Thursday, 28 August 2008

House prices down (again)

The UK housing crash keeps on exceeding expectations. It is worse than the worse case scenario.

Prices are now down 11.5 percent since the Autumn 2007 peak. We could be looking at the most violent housing crash in UK history. How low can they go? Most UK homeowners lack the imagination; they can not conceive how bad this crash will be.

10 comments:

mattyb245 said...

I think that the state of the housing market is at its worst since 2006, but the drop in prices has not been this severe since 1990. A lot of people are looking for mortgage advice, especially landlords who are selling with a sitting tenant, as there are certain rules regarding how much notice must be given to tenants before eviction.

Anonymous said...

I love it.

Thank you Alice.

Rambo

Anonymous said...

How low can they go? Oh, this is easy - just look at the long term real house prices graph and draw the drop - c. 55%-60% in real prices, less in nominal terms, depending on inflation. Any upswing before then will be a false dawn.

B. in C.

Anonymous said...

Um, you obviously didn't include my worst case scenario (or more correctly, BEST case scenario, cos I'm a renter).

Adjust it for CPI if you really want to be dramatic.

Nick

Alice Cook said...

Nick,

It the twisted language of modern britain, good means bad, bad means good, and a worse case scenario means we will all be better off.

Alice

Anonymous said...

"We could be looking at the most violent housing crash in UK history."

And intriguing statement. Care to go into more depth? Nominal fall? Inflation adjusted fall? Depth of fall? Or just how fast we knock off 30%?

Anonymous said...

Dear Alice

While I have a small grasp of real term price drop what does it really mean for house prices this time around?

Mark Wadsworth said...

Many people assume that the fall will be 'less in nominal terms' because of inflation.

The jury is out on whether we'll have inflation or deflation, it's just as possible that the REAL fall will be MORE in nominal terms because of DEFLATION.

Anonymous said...

Mark,

That's why I'm sitting in a pool of cash with my fingers crossed. If I'm right, I'm minted. If I'm wrong I can rush into gold or another currency.

So long as the BoE doesn't cut much, I'm prepared to take a slightly negative real interest rate to preserve that choice (and lack of exposure to the asset collapse).

Nick

gw said...

More perspective - longer timeline please. This pullback is peanuts to what is ahead.