Above shows house prices related to wages. It is used alongside this article from Roger Bootle in Her Majestys Daily Telegraph today:
http://www.telegraph.co.uk/money/mai...07/ccom107.xml
Below shows house prices with retail inflation adjusted for so is therefore often referred to as 'Real Prices'
You can clearly see that we are very much at the top of a very steep peak in the graphs. If history is any guide, and it usually is, prices will now fall to a point below the long term mean as it overcorrects. In the last house price crash of the early 1990s we saw a peak in July 1989 when the average house price hit £113,869. By Oct 1995 prices were £71,725.
The correction will be faster this time in my view. More perfect information due to the internet will counter the spin of the Vested Interests of the mortgage/construction/sales industry. More importantly the role of Buy-To-Let mortgages will prove disasterous. At the start of 1999 in the UK there were 58,800 BTL mortgages in existence.
The numbers rose in a sharp straight line up to the summer of last year when there were 938,500 such mortgages in the UK. 58 to 938 is one heck of a fundamental market shift. As these 'portfolios' of depreciating assets, assembled by amateurs with borrowed money, enters negative equity you will see them being offloaded or repossessed at a phenomenal rate.
This will be a turbocharged crash.
I expect the impact on the UK airline sectors to be worse than in the last recession of the 1990's as its bigger now, consists of more discretionary travel and lacks some of the protectionist rules that were in place 20 years ago.
As FTO's go bust the others will cut their prices to the bone to survive.
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