The “House Price Crash” (HPC) Community Scare The Crap Out Of Me

Thanks for such a comprehensive reply. I like a debate (I need to get out more as this is now almost a hobby) and it was quite disheartening to see my point of discussion being filed away, so it is nice to see that it has been looked at.

That set of data did make me pause for thought, as the trends/numbers ring true to me from my days of studying International Economics, and I have checked that the interest rate and population numbers were correct. The areas I agree with in that set of data is that house prices can fall regardless of there being high population growth, low unemployment and interest rates, and a lack of land.

I think I agree with your points regarding the difference between the UK in 1990 and now. I was not old enough to know much about what happened in 1990 so I do not know when the crash started, so I would be interested in know the unemployment timings….according to the ONS, in March 1987 unemployment was 10.9% and it fell gradually to 6.9% in May 1990 but then rose to 9% by August 1991. I thought the crash started from 1989 and deepened in 1990 i.e. is the causality unemployment followed falling prices and not the other way around? This compares with unemployment rising from 4.7% in 2004 to 5.4% currently. The other thing of concern is that I have read that repossessions are occurring regardless of the low unemployment. A year ago I read that repossessions require a major rise in unemployment.

Based on what you say, we are all in agreement, that is, that liquidity conditions are the main difference. But this is where my problem arises. The BLT house is valued on paper at least at £300,000. It was £230,000 in 2004. The rent almost covers the new mortgage payments.

However, the problem is that I cannot see house prices going up any more in this area for at least three years precisely because liquidity conditions are going into reverse. Assuming a 6% (even if the central bank reduces rates by 50 points next year it looks like lenders will not follow) interest rate, if a BLT person were to buy the house they would be paying well above the rental income in mortgage payments, with no sign of capital appreciation to offset this. In 2004 buying made sense as the credit cycle had some time to go, so there was no doubt that there would be a capital appreciation. The 10% deposit has now grown by a factor of 3 and (minor) income losses only started after re-mortgaging, so that leveraging worked. Overall, the buying decision made sense at the time but why would a BLTer buy the property now.

At the same time, I have been told that FTBers have an average income of less than £30,000 in London. They would then need 10% deposit and still a mortgage of 9 times their income. I cannot therefore see anyone being able to afford to buy the house anytime soon.

Both groups of potential buyers do not have the ability to buy at anywhere near the levels even currently being suggested. If confidence goes down even further there will be no capital upside (and increasingly possible, a fall), while paying £100 per month for mortgage payments over the rent (the area has so many rental flats that it is not easy to raise the price).

Related to the above and what you said, lending criteria has improved as banks started using affordability analysis. Leading on from that, if house prices are now 3 times higher than in 1990, then interest rates have to reach just 5% to hit the same wall…income growth has not been incredible over the last 10 years and effective mortgage rates are at least 5.5%.

In addition to lenders seemingly ignoring the Bank of England even if it does cut rates next year, my concern is that inflation is not dead. The issue is how far China will now be exporting inflation. Services inflation has been roaring for years and it represents over half our inflation basket, but this was offset by goods deflation because of a shift in the global goods supply curve. If services inflation remains at trend and good prices are even just stable, we will have high inflation, as China now seems to be causing an upward shift in the global goods demand curve. It is no longer possible to grow company profits through outsourcing/ cost cutting, so to maintain profits prices must rise (input costs have been rising for a long time). Also, food and commodity prices in general will remain high.

My assumptions are that the Japan example shows the four supports mentioned (low interest rates, rising population, lack of land and low unemployment) do not guarantee anything. If the economy turns for the worse, which I think is happening and inflation remains above the 2% target (still very possible), immigrants won’t get jobs here so won’t come and may leave (my area relies a lot on them). The City also looks like it is in trouble.

I agree that the liquidity issue has been the key in terms of giving access to loans, but it is precisely this pillar that I think is about to reverse as well. Given the above, I would like advice for why selling would not make sense in April (when the tax laws change). That gives £100,000 (original deposit plus equity) to put in an account to earn £5,000 net a year with no hassle or costs, and buy in two years even at the same price (I think less) but knowing that would involve paying stamp duty. No gain or loss but no hassle. This works even if prices do not fall, although no asset surge has been followed by a nice return to zero, it always undershoots the average trend line. It does not work if prices rise (and I do not think they will).

My apologies if this disjointed. I have rushed it but wanted to get it out of the way.

p.s. I figured out what GHPC is, I am not even going there, as I could spend the rest of my life getting addicted to blogs.

sorry, another p.s. when I refer to affordability it is not just nominal payments and the interest rate not going down, but also the reduction in income multiples lenders will give and the higher deposits that they require.

The problem with many people and companies in property and reliant on property is their vested interest taints their views regarding economic data which has been showing we were leading up to an adjustment for the last eighteen months when the sale of new build apartments began stalling in certain areas. In August 2007 the triple "A" rated poisoned wrapped bonds were revealed and it was evident the down breeze was due to turn into a storm.

Within many companies anyone who voiced downturn concerns would have been termed "negative" for facing the truth. That is why I find a forum like HPC healthy as everyone can stand and deliver their view points. Anyone banned would normally have been involved in insulting, racist or other bad behaviour which can be reported to the moderators who seem to take action fairly quickly.

I am an owner occupier and came through the '88-'95 adjustment. In fact I traded down to get rid of my mortgage in '88 anticipating the turmoil.

If you have a view stand by it, bear or bull. That is what like to see.

Looks like the market is defintely crashing now, higher rates, bigger deposits required, lower rental income, oversupply, larger arrangement fees.
Save yourselves!!!
SELL UP NOW!!!!

oooopppps....

too late.

Ha, ha so funny. It's very true that a lot of the HPC crowd are immature, lazy little tw@ats who missed out due to their own stupidity. Now they can't wait to see other people suffer because of it. We all know these sort of spiteful people, they usually vote Labour, muwhahaha.

Have to say though that here are also some very good people on the site as well. They tend to be older though and to have already achieved success.

Yeah, I think the name of the site gave it away for me. Once you call your site House Price Crash it doesn't exactly leave much room for movement. Let's start a 'there is no god' website and see who turns up on that....

HPC is a forum i frequently read and as a first-time buyer i do generally want the "crash". I can see where you are coming from though as some of the views and opinions on there can be a bit extreme. I think you will find the majority are "sell to renters" rather than first time buyers.

This is an amusing article written by someone who has not really read the HPC website. Yes, there are a few extremists but they often tend to be the ones who claim no crash will occur. They come on and make claims to that effect, they then refuse to answer questions and justify themselves on the basis of (often) flawed arguements. To enter any discussion with one justification and an unwillingness (inability) to listen to counter arguements is just asking for people to think you are an idiot.

There are several good references each day in the media regarding the current slip in house prices, I think people are brutal with their words and yes some people are rude.

However the grpahs, media links etc are well worth the look, after all you don't need to click on forum.

p.s. most internet forums are fill with rude people.

Wake up and smell the coffee. The ballon has been inflated by cheap credit nothing else. No cheap credit no HPI. No HPI equals recession.

Talk about the HPC being full of obsessives everyone here is fixated with BTL as the only way to make money. Remember any geared investment has risk.

Hang on - isn't this site vilifying housepricecrash.co.uk in exactly the same way as you accuse them of?

Hmmm.

Either way, the site is redundant. The UK is already in the midst of a housing price crash - which really wasn't that surprising - when prices go up its because of immigration, island, sound economic fundamentals, but when prices go down it's because htere's no more cheap credit.

Hmmm.

I to post on this site and find some of the financail information interesting. I think that the majority of people on the site are dead set on a crash but to be perfectly honest I feel it is not if but when. I also think that people who have a lot invested in the property market get pretty heated when confronted somebody who thinks the market is going to fall. But just for fun if anybody out there thinks there will not be a downturn in property prices in the next decade then I would love a wager with them, a big one.

For prices of any commodity to continue rising, there has, of course, to be a demand. But that demand can only be met by people with sufficient funds, so once the price goes beyond their means and/or the supply of credit dries up, so does the price stop rising. Then, think the potential buyers, I'll wait until the price falls to my level. Simple, isn't it?
There is still, naturally, a demand for property, but the funds are no longer available, so that the prices will have to fall until they reach affordability again. With some properties being at six or seven times annual salaries against a historical three times, there is only one way for prices at the moment.
I have NO axe to grind, and I do not want to see any innocents suffer, but basic economic logic says that down is currently the only direction.
I had never heard of the HPC site, so just had a quick look and find that most people there are talking the same logic.
Sell NOW - if you can!

Erm, reading through the posts on this website, you could easily reverse the positions. Is there going to be a crash? I dont care. Will you "investors" loose money as you have no clue what you are doing? Yeah. "But it is different this time" - Quote from the dot com/stock market/previous house price/tulip booms.

****ing hilarious, really cheered me up! I think you're in the wrong job. There are quite a few morons on HPC (you can work out who they are) but then again there are quite a few people who actually know what they are talking about. I hope there won't be a crash but when you look at it logically there seems no alternative but some form of 'substantial' correction.

Bring it on HPC. Forum WAR!!!Propertyinvestmentproject.co.uk vs. housepricecrash.co.uk

"This is a normal 1-on-1 conversation:
Person 1: Hey, mate, I’m a Christian.
Person 2: That’s cool. I don’t believe in Reglion myself, but I’m open to all teachings…
Person 1: Good stuff. So, what you up to?"

You think that's a normal conversation? I can assure you mate, it isn't. I laugh at people who believe in superstition and then politely inform them that they were clearly brainwashed by their parents from a early age. Anyone who doesn't believe in religion would not say "I'm open to all teachings". That would be stupid.

Its kind of ironic that a comment on here says that 1990 and now have lots of differences like greater availability to credit and low inflation.. what a difference a few months make..

First Direct seem to be joining the HPC bandwagon!!! ;o)

Great cartoons though.. Some of those on HPC site are total nutters I have been banned twice but I keep going back because despite being nuts there is a lot of truth on that site!

I see you admit you don't remember the last crash. I do, and this is much much worse.

And inflation which you say is less this time and so will save us? It was inflation that saved the last housing crash from looking worse, and in the 70s it hid it altogether. A lack of inflation will keep pthe debt around for many years to come, while wages stagnate and fall.

Still, there is no point telling people this. They have to experience it for themselves.

Good luck with your web site. See you on the other side in about 6 years.

Let's be honest though, for all their crudeness, the HPC guys appear to have been right. It looks like the UK property market is following the US over the cliff. There is very little good news coming out, and you get the feeling from the media that the consensus view is now that property is likely to fall in price significantly for months, if not years.

I think you over exaggerate greatly, but there are some people at HPC who are frustrated at their inability to buy because of an overboiling market. When house prices are at massive multiples of salary, I can imagine that non home owners feel a little despairing.

The strength of your reaction to this though (producing a cartoon) shows that you are rather frustrated with the increasing evidence that the market is massively overheated and going down.

If you can't prove them wrong... discredit them... I've found HPC news board to be a great place to view the unwinding financial crisis

well, you know going to HPC and making a statement of how the market is not gonna turn is a bit like going to vegsource.com and asking for a recipe for Boeuf Bourgignon.
You're bound to get flamed since the group has this opinion as the basis for being a group.

"I laugh at people who believe in superstition and then politely inform them that they were clearly brainwashed by their parents from a early age."

How is this your right?

I don't believe in God myself but I did Santa Clause - I guess I was 'brainwashed'.

GHPC = Global House Price Crash

So, to revisit this topic....

What do you all think now the HPC website seems to have been totally, absolutely correct all along and any over-leveraged BTL paper "millionaire" is probably doomed?

Well, actually many at HPC called the top at 2005 - but a (now obviously) unwise rate cut gave the market new life to rise to even more dangerous levels.

I'd also have to disagree that no one was denying prices would eventually cool. In mid 2007 everyone I asked believed prices could never fall, including one relative who MEWed his house to go into BTL big time. He's toast.

But yes, perhaps there appears to be a mob mentality on HPC, but this anger was often from people who were unable to buy a house for a reasonable price.

I don't blame the BTL brigade for taking advantage of the flood of money available either. The problem is many of the "amateurs" are now trapped. It's not just raining, it's pouring, and many of them are on tiptoe with the water up to their necks.

People will look back and wonder why on earth the banks lent these people money in the first place.

In the USA you can give the keys back and walk away. In the UK you're in debt. Long term debt. Maybe until you're dead (or bankrupt).

Well. We have a year's hindsight after the peak now, and it is very clear that a House Price Crash is underway.

Those that thought the force of gravity could be overcome by aggressive finance, hype, spin, and misplaced confidence are being forced to eat their hats, and subsidise their buy to lets.

A property correction could have been brought about in 2005, with less dire impact on the economy. And Governor Mervyn King would have liked that, but the BofE lost its nerve. Gordon Brown got his wish, and pushed off a recession for a few more years until after he became Prime Minister. Now he, and the country, will pay the price of his hubris, and the tricks that a country of property bulls so willingly fell for.

Who got it right? Fred Harrison, who foresaw and foretold the last two years of a "Winner's Curse":
http://www.youtube.com/watch?v=_C-Nd_MStxU

JOIN KIRSTY ALLSOP IN EATING HER HAT AS YOU WAS ABOUT AS RIGHT AS HER...THIS CRASH WILL SORT THE MEN FROM THE BOYS....

wow :-)
its very point of view.
Nice post.
realy good post

thx :-)

If it wasn't for the dumb money I wouldn't have been able to sell my three flats in May 2007. Thanks boys!

I bought at the highest point on the recommendation of this website. Now I've lost my job and I'm left with a £200000 mortgage, three kids and a wife with an expensive c*c**n* habit and no income. Thanks for all the positive talk in the past. As they say nobody ever lost money under-estimating the intelligence of the public. I am just one of those gullible idiots who believed that positive thinking will overcome all obstacles. It doesn't. In France and in Russia this sort of thing led to a revolution.

Well it is 2 years after the original post and boy were you wrong. There was a crash and there will be a bigger one in 2010 especially after the election when we loose our AAA+ rating. By re-rating now the rating agencies will be accused of influencing an election and many economists and politicians have stated that we will not know the full extent of the GB debt until after the election. Hold on the rolacoaster just about to really speed up!!

P.S. Only stats you can believe is Land Registry as these are factual. Nationwide and Halifax reflect valuations and not completions so any idiots that are thinking of quoting them in response to this post!!!

Oh and by the way, I have made a fortune from my accurate crash predictions. I am in property and still own a few (commercial, sold all residential at the height). As a bit of advice to would be investors:
1) Buy commercial, better returns and far far less headache.
2) Buy in cash or very low mortgage.
3) Never trust an agent, whatever they say is a lie and believe the opposite. It is amazing that every house I look at already has an offer!!!
4) The agents will not give you any great property deals, they give those to friends like me who give them kick backs.
5) If you are selling and you get an offer before the property has been marketed, they have undervalued you (see point 4).
6) If you are looking for a house wait until the end of 2010 to buy.
7) Banks are asking for large deposits to cover upcomming crash and are only giving 25% deposit mortgages to those who can deffinately afford negative equity without a repo.

Sorry to necro post, but the comments are hilarious! I guess most of these guys didn't get the point of the post.

I like no.47 from J Levene how tells you you've got it all wrong and then goes on to predict a load of stuff which didn't happen (that said I agree with lots of J's next post).

The trouble with house price predictions is that predicting the timing of house price moves is a bit of a highway to nowhere - and that has been proved plenty of times!

I appear to have been banned from there and have been givenno explanation what so ever. My account still seems to be there but I was unable to make posts a few days ago and now when I sign in it won't let me view any of the boards. All I can suggest is that as the last few posts I made were very sceptical of the possibility of an immenent crash I fell out with tune with the religion of HPC.

I started posting there in 2008 and have over 5K posts to date. I actually agree with a great deal of what these people are saying; the banks have loaned far too much money to far too many people who shouldn't have had it; houses are ludicrously over priced; house prices are falling; people have led profligate lives centered around acquiring cars, mega tellies and suchlike on stupid amounts of credit.

Their theories of why a crash is going to happen are actually pretty sensible the problem is it isn't actually happening and probably won't. Four years since the banks started to go down and still nothing. The mistake I made was to point all this out to them and point out why its probably not going to happen. The bottom line is that it can't happen without lots and lots of forced sales (repossessions) and they are unlikely to happen in the forseeable future. They will tolerate you posting if you are talking down a crash on crap arguments but as soon as you start posting sensible reasons as to why it can't happen then they'll ban you.

The arguments of HPC do seem quite sensible, I also think house prices are way too high. However they fail to see that we have a huge housing shortage - so of course house prices are high. Changes in bank lending aren't going to significantly alter supply and demand. I think we should be building many more houses, but that'll never happen.

You're right, house prices are way to high. I have to disagree that this is purely down to supply and demand though - it isn't. It's down to the fact that people will pay whatever they can afford or, in the cases of houses, borrow!

House prices aren't stupidly high because demand has rocketed in the past 10 years or so. They are high because people have been able to borrow insane amounts of money very cheaply and with ever fewer checks.

I bought a property back in about 2001 for £11.5K and sold it about three years later for £50K. The value of it didn't skyrocket because the demand shot up, it skyrocketed because the people who were doing the demaninding were able to borrow more money. No other reason. If people are suddenly allowed to borrow six times their income at a 100% LTV then the price of properly will increase from the where it was when they were only able to borrow three times income with a 75% LTV even if the actual numbers of potential buyers had not increased by even one person.

These are precisely the arguments put up by those on HPC and, being fair, they are spot on. The problem is that a number of people on there have been waiting for a hugh crash for years (it's now 4 years since the banks started going down) and are having to face up to the unthinkable outcome that it may actually never happen. It's got to the point of the denial stage whereby their belef in this "crash" is getting to an almost religious level and many of them simnply don't want to face up to reality that they have been worshiping a false god. As you say, their general reaction of "f**k off" gives it away that they really have no argument and are scared. The final thread I was allowed to post on before I was benned (without reason or even any notification) shows this mentality. It's actually a great pity because there are a great many sensible and likeable people on there who aren't a bunch of radical idiots. What annoys me is that although I have been banned my account hasn't actually been blocked so it just looks to anyone else that I'm not posting any more. They should at least show some balls and tell everyone precisely I was benned - ie: that they don't allow dissent within the ranks.

I'm not saying that a crash cannot happen, by the way. It clearly could if there were enough forced sales about. Fact remains though is that that it isn't happening now and doesn't look like it's going to any time soon.

My last post on HPC.

http://www.housepricecrash.co.uk/forum/index.php?showtopic=160352&view=findpost&p=2912713

Clearly from the contents of the thread I haven't broken any of the established rules, I just wasn't following the HPC orthodoxy.

6538

6538 - I mostly agree, but there has to be a point where people will say "I don't want to spend all my money on interest payments, I want to have fun and spend money on fun things. I know, I will move somewhere cheaper, even if it isn't as nice".

If all the people in the middle of the market decided that they only wanted to pay what the bottom third were paying (and priced them out), there would be a lack of buyers for mid-ranged properties and the price would fall.

This won't happen because competition to get somewhere half decent is high. If there were more decent places I think more people would trade down to have more fun...

So the crash was averted and the lunatics are still renting paying off their landlords mortgage for them.

Nov Tax Grab on its way. If aint incoproated then you are stuffed. Sell early, sell all