- Original Poster
- #1
amazing how vested interests effect the experts opinion.:|
http://news.bbc.co.uk/1/hi/business/8224453.stm
Earl
http://news.bbc.co.uk/1/hi/business/8224453.stm
Earl
I agree totally with Jonathan Davis's view, having worked previously for 8 years in the mortgage market and right through the last collapse.
There are still more negatives than positives to come before there is any real sign of recovery.
And when the shoots of recovery do come, every bank, building society and specialist lender with punish us with their rates to make up the money lost.
Heads the lenders will win, Tails the customer will loose
There are still more negatives than positives to come before there is any real sign of recovery.
And when the shoots of recovery do come, every bank, building society and specialist lender with punish us with their rates to make up the money lost.
Heads the lenders will win, Tails the customer will loose
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Everything tells me JD's view is the more likely to be correct. If it is not correct then that means we must be returning to what went before and see where that got us.
It is all blah, blah, blah at the end of the day as no one really knows, only time will tell. Place your bets and hang on for the ride.
It is all blah, blah, blah at the end of the day as no one really knows, only time will tell. Place your bets and hang on for the ride.
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"AB: In my opinion, the very bottom of the market was reached several months ago, when cash buyers and professional property investors were having a field day"
I can't beleive people are still spouting this kind of rubbish, even from the vested interests. The housing market has a long way to fall yet. The only question is if it will be long and drawn out, or if something will happen to cause a sudden drop.
I can't beleive people are still spouting this kind of rubbish, even from the vested interests. The housing market has a long way to fall yet. The only question is if it will be long and drawn out, or if something will happen to cause a sudden drop.
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The reason that this rubbish is being branded about is very simple. Balance Sheets. From the banks to large business to small business a huge proportion of balance sheets are supported by property on them shown as assets. Now the reality is when the price falls the assets do not look so good against the borrowings anymore and if the cash flow has dropped the bank/business etc is bust!
Hence the amount of huge vested interest to keep the perceived value of property up and rising if possible as as they cannot see any other way out of the mess.
The system works a treat in the boom times but is a house of cards in times such as these.
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From a lay-persons view.
If interest rates increase by much then ar'nt we going to be in the same situation were in now.
With people coming off fixed rate onto a svr which they cant afford leading to repossessions and negative equity and oops were back here again.
Surely the best thing is for tighter regulations on who can borrow and whether they can actually repay the loan(based on earning as oppossed to the banks gambling on a rising market)
If interest rates increase by much then ar'nt we going to be in the same situation were in now.
With people coming off fixed rate onto a svr which they cant afford leading to repossessions and negative equity and oops were back here again.
Surely the best thing is for tighter regulations on who can borrow and whether they can actually repay the loan(based on earning as oppossed to the banks gambling on a rising market)
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- Original Poster
- #7
you mean like this:
http://news.bbc.co.uk/1/hi/8258405.stm
Not sure but a large drop in property prices may be a good thing to bring them into line with wages.
I suspect the people who will suffer will be the speculators as those that have bought at a high will not have a change in there circumstance if they have bought the property as a home.( unless they become one of the army of unemployed ).?
And the benefit to the first time or low income buyers will be enormous.?
No expert in this area But I was able to buy a house in 1964 for £5,400 while working as a toolmaker.
That same house was up for sale a couple of years ago for £800,000.
Surely illustrating the ridiculous dependance the country has had on a basic commodity for profiteering.?
Earl
http://news.bbc.co.uk/1/hi/8258405.stm
Not sure but a large drop in property prices may be a good thing to bring them into line with wages.
I suspect the people who will suffer will be the speculators as those that have bought at a high will not have a change in there circumstance if they have bought the property as a home.( unless they become one of the army of unemployed ).?
And the benefit to the first time or low income buyers will be enormous.?
No expert in this area But I was able to buy a house in 1964 for £5,400 while working as a toolmaker.
That same house was up for sale a couple of years ago for £800,000.
Surely illustrating the ridiculous dependance the country has had on a basic commodity for profiteering.?
Earl
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I have a £125k mortgage now which is costing me £709 PM capital and interest. maybe £60k equity we have done a lot of work to the house
I have seen a house for £399k which will cost me £900 PM Interest only
Its 4 times the size of my house now.
My thinking was but now whilst rates are low keep for 30 yrs then sell off when retiring. going on house prices for the last 40 yrs it should be worth in excess of a million leaving £600k to buy a retirement home.
That is all based on a 25% deposit with a 15% deposit the repayments are £1700 PM Whilst that may still be doable who wants to throw away £800 per month.
I have seen a house for £399k which will cost me £900 PM Interest only
Its 4 times the size of my house now.
My thinking was but now whilst rates are low keep for 30 yrs then sell off when retiring. going on house prices for the last 40 yrs it should be worth in excess of a million leaving £600k to buy a retirement home.
That is all based on a 25% deposit with a 15% deposit the repayments are £1700 PM Whilst that may still be doable who wants to throw away £800 per month.
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If history shows us one thing that every boom is followed by a bust. Then collective amnesia sets in followed by another boom.
Boom and bust is almost miserably predictable: the bust comes around 10-12 years after the recovery from the previous bust has occurred.
Thus it has been since almost the end of the Napoleonic wars. The cycle only being interrupted briefly by the inconvenience of a couple of world wars.
There is an awful lot to be said for contrarian thinking.
Buy when there is blood on the streets -
-sell when your barber starts telling you how much he is making from his investments.
Boom and bust is almost miserably predictable: the bust comes around 10-12 years after the recovery from the previous bust has occurred.
Thus it has been since almost the end of the Napoleonic wars. The cycle only being interrupted briefly by the inconvenience of a couple of world wars.
There is an awful lot to be said for contrarian thinking.
Buy when there is blood on the streets -
-sell when your barber starts telling you how much he is making from his investments.
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S
savethesquirrel
If your planning what you'll do in 30 years time then really don't worry about a slight fluctuation now.
On the whole house prices will steadily climb at 4% give or take. If they increase more than this then we can only expect a drop in order to counteract.
This is waht's happened over the past 5/10 years.
x
On the whole house prices will steadily climb at 4% give or take. If they increase more than this then we can only expect a drop in order to counteract.
This is waht's happened over the past 5/10 years.
x
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As a former master mortgage broker who introduced many new products to this country and just about survived through the last recession the way I see it is that we have a polarization in the market. At one end are homeowners who have already seen a large drop in prices. Tough if they only bought at the height of the market but for a good many others it was just a rollback in the huge capital gains over the last few years.
At the other end of the globe there are the all important first time buyers who underpin the whole market where even young professional's can't afford to get a foot on the housing ladder. Until we get convergence then the market is going to stay flat.
In terms of timeline I think we are looking a least 2012 and after the Olympics by which time hopefully unemployment will have come down and I do in fact see wages catching up to make it possible for 1st time buyers to afford to get into the market rather than another step fall in house prices.
In the meantime we are talking 2 years of treading water and what an opportunity that is for an entrepreneur. I have other business activities now and plan to semi-retire soon but I know what I would do and that is introduce another new financial product to Britain.
New here but it has been tried and proved successful in Japan. I refer here to the 2nd - 3rd generation mortgage. 50 - 75 perhaps even 100 year mortgages and what better vehicle to fund these to start with anyway than a government backed Northern Rock. Personally I would go direct to an Arab bank as I did once before and had no trouble of arranging funding of over £100,000,000 to trial the new financial product.
Not bad eh - but get this for a nice little Christmas story. I was running late for the meeting and so got my secretary to drop me off outside the bank and sent her off to park the car giving her all the change I had in my pocket. She returned just as we were about to conclude the deal and trying to remain cool and sophisticated we walked slow out of the office ang along the long marble corridor with her holding my arm as she had almost feinted when I told her the bank had agreed to back me with all that dosh and more after a trial period.
Then we got outside and the emotions kicked in. 5 min's later I put my hand in my pocket to make sure I had my credit card to buy more than a few bottles of shampoo and guess what. No wallet. I had left in the office.
The punchline. I had walked into a bank and arranged a £100 Million pound drawdown facility without a penny piece in my pocket and Diane didn't have more that a few quid in her purse either because I hadn't been able to afford to pay her for 5 weeks.
Talk about laugh I am sure she wet herself. I know my bank manager was in teas of laughter when I phoned and told him what had happened. I was £28K overdrawn at the time and asked him to arrange for me to pick up £250 quid at the local branch up the road.
Pity they don't make real bankers like that these days and a tip to any entrepreneur seeking a lot of dosh with a very solid business plan. Check out the who is who at the Arab banks and see if there is a new business manager who happens to also be a Prince. They are always keen to please the family and will often take a punt.
Robert
Apologies for hi-jacking the thread with that last bit Earl but thought that it was important to get across that there are opportunities out there even in a flat housing market.
At the other end of the globe there are the all important first time buyers who underpin the whole market where even young professional's can't afford to get a foot on the housing ladder. Until we get convergence then the market is going to stay flat.
In terms of timeline I think we are looking a least 2012 and after the Olympics by which time hopefully unemployment will have come down and I do in fact see wages catching up to make it possible for 1st time buyers to afford to get into the market rather than another step fall in house prices.
In the meantime we are talking 2 years of treading water and what an opportunity that is for an entrepreneur. I have other business activities now and plan to semi-retire soon but I know what I would do and that is introduce another new financial product to Britain.
New here but it has been tried and proved successful in Japan. I refer here to the 2nd - 3rd generation mortgage. 50 - 75 perhaps even 100 year mortgages and what better vehicle to fund these to start with anyway than a government backed Northern Rock. Personally I would go direct to an Arab bank as I did once before and had no trouble of arranging funding of over £100,000,000 to trial the new financial product.
Not bad eh - but get this for a nice little Christmas story. I was running late for the meeting and so got my secretary to drop me off outside the bank and sent her off to park the car giving her all the change I had in my pocket. She returned just as we were about to conclude the deal and trying to remain cool and sophisticated we walked slow out of the office ang along the long marble corridor with her holding my arm as she had almost feinted when I told her the bank had agreed to back me with all that dosh and more after a trial period.
Then we got outside and the emotions kicked in. 5 min's later I put my hand in my pocket to make sure I had my credit card to buy more than a few bottles of shampoo and guess what. No wallet. I had left in the office.
The punchline. I had walked into a bank and arranged a £100 Million pound drawdown facility without a penny piece in my pocket and Diane didn't have more that a few quid in her purse either because I hadn't been able to afford to pay her for 5 weeks.
Talk about laugh I am sure she wet herself. I know my bank manager was in teas of laughter when I phoned and told him what had happened. I was £28K overdrawn at the time and asked him to arrange for me to pick up £250 quid at the local branch up the road.
Pity they don't make real bankers like that these days and a tip to any entrepreneur seeking a lot of dosh with a very solid business plan. Check out the who is who at the Arab banks and see if there is a new business manager who happens to also be a Prince. They are always keen to please the family and will often take a punt.
Robert
Apologies for hi-jacking the thread with that last bit Earl but thought that it was important to get across that there are opportunities out there even in a flat housing market.
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Obviously, a "slight fluctuation" isn't something to worry about over a 30 year period, but who says it'll be "slight"?
Those that invested in US stocks in 1929 had to wait 25 years (until 1954) to see the stock market rise to the 1929 level.
(and that's the just the number, it doesn't account for inflation - so, in real terms, you would have had to wait a little longer)
We're not at the peak of property prices right now, but I wouldn't be shocked if house prices were, in real terms, lower 30 years from now than they are today.
(if they fall back to pre-boom levels and then increase at slightly above inflation)
The last 5-10 years have been atypical.
Steve
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The government slashed interest rates to 0.5% and then printed GBP175bn to pump into the economy. Largely this new money was handed to bankrupt banks who'd made some silly loans to people to buy over priced houses - with the instructions to lend it out to even more people to buy houses at historically high prices.
GBP175bn is a lot of money. Its enough to buy outright 1 million "average" priced homes. As such its unsurprising that house prices are rising yet again.
It'll all end in tears of course. You can't have years of massive house price inflation, then a near-collapse of the financial system, unprecedented govt bailouts, the longest recession in history - and still see house prices rising... that has nothing to do with sound fundamentals, and lots to do with very silly lending practices, now financed by the taxes we pay. I suspect that whoever wins the election will be facing the collapse of our economy.
GBP175bn is a lot of money. Its enough to buy outright 1 million "average" priced homes. As such its unsurprising that house prices are rising yet again.
It'll all end in tears of course. You can't have years of massive house price inflation, then a near-collapse of the financial system, unprecedented govt bailouts, the longest recession in history - and still see house prices rising... that has nothing to do with sound fundamentals, and lots to do with very silly lending practices, now financed by the taxes we pay. I suspect that whoever wins the election will be facing the collapse of our economy.
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As mentioned earlier this has nothing to do with property prices as such. It is the relation to them with average earnings. That relationship was unfortunately destrored over the last few years with the boom in the buy to rent market. Now that many have burned their fingers on that and can't anticipate the profits ahead they thought we should return to a more stable market and given the tight economics we will face over the next few years I can't see average property pices rising at all or incomes rising that much either.
So where does that leave us. A solicitor - bank manager etc are on about £50K a year. At the old tradional income ratio of 3 times income we are looking at £150,000 mortgage a single. That is not far off the current market for a flat. For a couple the old criterea was + 1 half the partners salary. Lets say half of £30K then.
3 times £65K gives a mortgage of just under £200K. Even with a reasonable desposit you can'y buy a decent 3 bed semi for that in the South East. Either salaries will have to creep up then or as I suspect the repossession market will be the place to buy.
So where does that leave us. A solicitor - bank manager etc are on about £50K a year. At the old tradional income ratio of 3 times income we are looking at £150,000 mortgage a single. That is not far off the current market for a flat. For a couple the old criterea was + 1 half the partners salary. Lets say half of £30K then.
3 times £65K gives a mortgage of just under £200K. Even with a reasonable desposit you can'y buy a decent 3 bed semi for that in the South East. Either salaries will have to creep up then or as I suspect the repossession market will be the place to buy.
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Surely the real truth is that *no-one* knows for sure what will happen. Its all speculation and house prices, like stocks and shares are always predicted based on historic trends/data which is not a guarantee of future movement.
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Lets have no more of them negative thoughts Mart. We had all this collapse in the economy doom and gloom when Harold Wilson was PM. When Britain itself actually went bankrupt and we had to go begging to the IMF.
The money was soon found however and today who runs the IMF. The G8 . The main players the USA - Britain and our friends in Saudi Arabia. In fact I doubt that our huge debt of 175bn would even make a dent in one of those crown princes bank accounts. Equip the air force with new planes and missles and yet more arms here. - more ships there and we could easily make that money up.
Cheer up then folks and have faith in our politians ability to survive and to survive and get their own rewards they need money in the treasury. They will get it by hook or by crook and many have proven that they are bloody big crooks at that.
The money was soon found however and today who runs the IMF. The G8 . The main players the USA - Britain and our friends in Saudi Arabia. In fact I doubt that our huge debt of 175bn would even make a dent in one of those crown princes bank accounts. Equip the air force with new planes and missles and yet more arms here. - more ships there and we could easily make that money up.
Cheer up then folks and have faith in our politians ability to survive and to survive and get their own rewards they need money in the treasury. They will get it by hook or by crook and many have proven that they are bloody big crooks at that.
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spot on mate in shropshire you now need to earning over 50 grand to buy an averidge house and the avridge wage for shropshire is about 18 grand ,its just stupid i think the house boom was a bloody menace ,until pricees reflect wages it will be a wile before prices rocket up again, i for one hope they never do .
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House prices are going up!!!
Did you know?? Even dead cats bounce, if they are dropped from high enough up!!
Don't get sucked in by the hype, every crash, of every kind, has always been followed by the 'dead cat bounce'.
Did you know?? Even dead cats bounce, if they are dropped from high enough up!!
Don't get sucked in by the hype, every crash, of every kind, has always been followed by the 'dead cat bounce'.
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By the time the government of this once-great country finally realise that they have to balance the books, and they cripple every last one of us for many years while they try to do so, there will be little dosh left to allow the housing market to over-inflate again for a while.
So, whilst there might be slight increases and re-adjustments in some areas, I wouldn't expect property prices to rise quickly at all.
They don't seem to get it - somebody, somewhere, is gonna pull the plug, and we are not going to be able to borrow the money they seem to want to continue to throw away - and at that stage they will have to squeeze every last penny they can from us, the general population.
I fully expect taxes to become a joke (worse than they already are that is), lots of additional 'stealth' taxes (which there are already enough of btw), and lots of these 'green' taxes (which seem to be politically popular, but I wonder for how long when they become too expensive even for the do-gooder section of the population).
They gotta stop the deficit, at least slow it down, and somebody has to pay for it...... I can assure you it will not be our politicians who will do this.....it will be US !!
So, whilst there might be slight increases and re-adjustments in some areas, I wouldn't expect property prices to rise quickly at all.
They don't seem to get it - somebody, somewhere, is gonna pull the plug, and we are not going to be able to borrow the money they seem to want to continue to throw away - and at that stage they will have to squeeze every last penny they can from us, the general population.
I fully expect taxes to become a joke (worse than they already are that is), lots of additional 'stealth' taxes (which there are already enough of btw), and lots of these 'green' taxes (which seem to be politically popular, but I wonder for how long when they become too expensive even for the do-gooder section of the population).
They gotta stop the deficit, at least slow it down, and somebody has to pay for it...... I can assure you it will not be our politicians who will do this.....it will be US !!
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Er no! They gotta get people in who actually know what they are doing.
Anyone can run a business and go bankrupt because they dont know what they are doing. It takes someone with knowledge and understanding of the market to run a successful business. We need politicians and civil servants who actually know what they are doing, people who actually get out into the real world and understand what their policies actually mean in reality.
There is no more room in this country for useless, unprofessional ftards.
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I agree totally Rich, but I doubt we will get anyone worth their salt into government in our lifetime..... I have yet to see anyone yet.
We'll vote in another load of crazed idiots at the next election, who will promise a lot but achieve very little.
They WILL raise what we pay in taxes, and we WILL pay for this deficit, its just a case of how long they intend it to run before they finally wake up to this fact.
My advice for next year, and the year after that, etc..... batten down the hatches, and keep your spare dosh, you will need it
We'll vote in another load of crazed idiots at the next election, who will promise a lot but achieve very little.
They WILL raise what we pay in taxes, and we WILL pay for this deficit, its just a case of how long they intend it to run before they finally wake up to this fact.
My advice for next year, and the year after that, etc..... batten down the hatches, and keep your spare dosh, you will need it
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I'm surprised that no-one has posted this graph yet.
It explains everything you need to know about the cycle of a speculative bubble. The current housing bubble is at the 'return to normal' stage about now.
The real crash will start in the new year. Hold on to your hats!
It explains everything you need to know about the cycle of a speculative bubble. The current housing bubble is at the 'return to normal' stage about now.
The real crash will start in the new year. Hold on to your hats!
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- Original Poster
- #29
house prices since 1952:look at the jump from 2001 t0 2003.
I bought my last 2 gaff's in 1992 and 2001 more luck than judgement.:|
http://209.85.229.132/search?q=cach...960&cd=6&hl=en&ct=clnk&gl=uk&client=firefox-a
Earl
I bought my last 2 gaff's in 1992 and 2001 more luck than judgement.:|
http://209.85.229.132/search?q=cach...960&cd=6&hl=en&ct=clnk&gl=uk&client=firefox-a
Earl
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I'm surprised that no-one has posted this graph yet.
It explains everything you need to know about the cycle of a speculative bubble. The current housing bubble is at the 'return to normal' stage about now.
The real crash will start in the new year. Hold on to your hats!
Top stuff, dead cat's bounce!!
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G
Gratis Guidance
While I love that graph, you can't use it for forecasting - only for hindsight.
The problem is, every boom is caused by something put into place by regulators and governments based on previous booms and busts. The problem is, it is usually always the wrong action to take. The end result becomes a really long drawn out affair!
The last house bust I remember was during the early 90's. It took forever for prices to start rising because people couldn't get the credit. It took for wages to start rising and for the credit to start flowing before prices started going mad. However, this wasn't the only thing that was happening in the economy. You had the IT boom and the whole services sector growing, and that reduced unemployment which made mortgages more available - combined with the new speculative hobby of Buy to let and eventually houses started to rocket.
The next boom won't be like that.
That is why you can't use this graph and say - we are here!
I would guess that the house market will be at the current rate for a long time. It is in nobody's interest for house prices to go down any further. The answer is for stability to become the norm while we wait for another boom - but we could be waiting 6 years for that - and it might not be in housing and construction.
The next fashion will be for buying houses as homes - at least until average wages and average house prices even out at around 3-3.5 to 1 - maybe ...!
The problem is, every boom is caused by something put into place by regulators and governments based on previous booms and busts. The problem is, it is usually always the wrong action to take. The end result becomes a really long drawn out affair!
The last house bust I remember was during the early 90's. It took forever for prices to start rising because people couldn't get the credit. It took for wages to start rising and for the credit to start flowing before prices started going mad. However, this wasn't the only thing that was happening in the economy. You had the IT boom and the whole services sector growing, and that reduced unemployment which made mortgages more available - combined with the new speculative hobby of Buy to let and eventually houses started to rocket.
The next boom won't be like that.
That is why you can't use this graph and say - we are here!
I would guess that the house market will be at the current rate for a long time. It is in nobody's interest for house prices to go down any further. The answer is for stability to become the norm while we wait for another boom - but we could be waiting 6 years for that - and it might not be in housing and construction.
The next fashion will be for buying houses as homes - at least until average wages and average house prices even out at around 3-3.5 to 1 - maybe ...!
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amazing how vested interests effect the experts opinion.:|
I wouldn't trust a bank or estate agent to predict what day follows Tuesday.
The very same self-serving estate agents, banking spokespersons and Government spin doctors were predicting continuing house price rises just weeks before the crash.
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G
Gratis Guidance
Everyone who has a house or any loan based on the value of property or maybe you are a bank with a loan based on property outstanding or finally anyone with a pension based on rental income - all these people don't want property value to go down.
The only people who want house prices to go down are those who don't have a house or think they can get a great deal if someone else takes the hit for them before they too can profit from the house price boom! Some might call those people vultures!
Does that clarify my opinion to you?
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Everyone who has a house or any loan based on the value of property or maybe you are a bank with a loan based on property outstanding or finally anyone with a pension based on rental income - all these people don't want property value to go down.
The only people who want house prices to go down are those who don't have a house or think they can get a great deal if someone else takes the hit for them before they too can profit from the house price boom! Some might call those people vultures!
Does that clarify my opinion to you?
Clarify's it to me mate, it shouts about people who are up to their greedy little eyes in debt, people who don't see a house as a family home, but see it as a commodity.
May you sink, quickly and shamefully.
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- Original Poster
- #36
Everyone who has a house or any loan based on the value of property or maybe you are a bank with a loan based on property outstanding or finally anyone with a pension based on rental income - all these people don't want property value to go down.
The only people who want house prices to go down are those who don't have a house or think they can get a great deal if someone else takes the hit for them before they too can profit from the house price boom! Some might call those people vultures!
Does that clarify my opinion to you?
So all those people who have bought a home to live in and agreed to pay x amount of pounds for it per month for its use,are suddenly unhappy because the value of the property is less.
so what happened did the house fall down when it found out it was worth a tad less.
Or was it that those people did not buy a home but an investement to make a profit on.?
Only I thought that was what got us into all this trouble in the first place.
At least if prices come down we as the 4th richest nation on earth might be able to house our population.?
P.S for god's sake don't ever buy a new car cause you is going to take one gigantic hit on that.:|
Earl
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The whole point of the graph is as a reminder of how the life cycle of speculative bubbles normally pans out. The 'bear trap' or 'dead cat bounce' is an entirely predictable phenominum that invariably occurs after the initial fall from the peak, as many imagine that the worst is over prematurely.
There is no time line or quantities on the axes of the graph. It is simply a representation of the 'shape' that one can expect a bubble to make as it inflates and then bursts. To that extent, it is a useful tool to use when anticipating the next stage in an unfolding saga.
I would suggest that a bubble is created more by a belief that grows amongst the general populus that this particular investment 'can't fail'! The current housing bubble was fuelled by easy credit from banks who abandoned completely all the prudent lending practices that had developed over hundereds of years in a stampede of greed and stupidity.
It was easily available cheap credit that stoked demand in the housing market in this bubble, combined with a mania among the public that they should leverage themselves to the max in pursuit of ever greater gains.
That easily available credit is no longer there - nor is the appetite to take on ever greater amounts of debt. So what is going to support house prices?
You are right in what you say about it being a long drawn out affair. It took ten years for house prices to get back up to their level of 1989 - and that's not taking into account inflation in the general economy.
Perhaps not so simplistically. It does though, give a useful indication of what we might expect to happen next.
I would guess that the house market will be at the current rate for a long time. It is in nobody's interest for house prices to go down any further. The answer is for stability to become the norm while we wait for another boom - but we could be waiting 6 years for that - and it might not be in housing and construction.
The next fashion will be for buying houses as homes - at least until average wages and average house prices even out at around 3-3.5 to 1 - maybe ...!
The only way for house prices to remain stable is for wage inflation to rocket. This would follow the pattern of the 1970s house price crash, when prices remained about the same, but inflation was running at 20%. If inflation is kept at bay however, nominal house prices will fall.
As for the statement that 'It is in nobody's interest for house prices to go down any further', I think you would be surprised at peoples' actual sentiments.
There are millions of young people currently living in rented accomodation or with parents who would love to buy their own home, but have been locked out of the market completely. It is definitely in their interests for house prices to fall.
Most of these peoples' parents meanwhile, will have paid off or be close to paying off the mortgage on their home. The value of that home is completely irrelevent to most of them. The vast majority of middle aged people would welcome a fall in house prices as it would enable thair kids to become first-time buyers without over extending themselves.
The losers?
Those foolish enough to have bought in the last few years on big mortgages...
...and leveraged Buy to Let 'investors'. All that will happen is that they will go bankrupt and their properties will flood the market with affordable homes for first-time buyers. I cannot see a downside to this scenario!
Rubbish!
It is in society's interests for house prices to fall considerably. The ridiculous cost of shelter is the single biggest factor dragging this country back from being a competitive economy.
Cheap housing = competitive wage levels = competitive industry.
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Yeah, it sounds like those who thought they could get rich on the greater fool theory are upset because it turns out they're the biggest fools around.
Who would like house prices to go down?
Lot's of people. How about young couples who could have mortgaged their lives for a one bedroom flat, but refused to because they couldn't really afford the mortgage?
They watched prices get further and further out of their reach, driven by people borrowing money they couldn't afford, based on a "can't-lose" theory.
Who do I have more sympathy for? The prudent/responsible or the speculators/greedy?
However, Gratis Guidance does make a point: the banks are so deeply invested in all this property speculation that a fall back to normal house prices could drag everything down.
As for Spongebob's chart, I think it's pretty good. We've just been through a mania and manias have a set structure of worry, confidence, exhuberance, denial of fundamental reality, fright, hope, fear and dispair. And those are shown on his graph.
Steve
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From the TimesOnline website:-
Economists from Morgan Stanley said that if next year's general election resulted in a hung parliament, Britain could face losing its AAA debt rating as investors panicked over whether the majority party had the authority to push through fiscal tightening needed to get back on track. "In an extreme situation, a fiscal crisis could lead to some domestic capital flight, severe pound weakness and a sell-off in government bonds," the Morgan Stanley economic report said. Such a scenario could lead to a sharp rise in interest rates.
I'm not sure how likely this scenario would be, or whether a hung parliament might be the trigger that unfolds such a drama or something else. But I've seen plenty of comment similar to this in recent months.
Economists from Morgan Stanley said that if next year's general election resulted in a hung parliament, Britain could face losing its AAA debt rating as investors panicked over whether the majority party had the authority to push through fiscal tightening needed to get back on track. "In an extreme situation, a fiscal crisis could lead to some domestic capital flight, severe pound weakness and a sell-off in government bonds," the Morgan Stanley economic report said. Such a scenario could lead to a sharp rise in interest rates.
I'm not sure how likely this scenario would be, or whether a hung parliament might be the trigger that unfolds such a drama or something else. But I've seen plenty of comment similar to this in recent months.
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It sounds like they're saying "if the Parliament is hung, investors might be worried that Labour will still be able to knack the British economy."
Steve
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