How Big Was The Housing Boom?

The last property crash was almost THREE TIMES WORSE than your misleading article suggests. It also lasted several months longer. In real terms, the Halifax index fell 33.8%. A lot more painful than the "12.5%" fall that you seem to think was so bad. On this basis, prices didn't stop falling until JANUARY 1996, rather than the third quarter of 1995. Prices didn't regain their 1989 level until as late as MAY 2002.

Hello Cliff, The figures go back to the last boom and maybe a future article could offer some context. It would be interesting to link this housing cycle to the economic and policital cycles to explain the change in prices and to compare this to cost-of-money (interest rates & inflation) and competing investment opportunities (stock markets, savings accounts).

Hi Cliff I have never believed that the household income versus house purchase price link was broken. In other words the move from the multiple of 2-3x joint household income to 'affordability' criteria when applying for a mortgage was non-sustainable in the long term. Eventually average house prices must return to the long term trend which is about 3-4x average wages. This will either be uncomfortable with a 30-40% drop in average house price in the short term or a slower stagnation in house prices while real inflation (RPI or real inflation not CPI)allows wages to catch up. I think it is most likely it will occur with a combination of both. However it will be painful and I would not be surprised with house purchase prices falling by 30% or more.

I must say contratulations to Cliff D'Arcy for this article, this shows the reality and regional price differences and how buying a house pays off long term. The other calculation needs appying is renting a house and the financial loss from that over a long term,so in my opinion buying your own home is the way to go. As I remember the big difference now is interest rates are low,early ninties peaking at around 16% and market bust. I think its important for people not to get mixed up with the current market climate and the early ninties with very high interest.

Can I add,the current so called credit crunch is a fallacy cos the financial bodies will claw back the bad debt from people who continue to pay, as on the news today the rate cuts are not being passed on straight away to the customer.

Statistical data can provide a different picture according to the dates in your comparison. You show house prices have increased at an average annual rate of 10.3% over the past 12 years (since 1995). But your start point was at the bottom of the last housing recession. If you start from the top of the last housing boom (mid 1989) then the average annual rate of increas in house prices over the past 18 years was 6%. This can hardly be described as excessive or even in bubble territory. In fact it virtually correlates with the average rise in the FTSE 100 Index which trebled over that period which also represents an annual average increase of 6% too !

I think that you will find that since the peak of August 2007, house values are dropping by an average of £471 per month. It takes on average about 2-3 months for the majority of property valuations to be reported and turned into the many doom and gloom reports we are now getting. I think a huge crash is en-route. I live in Surrey study the local markets like most people with a vested interest. The properties that have been on the market for months, some are being removed and some have dropped the asking price by about 5-10 per cent and are still not moving. I have followed Mr D`Arcy and sold up in August and banked the money. I make on average 6% int and with house prices falling I would like to state that renting may not be dead money as some may say. My money is safe, I am happy in my rental and can move at anytime taking advantage of any future bargains, I must admit though this may take a few years and I hope to be as savvy about my timing to jump back in as I was getting off. It`s a game!!

The housing boom was late eighties and crash due to very high interest rates and government tinkering early ninties. I dont see how selling your house, rent then think you are saving money, look at long term statistics. AST tie in for six/twelve months,if you leave the house in bad order your deposit is lost,there is a set up fee from the letting agents. 12 month let £650pcm loss in rent £7,800 set up fee deposit around £950 min, after 2 years loss £15,600+the set up fees. Suppose it depends how much cash is on deposit at 6% to offset, still think the credit crunch is a fallacy they will get there money back from lenders and the housing market has low interest rates so wait till the media find another topic.