House prices to take 20 years to recover!
#31
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#32
The last crash was NOT 1994 ..... I should know, I was selling and buying at that time.
The House Prices rose rapidly because the then Tory Government informed everyone in 1989 that (multiple) MIRAS Tax Relief was going to end the following April 6th, 1st time buyers panic bought everything in sight with multiple buyers and mutiple tax relief being the order of the day.
Then, in 1990 (NOT 1994) the market and price of property went into freefall - in 1994 it bottomed-out and from 1995 the prices began their 12 year rise ........ only to, in 2007, to start slowing.
2008 has seen an increase in the speed of price falls .... all areas will be dragged down, nowhere will be exempt.
I predict the bottom to be in 2010 and then it will climb again .... after an election (just as in 1995)
The House Prices rose rapidly because the then Tory Government informed everyone in 1989 that (multiple) MIRAS Tax Relief was going to end the following April 6th, 1st time buyers panic bought everything in sight with multiple buyers and mutiple tax relief being the order of the day.
Then, in 1990 (NOT 1994) the market and price of property went into freefall - in 1994 it bottomed-out and from 1995 the prices began their 12 year rise ........ only to, in 2007, to start slowing.
2008 has seen an increase in the speed of price falls .... all areas will be dragged down, nowhere will be exempt.
I predict the bottom to be in 2010 and then it will climb again .... after an election (just as in 1995)
Les
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Taking the UK on the whole, the slide started in Q1 1990, and did not bottom out until Q1 1996. They did not recover to pre-crash prices until Q1 1998 - So the whole process took 8 years last time. (obviously individual areas will tell thier own story)
#34
I just don't understand why the developers are cancelling developments.
Build the bloody things and then sell them at 2005/2006 prices.
Demand will outstrip supply no problem. And you can't tell me that they weren't making a tidy profit back then.
This glut of less expensive housing should bring the house prices down without affecting the rest of the economy.
It certainly wouldn't increase unemployment like canceling the developments will.
Build the bloody things and then sell them at 2005/2006 prices.
Demand will outstrip supply no problem. And you can't tell me that they weren't making a tidy profit back then.
This glut of less expensive housing should bring the house prices down without affecting the rest of the economy.
It certainly wouldn't increase unemployment like canceling the developments will.
#35
I just don't understand why the developers are cancelling developments.
Build the bloody things and then sell them at 2005/2006 prices.
Demand will outstrip supply no problem. And you can't tell me that they weren't making a tidy profit back then.
This glut of less expensive housing should bring the house prices down without affecting the rest of the economy.
It certainly wouldn't increase unemployment like canceling the developments will.
Build the bloody things and then sell them at 2005/2006 prices.
Demand will outstrip supply no problem. And you can't tell me that they weren't making a tidy profit back then.
This glut of less expensive housing should bring the house prices down without affecting the rest of the economy.
It certainly wouldn't increase unemployment like canceling the developments will.
#36
except when people still don't buy them and they've laid the cash out on building them they will go bust. Their cash flow has pretty much stopped dead. To my mind new builds will and are distorting the figures as developers get desperate to sell even selling at cost or below helps their cash flow no end so if the banks are on their back his is where the bargains will be. Private sales wise people are sitting tight and accepting they won't sell at the moment, till the media changes its views not much will sell with the resulting fallout
#37
This glut of less expensive housing should bring the house prices down without affecting the rest of the economy.
It certainly wouldn't increase unemployment like canceling the developments will.
It certainly wouldn't increase unemployment like canceling the developments will.
#38
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I just don't understand why the developers are cancelling developments.
Build the bloody things and then sell them at 2005/2006 prices.
Demand will outstrip supply no problem. And you can't tell me that they weren't making a tidy profit back then.
This glut of less expensive housing should bring the house prices down without affecting the rest of the economy.
It certainly wouldn't increase unemployment like canceling the developments will.
Build the bloody things and then sell them at 2005/2006 prices.
Demand will outstrip supply no problem. And you can't tell me that they weren't making a tidy profit back then.
This glut of less expensive housing should bring the house prices down without affecting the rest of the economy.
It certainly wouldn't increase unemployment like canceling the developments will.
I think the media have got a lot to answer for. Really its the people who have bought houses at 2007 prices on 100% mortgages who are going to suffer the most.
Last edited by BLU; 10 July 2008 at 03:28 PM.
#40
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i have a few mates "in the trade" regards plastering and windows etc etc and they are now forced into taking on general public jobs just to pay the bills. new homes are now a big no no
i suspect it is all going **** up, its just taking a while to filter down to everybody else?
spoke to my mate today and he is waffling on about looking at a new house, i was suprised at this as the one he has got now was his "dream house" a few months back (only had it about 6 months?) , so i asked him if the credit crunch was having an effect on him
"nahh we have made our money on it, we are looking at bigger ones, its the right time to upgrade"
WTF ??
i suspect it is all going **** up, its just taking a while to filter down to everybody else?
spoke to my mate today and he is waffling on about looking at a new house, i was suprised at this as the one he has got now was his "dream house" a few months back (only had it about 6 months?) , so i asked him if the credit crunch was having an effect on him
"nahh we have made our money on it, we are looking at bigger ones, its the right time to upgrade"
WTF ??
#41
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It's the perfect time to upgrade. The bigger more expensive house will lose more than something down the chain. It actually makes sense. If you can afford it, the best time to buy is when the prices are dropping. Some people are desperate to sell, not to mention repossessions etc. Sellers will bend over backwards to secure a sale.
WHEN prices recover your mate will be laughing, he'll have a much better house and he'll be sitting on more equity. Especially if he fixes his repayments at a rate he's comfortable with.
WHEN prices recover your mate will be laughing, he'll have a much better house and he'll be sitting on more equity. Especially if he fixes his repayments at a rate he's comfortable with.
#42
Why do Developers do ANYTHING except drop the price!!??
It's pathetic, round our way they are now putting a new MINI in the garage for when you move in!!
That's in addition to the Stamp Duty paid, landscaped gardens, mortgage paid for 5 years, no deposit, fees free buying .... and on it goes.
Just drop the frigging price by 30% and be done with it!!
It's pathetic, round our way they are now putting a new MINI in the garage for when you move in!!
That's in addition to the Stamp Duty paid, landscaped gardens, mortgage paid for 5 years, no deposit, fees free buying .... and on it goes.
Just drop the frigging price by 30% and be done with it!!
#43
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To be honest there are a lot of people in trades that I have little sympathy for. For quite a few years they have been charging excessive amounts due to high demand for and low supply of labour.
It should now be easier to get someone decent to paint or plaster for less than £250 a day!
It should now be easier to get someone decent to paint or plaster for less than £250 a day!
#44
except when people still don't buy them and they've laid the cash out on building them they will go bust. Their cash flow has pretty much stopped dead. To my mind new builds will and are distorting the figures as developers get desperate to sell even selling at cost or below helps their cash flow no end so if the banks are on their back his is where the bargains will be. Private sales wise people are sitting tight and accepting they won't sell at the moment, till the media changes its views not much will sell with the resulting fallout
50% more I could accept.
A friend of mine bought his house for £63,000 5 years ago. The developer (perssimon) was happy to build the house and sell it for that much. It's a nice 3 bed semi in a nice village.
He had that house valued at £160,000 in January.
The increased cost of labour and materials has not increased by £97,000. There LOTS of money in building houses if your not trying to take the **** with the price you want to sell it for.
People WOULD buy the houses if there were at a decent price.
I have just heard top economists on channel 4 news say that we are 3,000,000 units short.
That does not indicate a shortage of buyers.
Build them and people will buy. At a reasonable price. Not the ridiculous numbers you see today.
The same economists predicted a 25-45% drop in house prices over the next 2-5 years
Mortgages are out there for people who can afford them And due to the cost of the houses, not many new buyers can afford them.
Bring on the 45% I say. I might then be able to afford a grotty little flat.
#45
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Declines then gathered pace with the worst monthly fall coming in September 1992 when values tumbled 3%.
After false dawns in 1993 and 1994, the market finally bottomed out in July 2005 at £60,965. That marked a 13.2% decrease over six years.
The 10% decline since August 2007 would therefore appear to be far more acute than the property bust of the early Nineties.
The Nationwide Building Society's index - using the old series as the new one only goes to 1990 - shows the average price of a home falling from a peak of £62,782 in September 1989 to a low of £50,128 in March 1993. It then shows a stunted recovery and prices fall back to £50,930 by December 1995.
The total fall between the high and low, at 21%, was bigger than for the Halifax index and quicker, lasting four years, although it could be argued that the crash lingered until the end of 1995"
#46
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All well and good. One flaw however, no boom and bust are the same. There were different factors at work two decades ago than there are today. A higher intial drop this time is not necessarily a marker for further massive drops.
Overall the economy is in better shape than it was then, the main cause for the drops at the moment is a scarcity of credit and a peak in oil prices. Both may well turn out to be short term measures. Lack of confidence in the market may turn out to be the biggest issue with the current situation.
Overall the economy is in better shape than it was then, the main cause for the drops at the moment is a scarcity of credit and a peak in oil prices. Both may well turn out to be short term measures. Lack of confidence in the market may turn out to be the biggest issue with the current situation.
#47
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It does show the short sightedness of the house builders - over the past few years they have all made MASSIVE profits ( house prices kept going up, while the cost of building them didnt rise nearly as much, meaning they just made more and more money on them, which is why so many new build developments were shooting up everywhere, built as quickly as possible ).
Now things have slowed down and they all seem to be crapping themselves and dont seem willing to accept that they cant sell houses at the huge profit margins they were making before.
Its a schoolboy error in business to look at a short period of sales, and assume they are always going to be at the same level, and run your business according to that profit level. Most businesses that have long term success take a much longer view, and accept that some periods will be very busy, and you'll rake it in, and some periods will be quieter and you wont make as much.
Sensible businesses use the money from the busy periods to tide them over in the quieter ones.
House builders should be looking at how much profit they are making over a 5 or 10 year period at least, not over the 3 years where the prices rocketed and doubled or tripled.
All the house builders seem to be announcing job cuts at the moment, which I suppose will mean a lot of Polish and Eastern European builders going home in the next few months.
Now things have slowed down and they all seem to be crapping themselves and dont seem willing to accept that they cant sell houses at the huge profit margins they were making before.
Its a schoolboy error in business to look at a short period of sales, and assume they are always going to be at the same level, and run your business according to that profit level. Most businesses that have long term success take a much longer view, and accept that some periods will be very busy, and you'll rake it in, and some periods will be quieter and you wont make as much.
Sensible businesses use the money from the busy periods to tide them over in the quieter ones.
House builders should be looking at how much profit they are making over a 5 or 10 year period at least, not over the 3 years where the prices rocketed and doubled or tripled.
All the house builders seem to be announcing job cuts at the moment, which I suppose will mean a lot of Polish and Eastern European builders going home in the next few months.
#48
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What is different this time?
1. Lower inflation (although it is still too high), so the actual price dropping faster is not surprising as inflation doesn't do most of the work.
2. More stretched valuations relative to incomes.
The economy got worse well into the house price crash last time. It is too early to say our economy is in better shape than last time since we are comparing the start of the crash with the middle/end of the crash.
1. Lower inflation (although it is still too high), so the actual price dropping faster is not surprising as inflation doesn't do most of the work.
2. More stretched valuations relative to incomes.
The economy got worse well into the house price crash last time. It is too early to say our economy is in better shape than last time since we are comparing the start of the crash with the middle/end of the crash.
#50
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You aren't seriously trying to tell me that houses are 150% more to build than 5/6 years ago are you?
50% more I could accept.
A friend of mine bought his house for £63,000 5 years ago. The developer (persimmon) was happy to build the house and sell it for that much. It's a nice 3 bed semi in a nice village.
He had that house valued at £160,000 in January.
The increased cost of labour and materials has not increased by £97,000.
50% more I could accept.
A friend of mine bought his house for £63,000 5 years ago. The developer (persimmon) was happy to build the house and sell it for that much. It's a nice 3 bed semi in a nice village.
He had that house valued at £160,000 in January.
The increased cost of labour and materials has not increased by £97,000.
When a builder could build 10 houses in a field and sell them for a million pounds each the land was worth £5m. Now that the houses are only worth £750k that £500k / property that he paid seems very expensive.
He can't sell the land because no-one else needs it. If he sells the houses at 2005 prices he will lose out big time. The builders are sitting on big tracts of land that are now worth much less than they paid for it, and they haven't even built anything on it yet. That's why their shares are down to about 10% of their value a year ago.
#52
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A friend of mine bought his house for £63,000 5 years ago. The developer (perssimon) was happy to build the house and sell it for that much. It's a nice 3 bed semi in a nice village.
He had that house valued at £160,000 in January.
The increased cost of labour and materials has not increased by £97,000. There LOTS of money in building houses if your not trying to take the **** with the price you want to sell it for.
He had that house valued at £160,000 in January.
The increased cost of labour and materials has not increased by £97,000. There LOTS of money in building houses if your not trying to take the **** with the price you want to sell it for.
Also house builders are stopping building as no one is buying houses, the 1st time buyer isn't able to get a mortgage now and it has a knock on effect on the chain, Some house builders were virtually giving the houses away at cost to keep afloat but still went under
#53
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If they are giving them away, why am I not remotely tempted to buy? Because I wouldn't get a decent rental yield from them. I would happily shift from tenant to owner-occupier to owner-occupier & landlord if the numbers made sense.
#54
Developers aren't stupid. They don't finish a development then start looking around for land while their trades play cards and eat bacon sarnies.
They own large tracts of land for many years before they build on them. This is partly due to planning and because they need "stock" ready for the next build.
A Lage estate has been put up near me recently and I know for a FACT that the developers have owned this land for about 6 years.
Quite often, the developers don't even own the land, they buy an option on land. They then get the planning and once they're ready to go, they buy the land.
If they buy the land then they often pay an overage of for instance 10% which means they have to pay 10% of the increased value of the land minus the original payment.
I know all this because my mother has shares in family land in Buckinghamshire and we done deals with Wimpy homes and are talking to Knight Frank at the moment.
Single plots and plots for 2,3,4 or 5 houses have increased in value dramamtically but the prices for really large developments hasn't gone silly. They just pay a resonable rate + overage.
#55
I'm tracking commercial property at the moment. Since the start of the correction yields have softened by about 1% on prime lots. Problem is the cost of borrowing has gone up about the same amount so unless a 100% cash purchase there is no real benefit.
I
#56
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Looks like the availability of credit could be about to get a whole lot tighter - the knock on effect being even sharper house price falls (despite prices falling at their fastest since the Great Depression in many Western countries)...
World's largest mortgage providers teeter on the brink of collapse - Business News, Business - The Independent
US mortgage giants' crisis sparks fear for British banks | Mail Online
Property values plummet across nation | The Australian
World's largest mortgage providers teeter on the brink of collapse - Business News, Business - The Independent
US mortgage giants' crisis sparks fear for British banks | Mail Online
Property values plummet across nation | The Australian
#57
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Agree entirely Deep. In the long run I would happily rely on the capital growth to keep up with inflation, but wouldn't bank on any more especially since capital gains tax would be due on an investment property. I'd want the rental income each month to then give me my real return after expenses (including paid interest on borrowings or lost interest on savings used). It seems that many property investors are taking a monthly loss on anything bought recently and have been subsidising the rent on the expectation of capital growth. This is classic bubble mentality.
If you only buy stuff that makes a monthly profit from the rental income, you have a more solid basis for the valuation and it should be relatively crash proof. In the past it has been possible to buy property on this basis and the numbers would add up. Until they do again, I won't be buying property.
I am breaking my rules by buying precious metals (which so far are doing a beautiful hedging job) since they don't produce an income. However, I'm hoping that they are simply keeping my portfolio up with real inflation. If I'd not moved all but £7k of my FTSE holdings into precious metals and Japan, I would have been very upset last week. As it was I've lost £1-2k recently on that single FTSE ISA, but made 5 figures out of gold.
If you only buy stuff that makes a monthly profit from the rental income, you have a more solid basis for the valuation and it should be relatively crash proof. In the past it has been possible to buy property on this basis and the numbers would add up. Until they do again, I won't be buying property.
I am breaking my rules by buying precious metals (which so far are doing a beautiful hedging job) since they don't produce an income. However, I'm hoping that they are simply keeping my portfolio up with real inflation. If I'd not moved all but £7k of my FTSE holdings into precious metals and Japan, I would have been very upset last week. As it was I've lost £1-2k recently on that single FTSE ISA, but made 5 figures out of gold.
#58
I am hoping it will affect the tradesmen, they might bring their prices down to realistic levels, i.e. reasonable prices for people not paying with a second mortgage, they may start getting more attentive to their customers as well as for the last few years I have been ignored, overcharged and had mediocre work done at sky high prices.
#59
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It's very simple. It always used to be that you'd get a job, save for a few years to get a deposit together of several thousand pounds, go and get a 2 to 2.5x mortgage on top of your deposit, buy your house. That's the way it should be and soon enough it will return to it. The whole market was skewed by cheap, easy credit, buy-to-let landlords and buyers who thought property was an investment that could never go down in value. All of it was bull****.
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