Yup, I'd put down my morning paper after reading that, turn to my wife and kids (if I had those of course) and say "hey everyone, let's go house shopping today! It's never been a better time to go out and buy a house"
25% is optimistic I believe. When everyone who would have bought stops buying (all of a sudden) and everyone who wants or needs to sell starts selling, there's this funny thing called math, and you all know what happens to prices.
What's happening folks right now has never happened - a worldwide simultaneous property meltdown (with a financial meltdown, a bank meltdown, and a hedge fund meltdown to boot). Duck and cover. Housing Panic is underway.
If the UK's debt bubble bursts, house prices could fall by as much as 25% over three years, the Bank of England warned in its Financial Stability Review
The Bank said a sudden jump in borrowing rates - potentially caused by a further surge in the oil price - could cause a 2% fall in economic output and wipe out a year's worth of bank profits, this year estimated to be £40bn.
A sharp fall in credit conditions worldwide could cause a 1.5% contraction of the UK economy, a 25% fall in house prices and a 35% drop in commercial property prices over three years, according to the scenarios mapped out by the Bank.
The report showed that the financial system remains extremely healthy, although there were six major risks that could lead to serious financial trouble. These risks largely revolve around the record level of debt that has been built up in recent years.
"The severe crystallisation of credit, market and liquidity risk could plainly represent a serious shock to the UK financial system," it reads."Such extreme scenarios could be sufficient to more than absorb the annual profits of the UK banking system and therefore cause some material erosion of capital.
July 14, 2006
FLASH: Bank of England warns house prices may crash 25%
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7 comments:
That is a very well-written post, Keith. I'd like to congratulate you for once putting off cocktail hour until post-posting.
The writing is on the wall here in UK in huge neon letters so high it's like the main drag in Vegas!!
We're deeply entrenched in denial, I've broached the subject a few times, regarding a housing collapse and the way things are going it will be cheaper to wipe our arses on £20 notes than buy bogroll.
All I get is "They wont ever let that happen" to which I reply "Who's this they, and what they going to do to stop it?" and it's all "They just wont".
The way I see it is this, it's all well and good to stand there with your head buried in the sand, but all you're doing is leaving your arse out there for all the world to kick!!
They will be doing more than kick those exposed asses!
The headline is misleading. The 25% price decline is one of the stress scenarios the BOE considered in assessing the UK's financial stability.
BOE's Financial Stability Report
Still, a 25% decline is quite probable, at least in real terms.
Bank of England
Is that the bank Warren Buffett robbed ?
Hmm, I remember it as the bank that sold off it's gold reserves for $250/oz
It only sold off half its gold reserves at about $250 an oz.
I don't know about Warren Buffet, but wouldn't be at all surprised.
It also has all your ETF gold and silver squirreled away too.
Lets just say, posession is 9/10ths of the law!!
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