To think that house prices will ever fall to affordable levels?

[MumNWLondon]

I saw this in the Daily Mail:

link

For those that know me, I have been a property bear (ie I think that house prices will fall) for a while now; I think its very sad that its no longer possible to buy an average family house for three times family income, and ever sadder that many bought in at the peak and now face negative equity in small properties and hence will not be able to easily move to a family home.

So am I being unreasonable to hope that house prices will decline to sensible levels and do you think its likely?

Xenia - true over time its always gone up but thats partially because we've always had high inflation. Its not clear that this will be the case going forward. The indexes are predicting flat prices for next 10 years.

But in 1997 when labour came to power you could buy a house for 3x salary. GB said in his first budget, I will not let house prices get out of control. He then put up stamp duty. He didn't realise that this would make no difference. If he had wanted to stop house prices going out of control he would have left capital gains for landlords the way it was (taxed on gain at marginal tax rate) and he would have enforced strict limits on the amount people could borrow (ie 3x salary).

re: earnings, I have no idea what my DCs will earn, but I would want them to be fulfilled in their jobs and not feel pressure that they have to earn a big salary.

ah crap folks

looks like a troll raid

The funny thing is I read HPC every day and have been posting there for years longer than on MN.

Its really weirding me out now to be trolled by people on another site I already post on.

Bit feeble, aren't they BALD? ROFL at the suggestion that talking about houseprices is a bit 'above their level'. Umhmm.

Riven, as you know, there's a proud and noble tradition in the UK of doing academic subjects at university without a particular end in mind. Classics, politics, history, etc. I've just been explaining this to my French colleagues and they look at me as though I am demented. What? No business school? But it's a pretty good system IMO

I did an English degree - very versatile and useful degree IMO - and I am not poor now. Also she will enjoy it and it will give her time and space to make up her mind what to do next.

I did an English degree as well.

Am poor, though .

Housepricecrash very boring site.

Here, more interesting.

I haven't posted on that site but they are frighteningly accurate at times I have bought and sold a few times and they were generally right about the state of the market etc

I don't think there is any chance that anyone buying now and owning over the next 50 years will find it was a bad deal. Even if we have 7 years of stagnation. Even if we have more of the 1990s negative equity again. We bought in 1990 and sold at exactly the same price in 1997 but over the 25 years I have owned property and the 37 - 40 I am likely to continue to own it it will continue to rise ni value. There will not be worse inflation than the 1970s (which I remember), nor the problems of the 1920s crash and in all those times property still climbed in value even ahead of inflation. There is it is usually good to invest for your remaining 40 year life term adn it also gives you psychological security and a whole heap of other things which renting doesn't.

Teenagers have always known if you pick nursing you will earn less than being a surgeon. If you decide to each you won't earn what a dentist earns. If you choose art you're likely to be on less than if you're on the board of M&S. Everyone can know these things and the consequences of their career choices.

I did an English degree too. My mistake was then to go into accountancy, which, while well paid, made me utterly miserable. I'm still glad I did Eng Lit, because I loved it so much, and got a good degree out of it. I disagree with Xenia about people knowing what they are getting into when they choose their degree, no-one in my family had been to university before me, so no-one suggested that doing another degree would be more lucrative. It was just so bizarre to my family that I was going to university at all, they thought any degree would lead to untold riches.

It will take high unemployment + higher interest rates + banks enforcing repossession to real crash. In 2008 commercial property prices (especially offices) were 50pc down from peak as this asset type is "marked to market", in the jargon. But residential property owners don't take loses unless they have to which is one of the reasons why residential property prices are stickier than commercial property prices on the downside. Then the supply pipeline is also important. Phd's have been written on the subject.

The "forward" halifax prices in the synthetic market are fairly flat but this not always a good indicator. Although it is a better indicator than many research papers as there is "real" betting money behind these numbers. see bottom of page2

Also, let's remember than the GBP currency has taken a hammering against basket of foreign currency which means that to outsiders, UK property has fallen by say 25pc due to currency alone- this is more relevant for London.

Also, let's remember that inflation risks looking forward are high which would be a supporting factor for nominal house prices.

We are a mumsnet housepricecrash marriage and both spend equal amounts of time on our respective sites!

I feel I am adding more value reading up on parenting. Dh spends a considerable amount of time posting on housepricecrash. We are in rented because he is convinced lower prices will arrive. Tonight as I update my blog and read about potty training he is sitting there mumbling on about Spain's ratings being downgraded and saying I told you so!

I lie in bed and read Junior, he lies next to me reading the pocket size SAS survival guide.

I just want to buy a house so I can give my offspring the security of not moving all the time, someone else not having the keys and we can decorate properly and settle. The closes I can get is the Little Tikes playhouse.

He thinks we'd be throwing money down the toilet so we live in rental limbo and endlessly debate the end of the economic world

Back in 1987 we bought a 2 bed semi in the south east for 2.5x dh's salary plus 1x mine.

My earnings probably around average for the area and dh's slightly higher.

But worth adding that interest rate at the time was 11.5% and subsequently rose to 15%!!

Blimey, that HPC thread was lame. I'm sure they would be torn to pieces if they attempted such bullshit on MN. Talk about groupthink!

Well.... okay, there may be a bit of groupthink on here (think of the piling-in which occurs once someone shouts troll), but there is enough of a competitive spirit that it's not safe to say smug and lazy things; you will be jumped on, and the guts of your argument slashed and spilled, particularly on AIBU!

The banks (structural) policies play a key role. Commericial Property prices could have fallen even more but the banks say that it wasn't in their interest to enforce various covenants learning from previous crashes. So they did more waiting and resturcruring of debt this time to avoid force selling. It is not in the banks interest to cause wholesale meltdown that some are hoping for.

...Nor the govt's interest. We could/may get a dip but nothing like 50pc IMO. say backdown another 10pc but we could get an inflationary surge as well.

Going back to the original link, I see that we are quoting Capital Economics...they are really nice guys but they (their head Roger Bottle) were predicting a crash/bear market for about 10 years...eventually it happened....if you predict a crash long enough you will eventually be right.

We might well get at 1990 - 1997 period with a big negative equity thing in the middle but then be back up to what it was in 1990 by 1997 thing. That does happen and if you want to dip in and out of the market or you think thre wil be no inflation in the next 40 y ears (you'd be a fool to think so) then you might want to time an entry or exit to the market but it's a fool's game. you're better off getting on in there and having the stability of ownership even if you do have negative equity for a bit. As most of us wil live to 80 or older we hav a good long time for the market to right itself. You are also balancing the emotional issues of just renting knowing others are buying and not being settled. That'sd a huge reason for many to buy even if they end up timing it slightly wrong. If the 40k house we bought in 1984 is now worth £250k (it is) the difference between waiting for it to be £40k for 45k or 35k looking back 25 years is negligible compared to 250k now so you might as well get on in there in my view unless of course you cannot afford future interest rate rises and don't think rents when inflation kicks in hugely will increase.

Yes, to anyone thinking of buying my advice would be that the risks on the upside are well balanced with the risks on the upside. If anything there is more upside price risk. There is a greater chance of 50pc price increase in the next 7 years than 50pc price fall in the the same period?

Anyway, I think one should not panic buy, but take your time finding the right property and buy based on affordability and do scenario analysis to ensure that you have back up plan if you lose your job for x months etc.

Speaking of not panic buying, that is one reason we are not looking to buy a house now that we have to move on from our rent: there simply isn't enough available here to make it a proper, liquid market. Under time pressure as well, as we are, we would be bound to make a horrible mistake!

WingedVictory- It is worth just keeping an eye out so that you can be opportunistic but need to be disciplined and patient to adopt that strategy.

Thanks, TDiddy, but we need to choose some "spots" first, otherwise we will be all over the place, or else hostage to whichever of DH's friends has been bending his ear about how wonderful it is where they live!

I think having a objective list of things, places makes sense. Wishes we had done that two years ago and stuck to our guns