Last December, I forecasted a 9 percent fall in house prices from their October 2007 peak. That forecast proved to be too conservative. Prices are now down over 13 percent. By the current rate of decline, the price decline should easily touch 15 percent by next month.It wasn't too long ago that the prevailing consensus was that house prices would keep on rising eternally; there was too much demand; oppressive planning restrictions and hordes of rich foreigners ready to buy up whatever came onto the market.
Where did those ideas go?
8 comments:
as falls niagara...innit...!
deflation all around soon...p
only a BAILOUT can save inflation
I won't be buying until they drop 50% from the peak... even then, a moderate place would still cost 5 times average earnings.
I will stick with good old fashioned cash in the bank till then... spread about a bit I hasten to add !
You made your -9% prediction when "expert" opinion was between +1% and +10%. I think a pat on the back is in order.
Nick
Face it so called experts either no nothing or have a vested interest.
Each of the last three bubbles are basically synnetrical on the real price graph, and leave only a slight real gain by the bottom of the trough.
This one will likely be the same, unless there is no real gain at all from Jan 96 by the end around 2015.
Long wave theorists might support that scenario, assuming we are now in a genuine deflation parallel to the 30's. Kondratyev was sent to the gulag - he may have been right on certain things!
By drawing a drop on the real price graph the same basic shape as in the 89-Jan 96 drop, with a similar symmetry with the rise, but a little steeper as the rise this time is greater, I come up with nearly 21% drop over this year. Take out 5% for inflation, and I guess the year drop at 16%; the fall October-December '08 will be larger than October- December '07, stretching the annual fall somewhat beyond what it is now.
Then the real annual falls decrease significantly, 09 being ten or eleven per cent, and about six more years of real falls 2010-2015.
B. in C.
Anyone who has seen charts of the great 20th centruy bubbles--Gold in 70s, Nikkei in 80s, Nasdaq in 90s--could see what was going to happen to UK housing. Bubbles burst eventually, as has this one--it would have saved a lot of heartache if it had burst earlier, but this was the mother of all property bubbles, and it did not go gently in that good night. Expect at a minimum--as with gold, Nikkei, Nasdaq--a 50%+ decline. That's no guess; it's historical precedent, "bubble-style."
I see UK housing going down by 75%. Why? Because we weren't supposed to be where we are today. Remember all the bulls? It only ever went up, blah, blah? Well, it is dying at a furious pace. And when credit goes, house prices have to come down. Housing will return to the level of the mid 90s.
I think it's important to distinguish between the different types of property. I know that round my way, newbuild flats have dropped by around 50%: even more if sold at auction and overvalued to start with. People who have bought sturdy, decent family homes will not suffer so much. Perhaps they won't be selling, since they may have bought the house they will live in until the day they die.
NB; With values crashing, has anyone else thought about how this affects Council Tax bands?
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