Best of the Week
Most Popular
1.BrExit House Prices Crash, Flat or Rally? UK Housing Market Affordability Crisis - Nadeem_Walayat
2.Stocks Bull Market Climbs Wall of Worry, Bubble? When Will it End? - Nadeem_Walayat
3.Gold Price Is Now On Its Way To All-Time Highs - Hubert_Moolman
4.Deutche Bank Stock Price Crash - The EU Has Problems Far Beyond the Brexit - Harry_Dent
5.UK interest Rate PANIC CUT! As Banks Prepare to Steal Customer Deposits - Nadeem_Walayat
6.Gold and Silver Bull Phase 1 : Final Impulse Dead Ahead - Plunger
7.Central Bankers Fighting An Unprecedented Global Economic Slowdown - Gordon_T_Long
8.Putin Hacking Hillary for Trump, Russia's Manchurian Candidate? - Nadeem_Walayat
9.Stock Market Insiders Are Secretly Selling, Cycle Top Next Month - Chris_Vermeulen
10.Gold Sector - Is it time to Back up the Truck? – Mortgage the Farm? - Peter_Degraaf
Free Silver
Last 7 days
Merkel Prepares For a Deliberate Crisis While White House Plans For a Disastrous Succession - 24th Aug 16
Suspicious Reversal in Gold Price - 23rd Aug 16
If Trump Can’t Pull Off a Victory, Expect a Civil War - 23rd Aug 16
Ceding ICANN and Internet Control to Globalists - 23rd Aug 16
How to Spot an Oversold Stock Market - 23rd Aug 16
Gerald Celente Sees Worst Market Crash, New Military Conflict, Gold Spike to $2,000/oz - 23rd Aug 16
EU Olympics Medals Table Propaganda Includes BrExit Britain - 22nd Aug 16
BrExit Win's Britain Olympics Success Freedom Dividend, Economy Next - 22nd Aug 16
Stock Market Top Forming, but Slowly - 22nd Aug 16
(Really) Alternative Banking Systems - 22nd Aug 16
Vauxhall Zafira Fires - Second Recall Issued - Inspection Before Bursting into Flames? - 21st Aug 16
Will the Stock Market Bubble Pop Regardless if the FED Never Raises Rates? - 21st Aug 16
US Government Spending - 3 Big Stories Not Being Covered – Part III - 21st Aug 16
Silver Analysis - 20th Aug 16
SPX New Highs, Correction Next? - 20th Aug 16
Housing Bubble - The Marginal Buyer Holds The Pin That Pops Every Asset Bubble - 20th Aug 16
Gold Miners Q2 2016 Fundamentals - 19th Aug 16
Which Price Ratio Matters Most in a Fiat Ponzi? - 19th Aug 16
Big Policies, Bigger Failures - 19th Aug 16
Higher Crude Oil’s Prices and USD/CAD - 19th Aug 16
Here’s Why You Should Look for Dividend Stocks and How - 19th Aug 16
Deglobalization Already Underway — 4 Technologies That Will Speed It Up - 19th Aug 16
These 6 Charts Show Why the Average American Is Fed Up - 18th Aug 16
SPX Easing Lower - 18th Aug 16
Low / Negative Interst Rate’s Legacy - 18th Aug 16
The 45th Anniversary of The Most Destructive Event In Modern Monetary History - 18th Aug 16
USDU - An Important Perspective on the US Dollar - 17th Aug 16
SPX Completes Wave 1 Decline - 17th Aug 16
How to Quickly Spot Common Fibonacci Ratios on a Chart - 17th Aug 16
When Does a Forecast Become a Trade? - 17th Aug 16
Kondratiev Wave - The Financial Winter Is Nearing! - 17th Aug 16
Learn "The 4 Best Elliott Waves to Trade -- and How to Trade Them" - 16th Aug 16
Stock Market Bears Turning Bullish At New All Time Highs - Time to Get Worried? - 15th Aug 16
Job Seekers Sacrificed to the Inflation Gods - 15th Aug 16
A Look At Commodities and Financial Markets Trading Week Ahead - 15th Aug 16
Stock Market New Top Forming? - 15th Aug 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

How to Trade Elliott Waves

How Inflation Will Destroy Home Owners Equity

Housing-Market / UK Housing Jun 18, 2008 - 01:35 AM GMT

By: Nadeem_Walayat

Housing-Market The UK housing boom has seen house prices rise from a low of £60.096 in 1993 (Halifax UK:NSA) to a high of £201.081 by August 2007. A whopping gain of 334%. The below graph illustrates the remarkable strong trend higher, where even the measured forecast downtrend of 15% only measures as a minor blip on the long-term trend of ever higher house prices.


Looking at the above graph it is hard to believe why so much distress was voiced of the 1990's housing bear market which barely registers on the graph. Yes house prices fell from £70,588 in 1989 to £60,196 in 1993, a fall of 15% but after a period of consolidation soon recovered to pass the previous peak. So why did the housing market have such an significant impact on the economy, why did so many home owners hand back their keys as repossessions surged ?

The answer is illustrated in the below graph which shows inflation adjusted house prices. As the housing market stalled and started to fall, home owners were hit hard by the real impact of real terms falls in house prices. Who wants to hold an asset that is going to year on year lose value ? Which is why the house prices remained depressed for TEN years, not because they were expensive, but because of fear of real terms loss of value when inflation is taken into account.

Today's home owners despite the fall in house prices of 7%, have yet to incorporate into their psyche of real terms loss of value, which will be with the housing market long after the UK housing market stops falling. The implications are that the UK housing market could yet again be depressed by a further decade of stagnating house prices on a real terms basis that will ensure houses being seen as an asset that will lose money in real-terms, by which time the housing market will probably have reached the next buying point.

The above inflation graph should dispel the notion that inflation was inordinately high during the 1990's stagnant housing market than the present. The graph clearly shows that inflation this time around seems set to be higher on an average basis and thereby sends a warning shot to those that view housing as a long-term investment. THis is the wrong time to be invested in property as the scene is set for a 50% to 60% fall in UK house prices from the Peak to the eventual inflation adjusted trough.

Analysis of the UK Housing Market:

26 May 2008 - US and UK Housing Bear Market Trends
22 May 2008 - Council of Mortgage Lenders 2008 Housing Market Forecast Demolished
08 May 2008 - UK House Prices Tumbling- Interest Rate Conundrum
21 Apr 2008 - Bank of England Throws £50 billion of Tax Payers Money at the Banks
17 Apr 2008 - Credit Crisis SCOOP- LIBOR Is Now Irrelevant to Derivatives Pricing
08 Apr 2008 - UK House Prices Plunge Over the Cliff
01 Apr 2008 - How to Fix the Credit Markets
11 Mar 2008 - RICS Data Confirms UK Housing Market Heading for 1990's Style Crash
03 Mar 2008 - Credit Crisis Morphs Into Stagflation- Protect Your Wealth!
26 Feb 2008 - UK House Prices Fall for 5 Months in a Row- Housing Market Will Go Negative April 08
07 Feb 2008 - UK Interest Rates Cut to 5.25% - Will Not Help the Housing Market
21 Dec 2007 - UK Commercial Properties Crash Looms as Property Investment Fund Frozen
07 Dec 2007 - Analysis of Interbank and Base Interest Rate Spread
05 Dec 2007 - UK Home Owners Unable to Refinance Mortgages As Fixed Rates Expire During 2008
02 Dec 2007 - UK Housing Slump Gains Momentum as Properties Fail to Sell at Auction
10th Nov 2007 - Crash in UK House Prices Forecast for April 2008 As Buy to Let Investors Sell on Capital Gains Tax Change
28th Oct 07 - UK House Prices - Primary Reasons For a Sharp Fall
25th Sep 07 - UK Housing Market on Brink of Price Crash - Media Lessons from 1989!
22nd Aug 07 - UK Housing Market Crash of 2007 - 2008 and Steps to Protect Your Wealth
1st May 07 - UK Housing Market Heading for a Property Crash

By Nadeem Walayat

Copyright © 2005-08 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 150 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Attention Editors and Publishers! - You have permission to republish THIS article if published in its entirety, including attribution to the author and links back to the http://www.marketoracle.co.uk . Please send an email to republish@marketoracle.co.uk, to include a link to the published article.

Nadeem Walayat Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife