Will the property market crash?

Answer 1

It will eventually stabalise.

There will be a number of corrections ( so crash is relative to how much you paid and how long you can afford to hang on)

Different areas will be changing values at different rates but in essence here goes:

The South East will maintain a very healthy outlook for a long time as more people live here and more people will move here ( children alone and divorces will keep the market buoyant for a long time) Add to that immigration and high property prices it will mean entry levels for proerty will continue to rise ( downsizing will occur )

Rest of the country is driven by income/inheritence ratios

Earnings inflation will drive prices in areas of increasing employment.

Areas of growing unemployment or where earnings are flat rely on inherited money to sustain the property market. Since the right to buy council homes in 1979 when Maggie came to power and people bought at a discount the proerty market has been artificially upbeat ( of course ineterst rates play a part but are not the real critical factor )

As the effect of free money gets diluted with 3 or 4 generations down the line inheriting a smaller % ( 8 grandchildren to 4 children etc) then the buyer has to rely on earnings ratio to purchase at this point all bank rate does is determine whether you buy at a multiple of 2 4 6 etc.

Past 6 times earnings IT IS IMPOSSIBLE TO PAY BACK.

So my guess is South east 50 years rest of country 30 then it flattens.

Old age care provisiosion will then cause the backside to fall out of the market as people have to sell their homes to pay for care a glut of properties appear and less gets left in wills as people live longer and have to discpose to pay for care at that point the market goes into freefall and we get an economic downturn bigger than at anytine in history.

But hey what do I know!!!

Answer 2

Property prices are determined by many factors, most continually in flux.

In UK, especially southern UK, cost of getting onto the bottom of the housing ladder is now beyond all but very well paid and wealthy (huge deposits from Mum and Dad etc). If there is no one to buy starter homes at prices needed for their present owners to trade up, they don't sell, if they don't sell, everything slows. Small properties and first time buyers under-pin the whole market. It has only been kept buoyant so far by the wealthy and those investing in rental properties, and regardless of the 'spin' we all hear about how market will carry on like this forever, it is only 'spin' to try and overt an inevitable slow-down and crash.

Add to this the: struggling job market, imminent mortgage interest rate hike, continued building frenzy, rising utility costs and rumoured 'brain drain' and you have a potential disaster for the whole country.

Everyone is working busily to prevent a crash and talking the market up like as if that will stop it, but the longer it takes the harder it will be. With the levels of debt everyone apparently has, based on over-inflated house prices, everyone will come to learn what negative equity is.

On the plus side, if you are waiting to buy and are saving hard, you should be able to pick up a bargain from some poor soul.

Answer 3

The operative word here is not "will" but "how far", for the market is already going downhill, and the speed is increasing. The government (and the Fed) cannot afford to let the market crash because millions of people would lose their shirts (make that lose everything but their shirts), and a depression (or at best a recession) would occur.

Right now, building construction worker is a bad occupation; increasingly, real estate agent and broker will become a bad occupation. Banks are on edge (those who gave out ARMs, for example); many people have mortgages that are higher than the value of their houses (and the house value is decreasing, so they hold debt that is more than the value of what they got into debt for). I think the whole house of cards (actually, house of wood) will come tumbling down in the course of the next year so that by this time next year, many homes will be sold for 50 to 80 percent of their current book value)...Want to buy a home? Wait a year.

Answer 4

I doubt it very much. With more Eastern European countries joining EU, the open borders that we have for labour from those countries, inelastic supply of land in metroplises, inelastic supply of new houses in big cities... I doubt if the property market will suffer a crash that we have seen in the past.

Having said that, higher the BoE base rate goes, lesser the demand for new mortgages and hence the property prices will go down. But I can not see the base rate factor alone acting as a counter-balance to all that's raising the house prices.

Other than simple demand and supply issues of housing market, any upheavel that the stock markets might suffer because of any unforeseen events will see the capital flowing from bourses to housing market.

A house, in the longer run, is a safer investment than capital markets.

Answer 5

Well it can't stay the way it is. I heard recently that the average house price is ten times the average salary so they have to come down eventually. It will only take interest rates to go up a percent or too to have them going into freefall.

Mind you there are a lot of people who say they won't. However I remember a few years ago people telling me that the stock market wasn't going to crash because the economy was stable under labour. How wrong they turned out to be. The same bloke lost a fortune on shares and his endowment was worth about a third of what it should have been.

As someone else said, what comes up must come down.

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Answer 7

Depends upon where you are and what your definition of crash is. The real estate market is only a statistical amalgamation of local markets, not itself any kind of unified market.

Here locally, we've lost about twenty percent of peak value and may (or may not) lose another ten before it turns back up. If that's a crash, it's already happened.

Some places aren't overpriced at all. Others are badly overpriced. As you might expect, that has an influence on whether they will crash, but I wouldn't be looking for anywhere to lose more than thirty percent.

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Answer 9

No - I think there will be a slide but not a crash. The reason being that everyone expects a crash and the market never goes the way people think it does (otherwise we would all be asset-rich millionaires!).

Answer 10

Doubt it. Not unless there is a population crash first. Everyone always needs a place to live.