How far will house prices fall? [Volume 3]

How far will house prices fall? [Volume 3]

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Digga

40,206 posts

282 months

Thursday 28th October 2010
quotequote all
ATG said:
It is entirely normal for banks to behave pro-cyclically just like any other firm caught up in the start of a recession.
This is part of the problem with our economy though - the short termism - and it's where we will struggle to compete in the future. Again, banks are not to blame for this, the institutions who hold shares are as guilty as anyone.

However, the banks are presently giving the old "what, who, me guv?" bks about lending to business - doing one thing and saying another, which isn't helpful and is more than a little disngenious. They make no mention of a 'pro-cyclical' strategy.
ATG said:
Why single them out for abuse?
Where's the abuse? I'm not demanding the city be ringed by a forest of pikes with bankers heads atop.





Edited by Digga on Thursday 28th October 08:10

NoelWatson

11,710 posts

241 months

Thursday 28th October 2010
quotequote all
ATG said:
It is entirely normal for banks to behave pro-cyclically just like any other firm caught up in the start of a recession. Why single them out for abuse?
I think you have missed the fact that housing is not cyclical. It goes up several hundred percent, falls a few percent and then we are at the start of the next cycle. There has been a lot of research in this area by luminaries such as Krusty Allslop

Meanwhile in other news, Nationwide -0.7% MOM

http://www.nationwide.co.uk/hpi/historical/Oct_201...

But don't worry, the falls are only modest, and "Further quantitative easing could boost
the housing market" (did they miss the GDP numbers?)

XJ40

5,983 posts

212 months

Thursday 28th October 2010
quotequote all
Beardy10 said:
XJ40 said:
So, "millionaire mansions double as house prices fall"?

This seems at odds with some of what I've read on this thread (the last volume) recently, seems quite surprising to me.

http://blogs.telegraph.co.uk/finance/ianmcowie/100...
I've read this somewhere else and see evidence of the amount of money going into high end property daily. I live in an area of London where there are a lot of very,very expensive houses (not on my street). Houses get bought for £5 to £10 mil and have several million more spent on them.....huge basements dug out and the house built back on top of them. Literally the only thing they leave is the facade and everything else is ripped down.

It's got nothing to do with the rest of the housing market....different world. The wealth gap between the genuinely rich and the middle and working classes (for want of a better expression) had closed hugely over the last thirty years....it's now appears to be going back to where it was in Victorian times.
Well there certainly seems to be a two-tier market, especially in London. Obviously it's a small propertion of the overall national market as the average continues to fall, but perhaps it's a early sign of confidence returning to the property market in general? It seems there's a "let's wait and see" mentally, but maybe now we've a couple of quarters of decent growth those with secure private sector jobs at least will return to the market and help stabilise prices.


fido

16,752 posts

254 months

Thursday 28th October 2010
quotequote all
Decent article about the Great housing boom and bust.

http://www.telegraph.co.uk/news/newstopics/politic...

"Between 1975 and 1995, average house prices rose by just 3.5 per cent in real terms. Between 1995 and 2009, they went up by 120 per cent. That was great for Gordon Brown, since soaring house prices are like crack cocaine for politicians: illusory wealth created by unsustainable inflation that induces a huge “feelgood factor.” The hangover, however, is terrible. Under Labour, rents rose by two thirds, leaving young people unable to afford a house and forcing families to spend more on their mortgages (and, if they can afford it, on their children’s)."

NoelWatson

11,710 posts

241 months

Thursday 28th October 2010
quotequote all
fido said:
Decent article about the Great housing boom and bust.

http://www.telegraph.co.uk/news/newstopics/politic...

"Between 1975 and 1995, average house prices rose by just 3.5 per cent in real terms. Between 1995 and 2009, they went up by 120 per cent. That was great for Gordon Brown, since soaring house prices are like crack cocaine for politicians: illusory wealth created by unsustainable inflation that induces a huge “feelgood factor.” The hangover, however, is terrible. Under Labour, rents rose by two thirds, leaving young people unable to afford a house and forcing families to spend more on their mortgages (and, if they can afford it, on their children’s)."
fido said:
Decent article about the Great housing boom and bust.
We haven't see the bust yet

fido said:
Between 1975 and 1995, average house prices rose by just 3.5 per cent in real terms. Between 1995 and 2009, they went up by 120 per cent.
This was caused by the following

1. In 1995, all women went to work - this was unheard of before
2. Great swathes of the white cliffs of Dover fell into the sea, causing a shortage of land
3. 99% of people became self employed in 1995, earning 10 times what they did as an employee. This doesn't show up on the earnings numbers, hence the price increase.



VX Foxy

3,962 posts

242 months

Thursday 28th October 2010
quotequote all
MMC biggrin

XJ40

5,983 posts

212 months

Thursday 28th October 2010
quotequote all
NoelWatson said:
fido said:
Decent article about the Great housing boom and bust.
We haven't see the bust yet
Although we've not had a spectacular bust, the fact that we've got 5%+ inflation PA eroding prices in real terms is a gentle bust is it not. It seems to me that low rates, QE, etc. are letting the air out slowly. Wages are lagging but will follow sooner or later. We did have a significant fall in prices, to the point where enough people though “cheap as chips mate” to start buying, leading to prices rising again. If the current fall is sustained, I'd back prices to swing back again.

With evidence of an economic recovery confidence will start to increase. I know we've got the whole government “cuts” thing which will have some effect on growth, but as government spending overall will still be increasing I think the impact is being over played by some, I'm trusting the government approach although it's early doors yet. A growing private sector can mop up public sector job losses over the next five years.

Personally, I think that for all the orange folks with the maxed off plastic buying 60 plate Audi's on the never never, there's a good, perhaps greater number of proper people out there who've been quietly and without fuss saving / paying down debt over the last few years. That's what I've been doing in any case and am in the process of becoming a FTB (still), buying a new build that not yet finished.

I did share some of the gloom on house prices though I'm seeing reasons for cautious optimism and have changed my view now I've a vested interest. biggrin

Edited by XJ40 on Thursday 28th October 11:12

NoelWatson

11,710 posts

241 months

Thursday 28th October 2010
quotequote all
XJ40 said:
Although we've not had a spectacular bust, the fact that we've got 5%+ inflation PA eroding prices in real terms is a gentle bust is it not. It seems to me that low rates, QE, etc. are letting the air out slowly. Wages are lagging but will follow sooner or later.
And when wages go up, and inflation is at 5%, will interest rates still be at 0.5%?

VX Foxy

3,962 posts

242 months

Thursday 28th October 2010
quotequote all

XJ40

5,983 posts

212 months

Thursday 28th October 2010
quotequote all
NoelWatson said:
XJ40 said:
Although we've not had a spectacular bust, the fact that we've got 5%+ inflation PA eroding prices in real terms is a gentle bust is it not. It seems to me that low rates, QE, etc. are letting the air out slowly. Wages are lagging but will follow sooner or later.
And when wages go up, and inflation is at 5%, will interest rates still be at 0.5%?
I doubt it, but with evidence of an economic recovery underway they won't need to be. They'll ramp it up slowly, they won't turn around and stick 2% on it overnight.

NoelWatson

11,710 posts

241 months

Thursday 28th October 2010
quotequote all
XJ40 said:
NoelWatson said:
XJ40 said:
Although we've not had a spectacular bust, the fact that we've got 5%+ inflation PA eroding prices in real terms is a gentle bust is it not. It seems to me that low rates, QE, etc. are letting the air out slowly. Wages are lagging but will follow sooner or later.
And when wages go up, and inflation is at 5%, will interest rates still be at 0.5%?
I doubt it, but with evidence of an economic recovery underway they won't need to be. They'll ramp it up slowly, they won't turn around and stick 2% on it overnight.
I'm not sure they will be able to keep negative real interest rates forever. Base should really be around 7% now with RPI at around 5%. They are getting away with it for the time being, but when demand increases, this may not be the casde.

XJ40

5,983 posts

212 months

Thursday 28th October 2010
quotequote all
They're clearly using low rates to support the economy rather than to put the brakes on inflation. If the recovery is sustained then I think we'll see 'em rise to something approaching sensible though I think it'll be a long time before we see anything like what your suggesting. If not then they'll look to keep them on the deck as they have done. Either way, I don't think it has to be bad news for house prices.

DonkeyApple

54,923 posts

168 months

Thursday 28th October 2010
quotequote all
XJ40 said:
NoelWatson said:
XJ40 said:
Although we've not had a spectacular bust, the fact that we've got 5%+ inflation PA eroding prices in real terms is a gentle bust is it not. It seems to me that low rates, QE, etc. are letting the air out slowly. Wages are lagging but will follow sooner or later.
And when wages go up, and inflation is at 5%, will interest rates still be at 0.5%?
I doubt it, but with evidence of an economic recovery underway they won't need to be. They'll ramp it up slowly, they won't turn around and stick 2% on it overnight.
They might not have any choice once inflation gets going.

It'll start slowly with a quarter or half point announced at the meetings but then it is extremely likely that all hell with break lose with inflation and we'll see emergency 50 to 100 bp being piled on out of the blue and what started as a small, slow, gentle climb back up will become a rout.

That is when hoards will be taken out fo the market overnight.

We are in a period at present where banks are shoring up their balance sheets so as to take the hits on board and attempting to reduce their exposure and the people have the opportunity to pay down debt or unwind their over leveraged positions. A lot of people are doing just that but others are leasing cars and buying hair products.

There is an extremely strong probablity of a large section of the home owning public being fked within a quarter once this starts. But it will release property to those who have been smart enough to save their money rather than invest it in cars, TVs and hair products.

I would say the chance of a strong but selective and short lived price correction within the next few years is very good.

Digga

40,206 posts

282 months

Thursday 28th October 2010
quotequote all
DonkeyApple said:
I would say the chance of a strong but selective and short lived price correction within the next few years is very good.
Outside of Pistonheadcestershire.

Naturally.

NoelWatson

11,710 posts

241 months

Thursday 28th October 2010
quotequote all
Tonker - this must be in your "hood"

http://www.guardian.co.uk/money/2010/oct/24/buy-to...

DonkeyApple

54,923 posts

168 months

Friday 29th October 2010
quotequote all
Digga said:
DonkeyApple said:
I would say the chance of a strong but selective and short lived price correction within the next few years is very good.
Outside of Pistonheadcestershire.

Naturally.
But of course, the normal rules apply. biggrin


Digga

40,206 posts

282 months

Friday 29th October 2010
quotequote all
DonkeyApple said:
Digga said:
DonkeyApple said:
I would say the chance of a strong but selective and short lived price correction within the next few years is very good.
Outside of Pistonheadcestershire.

Naturally.
But of course, the normal rules apply. biggrin
More news from outside of Pistonheadcestershire.

House rpices resume slide

NoelWatson

11,710 posts

241 months

Friday 29th October 2010
quotequote all
Digga said:
Wake up at the back!! Posted yesterday - think people are so used to seeing falling prices now (obviously their area excepted) that there wasn't much comment

Digga

40,206 posts

282 months

Friday 29th October 2010
quotequote all
NoelWatson said:
Digga said:
Wake up at the back!! Posted yesterday - think people are so used to seeing falling prices now (obviously their area excepted) that there wasn't much comment
Sorry. I coudln't even spell the link correctly.

My excuse: It's exceptionally dark here this morning and it's difficult to wake up. I have a cup of super-strenght coffe on the go, but still I'm feeling a bit like I'd prefer to go back to my pit than stay awake.

The article harps on about consumers preparing for "for the toughest government spending squeeze in generations", but as well all know, the cuts aren't much depper than Darling had already announced - prior to the revival in house prices - and are unlikely to have significant or immediate effects in any case. If it is true though, then coupled with the natural quiet spell for house purchases over Christmas and New Year, it'll be dead in most EAs until at least March.

NoelWatson

11,710 posts

241 months

Friday 29th October 2010
quotequote all
Mortgage approvals hardly fell in September

http://uk.reuters.com/article/idUKTRE69S1502010102...

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