House Prices

[Likely]

London prices never stopped climbing ... buy buy buy

[Cyberman]

House prices always go up in the long-term. Short-term, there will certainly be some bargains in BTL for people with cash as some investors have over-stretched themselves and cannot afford higher interest rates.

My view is that we will could have stagnation for up to 18 months while the credit crunch and subprime write-offs continue and while the banks rebuild their liquidity and ability to lend. After that, interest rates will fall and house prices will then start to rise again.

[DimPrawn]

House prices always go up in the long-term. Short-term, there will certainly be some bargains in BTL for people with cash as some investors have over-stretched themselves and cannot afford higher interest rates.

My view is that we will could have stagnation for up to 18 months while the credit crunch and subprime write-offs continue and while the banks rebuild their liquidity and ability to lend. After that, interest rates will fall and house prices will then start to rise again.

Yeah, that's what's going to happen. Do you work for an estate agent?

[Bagpuss]

House prices always go up in the long-term. Short-term, there will certainly be some bargains in BTL for people with cash as some investors have over-stretched themselves and cannot afford higher interest rates.

My view is that we will could have stagnation for up to 18 months while the credit crunch and subprime write-offs continue and while the banks rebuild their liquidity and ability to lend. After that, interest rates will fall and house prices will then start to rise again.

The last time the housing market crashed, houses took several years to regain the value they lost. Why should it be "different this time"? Has the economic cycle started to change shape?

[Turion]

House prices always go up in the long-term. Short-term, there will certainly be some bargains in BTL for people with cash as some investors have over-stretched themselves and cannot afford higher interest rates.

My view is that we will could have stagnation for up to 18 months while the credit crunch and subprime write-offs continue and while the banks rebuild their liquidity and ability to lend. After that, interest rates will fall and house prices will then start to rise again.

In the last downturn prices fell for 6 years (1989 - 1995). During that time interest rates halved. The rot only stopped, because an overbought, overpriced market had fully unwound. Expect the same story this time. At least 5 years of falling or stagnent prices, reducing the average real price by 40% in that time. By that time the increased affordabilty will start heating the market again.

[Sockpuppet]

What people seem to fail to notice is that unless prices are rising by inflation (now which one wage, real or the govt figures ) then the house is falling in real terms.

So over 12 months a house that holds value on £100k has "lost" maybe £4-6k in real terms.

[Cyberman]

In the last downturn prices fell for 6 years (1989 - 1995). During that time interest rates halved. The rot only stopped, because an overbought, overpriced market had fully unwound. Expect the same story this time. At least 5 years of falling or stagnent prices, reducing the average real price by 40% in that time. By that time the increased affordabilty will start heating the market again.

A fair bit of that slump was MIRAS linked because the Tories abolished mortgage interest relief around late 1988. This caused 'artificial' demand in the housing market and a rise in house prices as more first-time buyers took the plunge to grab the last chance of MIRAS relief. There was thus a big rise in demand followed by a corresponding drop in 1989.

Now we have that great New Lie invention called HIPS which is causing a drop of properties on the market over the past nine months as people are unwilling to pay 500 quid to advertise their houses which may not sell. This could actually prop up prices to a certain extent as the supply will not be as high as it otherwise would. Thus, I do not see the market taking a 40% drop or six years to recover. BTLs may well suffer disproportionately though as people have vastly overpaid at that end of the market.

Two years from now we will have an election and HIPS will be abolished if the Tories get in. We could see a glut of properties for sale at that time, again bringing house prices down, but this could be compensated by lower interest rates which will increase buyers in the market. Time will tell.

[51st State]

I vote for stagnation/slight drop overall. Certain areas will get hit harder than others, but that's always been the case, as they tend to enjoy more extreme growth too.

It's certainly an odd market at the moment. As an example, my house went onto Rightmove last Thursday (day before Good Friday). As soon as the estate agent was open on the Tuesday, I had a cash offer at full asking price!

We've used the credit crunch to leverage 20% off the asking for the new place, which effectively means that we have at least a reasonable level of equity to play with if the worst happens.

[Peoplesoft bloke]

In the last downturn prices fell for 6 years (1989 - 1995). During that time interest rates halved. The rot only stopped, because an overbought, overpriced market had fully unwound. Expect the same story this time. At least 5 years of falling or stagnent prices, reducing the average real price by 40% in that time. By that time the increased affordabilty will start heating the market again.

That's not the whole story though - Interest rates only halved (and that took a couple of years) because the Tories economic miracle chancellor doubled them overnight. Although there are other similarities, even with recent increases, rates are less than half what they were in 1989.

[Cyberman]

That's not the whole story though - Interest rates only halved (and that took a couple of years) because the Tories economic miracle chancellor doubled them overnight. Although there are other similarities, even with recent increases, rates are less than half what they were in 1989.

The exit from the ERM was in 1992 when we had the sudden big jump in interest rates. So between 1988 to 1995 we really did had some very unusual events that affected the housing market detrimentally. Whether this current period will be full of such events we will have to wait and see, but personally I do not think so, as I believe that the liquidity crisis will be resolved within a year or so. We have been in a Brown-inspired credit boom and that could only go on for so long. The markets will now return to some realism which will not be a bad thing.