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Housing market crash

Housing market crash

Old Jun 17th 2008, 6:47 pm
  #1  
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Default Housing market crash

Britain: 'Housing market crash could last 4 years'

In the last couple of months, the credit crunch seems to be heading towards what could be termed a recession.

As a result, there has, quite naturally, been a lot of talk about what will happen to both the mortgage and housing markets!

Now, a wide-ranging survey of experts has now warned that house prices will take more than four years to rise above their 2007 peak.

This prediction was made by more than 60% of the Society of Business Economists (SBE) surveyed for the latest edition of ITV1’s Tonight programme. The survey showed that:

56% of the economists believe that house prices could fall by up to 20% from the top of the market
20% of them took an even more pessimistic view; they forecast that property values could slump by as much as 30%
More than half the experts from banks, building societies and industry said house prices would fall by between 6% and 10% in this year alone
44% of those surveyed believed that the housing market will hit rock bottom in 2009.
If you are worried about the housing market crash and what it might mean for you then you should get some help:

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The SBE’s chairman, Bronwyn Curtis, also warned that recent home buyers could have to wait “a long time” to get their money back. She said:

“It doesn’t look like we’re going to see a fall, which is what we’re in the middle of, and a quick bounce back. It does look as though it’s going to go on, and we’ll have slow growth for some time.”

Recent figures from the Nationwide and Halifax building societies showed hefty price falls during May, while the number of homes changing hands also slumped to a 30-year low.

The downturn has been driven by a loss of confidence among potential buyers and a fall in the availability of mortgages as a result of the credit crunch.

Ms Curtis said that, just as house prices had previously been set too high, they would now ‘remain undervalued for a long time’.

But is a housing market crash necessarily a bad thing?

Think about it. With the free and easy access to credit that created the housing boom in the first place now gone, house prices will settle back to a level that genuinely reflects supply and demand. Surely that is a good thing for anyone seeking to buy a house?
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Old Jun 17th 2008, 11:18 pm
  #2  
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Default Re: Housing market crash

Originally Posted by Slingshot View Post
But is a housing market crash necessarily a bad thing?

Think about it. With the free and easy access to credit that created the housing boom in the first place now gone, house prices will settle back to a level that genuinely reflects supply and demand. Surely that is a good thing for anyone seeking to buy a house?
My view is that a readjustment is a good thing, but in this "crash" its going to be a whole different story.

Firstly, those who will benefit from the adjustment are those who will be looking to move up the property ladder and stay put for a while. There will be (and already is) a lot of distressed sellers. But then the problem is, even the banks are now making mortgage applications very difficult. If you have less than 20% deposit it isn't even worth attempting to approach a bank.

With the rising oil and food prices, I fear that crash will take many people with it. The government likes to talk of the possibility of a recession but I firmly believe it is here. Consumer confidence is at rock bottom, with established retailers collapsing out of the High Street, and redundancies already started in the city, it will take a long time to recover.
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Old Jun 18th 2008, 3:02 am
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Default Re: Housing market crash

Already said it before, will say it again, it will take 3-4 years just for property to reach bottom in the Uk.
As for prices reaching 2007 levels... maybe 2016-18.

What always makes me laugh in these scenarios is that the property 'experts', real estate companies and banks all club together saying the same 'there will be no crash' 'property will keep going up' etc rubbish - then once faced with the facts of a property recession still try to talk it down to 'small adjustments'.

If these so called economists were in the building trade, they would be sacked for shoddy workmanship.
It seems the one quality you need to be an economist is eternal misguided optimism - as far as property markets go anyway.

Every time there is a property spike, the 'economists' claim there will be no crash 'because it is different this time'...

Time to look at the facts.
Fact, a typical economy has a peak and a trough every 10-20 years.
Fact, this has happened in the Uk for over 200 years, since the early beginnings of a civilised 'economy'.

When the peaks are highest and last longest, then the risks of the trough lasting longest and reaching lower also increase.
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Old Jun 18th 2008, 4:30 am
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Default Re: Housing market crash

Originally Posted by admon View Post
Already said it before, will say it again, it will take 3-4 years just for property to reach bottom in the Uk.
As for prices reaching 2007 levels... maybe 2016-18.

What always makes me laugh in these scenarios is that the property 'experts', real estate companies and banks all club together saying the same 'there will be no crash' 'property will keep going up' etc rubbish - then once faced with the facts of a property recession still try to talk it down to 'small adjustments'.

If these so called economists were in the building trade, they would be sacked for shoddy workmanship.
It seems the one quality you need to be an economist is eternal misguided optimism - as far as property markets go anyway.

Every time there is a property spike, the 'economists' claim there will be no crash 'because it is different this time'...

Time to look at the facts.
Fact, a typical economy has a peak and a trough every 10-20 years.
Fact, this has happened in the Uk for over 200 years, since the early beginnings of a civilised 'economy'.

When the peaks are highest and last longest, then the risks of the trough lasting longest and reaching lower also increase.
The so-called experts say the same thing about the UAE...that property will keep going up and you can make huge margins in just a year. Even with Dubai's government spinning and jumping to keep the market growing the fact is, as you stated, that a typical economy has a peak and a trough every 10-20 years or so. It's perfectly normal and healthy as it corrects prices and sets up things for better returns in the long run.

I would say now is one of the best times in a long time to be buying property in the UK or USA...investing in Dubai (which is getting nearer it's peak) is far riskier. UK property is at least stable (and will be standing in 15 years!).

N.
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Old Jun 18th 2008, 4:49 am
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Default Re: Housing market crash

Originally Posted by Norm_uk View Post
The so-called experts say the same thing about the UAE...that property will keep going up and you can make huge margins in just a year. Even with Dubai's government spinning and jumping to keep the market growing the fact is, as you stated, that a typical economy has a peak and a trough every 10-20 years or so. It's perfectly normal and healthy as it corrects prices and sets up things for better returns in the long run.

I would say now is one of the best times in a long time to be buying property in the UK or USA...investing in Dubai (which is getting nearer it's peak) is far riskier. UK property is at least stable (and will be standing in 15 years!).

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Surely it would be better in 2 or 3 years time, when the markets start to hit the bottom...
Although areas such as the South East UK, are likely to stay in demand and defy much of the drops.
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Old Jun 18th 2008, 6:56 am
  #6  
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Default Re: Housing market crash

What I find grimly amusing is that everyone who pointed out that the UK property boom was unsustainable in the long term because it depended on artificially-cheap credit and lenders abandoning prudent lending principles was derided at the time for being "jealous" or harbouring "sour grapes".

Prophets without honour, eh?

It can't be said enough that this is the property recession that was "just not going to happen" less than a year ago.
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Old Jun 18th 2008, 7:07 am
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Default Re: Housing market crash

I agree with Eeyore (for a change), but in the same sense I think the 'realists' such as myself, have been truly surprised at how far the property market in the Uk actually rose.

In 2005 I thought it was done, but no, it was another 2 years..

I have said the same before, but again i say it, the Dubai market could well defy gravity for another 3 or 4 years yet because of the high rate of cash investments...

But the law of gravity will apply, sooner or later..

And if nakheel really do build homes for 3 million people in the next 5 years - and fill them, then I am a monkeys uncle...

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Old Jun 18th 2008, 7:13 am
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Default Re: Housing market crash

Originally Posted by admon View Post
In 2005 I thought it was done, but no, it was another 2 years..
When we bought our place in 2002 we were advised to get a fixed-rate mortgage "because the interest rate's been so low for so long it has to start going up soon"...

And if nakheel really do build homes for 3 million people in the next 5 years - and fill them, then I am a monkeys uncle...
Well, that's the thing - they can build as much as they like, but to actually get bodies in to fill them, they need Dubai to remain an attractive place for businesses to operate. And any businesses operating in a global marketplace can't afford to keep ratcheting up their staff costs to meet spiralling inflation. Either they'll relocate to a cheaper country, or they'll employ cheaper staff... and cheaper staff aren't going to be good for the rental market here.

It's going to be interesting to see how they try and deal with it.
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Old Jun 18th 2008, 7:30 am
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Default Re: Housing market crash

Originally Posted by Norm_uk View Post
The so-called experts say the same thing about the UAE...that property will keep going up and you can make huge margins in just a year. Even with Dubai's government spinning and jumping to keep the market growing the fact is, as you stated, that a typical economy has a peak and a trough every 10-20 years or so. It's perfectly normal and healthy as it corrects prices and sets up things for better returns in the long run.

I would say now is one of the best times in a long time to be buying property in the UK or USA...investing in Dubai (which is getting nearer it's peak) is far riskier. UK property is at least stable (and will be standing in 15 years!).

N.
pretty much agree but I think it is worth holding out a bit longer for prices to drop even further in the UK.
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Old Jun 18th 2008, 9:29 am
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Default Re: Housing market crash

Originally Posted by admon View Post
Surely it would be better in 2 or 3 years time, when the markets start to hit the bottom...
Although areas such as the South East UK, are likely to stay in demand and defy much of the drops.
Location is always the key and I'm from the south east so I'm speaking about what I know...I know parts of the south and London have gone up this year (not as much as last year of course) despite the "crash"...for other parts of the UK it may be that the worst is not over.


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Old Jun 18th 2008, 9:35 am
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Default Re: Housing market crash

Originally Posted by Eeyore View Post
Well, that's the thing - they can build as much as they like, but to actually get bodies in to fill them, they need Dubai to remain an attractive place for businesses to operate. And any businesses operating in a global marketplace can't afford to keep ratcheting up their staff costs to meet spiralling inflation. Either they'll relocate to a cheaper country, or they'll employ cheaper staff... and cheaper staff aren't going to be good for the rental market here.

It's going to be interesting to see how they try and deal with it.
What I want to see is how they power and water all these new projects - the system is already stretched and all the talk of a GCC nuclear power system is years away and not exactly confirmed.

If we add the bad infrastructure, lack of decent public transport (I don't think Dubai rail will make a big difference), lack of political freedom, an archaic residence and visa system etc etc etc it really does make me wonder what this place will look like in 5-10 years

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Old Jun 18th 2008, 10:48 am
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Default Re: Housing market crash

Originally Posted by Norm_uk View Post
What I want to see is how they power and water all these new projects
Well, quite. It's probably going to mean more oil-fired power stations and desalination plants... all highly environmentally damaging, and expensive to run too, as the cost of fuel continues to rise... and sooner or later, they're going to have to pass that cost on to customers.

There was a piece in the back of Arabian Business this week in which it was baldly stated that consumers are going to have to accept that living in a hot country means higher utility bills. Quite how much higher they didn't say, but it's an open secret that DEWA makes a loss and has been lobbying the government for years to be allowed to hike up its prices dramatically.

it really does make me wonder what this place will look like in 5-10 years
I think it all depends on what the government does to help businesses that are struggling under the inflationary burdens here. If it carries on its present course, which seems to involve just expecting that businesses will keep throwing more and more money at attracting and retaining Western staff who can then afford to rent Springs villas and eat at five-star restaurants, I think it's going to find its plans coming unstuck.
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Old Jun 18th 2008, 4:06 pm
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Default Re: Housing market crash

As I have said several times............ this is NOT a property price crash (although that is the most obvious side effect of the REAL problem).....

....... it's a mortgage crisis.

So-called sub-prime lenders have lost a fortune on mortgage lending in the US. Many of them borrowed from other (UK and European) banks to fund their lending. They overlent to low income families who couldn't afford the repayments when the honeymoon period (of artificially subsidised low rates) ended. Homeowners defaulted. Lenders foreclosed. Repossessions soared. Banks who did not receive payments could not afford to pay back their own interest obligations to the banks that had funded them. Banks altogether had to write off, as at end of 1Q 2008, USD 334 billion globally...... now they have less money to lend, and what they will lend they are charging significantly higher rates for. So would-be house buyers cannot obtain the funding to buy the house they want....... but owners sometimes still need to sell - so they reduce the price to a level the buyer CAN obtain funding for.

House price crash? Tough for a while, but prices eventually recover.

Mortgage crisis? Don't know - there has LITERALLY never been one before......

3-4 years to recover? Sounds about right........... assuming they EVER recover......

....... and by the way - the South East is definitely NOT proving immune to the collapse....... a local estate agent in a reasonable area of a Sussex seaside resort has this week offered a flat (admittedly a small one) for under GBP 100k - the first time they have had ANY property on their books below that price since 1999.......

Last edited by The Dean; Jun 18th 2008 at 4:07 pm. Reason: plural
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Old Jun 18th 2008, 4:11 pm
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Default Re: Housing market crash

No sir, there is no bubble here and no question of a crash. House prices in Dubai went up 42% in Q1 2008 and 78% over 2007......

http://www.arabianbusiness.com/52227...soar-78-?ln=en
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Old Jun 18th 2008, 4:12 pm
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Default Re: Housing market crash

Originally Posted by IndieG View Post
No sir, there is no bubble here and no question of a crash. House prices in Dubai went up 42% in Q1 2008 and 78% over 2007......

http://www.arabianbusiness.com/52227...soar-78-?ln=en
So........ a bubble then...........?
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