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How Bubbles Burst - 7 Lessons from Past House Price Falls

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  • čas přidán 7. 10. 2023
  • A look at previous periods of falling house prices. What caused them and whether we are facing similar or different situation now.
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    ► www.economicsh... 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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Komentáře • 70

  • @economicshelp
    @economicshelp  Před 10 měsíci +1

    More on how much prices may need to fall in 2024. czcams.com/video/AgqGZV-mU6E/video.html

  • @johnrobinson2198
    @johnrobinson2198 Před 10 měsíci +28

    A small token of appreciation. Hopefully it will keep you motivated to keep making content. It's excellent.

  • @badusername4
    @badusername4 Před 10 měsíci +7

    I’d like to hear a video on the cost it takes to build a house compared to what house prices are. Timber has gone up 100% since 2019 for example …

  • @johnrobinson2198
    @johnrobinson2198 Před 10 měsíci +18

    Thankyou for this video. I found it very informative and balanced. Really appreciate all the effort, skill and knowledge required to put it together.

  • @CRAZYCR1T1C
    @CRAZYCR1T1C Před 10 měsíci +2

    This time is different: yes indeed this time it will fall more than you could ever imagine. For the last 30 years the whole world has built up a real estate bubble never ever seen before in the history of mankind.

  • @tyeng1295
    @tyeng1295 Před 10 měsíci +21

    Key to a Housing drop is Unemployment. Interest rates going up and cost of living just affects peoples Disposable income. They go out less, tighten their belts, eat less takeaways, buy less clothes, don't go on holiday etc etc
    Its not until they lose their job that they're forced to sell their house.

    • @sevecc939
      @sevecc939 Před 10 měsíci +3

      I suppose we need to account for the fact that the income to house price ratio is much higher now, therefore less disposable income than before. I do feel it is different this time for that reason. People over stretched themselves abd git on the ladder due to loans or inheritance. They didn't build a deposit because they had any disposable income.

    • @tyeng1295
      @tyeng1295 Před 10 měsíci

      @@sevecc939 Also remember people don't like to sell their home for a perceived loss. They'd rather just sit on it until they think the market has turned.
      This is a great time to put in low ball offers on Probate houses or Empty divorce places but not great to buy nice houses that people actually live in. It's the proverbial Stock pickers market.

    • @RabJ208
      @RabJ208 Před 10 měsíci

      Totally agree. I don't see the "big crash" happening at all. Average index's might show a slight drop but those mainly apply to the higher end of the market which pushes the average up. There is extreme lack of housing and demand for housing is as high as I've ever seen it. Media like to promote fear.

    • @BigHenFor
      @BigHenFor Před 10 měsíci +5

      You don't need to lose your job to lose your house. Just have real wage cuts instead of increases for a decade or two. Plus, the inability to trade down is real. What the real problem is the policy choice to allow the Housing Bubble to occur in the first place. It was stupid, because it was foreseeable that encouraging a housing shortage would not only inflate prices to unsustainable levels, but only really enrich the middle men. There's no point having a house valuation that is a telephone number if no one can afford to buy it. And very much like a parasite, the middle men make more money the tighter the market gets. Financialization of our economy encourages this, whilst starving economic growth. And there was no need, but the social engineering aspect of neoliberalism demanded it. How people can afford to buy a home when real wage growth was suppressed for decades, house prices were allowed to inflate, and no ancillary supply of social housing was created? They are now struggling to keep a roof over their heads and eat, never mind buy a house. They can't pay rent and save for deposits. It helps kill social mobility and increases wealth inequality. And let's say the quiet out loud: the only way to fix this is to build more homes, which will reduce the value of homes. Homeowners have a choice, and they are taking the option to let it burn. They think they are passing on assets to their descendants, but in a few generations, will only be for the few and not the many. Indeed, Boris Johnson himself mentioned that there was research in the banking sector on intergenerational mortgages. These are mortgages that last longer than the borrower's lifetime and which pass on to their inheritors. So the financial sector want to keep the gravy train going, because they won't earn their cut if they stop selling mortgages. It's debt farming by the banks, and debt bondage for future generations, unless we stop thinking of our homes as investment vehicles. That's the reality no homeowner is willing to face up to. Where this madness ends, I don't know. But it may have to get worse before it can get better.

    • @bbasleigh6149
      @bbasleigh6149 Před 10 měsíci

      Or underemployment with less hours worked hitting GDP. Turmoil in bond markets hitting Sterling. China goes bust hitting the banks. War in Ukraine spreads to Europe. Murphys law.

  • @bbdj2779
    @bbdj2779 Před 10 měsíci +3

    Having realtors in the family, I’ve learned that there has been a major shift in property sales over the past decade from family home buyer’s to ‘property investors’. Families, particularly first time buyers, can’t compete with those happy to bid up the value of their investment. Question is, with the market in decline, how many investors are willing/able to let their investments go into negative equity while interest rates continue upward? Will investors be the ones racing for the exits over the next 12 months and flood the market?

  • @kellywalker4494
    @kellywalker4494 Před 10 měsíci +4

    Somewhat depends on a case by case basis. In my area , in the north, I’d say prices have fallen slightly, properties are languishing on the market without a sale, but I’ve even seen some properties still selling at over asking price for the right property. Some people have generational wealth and really don’t care about recessions.

    • @Adam-mo2qw
      @Adam-mo2qw Před 10 měsíci

      This exactly. This exactly. I'm in my 40's and never been wealthier, even with young children. I'm waiting on a crash so I can buy a second house, if that crash happens

  • @flugelbinder
    @flugelbinder Před 8 měsíci

    Worth noting that social housing tenure was at 31% in 1980, and then fell when the Thatcher government sold off council housing. That's part of the reason why market rates for homes were lower and less vulnerable to interest rates.

  • @KamranKhalil-br6dk
    @KamranKhalil-br6dk Před 10 měsíci +15

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      @tryleraaron9244 Před 10 měsíci

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    • @raphfelimax2713
      @raphfelimax2713 Před 10 měsíci

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    • @adamalker71
      @adamalker71 Před 10 měsíci

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    • @arktom7335
      @arktom7335 Před 10 měsíci

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      @adamalker71 Před 10 měsíci

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  • @NS-kc8hb
    @NS-kc8hb Před 10 měsíci +1

    Another fantastic & very informative video thank you very much

  • @fafnir-santpoon84
    @fafnir-santpoon84 Před 10 měsíci

    so much in detail , i cant miss your new videos

  • @felixbishton3955
    @felixbishton3955 Před 10 měsíci +1

    Really insightful as always.

  • @ipreferfreedom162
    @ipreferfreedom162 Před 10 měsíci

    Very good video and I think a lot of your observations were accurate. Even in the dog days of the 1990s or 2007-8 house prices only came off 20% in the UK. One thing you didn't go into a great deal of detail about is wages. This year I have had a consolidated pay rise of over 10% and I have had a none consolidated pay of more than 6%. In total this year I have had a raise of inexcess of 17%. I work in the public sector & I think these are typical pay rises in the public sector. I know that the figures being quoted in the press are lower but trust me I am being honest with you. Next year I think we will get what the CPI is for September and I think that will will be another 6% or more. Add to this that there is more corporate interest in residential property from companies like Lloyds, Legal and General and Aviva and I'm not sure they will fall much more than 20% this time either. Add onto that the massive influx of immigrants and the shortage of supply is as great as it has ever been. It looks like 20% again and then when interest rates moderate another leg up.

  • @cobbler40
    @cobbler40 Před 10 měsíci +2

    When we look at house prices no mention is made of how much your mortgage actually costs. At the moment you have no idea how much your house will have cost you at the end of the mortgage term.

  • @zenastronomy
    @zenastronomy Před 10 měsíci +1

    one of the reason house prices didn't fall in the 70s was I'm guessing most of the working class weren't home owners and were living in social housing.
    if the rich are the only ones buying and their incomes are going up in a recession their spending won't drop.

  • @slothsarecool
    @slothsarecool Před 10 měsíci +1

    Thanks!

  • @wedocam
    @wedocam Před 10 měsíci +2

    it wasn't that long ago you claimed house prices will not fall.

  • @jonball3617
    @jonball3617 Před 10 měsíci

    interest rates in Ireland fell less than UK in 2009 and from a lower high

  • @MeiinUK
    @MeiinUK Před 4 měsíci

    It probably didn't fall because UK citizens.. and the various... deregulation as well.. and the introduction of the euro... and then the combination of more countries becoming part of the EU as welll.. this stopped them from seeing a fall... But.. for many of us... sitting and watching this.. we saw what was happening. So.... UK was living not within its means, is because we helped buy those EU properties... that is why it happened.... So.... I was not aware that we came out of the ERM.... actually.. but I know that negative equity was genuinely a thing... But these days with these online media, and social media... one cannot see the wood for the trees.

  • @monkswhiskers3354
    @monkswhiskers3354 Před 10 měsíci +3

    What goes up...

  • @RustyVanDoor
    @RustyVanDoor Před 10 měsíci +3

    Who did de-regulate the old rule of borrowing linked to your wage x 3 and x 1 of your wife?

  • @AlanWarrenBelfastArchitect
    @AlanWarrenBelfastArchitect Před 10 měsíci +2

    House prices will fall by say 20%, but interest rates will also start to fall and within a year we are likely to see a new government with hopefully a more coherent economic policy and a realistic stance on where our trading opportunities actually are. Unemployment, inactivity, and redundancy rates are low and hours worked relatively high. Real earnings are starting to show an up tick. The damage done by various disastrous policies will likely be behind us in 1-2 years. I don't see a crash as supply is a major problem.
    The other problem is build costs are rising sharply due to increases in labour and material costs and lack of available of land. Changes in the Building Regulations to meet net-zero, whilst desirable, are also adding to build costs. As house prices fall, the economic incentive to build falls and the housing shortage simply grows.

  • @sokolmihajlovic1391
    @sokolmihajlovic1391 Před 10 měsíci

    Prices will fall if supply starts grow.
    Dont see that coming for now.
    Why would you sell now?
    If you not forced to do so...
    Ok if this comes in fruition, even a slight grow in supply could have significant effect on prices.
    Of course, house prices are very local and divers.

  • @alaalrashaeideh1154
    @alaalrashaeideh1154 Před 10 měsíci

    Uk is falling apart
    Most of my UK friends
    Leaving to Dubai or Canada
    UK is falling

  • @jpgpearson
    @jpgpearson Před 10 měsíci

    look iff a country's worth is based on property...you have to keep house prices high...ie you dont build...you let the rich buy up property

  • @fern8580
    @fern8580 Před 10 měsíci +1

    You have an economic analysis, of course, but it is time to move on to an ethno-political analysis: not in my garden, no one wants the presence of new construction anymore, and decisions are made on the ground, yard by yard, inch by inch, no chance for prices to drop.

  • @connormcleod9595
    @connormcleod9595 Před 10 měsíci +1

    Buy at your peril. Wait till 2025

  • @alexmodeen6150
    @alexmodeen6150 Před 10 měsíci +1

    Its even worse than 2008

  • @FreaksSpeaks
    @FreaksSpeaks Před 10 měsíci

    Ofcourse it is, wink wink.

  • @jamesmc1272
    @jamesmc1272 Před 10 měsíci +4

    Interesting chat. But you didn't cover the enormous elephant in the room, Mass uncontrolled immigration, UK population was 57million in 97. its now 68 million, 11 million extra people to house and only a few million extra homes built, Economics Lesson 101 supercharge the demand side and restrict (with planning controls) the supply side, There won't be a massive fall, just another problem for Indigenous brits to suffer.

    • @mdkram
      @mdkram Před 10 měsíci +4

      Immigration is not uncontrolled. 11 million immigrants are here as allowed by your government.

    • @jamesmc1272
      @jamesmc1272 Před 10 měsíci +1

      @@mdkram We are talking about the demand for housing, But if your asking Importing millions of fake students taxi drivers, money laundering Barbers, nail shop and sweet shop proprietors, is not good for the economy or house prices, successive governments have relaxed the rules, and the Home office BAME civil servants, let anybody in. England is unrecognisable in just 20 years. more arrive in 12 months than in 2000 years of british history.

    • @danielriddell441
      @danielriddell441 Před 10 měsíci +4

      A quick Google got this:
      "Based on what we eat, one big supermarket chain reckons there are 80 million people living in the UK. The demand for food is a reliable indicator; as Sir Richard Branson says, you can have all the money in the world but you can only eat onelunch and one dinner."
      Earlier this year I heard it was more than 90 million

    • @immers2410
      @immers2410 Před 10 měsíci +3

      @@danielriddell441that’s because there are some people who eat for 2 or 3

    • @justinjoseph8491
      @justinjoseph8491 Před 10 měsíci +1

      @@danielriddell441Perfectly falls in line with obesity and food waste stats.