As mentioned, it wasn't a prediction like some headlines made out. It's what the bank uses for stress testing in the event of a major economic downturn. 1/3 drop in house prices, 4% rates and doubling of unemployment.
You can already buy 3 beds in "some areas" for around that.
Care to be more specific? What are these houses that you think will be worth £50k currently being valued at?
There are plenty of houses already built.
Yep, admittedly the last time I was involved in house building was in the 1980`s, but a couple of good brickies can knock up the basic structure of a decent house very quickly, matter of days, but I do clearly remember helping out a couple of people who had tried self-build and got into a real pickle, close to divorce over it type stuff, so I hope this isn`t the first time he has tried it Worst possible market to be throwing money at property AND building it yourself IMO.
Because the BBC lead story had an excellent explanation of what stress testing meant and how the parameters are deliberately set beyond even the worse case scenarios. The articles in other more sensationalist parts of the media seemed to lack this and other key information, so my comment was hardly irrelevant.
Where the dickens was that?
Would love to know as I'm in the house building game and our clients houses aren't going for that!
Which is why rebuild costs for home buildings insurance, is often more than the market value of the property.
Presumably, if a mid-terraced house (for example) is fire damaged and needs to be completely rebuilt, this needs to be done at a loss (relative to resale value) - because obviously the neighbours either side need the house rebuilding!
So they "stress test" for interest rates at 4% when they were at 5% before the last meltdown, and they didn`t see it coming last time but are allegedly prepared for all outcomes this time because they are doing "stress tests"? Best to take everything that MC says with a pinch of salt IMO, these comments are just designed to undermine Brexit IMO, the banks are still vulnerable to global events, but the funny thing is that they banged on about house prices dropping before the vote and the majority still voted to leave The appetite among the public for decades worth of debt for basic shelter is definitely waning IMO.
I thought they stress tested up to 7/8%, at least in the UK? In any event, far more important than borrower stress testing is the levels of capitalisation banks are now required to meet. If a recession hit to similar levels of 2008 the banks could withstand it many, many times over. The point being there would not even be a need to reduce rates into negative territory.
2008 was a banking credit crunch/crisis, the last real recession that actually affected people badly was in the early 80`s, easy credit has seen to it that people don`t experience real austerity any more, IMO anyway. They can`t reduce rates any more either, and the massive QE experiment hasn`t produced the growth results many hoped it would, plus the US is now raising rates and we have countries like Turkey with rates at what 24% at one point recently? With all the shadow banking/derivatives etc. nonsense that goes on I would say a big banking crisis is even more likely than in 2008, and the more MC and co. bang on about "stress testing" etc. the more I think that they know there are problems waiting in the wings. Even ignoring China/Trump and other global problems Italy/Turkey/Brexit has the potential to cause massive upsets to credit markets. Really really not the time to have a bubble mortgage IMO.
Sorry, just to add, the idea that the average person in London/SE with a recent mortgage could withstand rates anywhere near 7/8% isn`t even funny to me, it is scary!
When I took out my mortgage it was stress tested for 10% not 7/8%.
Let's say you buy a house for £200k now.
A 35% crash would make the house £130k.
Chance of that happening is slim.
Interest rates would be more likely to drop before they put them up while in negative equity. The news is fake, ramainers doing their best to avoid brexit.
Last edited by gazzabboi; 16-09-2018 at 2:03 PM.
According to the Land Registry, in Blackpool 223 flats sold in 2008 at an average price of £106,941. In 2009 163 sold at an average price of £85,611 a 19.95% drop in prices. It's a lot but isn't 35%, so you might be right.
In 2010 the average of the 101 flats sold was £83,213 a 22.19% drop on 2008.
In 2011 it was 141 @ £71,700: a 32.95% drop.
2012, 138 @ £67,934: a 36.48% drop.
So in 4 years it was more than Carney's prediction for a no-deal Brexit.
In 2013 they went up again, hurrah! to 141 @ £68,128. Only a 36.29% loss.
Then it went pear shaped again in 2014 when 192 sold at an average of £66,786 or a 37.57% drop on 2008 prices.
The figures are all there on the Land Registry website for you to examine. So, tell me again about this "fake news" of which you speak. And perhaps a quantitative analysis of what you would define as slim. Not only is there precedent for the housing market to fall by such an amount it was only 10 years ago when it did. And there are home owners who are still feeling the pain of this now who will undoubtedly bear the brunt of further drops whether that be 39% or 35% or maybe, if they are lucky 10%.
Do I think it will happen? I don't know, I am not an expert economist, unlike Mark Carney, but quite frankly I'd take his side when the alternative is someone who thinks it is clever to mimic Donald Trump's answer to anything he doesn't like the look of.
But I don't think it will be a BANKING crisis this time.
Governments have a habit of always "fighting the last war" and so banks have been made much stronger. In fact some of the hassles the government has given them is making HSBC consider gradually moving back to Asia (where it originated).
Ray Dalio said in his recent interview, that he thought the next crisis will have more of a social component to it. But I think he was talking more about the repercussions, rather than the triggers.
I don't know what will trigger the next crash. Each crash is slightly different.
Be off with you Sir, with your facts and figures.
"Not only is there precedent for the housing market to fall by such an amount it was only 10 years ago when it did"
Maybe it did in your specific example, but that makes up less than 0.1% of the residential housing sold in those years.
Correct. Using Blackpool as an example is a bit specific.
The only people who buy flats in Blackpool are landlords who fill them with benefit claimants and child abusers from all over the country.
Well of course it is specific, it is what is known as "an example" all examples are specific: it is the nature of examples. It is an illustration of an area where something has happened which was discounted as not going to happen.
Your reasoning is flawed as Blackpool is known as having a larger than average proportion of HMO's due to "landlords who fill them with benefit claimants" who don't buy flats - which is why I used them as an example - they buy houses, often guest houses to turn into HMO's. Pointless trying to turn a 1 bed flat into an HMO when you can pay twice the price and get a 10 bed guest house, isn't it?
Do you discount everything that only hits poorer areas as too specific? Is it all ok because the multimillion pound properties in Surrey a similar decline?
Do those look like figures of a town "in serious decline"? No. The crash caused the decline in prices not the other way around.
Now, I can hear those cogs turning, your going to say "Ah ha! Blackpool was in terminal decline in 2006/2007 before the crash. Look, the average has gone down." Well, yes it did, but the reason for that was the massive 56% and 46% rise in 2004/2005 which has skewed the results because of a single building known as Admiral Point (look it up). The average price of a the 66 "new" flats that sold in Admiralty Point in 2004/2005 was £195,804 and there has been nothing like it since or before.
So, you don't like facts. That is ok: who needs them when you are so entrenched in a position that all else bows before your superior ignorance. One day you might pull yourself out of the mindset of a 5 year old and realise that just because you don't want something to be true does not make it so.
Tell you what: you find me a town in the UK with a similar sample size to Blackpool where prices went up by a similar margin before the crash and continued to go up afterwards with the same detail I have provided and I'll show you some figures from other places where they have fallen by similar amounts. FYI The total sample base you will be looking at between 2000 and 2017 will be in the region of 2300 similar properties.
So, you don't like facts.
You were given the facts in the link I posted.
It showed your assertion was wrong.
Maybe one day the team at the BoE will solely use flats in Blackpool in their modelling instead of the UK housing stock as a whole and your insight will prove helpful.
You really didn't read the data in the ONS report - and it is an ONS not a BOE report. It does no such thing. (If I'm being generous: didn't read is better than didn't understand). An aggregate of all figures of all variant types will give a broad brush indication of the market as a whole but the underlying detail is what matters to people in real situations. That's how statistics work. For instance, moving away from the housing market for a moment, did you know that the average human only has 1.978 legs? That's right - I can show you reports that "prove" most humans have less than two legs! Ridiculous? No more so than your interpretation of the data you are relying on for your argument.
My initial response was to a post that claimed that an individual property's chances of falling 35% was slim. And I showed - including working, not some badly understood link - that those events were indeed possible and had happened to many people. At no time did I suggest that the level of drop had occurred throughout the country or to the same level, just that the drops were possible and that the pain of those drops are still being felt by many many people ten years on.
You don't like Blackpool as an example? Ok, lets take somewhere mentioned in the report you are so reliant upon: Middlesbrough. Showing flats with % change in value from 2007.
There you go - you can use that data for all your arguments now, It totally proves your point. Well done you. I'm sure the millions of mortgage payers will sleep easier in their beds knowing that data is out there.