Let’s Talk Ourselves Into a Housing Market Crash

Recessions are an interesting phenomenon.

This is because they are created by belief.

If everyone believes there is going to be a recession then they act accordingly. We spend less ‘just in case’ and we put off important decisions like moving house and taking on a bigger mortgage ‘just in case’.

The irony is that there is still the same amount of money out there, it’s just that in a recession those with the money (like banks) decide to either hold onto to it (just in case) or charge higher interest to borrow it (just in case).

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I remember clearly the last house prices crash in the late 80s and early 90s. No sooner had the 90s arrived and the recession looked like picking up, than we got a very grey and dull John Major telling us not to grumble, tighten our belts and so on.

The result?

Another immediate recession because everyone was depressed and reluctant to move their money around (from banks lending to you and I deciding whether to pay for a holiday).

The entrance of Blair in 1997 had a remarkable effect on that recession because suddenly we had a man who was upbeat and positive.

Nothing else changed, the politicians still lied to us, scandals still happened, the poor got poorer but suddenly there was an upbeat feeling everywhere and the cheap credit era was ushered in to fuel the spectacular growth in property prices and high street spending.

Now we have Brown, another miserable Prime Minister – at least Major wasn’t grumpy as well as dull.

So what’s changed? Nothing, really.

Brown was responsible for the Government finance policies behind Blair, now he has Alistair Darling following the Brown plan – yet recession is looming and house prices set to crash.

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The media also play their part. Just how many editions of Trevor McDonald’s Tonight programme can they make telling us the housing market is booming and buy to let will replace your pension? Eventually, some bright spark has to make a feature on ‘where will it all end’?

The house prices crash has been predicted by doomwatchers for the last 7 years.

Even if it does need a correction, there is too much money invested in property in the UK (not to mention too few properties for the growing population) for it to fall far. And any fall will still be way above where it was 5 years ago.

Gordon Brown said no more ‘boom and bust’. Unfortunately for him he has stayed around just too long to be able to blame anyone else for what is after all a cycle of nature.

The reality is though, if there is a crash or correction or recession it will only be because we have all talked ourselves into it, after years of talking ourselves out of the last one.

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