And that's the basic truth. Predicting when a market is going to correct is almost impossible to do, all we can say with certainty is that houses are overvalued and a correction will happen. When is anybody's guess.
House prices
- Thread starter captaincaveman1
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And that's the basic truth. Predicting when a market is going to correct is almost impossible to do, all we can say with certainty is that houses are overvalued and a correction will happen. When is anybody's guess.
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Life is a gamble but try seeing as a long term investment, from what I have seen it's the short term or bad timing of buying if you want to sell earlier and you will never get a straight forward answer, similar to the stock market timing but long term seems to override any problem.Well been renting for 5 years now but now a house at an attractive price has come up question is are house prices now on the rise or will they drop even more?
I bought my rundown 2 beds bungalow in 1981 for £17,000 at the auction and I was worried not meeting any payments at the time, now it's 4 bedrooms and have been told it's now worth over £300,000! At the end of the day you cannot beat having your own castle. Millionaires don't get rich without taking any risks
http://www.zoopla.co.uk/property-advice/rent-or-buy/
No, you've maintained its value by er, maintaining it. You might have got a discount when you bought it because the previous owner hadn't kept up with maintenance but you are going to have to keep maintaining it to avoid discounting when you sell.
Houses don't go up in price (except in credit bubbles - which will correct over time). The value of money goes down (by deliberate design).
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And unfortunately the way we will almost certainly get ourselves out of the current financial mess is to decimate the value of our money. So we will owe the same amount (actually a lot more as we cannot get ourselves off the debt spiral now) but that sum will not buy anywhere near the same amount of commodity. We will have to inflate our way out, or default, probably better to inflate.
Inflating our way out is what is being tried at the moment. It can't work unless there is matching wage inflation. There isn't any in the private sector and there can't be in the public sector because we would need to increase borrowing to pay for it. Actually, they seem to be just trying to buy some time for lending and therefore growth to restart. If they went full on for inflation, the middle and working classes would be rapidly destroyed (economically) leading to mass defaults, starvation and riots.
Unfortunately, growth isn't going to restart because there is far too much debt in the system. We've run out of credit worthy individuals and businesses willing to take on debt (I'm talking in the general sense, there will be exceptions). Those who are not in debt are probably smart enough not to get into debt.
There is no way out of this that doesn't involve a massive hit to GDP despite the BS emanated from both sides of the house in Westminster. The only country that has adopted a sensible response to the crisis so far is Iceland. Default and get it over with.
Unfortunately, growth isn't going to restart because there is far too much debt in the system. We've run out of credit worthy individuals and businesses willing to take on debt (I'm talking in the general sense, there will be exceptions). Those who are not in debt are probably smart enough not to get into debt.
There is no way out of this that doesn't involve a massive hit to GDP despite the BS emanated from both sides of the house in Westminster. The only country that has adopted a sensible response to the crisis so far is Iceland. Default and get it over with.
If we (our government) defaults then we still get the same destruction of any investment that holds government debt. That's going to be anybody with a private pension for example. The government will also have to default on the crippling public sector pension liabilities too, in fact they should be doing that now, which would ruin the economy itself. So defaulting is a terribly bad solution as well, but then there isn't a good solution, or even a slightly bad one. They are all awful and almost certainly involve massive civil unrest. Inflation will be less of a 'nuclear option' and has been used in the past, the drop in standard of living will be over a decade instead of a month.
We are going to have to end up with the same income as the Chinese and Indians at some point - except they don't have massive debts like we do, so their income will probably be higher. House prices will just adjust so people on those levels of incomes can afford to buy one.
We are going to have to end up with the same income as the Chinese and Indians at some point - except they don't have massive debts like we do, so their income will probably be higher. House prices will just adjust so people on those levels of incomes can afford to buy one.
Yep, pain all round. But I still maintain we will hit the wall before we can inflate our way out. The defaults that will come from squeezing the working John are deflationary.
China is in a pickle too. Their economy is riddled with corporate debt and loans guaranteed with phantom assets. The wheels are starting to come off in the middle kingdom.
China is in a pickle too. Their economy is riddled with corporate debt and loans guaranteed with phantom assets. The wheels are starting to come off in the middle kingdom.
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Reality.
Inflation (RPI) end of 2006 - 2011 compounded 21.2%
Property (important distinction) say £320k in 2006, to maintain that value would need to be £387.8k today. (due to inflation).
Current selling price obtained £265k So what is the drop?
It is from £387.8k to £265k which is 31.7%
BTW It wasn't so much the buildings it was the land prices which had gone ballistic.
Average land values in South West England.
Aut' 1994 £587,000 per hectare (10,000m² or 2.47 acres)
Spr'g 2008 £2,800,000 per hectare
That is from £58.7/m² to £280/m² in 14 yrs, 11.8% increase compounded yr on yr.
I bought in Aut. '94 £92k, in 2008 was around £300k, if house had matched land rate of increase would have been £448k. Hence land was the culprit !! Pesky land owners again !
-o-
Inflation (RPI) end of 2006 - 2011 compounded 21.2%
Property (important distinction) say £320k in 2006, to maintain that value would need to be £387.8k today. (due to inflation).
Current selling price obtained £265k So what is the drop?
It is from £387.8k to £265k which is 31.7%
BTW It wasn't so much the buildings it was the land prices which had gone ballistic.
Average land values in South West England.
Aut' 1994 £587,000 per hectare (10,000m² or 2.47 acres)
Spr'g 2008 £2,800,000 per hectare
That is from £58.7/m² to £280/m² in 14 yrs, 11.8% increase compounded yr on yr.
I bought in Aut. '94 £92k, in 2008 was around £300k, if house had matched land rate of increase would have been £448k. Hence land was the culprit !! Pesky land owners again !
-o-
Land owners? Far from it.
The magic money was made available so the competition was there to buy the land. Land owners sell to the highest bidder. Simples.
Where the bidders get the money is their problem.
I have a site but won't be selling it. Don't need the money and certainly don't need a neighbour from hell..
Before 08 mugs might have forked out about £80k for it. Today maybe £35k.
Thats the reality.
The magic money was made available so the competition was there to buy the land. Land owners sell to the highest bidder. Simples.
Where the bidders get the money is their problem.
I have a site but won't be selling it. Don't need the money and certainly don't need a neighbour from hell..
Before 08 mugs might have forked out about £80k for it. Today maybe £35k.
Thats the reality.
It's all about timing .
Every bank (with the possible exception of HSBC and Standard & Chartered) is bust! The assets on their books are marked to fantasy rather than marked to market. The worst of their assets have been pledged as collateral to the Bank of England for loans of 'quantitatively eased' (as in 'Printed') money which have ten been used to buy Gilts. The Gilts are then held on the books as 'money good' making the banks appear solvent and funding the Government defecit spending. If house prices fall further, the high risk loans still on their books (many were already sold on) will be run through the securitisation mill and converted to Gilts the same way.
True, or more accurately, the price of land with planning permission although agricultural land has also increased significantly. That's what happens in a credit bubble.
Congrats on buying at the bottom, you would have paid a lot more in 1989...
E
EddieM
Nothing to do with anything historic it's simply down to what people can afford. If you have a balloon in people who can only afford to rent, despite being cheaper for them to buy, then this only happens for a finite time, when those landlords die, then the assets have to be sold, for errrr what, what the market will bear.. vastly under what they expected. The hosing market is the huge elephant in the room, and yest it is being propped up cos the reality is all the banks will go bust again.
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