2012 – Year of Crash and Opportunity 132


I predict a very substantial fall in UK house prices in 2012 – and that will be a very good thing.

Average house prices currently stand at over 6 times average earnings. That compares to a long term average since 1945 of under 4, which charts show to be the norm.

People simply cannot afford to buy homes at six times their earnings. People living on average earnings, and paying the high rents such high property prices entail, would take ten years to save one years earnings, which would give them a deposit. They then would need five times earnings (or two and half times joint earnings for a couple) in mortgage. It is with good reason that banks will not lend at that level – it is more than people can pay.

There is a fascinating graph in this BBC report of a National Housing Federation (NHF) study last summer. It shows that the number of households under 30 living in private rented accommodation increased astonishingly, from 30 per cent to 48 per cent, in the bubble years between 1997 and 2009. That is a massive gain to a landlord class apparently very rich in assets -but the value of whose assets is strangely inflated.

This leaves ordinary people stuck in a very unpleasant position. Until last year, I was forced to live in private rented accommodation. My annual rent was about 6% of the nominal property value. I now pay substantially less than that in mortgage interest.

The NHF study predicts that current trends will continue, that the private rented sector will continue to grow, and that house prices will grow 21% over the next five years. But the NHF, who commissioned the study, are providers of rented accommodation and as usual this “academic” study uses assumptions which promote the economic interests of those who funded it.

In fact, I expect the massive decoupling of house prices from average earnings will end in 2012 or 2013 and we will see a major crash in house prices. It may not begin in 2012 – possibly it can be delayed until 2013, but I predict that by 2015 we will see house prices to earnings ratios back to four per cent. And as I see no significant increase in average earnings over that period, that means a fall in nominal house prices of over 40%.

House prices currently bear no relation to the ability of people to buy them to live in. They are like a rock balanced on an apex, requiring only a little push to crash them down. A number of pushes are coming:

– Cuts in housing benefit. The whole rush to the private rented sector has been underpinned by artificially high rents forced up by government payment of housing benefit. I am of course extremely sorry that individuals may be hurt by the implementation of these cuts. I also expect some backtracking as it dawns on MPs that the £2,800 per month does not actually go into the pocket of the Daily Mail’s Sudanese refugee family, it goes into the fat pocket of some Tory landlord. But the housing benefit cuts will reduce returns to landlords and knock house prices.

– Unemployment. The main impact of public spending cuts is yet to feed through in terms of higher unemployment – you ain’t seen nothing yet. Tories like unemployment – it reduces the costs and leverage of labour. 2012 is the year that it will really hit. By the end of 2012, repossessions will be very high. This would always spark a drop in house prices; people have not yet got their heads round what a fall it will be this time.

– Interest Rates. The key factor in balancing that house price boulder has been the lack of any high wind of interest rates. The short term outlook is for base rates to remain real terms negative (which is undeniably true yet strangely almost never said). But that will not last forever either…

The coming crash in house prices is of course going to have a huge effect on the viability of the financial sector, and will join together with sovereign bond defaults in precipitating the fall of the casino capitalists who live on our labour and have the rest of us in their lockhold. Those who saw 2011 as a global year of revolutionary change were only witnessing a tremor before the eruption. I cannot be sure that the crash will come in 2012 rather than 2013 or 2014; but I am looking forward to the new year with genuine hope that a deal of stench will be cleansed.


132 thoughts on “2012 – Year of Crash and Opportunity

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  • Uzbek in the UK

    @ Passerby
    .
    And just to be absolutely clear; I have absolutely no hatred towards Iranians. But I do hate their oppressive government and particularly the part of it which is not even nominally elected by the public.

  • Passerby

    Uzbek,
    There you go, you cannot write about Iran without Insulting the Iranians.
    ,
    Note 1 is the exception; ie those who want to be retired earlier (at 50 M/45 W) rather than the actual pensionable age that is at the age of 60 for men, and 55 for women. This you seem to not take in/understand/comprehend.
    ,
    Further you seem to not understand President is not a job for life in Iran, as opposed to in the “Democratic”; Egypt/Yemen/Tunisia/etc. (albeit in recent past, soon these will be undemocratic too, because of Islam becoming the basis of their new constitution.) The current president of Iran is in the final years of his office. In addition you fail to understand Iranians had their revolution before anyone had heard of the “colour revolution”, and “occupy here and there”, the Iranian people whom kicked out the useless Plutocrats running the place, will not put up with any kind of shit, and will revolt again if the need arises. However, because the Islamic Republic is what they want, and not what you want is your problem and no theirs. You ought to understand that, the Iranians are mostly devout and practising Muslims, and the majority want to live their lives in such a fashion, hence their will reflected in their political arrangements. If you have a problem with Islam (as reflected in your various comments), frankly that is your problem and not that of the Muslims.
    ,
    The puzzling fact remains why do you hate Muslims so much?

  • Uzbek in the UK

    @ Passerby
    .
    Were in my regret that instead of primate Iranians would better send their Ayatolas and president you see insult towards Iranians? Is this not a fact that some, and particularly young, Iranians do not like their government. Yes, Iranian president might be tenured position but what about the core of the Iranian power? And why by disliking repressive governments one is meant to dislike Muslims? I for instance dislike Russian, North Korean, Chinese (note non Muslim) governments amongst others.
    .
    It is very appealing that tyranny of Shah has been successfully overthrown BUT as it turned out it was replaced with similar success with another tyranny. Or do you disagree? Do you really have any grounds to support your argument about Iran being liberal democracy? Please bring them on.
    .
    So you are suggesting that if Iranians are to retire in time they need to work and contribute towards their pension for just 15 (or even 10) years. And if Iranians decide to retire EARLIER then they need to work and contribute towards their pension for 30 years? Where is a logic?

  • Passerby

    Uzbek,
    You are seriously suffering an ongoing episode of a senior moment! Or on the other hand you are an opinionated snotty nose little git, with little or no knowledge of workable sorts!
    ,
    1- Back to the pensions; (which evidently you have no idea about)
    a- people who are self employed or itinerants, and a plethora of people whom do not have the luxury of working for corporates, and or public sector may find they have not paid any contributions towards their state pensions.
    b- people who have started work very early in life and feel they have done enough and need to retire at an earlier age.
    ,
    keeping the above in mind, article 1 takes into consideration those whom have decide to retire earlier than the stipulated retirement age, therefore notion of thirty years work and contribution clause. However, for anyone to be eligible to a pension in general they need to have contributed for ten years.

    What is so confusing about these matters? What kind of unlogic do you find that is confusing you?
    ,
    As I have said, your hatred of all things Iranian have dulled your senses, and you cannot think straight, so let me sketch it out;
    1- the homily of we hate the Iranian government, and not the Iranian people, is purely to fool the Iranian people kidding them,all the while plan to bomb the crap out of their cities and towns, and and kill them , all the same.
    2- Iranians did get rid of the Shah, and therefore have proved they can look after their own affairs, and need no external helper of any sorts.
    3- Iranians proved 2 yet again during the eight years of war that West armed, funded, and helped Saddam to plan his attacks on Iran, whilst putting arms embargo, sanctions, etc. on Iranians.
    ,
    However you have set yourself up in the self appointed/ self awarded role of ;”guardian”/”protector”/”chaperone”/”defender” of the Iranians, declaring the Iranians political arrangements (their choice) as “flowed”,”repressive”, and unworkable. This Uzbek is the height of insult, which again you seem not to understand, or comprehend.
    ,
    The Zeitgeist is such that self determination, self defence, self sufficiency, and self rule, self reliance, are concepts, which are all frowned upon, and the likes of you buying into this bastard alien world of arrangements where you are told what systems is good for you and what you ought to ware, and what you ought to think. Hence the obvious difficulties in understanding the pension arrangements in Iran, that allows people to retire and enjoy the last remaining years of their lives, whilst in UK and elsewhere he age of retirement is on the rise to pay for the cost of the fucking wars, their “democratically elected leaders” choose to fight despite millions of people opposing these wars (democracy indeed).
    ,
    Finally, I am sure you will come back disputing some point or other, because you patently subscribe into a regimented thought school; someone thinks it out for you and, and tells you, then you take it as your own thoughts, and run with it.

  • Uzbek in the UK

    @ Passerby
    .
    It is still unclear and have no logical explanation that Iranians who want to retire EARLIER have to work and contribute towards their pension for LONGER than those who wish to retire when reaching retirement age.
    .
    One might really like Iranians, Russians, Chinese but very much dislike their governments and this applies to Iranians, Russians and Chinese themselves. I see no correlation between unelected government and people that this government seemingly represents. Yes, I realise that you are going to come back to me with the Iranian presidential election BUT I might tell you that I was born and lived in the society that have had elections every 5 years BUT despite this people had NO real influence over government policy or even choice and influencing government’s membership. Paradox?
    .
    Again I am extremely happy for Iranians being able to overthrow Shah’s tyranny BUT I am extremely sorry for Iranians that their hopes for freedom and fair society have been shuttered as well as hopes of many others around the world who risk their freedom and quite often life in order to defend these universal values.
    .
    It is not me but many Iranians themselves who call their government repressive, corrupt, illiberal, and their society unfair. Yes, I realise that you now come back with the statement that those Iranians are actually Zionists, capitalists, Shah’s underlings etc.
    .
    The argument about pensions was brought up to clarify few issues where claims have been made without actual evidential support.

  • Mary

    Foreclosure Crisis Goes Global
    .
    http://www.counterpunch.org/2012/01/06/foreclosure-crisis-goes-global/
    by MIKE WHITNEY
    ,
    Even though housing is in terrible shape in the US, it’s not nearly as bad as Ireland. Irish real estate is in freefall. Prices have plunged 60 percent across the country and 65 percent in Dublin. Austerity measures have sent unemployment soaring (18 percent) and housing into the doldrums. According to the Guardian, prices dipped 8 percent in the last quarter alone, “the largest ever quarterly fall in house prices in Ireland.” (“Ireland’s house prices at lowest levels since 2000″, The Guardian)
    .
    And things aren’t so hot in neighboring Spain either where housing prices slumped 7.4 percent in the third quarter year-over-year, “the fourteenth straight quarter of falls.” (Reuters) The wreckage from Spain’s housing bubble is visible everywhere, from the dysfunctional, underwater banking system, to the skyhigh unemployment (22 percent), to the droopy state revenues. The country’s dreary finances have led to the ousting of Prime Minister José Luis Rodríguez Zapatero and his Socialist government to be replaced by rightwing hardliner Mariano Rajoy. (Rajoy promises to slash government spending wherever possible, even if it means rolling back popular social programs.) Here’s more on Spains’ housing bubble from Reuters:
    .
    “House prices have dropped around 24 percent in real terms since their peak in 2007 and are expected to decline between 35 and 40 percent over a 10-year period, with demand hit by high unemployment and low population growth.” (“Spain housing prices fall 7.4 pct in long slump”, Reuters)
    .
    In the US, homeowners have seen their equity vanish in a matter of a few years. According to the benchmark S&P/Case-Shiller Home Price Index, housing prices have slipped 32 percent from their peak in 2006, wiping out roughly $8 trillion in home equity. The price-reversal has caused a sharp decline in consumer spending as nearly $500 billion per year had been drawn from Home Equity Withdrawals (HEW) during the bubble years.
    .
    So, how far will prices fall in the US, and is there any chance that the US follows Ireland’s lead and lobs off another 30 percent or so?
    /…

  • Passerby

    Uzbek,
    You are trolling there.
    ,
    you say:
    “The argument about pensions was brought up to clarify few issues where claims have been made without actual evidential support.”
    ,
    Whilst it was you who introduced the link about the pension laws in Iran yourself. Intending to refute what Azra and others had said about pensions in Iran.
    ,
    Throughout the thread you are hanging on to the puerile reason;
    “no logical explanation that Iranians who want to retire EARLIER have to work and contribute towards their pension for LONGER than those who wish to retire when reaching retirement age.”
    ,
    You in fact consider logical; have one’s cake and eat it too, principle. that is to retire early and pay the same ten years too. This deliberate obfuscation stems from your singular failure in comprehension of the concept of social contracts, and the state’s duty of care towards her citizens, which are alien to your obtuse mode of thought.
    ,
    Notwithstanding the above, you are constantly referring to the unelected government in Iran, and setting off on your soliloquy; unfair. repres……bollocks… ad nauseum. This is yet another clear indication of your obtuse, and closed mind that is trapped in a quagmire of your prejudices, which you are bent on propagating as the actualities in the world, ie you don’t debate. You lecture, and harangue others with your brain bilge, which you do not intend to change under any circumstances, as the long saga of the pensions in Iran; as a working example has proved. That Uzbek, makes you a prime suspect of a sock-puppet zioKeyboard spammer.
    ,
    ,
    ,
    PS I have left the details of how a free election ought to run in this thread

  • Jon

    Passerby/Uzbek, please debate with each other with civility. You won’t achieve anything by lobbing insults at each other.

  • Uzbek in the UK

    @ Passerby
    .
    Yes, I did bring up the web link as the information there contradicts to that was provided by Azra. And the evidence shows quite clearly that Iranian need to work for at least 30 years before retirement and to contribute regularly towards their pension. There is no retirement after 15 (or even 10) years of work. The latter would have made Iranian the earliest retirement nation and by far even Iran with its gas and oil reserves is not able to afford such financial burden.
    .
    Also about pension sum in Iran. Neither you nor Azra have provided any source supporting your claims that pensions in Iran are over 400 pounds per month which would make Iranian pensioners much more better off than average working Iranians.
    .
    If you believe that the presidential elections in Iran since revolutions have been free and fare that it is good for you. You might as well NOT question elections in Uzbekistan? For your information in Uzbekistan presidential elections were always on the basis of multiple candidacy but for some strange reasons Karimov remains president for over 20 years. And you also forgetting Iranian Ayatolas. I have not seen Iranians voting to elect Ayatolas. Have you?
    .
    And again, if you do not stop personal insults, I am no longer is going engage in discussions with you. Note I do not insult you.

  • Passerby

    Uzbek,
    The “insults” you refer to are/were observations, here is what you have written;
    ,
    Yes, I did bring up the web link as the information there contradicts to that was provided by Azra. And the evidence shows quite clearly that Iranian need to work for at least 30 years before retirement and to contribute regularly towards their pension.
    ,
    Evidently this is some kind of a negative score against Iran, considering the early retirement age of 55 for men, and 45 for women, which in contrast to the current European pensionable age at 70 is is fifteen years earlier. However, you then have forwarded retirement after only ten or fifteen years of work is not possible (another negative score). Finally concluding that in case of the latter negative score (retirement after 20 years of work) would have made Iran the youngest ever retirement age nation (another negative score).
    ,
    This goes if Iran does she is damned, if Iran doesn’t she is damned, and anyway lets damn Iran for the sake of fun of it. That is the Uzbek logic coming through loud and clear.
    ,

    Also about pension sum in Iran. Neither you nor Azra have provided any source supporting your claims that pensions in Iran are over 400 pounds per month which would make Iranian pensioners much more better off than average working Iranians.
    ,
    It appears you have sourced the incomes of the Iranians, which then you can work out the amounts of pensions, of course not even realising that £400 per months of pension paid in UK is in fact an insult to all working people in UK. considering the rampant inflation, and the increasing prices and the fact that most poor pensioners are either starving to keep warm, and not die of hyperaemia. However you truck is not with the miserable amounts of pensions paid in UK, instead you are prevaricating about the amounts of the pensions paid in Iran.
    ,
    Finally you come up with this nonesense;
    If you believe that the presidential elections in Iran since revolutions have been free and fare that it is good for you. You might as well NOT question elections in Uzbekistan? For your information in Uzbekistan presidential elections were always on the basis of multiple candidacy but for some strange reasons Karimov remains president for over 20 years. And you also forgetting Iranian Ayatolas. I have not seen Iranians voting to elect Ayatolas. Have you?
    ,
    The degrees of obfuscation, and conflation to further paint Iran in a negative light speak for themselves. Elections of Mr. Bu$h with the hanging chads in Florida, and Diebold miracle vote maker machines aside. You somehow forget this part, and then equate Karimov elections with the Iranian presidential elections. Also in your haste you forget that in UK Lords are not elected, and also Queen was not elected too.
    ,
    Apparently what matters to you is “elections” which have been endorsed by “certain countries”, hence no election can be valid without these endorsements. This outlook belongs only to one kind of an indoctrinated sock puppet; ziospammer.

  • Uzbek in the UK

    @ Passerby
    .
    I am not sure why do you prefer to insult people instead of arguing on the matter, but as Russian proverb dictates that ‘Insult is favourite argument of a weaker party’ let us assume that.
    .
    It is obvious that retirement age in Iran cannot be 70 years as average life expectancy there is below this, is not it? It is also obvious that as much as we like to pretend to be ‘socialists’ or even ‘communists’ we would not like to pay higher taxes in order to allow us to retire in 50, also considering drop in birth rates and increase in life expectancy in Europe.
    .
    If it was true that 15 (or even 10 year) of work and contribution towards pension could allow Iranians to retire and received pension straight away (as suggested by Azra) then there would be not a case of suggested ‘negative score’ but case of wonderful care of state for their citizens and would probably make Iran a country where most of the citizens of other countries would love to live (especially considering suggested 400+ pounds per month pension). But no, Iranians first need to either achieve 50 (45 for women) years of age or regularly contribute towards their pension for 30 years. And unlike Azra or yourself I also provided a link to the credible source.
    .
    The arguments is not about whether or not pensions in the UK are sufficient (of course they are NOT) but whether or not (as it was suggested by Azra and bluntly supported by you) Iranians retire after 15 years or work and contribution and received pensions higher than pensioners in the UK. WHY is this so difficult to understand and argue like civilised human being without bringing in an insult?
    .
    Again this is not much about elections in US or the Queen but about fairness and openness of the elections in Iran (that according to your earlier claims is democracy). It is not about approval of elections by foreign observers but AS MUCH about consensus about this elections within the nation. When elections are just a smokescreen then whether they have been approved by foreigners of not does NOT really matter for those who cast their vote in those elections.

  • Passerby

    Uzbek,
    Despite having nothing new to add, and no more “proof” (as you put it) you still have gone on to write oodles of nonsense, that begins with a Russian Proverb, what about an Uzbek proverb; “he Who speaks a little knows a lot, and when he speaks, it’s with great thought”. Why don’t you start thinking more and typing less for a change?
    ,
    You have been bitching about Iranian elections without knowing diddly squat other than what the Western Media or the “dissidents” have been telling you. As of the last comment you have reduced the average Iranian age as not reaching seventy years and and your hatred of “socialism/communism” raising its ugly head you have been whining about taxation burden on Iranians, and a quick allusion to the disgraceful breach of the contract of the successive UK governments, that have brought about the abject poverty of the pensioners in UK as to be the new normal.
    ,
    You simply hate Iran, and Iranians, and in every opportunity take a dig at them without any justification. You are distorting what Azra has said; she only said anyone with contribution of fifteen years, but your screwed up brain interprets that as “15” only, needless to point out that also you have prevaricated about the amounts of pensions in Iran, so as of this last post Uzbek would have us all believe;
    1- Iranians do not reach seventy years of age,
    2- Iranians have an early, late, too little, too much, contributions to pay for their pensions which is unfair,
    3- Iranian elections were not transparent, because Uzbek was not there to verify it, along with none of the NGO of his choice to verify these elections, hence they are fake.
    4- Iranians are poopypants Muslims and oh why can we not stop religion at once?
    ,
    Uzbek you do realise that Isreal is a theocracy too? Do you advocate for the Jewish not to practice their religion too?

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