Re: I agree it’s difficult to predict the market


I remember the last crash in the UK, I was a student at university and had bought my own house with a fellow student. The property rose approximately 30% between agreeing the price and completing, a period of 3 months. Almost to the very day of signing, the day before the joint MIRAS tax relief was abolished the crash started in London. The crash took approximately 2 years to reach my university town by which time I had sold the property.

Money was extremely easy, lending to two unemployed students. Interest rates were 10% when I bought the property and 15% when I sold. Hence I saw an increase of 50% to my interest only mortgage over the period I had the property. A recession had hit the UK on graduating and many graduates could not find work.

On reflection it was obvious to me that prices had to fall.

Role on 7/8 years, (having had 40~50% increases in prices over the last 5 of them) I was very certain that a crash would re-occur, I could not see why it should not given that conditions to me appeared to be the same. And that was mainly the ratio of price to earnings.

Well the crash did not occur and we saw another 10 years of price growth to where we are today (an increase of 4.5 times for my particular property 550%) from when I bought right at the botton in ’93.

The reason why it did not crash is that interest rates fell to 5%, demand exceeded supply and the UK was in full employment. As well as other factors no doubt.

I don’t believe the UK will see a crash as these factors remain, but affordability will see that prices flatten or fall slighly over the next few years. But I could be totally wrong.

Now is Spain any different to the UK? Maybe, but I think it’s just as likely that if the UK prices remain flat and don’t crash, then Spanish property will also follow the same pattern. Only time will tell.