds. With the top end not under pressure and most people below that able to cope with the cost of their finance, the market would see an absence of supply. The thing that pressures the next layer is interest rates and the job market. Neither is likely to implode any time soon.

That said, markets always return to the mean. There are no new paradigms. They also do not correct by going sideways.

In other words, it can't stay in phase 3 for ever. It won't end prettily. the root cause of the end is not obvious (if it were, then the market would be correcting).

We probably need it to get more speculative before it ends.

Edited by AstonZagato on Thursday 28th August 12:29

turbobloke

103,742 posts

259 months

Thursday 28th August 2014
quotequote all
AstonZagato said:
I think it takes an exogenous shock - wealth tax, dirty bomb, war with Russia, etc. - to make the (top end London) market correct.
yes

gibbon

2,182 posts

206 months

Thursday 28th August 2014
quotequote all
AstonZagato said:
I think it takes an exogenous shock - wealth tax, dirty bomb, war with Russia, etc. - to make the market correct.

The thing about London property at the top end is that, from what I hear, there is so little leverage and speculation. They are bought by people who pay cash, rarely live here and really wouldn't be arsed if the thing they paid £30mio for were to be valued at £3mio the next day.

What makes things seriously correct (in my view) are leveraged unwinds - forced sellers needing to get out whatever the pain. No leverage, no unwinds. With the top end not under pressure and most people below that able to cope with the cost of their finance, the market would see an absence of supply. The thing that pressures the next layer is interest rates and the job market. Neither is likely to implode any time soon.

That said, markets always return to the mean. There are no new paradigms. They also do not correct by going sideways.

In other words, it can't stay in phase 3 for ever. It won't end prettily. the root cause of the end is not obvious (if it were, then the market would be correcting).

We probably need it to get more speculative before it ends.

Edited by AstonZagato on Thursday 28th August 12:29
I agree entirely.

gibbon

2,182 posts

206 months

Thursday 28th August 2014
quotequote all
princeperch said:
my buyers mortgage valuation came back clean today - its been signed off at 435k.

if I had bigger balls id take the 1/4 mill we'll shortly have in cash and buy a big old pad up in scotland.

instead everyone gets a slice, including the agent and the bloke we are buying from, and the london property merry-go-round continues...
Good luck to you, enjoy the new home.

I did something similar, except I kept the flat and rented it out and bought a local house (our areas are similar I believe). Owned the flat four years before I moved out, buying the flat was the best decision I have ever made for various reasons, easy to say with hindsight though, and it certainly felt scary buying it at the time.

turbobloke

103,742 posts

259 months

Thursday 28th August 2014
quotequote all
AstonZagato said:
The thing that pressures the next layer is interest rates and the job market. Neither is likely to implode any time soon.
Agreed again, not least as interest rate rises will be slow (ish) post-election.

That said, somewhere in the 'next layer' the average person's cash savings balance now stands at £1,678 so there isn't much of a cash cushion out there.

fido

16,752 posts

254 months

Thursday 28th August 2014
quotequote all
turbobloke said:
AstonZagato said:
I think it takes an exogenous shock - wealth tax, dirty bomb, war with Russia, etc. - to make the (top end London) market correct.
yes
Add - China subprime/shadow banking collapse?

z4RRSchris99

11,221 posts

178 months

Thursday 28th August 2014
quotequote all
From my inside view, we have a few sectors in play at the moment:

non core - going to get a small hit
sub prime non core - going to get fking demolished
prime - going to get a bigger hit
prime non core - going to get fking demolished
super prime - stable




avinalarf

6,438 posts

141 months

Thursday 28th August 2014
quotequote all
z4RRSchris99 said:
From my inside view, we have a few sectors in play at the moment:

non core - going to get a small hit
sub prime non core - going to get fking demolished
prime - going to get a bigger hit
prime non core - going to get fking demolished
super prime - stable
Care to put some percentages on those comments.
I'm planning to help my daughters buy properties in London circa £3/£4000K so any advice appreciated.
I'm thinking Stamford Hill type area.
Prices there are obviously cheaper than Hackney/Dalston etc.

z4RRSchris99

11,221 posts

178 months

Thursday 28th August 2014
quotequote all
anonymous said:
[redacted]
New builds but not stockbroker belt, just zone 1. might be a different market to outside london.

non core - going to get a small hit - your flat in TH that was 350k and is now 425k
sub prime non core - going to get fking demolished - you stuff 1500-2200psf in non traditional prime locations
prime - going to get a bigger hit - 2500psf to 4500psf, too toppy
prime non core - going to get fking demolished - 2500psf + in non traditional locations
super prime - stable - anything over £10m is used as a wealth store and money laundering, these people dont need to sell and couldnt give a st about value.



Magog

2,652 posts

188 months

Thursday 28th August 2014
quotequote all
z4RRSchris99 said:
From my inside view, we have a few sectors in play at the moment:

non core - going to get a small hit
sub prime non core - going to get fking demolished
prime - going to get a bigger hit
prime non core - going to get fking demolished
super prime - stable
I'd be interested in seeing your definitions fleshed out a bit more.

avinalarf

6,438 posts

141 months

Thursday 28th August 2014
quotequote all
z4RRSchris99 said:
New builds but not stockbroker belt, just zone 1. might be a different market to outside london.

non core - going to get a small hit - your flat in TH that was 350k and is now 425k
sub prime non core - going to get fking demolished - you stuff 1500-2200psf in non traditional prime locations
prime - going to get a bigger hit - 2500psf to 4500psf, too toppy
prime non core - going to get fking demolished - 2500psf + in non traditional locations
super prime - stable - anything over £10m is used as a wealth store and money laundering, these people dont need to sell and couldnt give a st about value.
Can you put this into a London context of categories with an example of an area.
Also will you give an idea of percentage drop.
Thank you.

Croutons

9,807 posts

165 months

Thursday 28th August 2014
quotequote all
Magog said:
I'd be interested in seeing your definitions fleshed out a bit more.
If you mean "in plain[er] English", I agree!

princeperch

7,911 posts

246 months

Thursday 28th August 2014
quotequote all
Croutons said:
Magog said:
I'd be interested in seeing your definitions fleshed out a bit more.
If you mean "in plain[er] English", I agree!
time scales would be useful too (and a borrow of the crystal ball too)

LucreLout

908 posts

117 months

Thursday 28th August 2014
quotequote all
I don't see prices crashing, given what we've just been through.

The biggest knowable risk is another labour government next year. If that doesn't happen then the economy should be set for 4 or 5 more years of growth.

z4RRSchris99

11,221 posts

178 months

Thursday 28th August 2014
quotequote all
I obviously dont have a crystal ball,

Time scales - I reckon end of 16 early 17

areas of london, ill give an example scheme of each. I deal in new build but the same applies for old stock just not in the same severioty.

non core - cityscape in aldgate east. £1000psf mental i reckon 25% drop

sub prime non core - riverlight, embassy gardens, anything in nine elms 35-50%

prime - Alpha Place, the chelsea stuff, fitzroy, 25% drop

prime non core - big stuff at NEO, st georges tower, 50%

super prime - stable - OHP

Magog

2,652 posts

188 months

Thursday 28th August 2014
quotequote all
z4RRSchris99 said:


super prime - stable - OHP
Are some people in your industry of the view that a closed market for an almost entirely separate asset class, owned largely by anonymised offshore entities and with resale activities heavily controlled by that asset classes originators might be an effective way of disguising or legitimising payments for other goods and/or services rendered?

princeperch

7,911 posts

246 months

Thursday 28th August 2014
quotequote all
z4RRSchris99 said:
I obviously dont have a crystal ball,

Time scales - I reckon end of 16 early 17

areas of london, ill give an example scheme of each. I deal in new build but the same applies for old stock just not in the same severioty.

non core - cityscape in aldgate east. £1000psf mental i reckon 25% drop

sub prime non core - riverlight, embassy gardens, anything in nine elms 35-50%

prime - Alpha Place, the chelsea stuff, fitzroy, 25% drop

prime non core - big stuff at NEO, st georges tower, 50%

super prime - stable - OHP
asides from your job - do you have skin in the game

z4RRSchris99

11,221 posts

178 months

Thursday 28th August 2014
quotequote all
princeperch said:
asides from your job - do you have skin in the game
no, when it crashes ill be out of a job.

the family has property we purchased decades ago so I live in one of them.

z4RRSchris99

11,221 posts

178 months

Thursday 28th August 2014
quotequote all
Magog said:
Are some people in your industry of the view that a closed market for an almost entirely separate asset class, owned largely by anonymised offshore entities and with resale activities heavily controlled by that asset classes originators might be an effective way of disguising or legitimising payments for other goods and/or services rendered?
I wouldnt say its a way of disgusing payments, but its certinatly a very safe place to put your money, much safer sometimes than a bank in your own country.

ukraine hits the fan, week later nick candy sells an apartment to a ukranian for £148m - no st.
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