From: "Andy Pandy" 
Newsgroups: uk.finance
Subject: Re: Property Price Hedging
Date: Sun, 30 Jul 2006 18:29:45 +0100


"Tim"  wrote in message news:xpOdnSK57cIHQ1HZRVnysg@bt.com...
> > > "Gareth" wrote
> > > > Consider my highly simplified and exaggerated example:
> > > >
> > > > a) current property worth 100k, want to
> > > > by property worth 150k, need 50k more.
> > > >
> > > > b) Property prices drop 50%, current property worth
> > > > 50k, want to buy property worth 75k, need 25k more.
> > >
> > "Tim" wrote
> > > Or what about the following example:-
> > >
> > > a) Current property worth 100k, want to
> > > buy property worth 150k, need 50k more.
> > >
> > > b) Current property price drops 45%, new property
> > > price drops 30%, current property now worth 55k,
> > > want to buy property worth 105k, still need 50k more...
> > >
> > > You see, lower-priced properties may have bigger
> > > percentage rises/falls than higher-priced properties!
> >
> "Andy Pandy" wrote
> > Or what about the following example:-
> >
> > a) Current property worth 100k, want to
> > buy property worth 150k, need 50k more.
> >
> > b) Current property price drops 30%, new property
> > price drops 45%, current property now worth 70k,
> > want to buy property worth 82.5k, only need 12.5k more...
> >
> > You see, higher-priced properties may have bigger
> > percentage rises/falls than lower-priced properties!
>
> That's exceedingly unlikely.  Have
> you ever seen it happen much?
>
> Whereas quite often smaller properties
> (eg studio flats) go up (or down) by much
> higher percentages than bigger properties...

Actually I'll have to conceded that you are quite correct. Looking at the data, flats
do seem to be far more volatile than houses, especially detached, during the last
"bear" market in housing in the early 90's flats plummeted whereas detached houses
actually increased slightly in price! Semi's and terraced went down slightly.

http://www.nationwide.co.uk/hpi/historical.htm

I remember when I was looking for my first property in 1990, I originally intended to
buy a flat but I couldn't believe what a rip off they were, I could get a 3-bed
terrace or small semi for the same price as a one bed flat! And no maintenance
charges.

--
Andy