A leading City figure with a track record of calling markets correctly, has said that the Government does not understand the economy – and that a housing crash is on the cards.
Hedge fund boss Crispin Odey said in an interview with the London Evening Standard: “The last time we were in a depression was the 1930s and what got us out was cheap money. We need a zero interest rate and a housing boom.”
But he said the exact opposite to a housing boom is far more likely: “Property is ludicrously expensive.
“House prices are right at the top of their cycle. I think they could crash. I’m not saying it’ll happen immediately, but I do think they can drop by half.”
He added: “House prices are not stable. They have a cycle like everything else. America has understood this much earlier than the UK. There, house prices have already fallen by 50% and they are affordable.”
Odey, who runs Odey Asset Management, also said that George Osborne is hated by the City, and he insisted that Britain is not in a recession but a depression.
For those seeking a calmer outlook, Jones Lang LaSalle is the latest property business to issue a housing market forecast.
It thinks next year will be dull, but that growth could kick in during 2014, and that by 2017, housing transactions could hit the million mark for the first time since 2007.
It reckons house prices will grow just 1% next year but be up by 5% by 2017.
Comments
"Thankfully, our limited housing supply keeps prices up..."
Then
"However, if interest rates tripled, there would be a disasterous oversupply of property"
Which is it then Lance?
Dave prices fell in Japan - so what and who gives a rats. This is the UK and we should be concerned with what's going on here.
Yes prices have dropped but all the time there are some buyers and the demand is not too high but stable then why would prices drop through the floor. Price drops are let by greed of stupid vendors fuelled by foolish EA's taking on overpriced stock and the end result is seen in the analasys of the likes of Rightmove stating 'prices have dropped'. Well of course they appear to have dropped but then have they? They are only interested in analising the information on the ones not sold. Average prices should be just that not average offering prices which gives a false reading.
Got one of those duff overpriced ones here where local dipstick agent offers the property at 25%+ too much and then owner gets kicked out. Obviously did not do too well on the research. Should be up for auction soon so may get a bargain if the 15% below value still happens.
Re: "You do understand that NOMINAL house prices are meaningless at the moment. "
Yip. See the end of my post at 2012-11-28 13:54:01.
Not sure where you're going with the rest of your post. I'll try and explain how I see it, in the hope that we're talking about the same thing.
If someone is using property as an investment, then their investment hasn't done very well in recent years. The price of property has at most stagnated (except in Prime Central London), whilst the cost of most other things has gone up. On the whole, someone selling a pile of bricks today for the same price in Pounds as they bought it in say 2006, is going to find that those Pounds will buy less stuff than they would have done back in 2006.
Most of that applies to those looking to downsize. Then there are those looking to buy a property to live in, either as a first time buyer or moving to a bigger place. If the salaries of these people had been going up faster than everything else, then people would have more money to spend on property, save for a deposit etc. Thus if house prices are static but the pay packet is going further each month, then houses are becoming more affordable, relatively speaking.
This pretty much sums up what happened during the early 90s. House prices fell some 15%, then remained static for a few years. Salaries carried on increasing over that period though, faster than the cost that food and fuel was rising. This factor was actually even greater than the 15% fall in nominal prices in making property significantly more afordable by the middle to latter part of the decade.
This time round, things are different. Salaries aren't keeping pace with the rising cost of necessities like fuel and food. There is less money left to take advantage of static property prices. So, as I said in my earlier post, for houses to become more affordable from here, it's going to require much greater pay rises than are currently happening, or further falls in property prices.
@Rantnrave 'You do understand that we are talking about REAL rather than NOMINAL prices here?'
You do understand that NOMINAL house prices are meaningless at the moment.
Nominal house prices are only relevant if wages are rising.
If bread goes from £1 to £2 while house prices are stagnant it does not mean that house prices have halved.
If wages go from £1 to £2 while house prices are stagnant, sure it means that nominally house prices are half as expensive as they were.
Feck all wage inflation in the economy for years past and years to come.
Where I live house prices are nominally and actually the same as they were in 2003. Still selling though at bonker's prices.
@rantnrave 'http://news.bbc.co.uk/1/hi/business/2732645.stm
The five comments at the bottom of that article are remarkably prescient.'
Indeed they are. Refreshing to be reminded that not everyone bought in to Gordon Brown's insane plan to enslave everyone in massive debts.
They all called it a 'global crisis' in 2008 - yet many people, including Vince Cable in his response to Brown's 2003 budget - had been warning about the massive increase in consumer debt for YEARS.
Yet with the banks and the estate agents and, lest we forget them, Inside Track - all making fortunes, and stupid people using their houses as cash machines, no-one wanted to listen.
Well, they'll listen now - and for the next 50 years or so.
prices are going to fall just like japan for 10-20 years
as prices fall,more people sell or become forced sellers or just throw the towel in creating a downward spiral
thats all with interest rates at 0.5%
in japan prices fell foe 20 years and are still 40% less than 1991...same is likely to happen here
as prices plunge ftbs will buy rather than rent causing a massive over supply in btl rentals forcing more sellers etc etc
dave out
Northern Ireland, for a start.
You do understand that we are talking about REAL rather than NOMINAL prices here?
Halifax data has UK house prices down by over 30% once inflation is factored in.
rantandrave could you please supply actual evidence of one area in the UK where prices are down by one third since 2007...
Everyone's an expert, jeez where's dave!
It doesn't help having high levels of student debt and nowhere near enough graduate jobs - another legacy of B & B
If you make enough predictions you may well get some right! If he was that smart why did he not makle shed loads of cash out of his wisdom, and not be attention seeking and spending all his profits in somewhere warm!!
I predict it will be cold at 3 today.
"Thankfully, our limited housing supply keeps prices up "
This is something to be thankful for, because...???
Either you're a banker or looking to downsize. If neither, then you're not about to win the Nobel Prize in Economics I'm afraid to say.
"Modest price falls (1-3% per year) coupled with inflation (3-5% per year) create an expected drop in VALUE of about 6% per year. "
As a store of value, yes, UK property is down by almost a third since 2007.
With salary increases running a good couple of percent behind inflation though, this is not improving affordability whatsoever.
Any correction will come about by either nominal falls in prices, or increases in real salary. Across large chunks of the country, neither of those is currently happening.
Prices don;t drop more than about 10% as the supply of homes is inelastic. As prices drop less people sell, which balances the fall in demand so prices stabalise.
In USA the supply was so massive that it wasn't reduced by reluctant sellers and the Freddie Mack & Annie May dumped too much distressed stock into the market which forced prices down further.
Thankfully, our limited housing supply keeps prices up and our banks have been sensible about a slow release of distressed property.
The UK is quite unique and cannot be compared with USA and Spain where the supply of development land was obviously too great.
However, if interest rates tripled, there would be a disasterous oversupply of property and a massive fall in demand so priced could plummet, but will the Bank of England and UK Government be able to maintain their stranglehold on inflation? If we have strikes and rising prices, inflation will rise and so will interest rates. Then we could see a crash on the horizon. Lets hope the Chancellor can keep things under control.
That said, the man is right but is wrong in the way it will happen.
Modest price falls (1-3% per year) coupled with inflation (3-5% per year) create an expected drop in VALUE of about 6% per year.
Which over 10 or so years means that the VALUE of the property drops by about 50%.
** Compared to salaries in real terms **
We are already 5 years down the road.
Salaries are under pressure too, but deposits and income multiples are making the property market stagnate.
THIS IS GOOD NEWS as the alternative would be impossible to deal with, so don't shoot me, but it means that us poor estate agents are suffering a bit.
@Rich - I don't think you go far enough, good sir.
Tony Blair is guilty of war crimes and should be serving life (off topic I know).
Gordon Brown is guilty of treason and should be hung drawn and quartered for his role in encouraging the credit boom and ensuing crunch.
He first stated on 20th May 1997 in front of the CBI: "Stability is necessary for our future economic success. The British economy of the future must be built not on the shifting sands of boom and bust, but on the bedrock of prudent and wise economic management for the long term. It is only these firm foundations that we can raise Britain's underlying economic performance."
And repeated that several times over the next few years.
He was then willfully negligent in encouraging the City Of London to misbehave with his extra special "Light Touch" regulation.
This purposeful lack of attention allowed the city traders & bankers to find ever riskier ways to "make money" until, of course, it all went wrong.
He's scum and should should be treated as such.
rantandrave.
oh my word. As early as 2003 they were warning...
Almost like the bank wasnt as independant as some might believe.
Industry experts didnt know why. Only means one thing Blair and Brown were behind it, probably building up there property/pension fund in the process.
Seriously, just imagine if he's right....
So dave was right all along....
"This is all still just the fallout from 2000-2005."
If there's a single moment when the point of no return was passed back then, February 18th 2003 was a key date in my opinion, as reported at the time on the BBC website:
http://news.bbc.co.uk/1/hi/business/2732645.stm
The five comments at the bottom of that article are remarkably prescient.
I just want an interview with blair and brown and ask them ' What did you think would happen when house prices tripled in value in just 5 years.'
This is all still just the fallout from 2000-2005.
25 years for fraud would be a start.
If all this talk of properties being at an all time high is correct why have so many borrowers taking loans in the past 3 years slipped into or very close to negative equity?
The other commenthere is 100% correct - it is the finance to purchase homes - or lack of it -0 that is the problem.
Activity needs to be created throughout all levels of the market - and you don't need zero interest rates for that. BoE rate is 0.5% anyway, and Santander have just increased their variable rate to something like 5.25% - care to comment on that Mr Expert?
Errr..no.
In some places in America, house prices may have fallen by 50% but there are plenty of places where they havn't.
I cannot remember a year when house prices haven't been labelled by somebody too high - boom or recession. It is the finance available to buy them that needs to be looked at, not the prices themselves.
We, the people dictate the price of houses by buying them, not some fairy with a magic wand.