Deep Singh

Reported in the Telegraph today. Senior analyst from Merril Lynch says it will take 20 years for house prices to recover in real terms (ie taking inflation into account)

PeteBrant

Man, they must be bored.

What basis do they have for this assertion?

Because it hasn't crashed anywhere near like it did in 1994, and that took about 5 years to recover, with a higher inflation rate to boot.

Scoobychick

iTrader: (1)

It's just more rhetoric...

Still, I feel the basis for another NSR argument coming on

scoobynutta555

Usual rubbish economic forecasts by people who have no clue at all what's going to happen to the markets the very next day let alone 20 years hence.

Paul3446

Hey, they sound like weathermen!

Devildog

Very restrained Pete.

My first thoughts were "your **** they will take 20 years to recover"

Still on the up round our way.

Its "pish" like that from Merril Lynch that will ensure the continued lack of confidence in the market.....

Sorry DS, not shooting the messanger here, just the message. Probably some creative reporting on the journalists part as well.

PeteBrant

An overall drop is happening (Obviously some areas of the country aren't dropping, but that's exactly what happened in '94).

BVut as for a 20 year recovery period, I mean, as it stands, the market has dropped 6.8% on avergae from last year.

You can only say it will take X amount of time to recover a given drop, if you know what that drop is going to be.

The fact that they are saying it will take 20 years to recover, suggests that they are forecasting an enourmous drop in values, like 50,60 or 70%.

I just don't see that happening.

Deep Singh

These analysts do make you laugh though! They can't predict their own sub prime losses which are happening with their own money yet make predictions 20 years in the future. The property market does look bleak and will get alot worse before it gets better, but predictions like these are just ridiculous

PeteBrant

The problem is that they have absolutely no idea what thier exposure to the sub prime market is, because it is impossible to tell.

Which makes the predictions of Merryl Lynch even more vague.

stilover

House prices haven't even hit the bottom yet. Plenty way to go for that yet.

Petem95

Hardly surprising is it? House prices went to insane levels fuelled by stupidly low interest rates, and massive sums of money being lent out with ease.

The crazy lending has stopped dead, and isnt likely to return for a long time. Property will be a dirty word before too long after people get used to it seemingly forever falling in price, when before it seemed it would always rise.

You could argue property prices may never reach the levels they got to at the end of 2007 because they're taking about inflation adjusted prices, another way of looking at it is like saying they won't reach 8 x average earnings for 20 years. IMO they won't for at least 20 years. Not inflation adjusted a number of predictions have said they'll reach recent peak levels again in 10 years, but of course in real terms they'll be worth less.

dpb

Well there has been 20 years worth added to the price of a house in the last 7 years or so so it all sounds quite reasonable to me

joekont

If prices have drop by 6.8% then someone needs to tell all the local estate agents around here.

There hasn't been a crash but really hope there is one soon.

What an **** this woman must be. Prices are currently about 150% more than they should be. I'm 32 with a good job and there is just no way on earth that I can afford anything with 20 miles of where I live. Not because I live in an overly expensive area. There just isn't anything for less than £100,000.
This is because people went out and borrowed stupid amounts and paid more than property was worth. As the interest rate rises, more and more people find that they can't afford their mortgage repayments.
I can't wait for the crash that this will cause.
Property may again be worth a reasonable amount instead of the complete fairy story that a glance in the estate agents window tells you.

This may seem like a selfish view and it is.

I have no sympathy for people who have pushed up the price of housing to a point where it simply isn't affordable any more.

I just wish the banks would lose out more than the people they leant to. But we know that's never gonna happen.

joekont

Lol.
I know.
this thread was the first I've heard of a "house price crash". I assumed Merril Lynch was some overpaid government muppet. Not a big company

Petem95

LMAO!!!

dpb

NotoriousREV

Recover from what? There's bugger all happened to them yet

scoobynutta555

Sorry to disappoint the bloke hoping for a price crash, but the ingredients for a crash will make it even harder for him to get onto the ladder unless he's a cash buyer.

joekont

That would be me.
I'll wait till the dust has settled. I might be a cash buyer then.

unclebuck

House prices are recovering







- from being so ridiculously over-inflated.

SunnySideUp

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)

ScoobyDoo555

I don't care anyway - I'm not moving for at least that !!!! Got the house I need/want to keep me going now.
And with at least 50% equity in the property.

I'm chuffed/relieved!!

zip106

MIRAS was introduced in 1983 and ended on 6th April 2000.
MIRAS: What is MIRAS and how does it work?: What is MIRAS?

I thought it actually ended earlier than that - around 1992/93?

SunnySideUp

I will be adding to my property portfolio just before the bottom (if I can judge it right!) ..... houses are still great bets over the 10 year span.

SunnySideUp

I was talking about MULTIPLE MIRAS, sorry if that wasn't clear.

zip106

Klaatu

Interesting, here in Australia, we've just had an economist predict the future of climate. Amazing!

MikeCardiff

iTrader: (2)

My prediction is that it is going to naturally level out between the price of the house and the price of borrowing - already the lenders have increased interest rates a lot, stuck on huge lending charges, reduced the salary multiples they will give and are decreasing the LTV they offer.

Lenders also seem a lot less ready to give long term fixes, either offering short term ones at higher rates, or variable rate loans, which cover their ***** whatever happens with interest rates.

As prices drop, the cost of borrowing will increase, so in real terms the houses arent getting any cheaper. They may drop for a couple of years as a knee jerk reaction, then level out for a few years before climbing again as the lenders realise making a small profit from lending is better than none at all when nobody is buying, so introduce better deals.

Already the house builders are laying people off and cancelling planned developments, which as a lot are flats and starter homes aimed at FTB's means there will be less properties about for FTB's, increasing the demand and pushing prices up for those that can afford to take the first step on the ladder.

One good side is that it should stitch up a lot of the amateur buy to letters, who are one of the main reasons prices went up in the first place meaning genuine FTB's couldnt afford even tiny one bed flats anymore.