Is this the trend of property prices in a crisis?

publication date: Feb 12, 2010
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Is this the trend of property prices in a crisis?

Following on from the first part of this article 'Will House Prices Fall by 50%?', here are yet more 'claims' about the state of the property market ......

Claim Six
“Rodrigue’s model ‘Mania Tracker’ (the red line on the chart) follows the pattern of market bubbles through four distinct phases… stealth, awareness, mania and blow off.” According to this economist's chart, we are in the ‘bull trap’.

Source: Fsponline-recommends

Is this the trend of property prices in a crisis?
It is true that you can see patterns in property market bubbles and that property prices can go up and then fall again, so they might be right, there may be a further fall in property prices and there are people that are predicting falls – even property professionals! However, their next chart completely shows that the Halifax data they use gives a further fall of 10% of property prices, not the 50% they claim is going to happen.

The problem with using Halifax data in this scenario is that it doesn’t take into account properties that are sold with no mortgage at all. So I tend to rely on the Land Registry data, and here is their property price averages per year during the last recession in the 1990s:-

Land Registry (Government) Data:-

1989       54,846
1990       59,785
1991       62,455
1992       61,336
1993       64,239
1994       65,874
1995       66,786
1996       69,889

The real figures of sold properties across the UK show that prices didn’t react anywhere near as much as they are trying to make you believe. In fact, during the property price recession, month by month there were quite big variations, but if you bought a property at the height of the market it was worth £62,455 and the lowest it dropped to was £61,336 after that – so I’m not sure where this 50% sudden decline is going to come from!

The reality during the 1990s were that many people thought they were going to lose value on their property, rented them out instead and made a fortune by hanging onto them and selling them when the market had picked up, or still own them and rent them out today.

Claim Seven
“Here’s another shocking chart the property cheerleaders would rather you didn’t see. Since the 1960s, every housing bust has lasted the exact same time as the boom that preceded it.”

Source: Fsponline-recommends

Are these figures correct? Could it take 11 years for the property market to recover?
Well again I’m stunned that this company/individual doesn’t appear to have done any research at all on the apparently ‘hated’ property professionals!

Savills, a respected property company, has clearly stated in its predications that it will take years for the property market to really recover. They make it clear that there could be further falls this year AND they have predicted that areas will recover at different rates, with some starting in 2011 and others taking until 2018 to recover.  Even in their own write up they refer to “Thomas Grounds of Cluttons predicts a peak-to-trough decline of 24% by the end of 2010 - that’s a 13% drop from today”.

The fact is that some areas and property types are more immune to property downturns than others, so these figures and claims they are making do appear to be hugely biased and are all based on national averages, not taking into account what happens at a local level.

So 'Why is this company/individual so anti property?' Read the final part of this article to find out!

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