I've just been reading rightmoves press release for May that was issued on Monday (makes for interesting reading as many of us use the asking prices on rightmove as a benchmark for pricing and then wonder why things aren't selling) and on page 3 they mention a comparison with 1974. Does anyone know what if anything is special about 1974 in house price terms? They mention 1995 too but I'm old enough to remember that for myself.
I've not seen the press release but in both the mid 70's and early 90's there were crashes. Take a look at page 3 of this link and you can see a graph for prices and clearly see the peaks and troughs:
I'd edit the above but I don't seem to have permission. So a correction:
I just grabbed that page from a quick Google. It does't show prices directly but shows them in relation to disposable income which is why the general trend isn't upwards. But hopefully it will give some idea of the troughs in the 70's and 90's.
Slight shot in the old foot really AB as the author clearly subscribes to the general view - no major earthquake, merely a very reasonable and probably overdue period of retrenchment, pretty much like 99.9% of us here have been saying. No crash, but possibly a slightly bumpier than ultra softy, cushiony, hardly felt it at all-y landing but, as we have been saying probably no pressing reason to go out there building a lead bunker in your garden and selling your grandmother. Now as with all such views it could be right and it could be wrong. Where we on this forum differ from other forums is that generally we acknowledge that no one actually knows, at this stage, whose version of events is the 'nah nah nah nah nah, I was right and you were wrong' version (well hey, that's how childish it's getting round here!) So in the absence of proof, and the presence of conjecture, can't we please stop this nonsense and just get on with the day to day which, for most of us, is challenging enough.
Adrian – your link is actually quite an interesting presentation by John Muellbauer, particularly because (on a quick reading) he seems to present a ‘soft-landing’ view. For example, he suggests on p24 that this time will be “nothing like 1989-1993 [the] ‘correction’” and cites lower IRs, inflation, and other factors as being different this time, concluding on p28 that although he does “not expect a perfect soft-landing” he thinks there would be an “extended period of low, sometimes negative, house price changes ... followed by lower interest rates if inflation permits”.
EDIT: agree with susiecam - maybe a nuclear bunker is not required!
I was around in 1974! Buying property OK not on a Grand Scale but the memory is as clear as crystal. By 1974 (I bought my 1st house in May 1971 £6000 3 bed semi South Coast) the price of houses had doubled with a slow, but accelerating increase late 1972 through 1973. In 1974 I sold up for £12,000 and bought a larger detached house for £14,500. House prices stagnated a bit through the late 70's. I have bought and sold property both for my own family occupation and for my property business through ALL the Peaks and Troughs which is why I don't pay much attention to the Doomongers. Yes, I have lost money but I have made more money from property than I have lost.I once lost, on paper, £80,000 on a property(1989) but just sat tight through the dip and sold out(1997) for more than I paid with a profit. # Oh! Yes! I have ben unemployed and in debt as well, these things happen, just as they may happen today for people but my advice is always to take the long term view with the Property Game and you won't go far wrong.
My home is the only property I have ever bought and the only one I ever wish to buy. (Unless I win the lottery but - back to reality!)
Through the 23 years I have owned my home the possible selling price has been all over the place. At one time it was supposedly worth less than I had paid for it but now it is supposedly worth 8 times what I paid. It is only of academic interest though as this is my home and where I love living.
**Just wants to pass some time without any hassle**
Have always respected your posts since I started to follow this forum. You tell it as it is.
Off course nominal house prices will arguably always rise over the longer term. Especially on a small crowded island with a fairly restricted supply of new housing etc.
However do you feel that REAL house prices can actually go any higher then todays levels in the forseeable future.
Have always respected your posts since I started to follow this forum. You tell it as it is.
Off course nominal house prices will arguably always rise over the longer term. Especially on a small crowded island with a fairly restricted supply of new housing etc.
However do you feel that REAL house prices can actually go any higher then todays levels in the forseeable future.
Personally I don't think there is room for any increases at the moment depending on which area you live in. There is a downward trend at the moment which is to be expected after the huge rises that have been seen over the past 5 years but the Economy(especially personal debt) is the key to everything and I believe this has peaked also but if Interest Rates do drop by a 1/4 of 1 per cent then it could have an influence of how things pan out over the next 3 Months a so. I do not for one moment confess to be a financial Guru but I do follow advice and read what others are saying to a point but I am a 'seat of the pants' speculator which most of the time works for me. In my office here, and I have said this before on this Forum, I have a Nov.1989 framed newspaper article from a so called expert who stated that "Property prices will continue to grow well into the next Decade" followed by graphs and indicators and other Twaddle to justify how this Economist had arrived at this profound statement. Within 6 Months or less of course, a resounding downturn was in progress. So you'll understand why I tend to ignore some, but not all, of the financial advice that floats around Newspapers and Forums
I have been told that I am 'Lucky' but luck had nothing to with it,it has been hard work over a long period of time and my advice to anybody else is to plan ahead and seize the opportunity should it come your way and that is not necessarily based on property renovation etc. Mel.
hey, a thread discussing house prices! I hope it lasts!
so, if you subscribe to the idea of "stagnation" for a while, does this also mean you subsccribe to the idea of accepting that now an acceptable mortgage multiplier is more like 5.5x income, rather than the ones the banks are willing to lend on of 3.5% income? What effect do you think it would have, if any, on prices if banks were to change their view to allowing 5.5x income multiples for FTBs?
one difference between 1974 and now is that inflation is much lower now than then, so debt will be eroded much more slowly.
hey, a thread discussing house prices! I hope it lasts!
This forum has always discussed house prices in a rational and interesting manner. It's only been the manic propaganda that has been deleted - thankfully. Be careful, you are showing your true colours and true point of being here.
hey, a thread discussing house prices! I hope it lasts!
This forum has always discussed house prices in a rational and interesting manner. It's only been the manic propaganda that has been deleted - thankfully. Be careful, you are showing your true colours and true point of being here.
yes, I have a point of view, and that point of view is that prices are falling, but I also want to discuss and debate it, explain in a reasonable manner of why i come to this view, perhaps point out some points that others haven't considered. I think my questions in the above post are fair and reasonable, not objectionable, not offensive and provide food for thought.
My true point of being here? to talk to a wider audiance of ordinary folk to find out what people really think.
perhaps point out some points that others haven't considered. I think my questions in the above post are fair and reasonable, not objectionable, not offensive and provide food for thought.
My true point of being here? to talk to a wider audiance of ordinary folk to find out what people really think.
Yes, you see this is the problem. You seem to want to "point out things others might not have considered" and "provide food for thought". No mention of chatting, swapping thoughts and ideas or actually LEARNING SOMETHING YOURSELF. You seem to want to find out the "ordinary folks'" viewpoint (what are you then?) while converting them to your own. I'm afraid it's obvious when people are posting propaganda and trying to convert others to their point of view and it's getting very, very tedious. The irony is that this forum has never promoted higher house prices - it's just that you and your gang are too blinkered to see it.
perhaps point out some points that others haven't considered. I think my questions in the above post are fair and reasonable, not objectionable, not offensive and provide food for thought.
My true point of being here? to talk to a wider audiance of ordinary folk to find out what people really think.
Yes, you see this is the problem. You seem to want to "point out things others might not have considered" and "provide food for thought". No mention of chatting, swapping thoughts and ideas or actually LEARNING SOMETHING YOURSELF. You seem to want to find out the "ordinary folks'" viewpoint (what are you then?) while converting them to your own. I'm afraid it's obvious when people are posting propaganda and trying to convert others to their point of view and it's getting very, very tedious. The irony is that this forum has never promoted higher house prices - it's just that you and your gang are too blinkered to see it.
Yes, I did state I wanted to "discuss and debate it" Of course I will listen to other viewpoints, and if someone has something new to say I will examine it in full. i think you will find that I am very reasonable debater and not prone to slagging others off nor am I prone to brushing anyone off with patt answers. I approach each and every person as in individual.
No I don't consider myself to be an "ordinary folk" because I seem to be unusual in that I will always do a LOT of research into a subject before making a decision. i have a quest for TRUTH, it is my scientific background.
But back to the subject in hand, do you have any thoughts on the questions I raised or points I made in my first post in this thread? do you have anything that you wish to point me to in support of your position?
I'm honestly thruthful that i want to debate this properly. My time is short right now as I am away for a few days from tonight, so won't get a chance to debate further till later next week.
if someone has something new to say I will examine it in full
Goodness - that's broad-minded of you. One of the problems seems to be a misapprehension about this site. This site is used by a group of people who join/leave/post/read according to their own personal interests and circumstances. There is no board identity and no group agenda, viewpoint or conspiracy.
For some reason a grouop from anoterh site has decided to make a concerted effort to invade this board and convert people to their group opinion. Not only is unfriendly and ignorant, but it's also very unpleasant.
[QUOTE]I will always do a LOT of research into a subject before making a decision[QUOTE]
Good for you. It must be nice to look down on other people from your lofty, one-perspective point of view.
And finally, I do not wish comment on the points you made because, frankly, they are worthless because they only seek to cause controversy not debate. And I do not "wish to point [you anywhere] in support of [my] position" because quite simply I don't have a position on the only issue you are interested in. Until your gang realises that this is a board of individuals who like to talk about houses and design you'll keep getting short shrift.
I don't see why that is such a hard concept to graps. But then again, one of your gang didn't know what a journalist was so perhaps I shouldn't be surprised.
Most people would surely agree that some (much ?) of the rise in house prices was due to speculation and even desperation as if the buyer didn't jump in quick the same property would cost (rather than be worth) X times more in a few months, weeks, even days time !
Now that things have settled down surely affordability is actually the key. If (?) - interest rates stay reasonably low - your circumstances (particularly finacial)haven't changed too radically - you haven't blown all your increased nominal equity on a new car, holiday, BTL etc - you stuck to the traditional mortgage income multiples and aren't entirely dependent on a very low fixed rate (and possibly interest only) deal
then once you are on the "property ladder" especially in the longer term you are not likely to have too much to worry about. For FTB priced out of the market it is obviously another matter.
The reason income multiples are best kept low (around the traditional 3 to 3.5x mark) is to allow for uncertainty in the money markets and global economy - oil price hikes, major wars, recessions etc. Most people who bought in the last few years with a sizeable mortgage would already be seriously struggling with a 3.5x multiple if interest rates were again to approach the 15% they reached in the fairly recent past. Even the long term average of around 8% IR would not be very comfortable. It really would be crazy to increase standard multiples to 5x earnings and beyond.
Perhaps more interestingly will REAL house prices - in comparison to a loaf of bread and everything else you buy - stay at current levels. Is it all to do with status - the Englishman and his castle ? On a basic level there isn't really any reason why relatively owning a house should be any more important in REAL terms now then it was 5, 10 or 20 years ago. Which applies equally looking ahead to the future.
On a personal level long may the current "soft landing" continue ...
Of course nominal house prices will arguably always rise over the longer term. Especially on a small crowded island with a fairly restricted supply of new housing etc.
Originally posted by gooseberry: OK. If we try to look at the fundamentals.
Most people would surely agree that some (much ?) of the rise in house prices was due to speculation and even desperation as if the buyer didn't jump in quick the same property would cost (rather than be worth) X times more in a few months, weeks, even days time !
Now that things have settled down surely affordability is actually the key. If (?) - interest rates stay reasonably low - your circumstances (particularly finacial)haven't changed too radically - you haven't blown all your increased nominal equity on a new car, holiday, BTL etc - you stuck to the traditional mortgage income multiples and aren't entirely dependent on a very low fixed rate (and possibly interest only) deal
then once you are on the "property ladder" especially in the longer term you are not likely to have too much to worry about. For FTB priced out of the market it is obviously another matter.
The reason income multiples are best kept low (around the traditional 3 to 3.5x mark) is to allow for uncertainty in the money markets and global economy - oil price hikes, major wars, recessions etc. Most people who bought in the last few years with a sizeable mortgage would already be seriously struggling with a 3.5x multiple if interest rates were again to approach the 15% they reached in the fairly recent past. Even the long term average of around 8% IR would not be very comfortable. It really would be crazy to increase standard multiples to 5x earnings and beyond.
Perhaps more interestingly will REAL house prices - in comparison to a loaf of bread and everything else you buy - stay at current levels. Is it all to do with status - the Englishman and his castle ? On a basic level there isn't really any reason why relatively owning a house should be any more important in REAL terms now then it was 5, 10 or 20 years ago. Which applies equally looking ahead to the future.
On a personal level long may the current "soft landing" continue ...
I agree with much of what you say. the 3.5 times has been in place for a long time as a traditional standard, precisly because it prevents people over extending themselves if things turn bad. Howver, I don't see how you get to the conclusion you come to that prices will just remain flat for a while.
Taking my situation. I live in somerset, and with the 25K a year job I did have (o.k. everythings gone bad there, but thats another story) was considered a VERY VERY good wage for the area. at 3.5x multiple and 10K savings would enable us to get a 100K property, which is a 1 bed flat, but with a toddler that is no good for us. If prices indeed stay flat and wage inflation remains at around 5% level, then it would take a further 4 years before we can get to the 120K level needed for a 2/3 bed place we would need for our current (and possibly expanded by then) family. And these are the houses in the worst part of the town too. As for all the averag wage families, they will have to wait even longer. So assuming the status quo and stagnant prices, I would suggest that many a FTB will not be able to afford a place for another 4 or 5 or more years. And in that period with FTBs unable to buy who is going to enable people to move house when they have to, either due to expanding families or job relocations. It does beg the question of who has been buying to get the prices to the levels they are at? Maybe the status quo can be maintined by these current purchasers. But with sales plummeting (40% of what they were a year ago) t doesn't look like these buyers are still buying.
Most people can sit back for 5 years or more, but these won't be the ones setting the prices, it will be those who have to move and have to sell.
As for real house prices, ie inflation adjusted, then that brings us back to the original topic of what happened in 1974? at this time prices fell compared to the real cost of living, but because the real cost of living was rising at a rapid rate, house prices just remained static. At the moment, inflation is very low, and the BOE doesn't see it going much above 2% within the next 2 years, so a true stagnation in house prices would suggest that the value of a house compared to normal cost of living will remain extremely high compared to historical standards.
But if inflation is set to remain low, then that might suggest interest rates are set to remain low, so why not allow higher income multiples? this would then enable FTB's to borrow enough to be able to make that first ladder purchase and the housing market can keep pottering along.
As for real house prices, ie inflation adjusted, then that brings us back to the original topic of what happened in 1974? at this time prices fell compared to the real cost of living, but because the real cost of living was rising at a rapid rate, house prices just remained static. At the moment, inflation is very low, and the BOE doesn't see it going much above 2% within the next 2 years, so a true stagnation in house prices would suggest that the value of a house compared to normal cost of living will remain extremely high compared to historical standards.
Hmm, I'm not sure that's quite right. In 1974, real house prices fell significantly, but this was masked by annual inflation rates well in excess of 10% per annum.
In today's low inflation environemnt, any real terms falls in house prices will not be masked significantly, if at all, by inflation, and so real and nominal falls will track each other much more closely.
quote:
if inflation is set to remain low, then that might suggest interest rates are set to remain low, so why not allow higher income multiples?
Higher income multiples have already been allowed, via self-cert, 130% LTV loans, guarantor mortgages and all sorts of other shenanigans allowing the young to load themselves up with debt...and the housing market has still stalled (transactions 40% down: http://www.thisislondon.com/money/articles/18573863?source=Evening%20Standard)
I realise the link refers to London but the trend is nationwide.
- maybe a nuclear bunker is not required!
