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When I lived in the UK last century, there was rampant house price inflation. It seemed to me to be at least in part due to the bizarre contractual setup where
by abraae 5y ago
When I lived in the UK last century, there was rampant house price inflation.
It seemed to me to be at least in part due to the bizarre contractual setup where even after a vendor had accepted an offer, they could still pull out and sell to a higher bidder. This led to purchasers paying over the top, just in order to try and prevent someone else "gazumping" them.
Of course we bought at the top of that cycle, and a year later our house was worth only 70% of what we paid for it. 2 of the 4 owners in our little row handed their keys to the bank and abandoned their properties as they were well under water with mortgages of significantly more than their property values.
That scarred me for life and I told plenty of people along the way that prices can go down as well as up.
Though with the benefit of hindsight, that's rare and houses are usually ... as safe as houses.
- thaumasiotes 5y ago> It seemed to me to be at least in part due to the bizarre contractual setup > Of course we bought at the top of that cycle, and a year later or house was worth only 70% of what we paid for it. Had the contractual setup changed over that period?
- n4r9 5y agoThere was a crash in house prices in the UK in the early nineties, which may be what OP is referring to. The govt increased interest rates up to 15% in '92 in an attempt to protect the value of sterling, causing mortgages to default and house prices to fall.
- chrisseaton 5y agoThat's nothing to do with gazumping, which is still allowed in contracts. It's due to differences in the way law sees verbal and written contracts. https://en.wikipedia.org/wiki/Gazumping#England_and_Wales https://en.wikipedia.org/wiki/Gazumping#England_and_Wales
- ImprovedSilence 5y agoRight, but it explains why housing prices fell.
- nbevans 5y agoYes - to protect the value of sterling as part of a half-witted attempt at joining the Eurozone. A third of the UK either lost their jobs or even their homes in that recession. That is what created Brexit - a whole generation scarred by a hoodwink attempt at closer integration into the European project.
- n4r9 5y agoIt's simplistic to point the finger at a single cause. Some people will say that's their reason, others will talk about immigration or regulations. The migrant impact fund being scrapped after barely a year can also be seen as a significant contributor, for example.
- abraae 5y agoI'm not an economist but it seems that gazumping and it's evil twin, gazundering (where the purchaser demands to pay a lower than agreed price, or they will pull out) don't necessarily cause increases in prices over the long term, but instead they increase volatility. When prices are rising, gazumping makes them rise faster, and when the market is tanking, gazundering makes them crash harder. Just my theory based on observation.