General Discussion
NEGATIVE EQUITY CONTINUED - 75% Drop in house prices
Thought I'd continue the thread here as the thread looks a bit weird in my browser.
According to:
http://www.moneyweek.com/investments/property/how-house-prices-could-fall-by-75-from-here-in-gold-terms-13547.aspx
How house prices could fall by 75% from here – in gold terms.
The bottom line for house prices has historically been around 100 ounces of gold. The highest was in 2007 when a UK house was worth 700 ounces. Since the peak it is already back to 400 ounces.
If the house market bottoms out relative to gold then this would represent a 75% drop in house prices.
You have to bear in mind currency exchange rates. The dollar is now $1.76 to the pound - down from $2.00 at the beginning of the year. The Euro is now 1.23 to the pound - down from a high of 1.8 a few years back.
So the point is, house prices are dropping at an accelerated rate and our currency is also deflating, so our money is worth less and less.
The crazy inflated housing market has caused serious damage to us all and we have yet to suffer the true consequences.
Oh. My. God.
Another username! I didn't realise that laughing boy was a Blackadder fan, certainly no-one would have guessed by his usual humourless tone. Eh, Dullish?
At least he hasn't tried to mask it this time. An absolute classic from the Angry Mob.
Oh dear! and I think it is still not enough.
The chief executive of the Nationwide Building Society has told BBC News that he thinks house prices could fall as much as 25% from their peak.
This prediction implies that 2.5 million homeowners could be pushed into negative equity.
Graham Beale also said he does not expect to see signs of recovery in the housing market until 2010.
Nationwide is by far the UK's biggest building society and is closer to the housing market than many others.
Methinks nearer 50% is more realistic. Even then It could drop further.
In 1971 a combined income (after putting down 10% deposit) of £200 a month would have been a struggle. If you multiply both sides up, £6,400 combined income per month would by at a struggle a £160,000 house.
Well how many people are on that sort of money?
Just goes to show how easy they tried to make buying a house fior all became.
Now the tears will come before we get back to reality.
Paper money did the damage, but no one could see it at the time.
In the old days, property used to be a safe investment. People referred to houses and bricks and mortar when they were talking of a safe investment.
Most investors, however, would not put their money in property because the rate of return was always lower than that of other stock on the stock market.
The Buy To Let (now Buy to Regret or Die in Debt) market is the UKs subprime market. The market encouraged a large number of amatuer landlords to gamble on 'heavily geared' property investments. Whenever you invest a small amount of money, say £10,000 against an investment worth 10x more, say a £100,000 property, then you are involved in a geared investment. You stand to lose 10x more than you invested. Other types of geared investments are derivatives - the type that Nick Leeson used to when he brought down Barings Bank.
Unfortunately, innocent homebuyers have been dragged into this over the last few years and stand to lose a lot of money.
Going back to house prices, there are only 2 things that can happen now if we are to achieve house price stability: Either house prices will come down to sensible prices (historically 3.5 to 4 x the average wage) or wages will increase to achive this ratio.
The latter would require an average income of £50,000 and I don't think this government would allow wages to increase to this level any time soon.
The former will require an average house price of around £90,000.
Which do you think will happen?
Could not agree with you more Lord Flasheart.
I have been trying to give good advice for years and most of it if not all of it has turned out to be the correct advice.
Trouble is, people tend to believe some twat in a stripped suit and not some beer swigging bloke in a pair of grubby overalls.
Drug takers, alchofolics, singers and comediens have a lot to say about what is going wrong in society, but not too many take any notice until it is to late.
I believe house prices will drop by as much as 50% from the highs of 2007.
You will alays get some nob-head with plenny of dosh, willing to bump the price up for something that they want, but for the general run of the mill prices, a 50% drop is certainly on the cards.