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by Peter Parsons
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The tipping point appears to have been reached towards the end of summer 2004, however, far sooner than hoped for by world governments basking in the reflected glow of easy prosperity. Analysts at www.mortgagedown.com point out that in most countries, the house price boom has run out of steam and has begun the downward swing towards normality, and the consumer spending boom that accompanied it has necessarily come to a dead stop too. Across the world, realtors and estate agents bemoan the fact that sales volumes have dropped by 60% or more, and that 'something must be done' or there will be 'dire consequences'. For estate agents and a very small minority, true. But not for the majority!
What do I mean by this? Simple. For the majority of the population, a house price crash is either irrelevant, or just what the doctor ordered. Lets look at the various groups to see exactly why this is true.
The first group are the 'first time buyers'. These are a relatively small group of people who do not currently own - they rent, or live with friends and family. This group also include people who DID own, but have sold up and exited the market, converting their paper gains into hard cash. As first time buyers are priced out of the market almost everywhere, and the 'STR' group are effectively priced out by their beliefs, they have everything to gain from a substantial house price fall. It will allow them to purchase property, where they currently can not.
The second group are the long term owners. These are people who regard a house as somewhere to live - not a leveraged investment opportunity. If they bought more than 10 years or so ago, they will be sitting on massive gains that not even a huge house price crash can erode. it is likely that most of them won't even be interested - they will continue to live in their homes, and have no plans to move anytime soon. If they are planning to move, statistically they are moving UP, to a bigger, more expensive house. As the percentage falls affect all properties, a crash actually brings the 'rungs' of the housing ladder closer together, meaning that it becomes easier to trade up. If you don't believe this, ask yourself a simple question - if the price of all property magically fell by 99.9% would you be happy? Of course - your own home may now only be worth a few bucks, but for 100 dollars you can now buy Neverland! Or Buckingham palace for a grand! So a house price crash will not affect this group. |
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