My house has already lost 25% from a year ago

How do you know that Bonnie Blue unless you have actually sold it then would not be your house. If you are going on agemys valuation then forget it.

Main thing is you have a home

The only people who truely suffer are those who purchased their houses at the top end of the market and are forced to sell at a time when confidence is low and borrowing is difficult. As Brian suggests no one has lost money on their property if they havent sold it!

Although economic confidence is low at least we don't at the moment have sky high interest rates to escalate the rate of repossessions. Most of us who own our homes will have technically seen a loss of 25% of so in the last year but as we are not selling and and are not overmortgaged its thankfully not an issue for us.
The potential of negative equity is however a constant source of anxiety for people who have bought at the top of the market regardless of whether they are experiencing an actual loss; its a paper loss and that can be bad enough. I think FH is in a good position as the prices have always been reasonable enough to stimulate buying as other areas have become increasingly unaffordable.

Look for KFH to close their Forest Fill office now!

Also 'lost' 25% of paper value of flat, though still think FH offer great value, and countdown to new tube / rail not far away now.

People opinions on house prices always amuse me so I enjoy reading these threads.

For a long time I have said house prices will fall 50% from the Winter 2007 peak, maybe getting there by late 2011 or 2012. A couple of years ago people use to look at me like I was mad. Now slowly but surely people are starting to see that I?m on to something. I still love people responses though whenever the topic comes up.
One of the classics which people always use is ?X area will be OK for reason?. Here it seems to be that ?Forest Hill? will hold up because we have a museum about birds, and children?s play area, an overpriced restaurant and possible, a swimming pool and tube line one day. While I haven?t got any particular argument against that I would point out that if you go to any ?X? area of the country the locals will give you a ?Y? reason. Everywhere.

What people don?t understand is that we have had a debt boom. After the 2001 recession that wasn?t. Our Glorious Leader while still at the treasury pumped up the money supply. He did this to avoid a recession following the dot.com boom, he was successful in stoking up a housing boom instead. The rules for banks was changed so that reserve requirements where halved and public spending rocketed.

Money supply is the total amount of money in the economy and can be created by a bank making a loan, which is effectively new money into economy. Take it from me as an economist that they don?t just loan out the money you deposit with them, indeed, you instinctively know that?s not the case anyway, because you have never gone to the bank to ask for some money out and they have replied ?sorry, we lent it to someone else?

The extra money had to chase the same amount of goods and services as our nation?s savings ratio steadily dropped to an all time low. People thought they could have whatever they want now, on credit. As a result house prices doubled in 7 years. Not because the people living in them became twice as productive, but because of extra debt bided them up. This debt needs to be repaid and prices will drop to the pre-boom levels.

?look around you, house prices have not fallen here? another classic. They look at estate agent windows and see that asking prices have not fallen. Well I could ask ?300 for my toothbrush, but no one is going to be daft enough to buy it. Same with houses, ask whatever you like, its what they sell for that matters. Selling prices are already at least 25% down.

Another great one is getting an Estate agent to value it. Estate agents are competing for your business, and even when they themselves are not firmly in denial, they know most of their customers are. So they give you a high valuation to get you on their books, and worry about bringing down the price later. Others have only been doing the job less than 10 years, and have never seen a correction before, so they are just as deluded. Again, it selling price that matters, not what you think its worth or your estate agent thinks its worth, or even how much you need it to be worth to pay your debts. It is worth what a buyer is willing and more importantly able to pay you.

I appreciate that the blinkers are not off yet, as we are still in the denial stage of the correction (as oppose the fear stage) so most people will think I?m talking rubbish. But seriously, if you can sell now, at 25% less than peak, you?re getting a barging, do it know before the other 25% comes off.

Unless your selling flats in FH Central. In which case your on another planet if you think your ever going to get even half price for those little slave boxes, quarter of a million for a 1 bed flat in zone 4, give over.

That's interesting becuase my niece has just moved to London and is hoping to buy later this year
my own house is paid for so I don't care much but if you tell us when it will all bottom out that would be useful D on the H

My other half works for a small SE based estate agency, they are selling houses at asking price and above and have done so for the last 3 months. Early indications are that there is a lot more confidence in the housing market.

I strongly suggest that your niece does not buy yet. Although the ?irrational exuberance? premium has come off the top prices are only still as high as they are because of lack of transactions and the last of the bulls are being caught up in property. Plus the net savers who are buying cash for a property because they have failed to factor in capital depreciation.

The cruelest scheme of all are these share-equity homes. It?s a pretty evil plan to artificially keep prices high. Originally designed for key-workers they are now on offer to anyone because key workers can?t afford them even on the scheme. The rules are heavily sacked against the poor buyer. If you own 40% and house prices drop 40% its all your money that gets wiped out. The provider does not take a hit. It?s a low risk way for them to rent properties that they cannot sell normally. However, we are going to see a lot more of those schemes as every last penny is sucked from the gullible.

The reason I say 50% falls from peak ending in 2011/2012 is based on a large number of factors returning to their long run equilibrium. These include: National saving ratio, multiples, broad money supply. Also looking at previous market corrections.

We have not even seen the unwinding of the buy to let market yet, and we are only a very short way into a recession. It is inconceivable that with the economy in a monster deficit and unemployment increasing steadily that we will see price inflation any time soon. Its only because the government has held interest rate down to such an artificially low level that we have not seen more carnage.

We all know that there is real demand from business for credit. But there is very little credit. If the free market was setting interest rates they would be north of 8% at least. But the government is more than happy to fix the market because politically it suits them to screw savers to transfer the wealth to the feckless.

Houses should be worth 3x the income of the profile of a typical person living there. So let?s assume your niece is a young single professional earning say ?25,000. The typical profile for that person might be a 1 bed flat in FH, that would seem reasonable. So I would argue when she can buy a nice 1 bed flat in FH for ?75k to ?80 the prices are about right. I expect that will not be the case for a couple of years yet.

She will certainly be offered loads of schemes of one sort or another, it is important she resists these, and remember they are only on offer because the provider cannot sell them normally.

She might also find this site useful: http://www.housepricecrash.co.uk

If you don't mind me asking what are their volumes like? and what kind of people are buying, i.e. cash buyers, first time buyers, or the normal mix from the last few years?[/quote]

Dan - you've got a view on local house prices that you clearly believe in. I think you are talking nonsense and that your simplistic analysis based on debt as a driver of prices is fatally one-sided and ignores the major factor of supply and demand. Even in a market such as the USA, where supply in most areas wildly exceeds demand, house prices have only fallen by 30 per cent from their peak in 2006. Demand simply hasn't disappeared from the London house market, as the rush to get 90% mortgages when they appear, shows.

But hey - why not back up your view by wagering ?100?

If, by 31 December 2010, property prices in SE23 have fallen by 50% from the Winter 2007 peak I will pay you ?100; if you are wrong you pay me ?100. I am sure that we can ask Admin to act as referee on this issue.

What say you? If you are as clearly confident of your views as you claim,this should be easy money.

There is full variety of people buying apparently. They market houses from 1 bed flats in Forest Hill to five story houses in Camberwell Grove.

Volume wise they used to sell around 30 houses a month in the good times and down to zero houses over December/January. They have sold 10 so far this month. So whilst still down on the good times they are a lot happier than they were.

Oh, she has also added that their property prices only dropped by 20% from Aug 2007 to their low in Dec 2008.

Nasaroc what do you base your remarks on?

DotH's comments makes sense to me but your remarks don't
However I am happy to listen

I remember talking to people in 05 and 06 who are very rational people and well educated but they insisted London prices would NEVER come down.
Who can say how low prices will go .
I think Dan a bit pessimistic but could go down another 10% to 15% .
How are people going to get mortages and savers go on strike with low rates??

What we are arguing about essentially is how far house prices will fall. They have fallen by approx 25 % from their peak already; Dan is suggesting that they will fall by another 25%.

Strange then isn't it that in the last two months house prices have risen by 0.5% (a fall in March of 0.4% and a rise of 0.9% in February). If Dan is correct, surely house prices should be accelerating rapidly downwards if a 50% drop is to be reached.

Dan's argument is essentially that the presence of cheap credit was the only (or major) factor in the housing boom. Of course easy credit played a vital part but far more important in the long run is the supply and demand for housing. Demand remains high - this isn't like "tulip fever" where people are speculating on "nothing" - people want and need places to live whilst supply is limited.

Of course the housing market will continue to be in the doldrums for some time; it will take many years to recover to the levels of Winter 2007. But prices ain't going to fall in SE23 by 50%. Look at the data - house price falls are slowing.

Now Dan - about that ?100 bet.

Well they are down by another 1% this month from what I recall on the news earlier today
however pig flu is going to get us all anyway so no point in worrying

When you say a simplistic analysis bear in mind I?m trying to get across a point in a few lines. If you want to go into detail feel free. I would feel happy to have the conversation with you at whatever level you like.

Perhaps you could start by explaining why you think house prices doubled in 7 years?

In my belief its because the money supply has grown at an unsustainable rate, take a look at M4 in this BoE report: (page 9)
http://www.bankofengland.co.uk/publicati...r09feb.pdf
Is one of any number of BoE reports that show you expansion in Broad money. Notice how the period of rapidly expanding M4 also relates to the period which house prices doubled. I have to ask where did you think all this extra money was going? Were people somehow removing this extra money from the economy by withdrawing cash and burning it? Well actually I know they didn?t do that because we don?t see a corresponding spike in M0. I argue, that the extra money bided up the factors of production, principally land, although also certain wages mainly in the City and public sector spending.

I get to the figures I mention simply by assuming a trend rate across those years and looking at the figures (you can do this by downloading the BoE spreadsheets and putting in your own numbers)

I?m not sure what you consider to be one sided about that, in fact I just don?t understand your point? People have always bought and sold houses to each other, it?s just that in the last 10 years people thought they could get rich doing so. So please explain how prices got so high and I can counter no doubt.

Regards a bet I believe this can be done on betfair. I will investigate the options and get back to you. I?m not prepared to specify an exact percentage amount of fall on a given date as of course there is a far higher likelyhood of variance. But what about that average house prices as quoted by the land registry and expressed through the BBC webpage being a lower figure on 31st of December 2010 than at 30 April 2009. Which for the avoidance of doubt is currently ?205,372: http://news.bbc.co.uk/1/shared/spl/hi/in...houses.stm

Or if you prefer a large wager we could use a local solicitor to hold an amount in a custodian account. I would prefer in some sort of interest bearing national saving vehicle such as premium bonds, or index linked bonds.

No doubt your want me to commit to an absolute 50% fall on a fix date, that could easily be missed even if I am right ultimately but wrong on my timing. But on a simple even money prices going up or down in 20 months from today for ?100 I have no objection.
[/u]

Average prices. Yes. Because London is a really good reflection of national average prices.

Nasaroc's bet offer seems to have made you slightly less confident in your position...

Well I'm even happier with Greater London, which again for the avoidance of doubt is as today ?344,521:http://news.bbc.co.uk/1/shared/spl/hi/in_depth/uk_house_prices/regions/html/region10.stm

I would be very happy with the bet, and I would be happy to make the same with yourself as well. I would even be happy to make the bet ?500 with each of you.

I'm not going to let you word it in such a way as to be restrictive, so we would have to agree simple and non-subjective terms, but in principle betting on a house price drop I am very happy to do.

Which as prices are rising (as was pointed out to me) should be no problem.
[/quote]