Traders predict house prices will fall by 50% in four years

Adam1 · Post by **Adam1** » 09 Jun 2008, 07:46

http://www.guardian.co.uk/business/2008 ... ouseprices

Anyone else trying to sell up now?

Traders predict house prices will fall by 50% in four years

? Investments based on property 'fall off a cliff'
? Job losses hit estate agents and mortgage firms

The slide in house prices will continue for at least three years and crush the value of a home by almost 50% in real terms, according to a key index of property price futures. Indications from futures trading on long term property prices shows that the average UK home will recover its current value only in 2017.

By the end of this year prices will be down by 10% and by a further 10.5% in 2009, according to the index. Prices will keep dropping through 2010 and cut values by 23.5% when they hit rock bottom in 2011. House prices will then begin a slow climb back to current market values over a period of about six years.

If an average retail price inflation rate of 4% is included in the calculation and in addition the 8% drop in prices over the last eight months already registered by the Halifax index, the fall in values over almost four years will reach 47.5% in real terms.

Article continues...

biffvernon · Post by **biffvernon** » 09 Jun 2008, 08:11

How can anyone possibly know the value of house prices in 2017? Why do folk keep listening to those who claim to be able to see into the future?

Post by **clv101** » 09 Jun 2008, 08:39

Those numbers look reasonable to me. The eventual inflection and return by 2017 is just trend analysis on previous house price crashes in the UK and other countries. No crystal balls involved and as no two decades are identical almostly certainly wrong.

biffvernon · Post by **biffvernon** » 09 Jun 2008, 12:27

So is there any value in this trend analysis? Consider the turkey that gets fed every day. What does trend analysis produce? Not Christmas.

contadino · Post by **contadino** » 09 Jun 2008, 12:48

From the last paragraph of the article...

The residential property futures market is based on the Halifax monthly house price index, published by the bank. It is an-over-the-counter market designed for banks, pension funds, insurance companies and housebuilders to trade on the future values of property. Tradition Property, a City-based property broker, operates a derivatives futures index based on the Halifax figures.

So this is a derivative instrument indicator. Traders in this market deserve everything they get, as it is them that have been gambling beyond their limit for years and have caused the bubble to burst.

UndercoverElephant · Post by **UndercoverElephant** » 09 Jun 2008, 12:55

clv101 wrote:he eventual inflection and return by 2017 is just trend analysis on previous house price crashes in the UK and other countries.

In which case it doesn't take into account things like country-specific demographics or peak oil.

Post by **clv101** » 09 Jun 2008, 13:21

UndercoverElephant wrote:
clv101 wrote:he eventual inflection and return by 2017 is just trend analysis on previous house price crashes in the UK and other countries.
In which case it doesn't take into account things like country-specific demographics or peak oil.

'course not. The unwritten assumption is ceteris paribus.

Totally_Baffled · Post by **Totally_Baffled** » 09 Jun 2008, 13:57

ceteris paribus

Blimey you have been reading too many economics text books!

Remember this being used in A level economics far too often! (all things being equal)

A very convenient "get out" caveat for any new economic theory or modelling work I always thought!

Papillon · Post by **Papillon** » 09 Jun 2008, 14:03

UndercoverElephant wrote:
clv101 wrote:he eventual inflection and return by 2017 is just trend analysis on previous house price crashes in the UK and other countries.
In which case it doesn't take into account things like country-specific demographics or peak oil.

You've just hit the nail on the head, UndercoverE. Speaking of demographics, check out this link (which has already appeared before somewhere in these forums): http://www.howestreet.com/index.php?pl= ... player/735

According to the interviewee, Daniel Arnold, we are in for the worst economic depression, ever, dwarfing the 1930's one, purely for the simple reason the demographic data "falls of a cliff" after 2012, for 14 years at least. Check it out anyway, very interesting interview. If Peak Oil is going to take over Global Warming as public enemy number one, then the looming demographic/economic crisis might be the only topic to threaten its lead!

Post by **clv101** » 09 Jun 2008, 14:14

Totally_Baffled wrote:
ceteris paribus
Blimey you have been reading too many economics text books!

Remember this being used in A level economics far too often! (all things being equal)

A very convenient "get out" caveat for any new economic theory or modelling work I always thought!

Yeah, totally agree - I did A-Level economics a few years ago (few months evening class) and didn't really like it for get out caveats! It's no science!!

Adam1 · Post by **Adam1** » 09 Jun 2008, 18:04

clv101 wrote:I did A-Level economics a few years ago (few months evening class) and didn't really like it for get out caveats! It's no science!!

Burn the heretic!!

Bandidoz · Post by **Bandidoz** » 09 Jun 2008, 20:21

clv101 wrote:Yeah, totally agree - I did A-Level economics a few years ago (few months evening class) and didn't really like it for get out caveats! It's no science!!

LOL I used to read "Cosmopolitan" to try to understand women better

JohnB · Post by **JohnB** » 09 Jun 2008, 23:31

So if prices will bottom out in 2011 and TS will HTF in 2012, does that mean I should keep travelling until 2011 and then buy a cheap house? Or will the financial system collapse before then so I lose all the money to buy the house?

danza · Post by **danza** » 10 Jun 2008, 05:39

John B

"So if prices will bottom out in 2011 and TS will HTF in 2012, does that mean I should keep travelling until 2011 and then buy a cheap house? Or will the financial system collapse before then so I lose all the money to buy the house?"

Well if you want to put down roots and purchase your own house I would save as much as poss now and buy in 4-5 years time with as little a mortgage as possible. (My plan)

There will still be banks in existence for you to deposit savings for years to come IMO. Pure savings accounts have low risk, its not the time to be investing in market led ISAS etc/ shares etc unless your extremely confident.

JohnB · Post by **JohnB** » 10 Jun 2008, 22:54

danza wrote:Well if you want to put down roots and purchase your own house I would save as much as poss now and buy in 4-5 years time with as little a mortgage as possible. (My plan)

There will still be banks in existence for you to deposit savings for years to come IMO. Pure savings accounts have low risk, its not the time to be investing in market led ISAS etc/ shares etc unless your extremely confident.

I've got the cash to buy another house whenever I'm ready. It's mostly in fairly safe places, but who knows what might be safe in the future.

It feels odd not owning a house at the moment, after owning one for around 25 years. If I buy one now I can expect it to fall in value, and it seems silly to buy, but I also think I should be making preparations while insulation materials etc are readily available, and I've got a few years to get the garden productive.