A look at the prospect for falling house prices in major industrial economies. Why the Housing Market turned in 2022 and what are the prospects for 2023? Will the Housing downturn be similar or different to the last crash in 2006-09?
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https://www.economicshelp.org/blog/171741/economics/global-house-price-fall/
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► https://www.economicshelp.org was founded in 2006 by Tejvan Pettinger, who studied PPE at Oxford University and teaches economics. He has published several economics books, including:
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35 Comments
Thanks for the video, Tejvan!
I'm finding these talks so helpful, thank you. And all the better that they are given by a hill climb legend!
👆 – НАVЕ А GООD ТIМЕ – FIND YОUR LОVЕ! ❤💋f💋
IF AN ECONOMIC SYSTEM COLLAPSES eveyr 7 to 14 years – is it fit for purpose – or are we just, and hear me out here, sticking with it cos it makes a tiny number of people very very rich…?
Ev'rything Is Awesome !!!
Have just read that all the sad uk mortgage holders who've taken on too much mortgage debt to buy a waaaaayyyyyyy over priced home are to be bailed out by allowing the pathetic little debt junkies to pay interest only.
What gets me is that most home ( mortgage ) owners like to give it big and make out they're better than renters ….yet when it comes to it and for the first time in years the precious little darlings have to stump up some real money each month by way of increased mortgage costs- making payments on par with renters…. they're not good for it
. They signed a contract…borrowed a shyt load of fake mortgage cash playing their part in pumping up home prices thus forcing some renters to rent…yet when it comes to it …when it comes to them coughing up each month monies compatible to what a renter would have to pay …. they're all hard done by and need bailing out
Makes me fking sick. Still …nothings gonna stop prices crashing …. can't really keep prices pumped up if first time buyers gotta stump up proper interest rates
The worst big mistake was the do big business on the housing market as it should always be treated as a human right of having a decent place to live.
Now everything is out of control because of greed
Lets go back to 2008. The banks were bundling mortgages and selling them to pension funds, who were desperate for money to pay retirees. Things were fine until other people started betting on how the CDOs performed (Synthetic CDOs). The banks were punished, but the pension funds were not. Remember this part, it's important. Roll forward a decade. Pension funds are still desperate, so desperate they decided to try the scheme themselves. They figured out a way to hide their actions, by using the new Bitcoin fad. "We're just investing in Bitcoins", they would tell their clients. Goodie. But, they were also using Bitcoins to game real estate. They would buy a dozen or more houses in an area, then set one house up for double other house's asking. This would jigger the algorithm the apps use to set anticipated price, and the buyers would panic and buy at the higher price worried that the price would go up even more. Other people started betting on how the price of homes moved, the old Synthetic CDO. This plan only made sense in a low interest rate environment, but they got greedy and kept at it after the rates started up. When things started to slow, they didn't want to, or couldn't, unwind their positions in time (just like CDOs in 2008). So, pension funds are about to breach, issuing "non withdrawal" notices. Housing market? BOOM!
Great video! Packed with real content, thanks!
Was laughed at last year when I told friends the game is over . 20% I said at the time . Now I think it will be worse .
Thanks, property developers sell houses before building them in UK too; farcial I know.
Demand will do very little to sustain prices; it means nothing when no-one can afford them regardless.
Personally I think this crash will be far worse than 2008 as 2008's correction was intervened by doing something never done before (0% interest rates). This overdue correction is coming plus house prices have tripled in the past 30 years; never seen before. What goes up must come down, especially when the income to mortgage ratios have only ever been exceeded twice in four hundred years. Normal people can only be squeezed so much leaving everyone in misery.
So ironic that so many farmers actively supported brexshit. I do agree that the idealism shown by the government has made the situation a lot worse. Things won’t improve until this government is removed. Just hope Labour can take us back to a closer relationship with the EU. 🤞
You blame brexit for our poor economy but here you talk of a global problem lol so brexit effected the world,? What a joke…shutting down the economy for covid is responsible
The problem is now people can't buy a house without stretching themselves by not spending in the economy to save for a deposit. So the idea that rising house prices create confidence only works until they are unaffordable. People have no money left to spend anywhere which is why they will fall. Unfortunately Politicians still think that house prices are a one way street to create confidence . There is no confidence to create anymore. The housing bubble is also built on the top of the lowest interest rates we've ever had.
Presentation.On the money as always.
They haven’t fallen rapidly and they won’t fall rapidly. This will be a slow decline month on month for 18 months and by the end of it prices could be between 15-30% lower than their peak.
I’ve been a property investor since 2007 so know all about the highs and lows of the market. This crash should of happened during covid but government handouts prevented it and did the opposite by creating a massive bubble and allowing people to build debt beyond their means
UK house prices were essentially supported by lack of inflation illusion. People could "afford" to borrow more but the debt is not eroded by inflation as it was in 80/90's this leads to perpetually higher debt is society and people wondering why they don't seem to move forward….
My other comment is – don't ignore the monetary effect. Since on average the person buying borrowers more than the person selling 's debt balance the difference accrues into the economy as spending over time (usually via elderly / downsizing leg of market chain and over there future life). This is why the treasury was so keen to jack up the market via help to buy (putting aside links between that party and house builders…)
Great vid as always, Trejvan. Not sure a UK housing bust is inevitable. Foreign investors like the UK housing market as the returns may be higher than investment vehicles in their own country and the cheaper £ helps. It's a feature of monetising an essential for survival. Add the supply side issues of building regulation, nimbyism, and joint demand for building skills and capital reducing the availability of skilled house builders. Even every pub being demolished to be replaced by flats won't help. There is not enough social housing to offer a cheaper substitute. The housing market is over-protected with government intervention such as stamp duty holidays and pressure for interest only payment mortgages/holidays and its difficult to regulate landlord rents which can spill into the shadow economy and incentivise buying with rental prices profit gouging higher than the level of interest rates. Years of QE has flushed money into the economy to be spent on housing rather than investment. CPI is a blunt measure of inflation in the economy as it doesn't measure housing costs. Any policy to regulate property prices will be seen as a disincentive to the free market. Property prices are regional so over-heated parts of the economy will still boom like London and the wealthy will pass on their savings to younger family members to pay deposits to buy up the available housing stock so keeping prices high. Higher interest rates won't impact cash buyers of high end property who can equity release to buy up cheaper properties. People will just suck up the problem with multi-generational mortgages, multi-household occupancy and reduced living standards, rental payments leading to dead money and no wealth to pass onto children, pension (index linked) income will struggle to pay rising rental costs (higher than CPI indexes) and general inequality.
The inflation isn't caused my high oil price and inflated US market, it was by printing money out of thin air.
What "globe" are you talking about?
Don’t bother listening to any so called expert, after all we’ve had experts running our economy from time immemorial and look at the complete balls up they continue to make of it! The housing market has more people looking for properties than there are available, that’s why the values continue to increase. When any drop happens it’s followed by increases, always happened and until we build enough houses, it always will! My advice to anyone between twenty and thirty….do yourself a favour and emigrate, this countries dead in the water!
Imgritation is the very key factors which affect the house price .if you look the house price Japan and Taiwan . they are so different stories.
Great analysis…tnx
Housing in the UK is vastly overpriced – propped up by years of artificially low interest rates and people encouraged to over extend their borrowing……….. all intentionally done by successive right wing governments to provide a more complaint and cheap labour force. Now the game is up.
10% is nothing. It dropped 2.3% in the last month alone!
We have a huge shortage in housing here in the UK. If people are expecting a crash or huge reductions in prices, i cant see this happening. 10% maybe but then it will level and go again. Newbuild construction will slow by 30% over the next few months which will also aid the price drop slow down. Major builders switching to housing association smaller builds over the next 12 months.
Interesting point from J Stiglitz on property inflation – 'The driver of the increase in rents was thus not a large increase in the need for housing but rather the widespread shift to remote work, which changed where people (particularly knowledge workers) wanted to live. As many professionals moved, rents and housing costs increased in some areas and fell in others. But rents where demand increased rose more than those where demand fell decreased; thus, the demand shift contributed to overall inflation'.
First time buyers, this is what you're saving for. For every boom there comes a bust. I had been saving from 2000 til I met my wife and we got lucky in 2009. We offered £117000 for a £124000 house and the seller caved because nobody had any money to pay the ridiculous prices by 2008. This is where you clean up. Don't get greedy and try be a property magnate, Buy one, pay it off and STAY OUT OF DEBT so it can't be taken from you when they try to make you live in zer pod.
Hi its already down 3% I'm three months probably goto 25% loss over the next 18 months, hopefully it will be sharp and get it over with. OBR are being very cautious.
Thanks
A house is only worth what ever someone's willing to pay for it.
The empire is collapsing
Don’t listen to this fear news. UK is a place of work and no matter how bad it is everyone wants to live in the UK.
So we need houses a place to live. Low stock means high demand and it will always stay like that. UK house prices is what keeps the UK moving. Migrants keep coming and 8 billion people in the world now and counting so resources will dry up which will make prices unaffordable. Keep buying.
Here is the truth. A 2 bedroom apartment in Portsmouth Gunwharf Quays is trying to be sold. Bought for £330,000 in 2016. Put on market in Sep 22 for £375,000 no interest. Dropped to £350,000 and will be knocked down if they want to sell I have no doubt. If it even sells it will be over 25% down from its highest valuation. The housing market is decimated and this is proof. This is a modern built apartment and it has crashed. Lets see if they say there is a 23% drop in the government House price index or if the devious government manipulators that control the HPI will turn a blind eye to 57% of house sales last month rather than the 55% of house sale the month before. The HPI has been deviously manipulated so that greedy rich bankers could carry on with their Ponzi scheme of lending money to those that only had to prove they had a bigger enough limit on their credit card to borrow the deposit. An urgent enquiry needs to be conducted about this crooked index so that those making the biggest financial decision in their lives are not conned by bankers.