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I have read several times (also in this forum) that the housing crisis in the 90s in the UK was quite long (4-5 years).
Now we are clearly starting a crisis in Spain. Unemployment is rising, sales are slowing down, GDP is going down a lot. However, the feeling in the street is still not too bad. Yes, people talk about the crisis all the time, but nobody *feels* it yet.
My question is: what happened in the beginning of the crisis in the UK? was it also like that, that people did not feel it too much in the beginning? or was it something sudden?
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I don’t remember ‘feeling’ there was a recession – only those who had bought recently and had to re-sell found themselves in negative equity. I also remember that when things turned around, prices rose quickly and the negatives cancelled out.
I have a friend who owns a small advertising agency. He is a brilliant indicator with respect to the direction of the economy. His turnover drops before a recession, because clients cut back on advertising first. Equally, when things are about to improve, his order book increases at an early stage. At the moment his business has not been effected. This just might all blow over, like it did in the late 90’s.
Always the optimist…………….. 🙂
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Eeeee laddie, I remember it well! It started fairly quietly, sort of snuck up and then disaster!
Problem was due to the wealth created prior a whole new service industry bounced up. People were buying and buying, borrowing loads and then interet rates shot up!
Suddenly mortgages coupldnt get paid, no one took on nannies, cleaners ad agencies and the like. Costs were cut to the bone and also no one took on staff
I was in the midlands at the time and I remember driving 2 hours to go to job interviews and they wee for crappy wages. I was a mortgage broker at the time, self employed and it was a hell of a shock to go from average 3k per week to nada within a few weeks!
It is similar here in as amuch as its hitting people, but they are going to other areas, countries or back to the UK or home land. There is more work around still than when I first came here 13 years ago, thats for sure, but one has to be prepared to work and get hands dirty. The easy money has gone – need to diversify and do whatever to survive.
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Blimey, where to start on this one – so many similarities to Spain and yet so many differences.
We bought a house in 89 having seen prices come off about 5% and thought we were getting a bargain. They continued to fall and the value of our house was exactly 50% of our mortgage amount.
At the same time as seeing your property drop in value, the mortgage payments virtually doubled (7% when we bought and reached a height of 16%).
The ripple effect meant that parts of London were first to suffer (especially the docklands area which had seen a huge building boom) whereas parts of London were still doing well.
I remember being in the middle of a property downturn (in the S East) and hearing about prices still rising in the N East and N West.
The problem with any property market is that it is localised – it can vary between towns in a county and regionally – broad brush statements are always to be taken with a pinch of salt.
The problem with a “recession” is that some will always feel it sooner than others (there are many thousands already behind with their mortgages in the UK) and some will see it as an opportunity.
Some people simply don’t know what is going on in the world unless it affects them directly.
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goodstich44 wrote:we only saw it as a blip in the east midlands. As soon as labour got the economy going again from the bloody mess the tories had made, confidence in the economy grew, and house prices started rocketing for the next decade or more.
Who is going to clean the super-bloody mess made by Tony, Gordon and company?
Cameron and his Eton buddies are just monkies who cannot do anything.
Probably nobody can do much.
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ralita
we haven’t got sky high interest rates ect, things might not be great now, but they were far worse. People tend to forget that!
quite agree about Cameron and his Eton monkies., i don’t see any plans by them to improve things?
I think most people think anythings better than Gordon and co’, and it’s time for a change. I hope they are right. People have short memories.
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I have asked this question since I mainly see what you are saying: Spaniards (BTW, I am Spaniard) just got completely crazy with housing prices.
I am trying to see if there will be a major crisis or not. To do that, I was asking if there were similarities with the crisis in the UK during the 90s. What I see is pretty bad: everything seems to tell me that the crisis will hit hard (housing is 19% of Spanish GDP; glut of new housing; major leverage; hidden subprime (through fake appraisals); …).
However, Spaniards have still not reacted. This leads me think that maybe I am wrong (the market is very often right, at least more than a single human brain), and Spanish economy will be able to recover through another economic sector.
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Farstar,
Tienes razon.
I see the housing market frozen, the cost of living rocketing, unemployment figures surging, but all around me, at least here in Barcelona, there is no sense of crisis. Shops and restaurants full, lots of expensive new cars on the road. My guess is it will take time, but it will come.
Mark
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@farstar wrote:
I am trying to see if there will be a major crisis or not. To do that, I was asking if there were similarities with the crisis in the UK during the 90s. What I see is pretty bad: everything seems to tell me that the crisis will hit hard (housing is 19% of Spanish GDP; glut of new housing; major leverage; hidden subprime (through fake appraisals); …).
The belief in property in the UK was the same in the 80s. I was told on numerous ocassions that if I didn’t buy NOW then I will never get another chance. Fortunately, I was young and leading a party lifestyle and not being from London I didn’t feel that I had to put any roots down there.
It was shortly after the removal of MIRAS that I got a job in a Canadian bank in the city. The property market had stopped dead but the fun in the city continued with loud in yer face yuppies spending long lunches in the bars. There was a tube strike one day and the important members of the bank’s staff were put up in hotels, including the traders of course. They partied all night, had champagne breakfasts and rolled into work at 10am, did a couple of hours and then went for lunch not to return until the next day.
It was about a year after the removal of MIRAS that the bank sent around a memo telling all staff that newspaper reports of it going bust because of overcommitment to the property market was rubbish. About 6 months later it was taken over by Royal Bank of Canada. It may have been around this time that the UK went into recession.
The next few years were depressing with few jobs in my industry (IT) but I got a job. There I knew a couple of guys who didn’t believe that they would not be able to find work because they were good at their trade. They were good at their trade but when they flounced out of the company I then worked for they both got a shock with one guy spending more than a year unemployed.
In 1993 I decided to buy a place in London. My own position in my new company was secure although no longer pure programming. Some people tried to persuade me not to buy telling me how property had destroyed their relationships and how I would be trapped with no prospect of moving on.
@farstar wrote:
However, Spaniards have still not reacted. This leads me think that maybe I am wrong (the market is very often right, at least more than a single human brain), and Spanish economy will be able to recover through another economic sector.
Recent events have further confirmed to me that mankind is herd like. Something might show up but what will provide the wages to support current prices? It would have to be underpinned by a highly skilled workforce or a unique advantage that can’t be copied elsewhere.
Best of luck but I think it’s best to prepare for the worst
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All these comments confirm me in what I think will happen: the first strong crisis in the modern times in Spain.
I think the problem is that Spain has become richer in the last third of the XXth century, coincidentally, the period of highest growth in the history of mankind. If year over year, you see things improving, after 30 years you believe it is going to last forever. Other countries with previous crisis may retain past experiences of overleverage in their minds, and people do not become crazy.
But Spain has not had a crisis in modern times (of course there were, but in old times when the country was extremely poor), and there is no counterbalancing force, no past experience, that makes people think that maybe things will change in the future for worse.
I guess that it will be similar to other shocks other countries have had during the 2nd half of the XXth century. The problem is how to get out of the crisis: Spain has not a skilled workforce. Possibly tourism and solar energy are the only comparative advantages.
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Unemployment was up 1.18% in April (málaga province). Compared with last April it is up over 13%! Spain will now feel the loss of huge infrastructure funds from the EU.
I didn’t really notice the last recession. Bought an apartment cerca 1989 for our Daughter and a couple of years later it was only worth 75% of what we paid. However, within about 3 years the price had doubled as it was in a good London area.
There are always winners and losers in a recession. I did lose an amount of money after 9/11 as I was doing online share dealing but I still came out of it with more than I started.
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