How far will house prices fall [volume 4]

[XJ40]

Yes I don't see rates going up any time soon if ever really. And if they do at some point only a very small rise will likely be all it takes to reign in any inflation, given the extent of mortgage borrowings these days. It seems like we need ever increasing debt to keep the show on the road, the current paradigm is next to zero rates and ever more QE, are the powers that be running out of levers to pull? Is now late capitalism as it were??

It's looking like some kind of recession is starting to be priced in at the moment and it seems there could be some downward pressure on house prices... I personally don't see any significant falls though, given the supply and demand and loose money conditions. The population continues to rise and quality houses particularly period ones in primes areas are limited, plus builders aren't likely to be churning out significant numbers of new properties in a downturn...

[Timmy40]

XJ40 said:

I personally don't see any significant falls though, given the supply and demand and loose money conditions. The population continues to rise and quality houses particularly period ones in primes areas are limited, plus builders aren't likely to be churning out significant numbers of new properties in a downturn...

I'd agree with this. I do think some of the froth will come off the more insane valuations in London, but I really don't see that as a bad thing.

[jdw1234]

I get the feeling the uk property market is like Wile E Coyote and has run off a cliff, but hasn't looked down yet and noticed!

[NerveAgent]

Loads of reductions in my search area today, 4 of which I have viewed over the last couple of weeks. Mostly seem to be chain free and empty so presumably investors wanting to get rid sharpish.

[V6Alfisti]

XJ40 said:

I personally don't see any significant falls though, given the supply and demand and loose money conditions. The population continues to rise and quality houses particularly period ones in primes areas are limited, plus builders aren't likely to be churning out significant numbers of new properties in a downturn...

Entirely logical but there are more drivers at play and is exactly what was said about Hong Kong, it also had/has demand far surpassing supply, cheap money (mortgages currently at similar rates to ours from a quick google search), lots of talk of reducing transactions (like ours), lots of people were feeling confident on that basis (like ours).

Yet according to bloomberg it fell 12% in about 6 months after hitting a peak http://www.bloomberg.com/news/articles/2016-05-11/...

HK was listed as the number 2 global bubble, and you can see who is in prime position.


My inbox has been flooded with property this week, in one day alone I received notifications of about 25-30 new properties in my search areas, I normally get about 4-5 on average.

Another reasonably large reduction today on a 3 bed house in Zone 3
06/07/2016,
Price changed: from '£850,000' to '£775,000'
13/05/2016,
Initial entry found.

Edited by V6Alfisti on Wednesday 6th July 19:06

[Welshbeef]

I have to say my decision to pause on the big extension is now very much more likely.

Sit tight get planning permissions sorted and wait to see how things start to play out then make the decision.




Also I'd say hopefully most people over the last what 8 years have been paying down debts be it unsecured or mortgage debt or building up savings it should put the vast majority in a comfortable position to weather any headwind.
The other fact that is key is the % of homes which are mortgage free - the "fk you money" position is what 65% of all properties so then of he remaining 35% mortgaged homes some have one month payment left while another is just starting a 25year run.

Don't worry don't panic play the long game always - when others are fearful be bold when others are greedy be fearful

[Derek Chevalier]

Welshbeef said:

Also I'd say hopefully most people over the last what 8 years have been paying down debts be it unsecured or mortgage debt or building up savings it should put the vast majority in a comfortable position to weather any headwind.

http://www.telegraph.co.uk/business/2016/07/05/here-are-the-five-biggest-risks-facing-the-uk-economy/

"While household debt has come down from its pre-crisis peak of 150pc of disposable income to around 132pc in the first quarter of 2016, the Bank warned that ratios remained “high by historical and international standards”"

[Welshbeef]

Derek Chevalier said:

Welshbeef said:

Also I'd say hopefully most people over the last what 8 years have been paying down debts be it unsecured or mortgage debt or building up savings it should put the vast majority in a comfortable position to weather any headwind.

http://www.telegraph.co.uk/business/2016/07/05/here-are-the-five-biggest-risks-facing-the-uk-economy/

"While household debt has come down from its pre-crisis peak of 150pc of disposable income to around 132pc in the first quarter of 2016, the Bank warned that ratios remained “high by historical and international standards”"

But for house prices unless you HAVE to move or sell then just like the last downward blip people sat tight rode it out and were not willing to take a hit/happy to wait and wait years for movement. In my area during that downturn there was literally no houses for sale/the same crap houses for months/a year plus with nothing new coming on - I predict the same if that happens again.

Personally unless I could manifest a much cheaper step up the ladder I'd sit tight and hold. As years go by debt vanishes and in time as always prices will go back up again so when that happens you've even more equity and much less absolute debt.
Sure there will always be those who lose out - but if a house is possessed I'd hope the bank then holds it and turns into a landlord itself and maybe allow those previous owners to rent the property from them. This way the bank doesn't take a bath on fire auction sale and the previous owners can carry on refund their feet and in time properly take back the house.

[Derek Chevalier]

Welshbeef said:

Derek Chevalier said:

Welshbeef said:

Also I'd say hopefully most people over the last what 8 years have been paying down debts be it unsecured or mortgage debt or building up savings it should put the vast majority in a comfortable position to weather any headwind.

http://www.telegraph.co.uk/business/2016/07/05/here-are-the-five-biggest-risks-facing-the-uk-economy/

"While household debt has come down from its pre-crisis peak of 150pc of disposable income to around 132pc in the first quarter of 2016, the Bank warned that ratios remained “high by historical and international standards”"

But for house prices unless you HAVE to move or sell then just like the last downward blip people sat tight rode it out and were not willing to take a hit/happy to wait and wait years for movement. In my area during that downturn there was literally no houses for sale/the same crap houses for months/a year plus with nothing new coming on - I predict the same if that happens again.

Personally unless I could manifest a much cheaper step up the ladder I'd sit tight and hold. As years go by debt vanishes and in time as always prices will go back up again so when that happens you've even more equity and much less absolute debt.
Sure there will always be those who lose out - but if a house is possessed I'd hope the bank then holds it and turns into a landlord itself and maybe allow those previous owners to rent the property from them. This way the bank doesn't take a bath on fire auction sale and the previous owners can carry on refund their feet and in time properly take back the house.

In the last downturn repossessions weren't insignificant IIRC - one would expect this unwind to be a lot worse based upon the >15 year unprecedented bubble, but who knows when it will pop.....

[Welshbeef]

Derek Chevalier said:

In the last downturn repossessions weren't insignificant IIRC - one would expect this unwind to be a lot worse based upon the >15 year unprecedented bubble, but who knows when it will pop.....

But unless you've been leveraging up and up all the time then even if you took out a mortgage at he peak in 2007 on a 25 year mortgage you now would only have 16 years to go assuming no overpayment and let's say you took out a 90% LTV then I'm fairly sure you'd be looking at around the 55-60% max now assuming price was the same as then but none the less absolute mortgage debt is massively less.

This is the key. People don't NEED to buy and sell houses unless they outgrow or divorce or need to move for relocating for work purposes. The rest is purely for a nicer house stepping up the location or simply up the ladder where you live.
Worst case you live there for 25 years then mortgage free job done.

[boxst]

A friend of mine is a two-man band surveyor in London and his work has more or less dried up -- all the bookings that he had (and he has them through August) are fine, but literally no new clients in the last week which is unheard of in the last 5 years of his business.

[Welshbeef]

Looking at my area right now it has a 2011 consensus population of c24,000 people but in that area only 25 houses for sale. Of which in a narrower area I look at there are 6 houses which have been for sale is say at least a year. Make of that as you will.

[Jockman]

Welshbeef said:

Derek Chevalier said:

In the last downturn repossessions weren't insignificant IIRC - one would expect this unwind to be a lot worse based upon the >15 year unprecedented bubble, but who knows when it will pop.....

But unless you've been leveraging up and up all the time then even if you took out a mortgage at he peak in 2007 on a 25 year mortgage you now would only have 16 years to go assuming no overpayment and let's say you took out a 90% LTV then I'm fairly sure you'd be looking at around the 55-60% max now assuming price was the same as then but none the less absolute mortgage debt is massively less.

This is the key. People don't NEED to buy and sell houses unless they outgrow or divorce or need to move for relocating for work purposes. The rest is purely for a nicer house stepping up the location or simply up the ladder where you live.
Worst case you live there for 25 years then mortgage free job done.

Plus UK banks are a lot more prepared for a downturn. This has not always been the case in the past.

PS, I know, you just want to watch the football

[Welshbeef]

Jockman said:

Plus UK banks are a lot more prepared for a downturn. This has not always been the case in the past.

PS, I know, you just want to watch the football

Yep - football on and Brains SA in hand .
Come on Wales

[Jockman]

Welshbeef said:

Yep - football on and Brains SA in hand .
Come on Wales

All us Jocks are with you

[Pork]

jonah35 said:

I used to follow what text books and economists said about inflation and the boe 2% target etc etc but the past 10 years or so have proven it all to be rubbish.

The underlying issue is for the government to keep house prices propped up forever. If they fall in any big way, say 30% plus then it will be a disaster so i truly cant see rates going up any time soon, 10 years plus really, unless theres a black swan event.

This broadly aligns with my thinking too. Theory is great, reality is house price falls lose votes and lose businesses money.

[Mr Whippy]

Pork said:

jonah35 said:

I used to follow what text books and economists said about inflation and the boe 2% target etc etc but the past 10 years or so have proven it all to be rubbish.

The underlying issue is for the government to keep house prices propped up forever. If they fall in any big way, say 30% plus then it will be a disaster so i truly cant see rates going up any time soon, 10 years plus really, unless theres a black swan event.

This broadly aligns with my thinking too. Theory is great, reality is house price falls lose votes and lose businesses money.

There will be a black swan I'm sure.

Now if it's caused by chaos or by design is another matter.

Either way expect lots of new legislation and policy during and after to 'prevent it happening again'... but actually just stopping normal people making or having as much wealth/power/liberty/freedom as they did before.

No doubt if we see a big crash now, we'll blame 'democracy' and 'referendums' for it... the idiots will cheer en mass, and we won't be having any more of those again

[Hitch]

Demand, general public sentiment that house prices only ever go up and government protectionist policy could suggest that periods of stagnation causing a limited correction in real terms may be the new house price crash. House price rebound post-2008 just underlined confidence in the 'system' so everyone still wants to be an owner.

London may indeed be a bubble on a bubble but if they've witnessed 10% growth YoY for the last 15 years will a 20% correction bother anyone who doesn't need to sell now? Probably not, and returning to my first point, that 20% correction just opens up a greater market of hungry buyers able to access virtually free money.

[V6Alfisti]

Hitch said:

Demand, general public sentiment that house prices only ever go up and government protectionist policy could suggest that periods of stagnation causing a limited correction in real terms may be the new house price crash. House price rebound post-2008 just underlined confidence in the 'system' so everyone still wants to be an owner.

London may indeed be a bubble on a bubble but if they've witnessed 10% growth YoY for the last 15 years will a 20% correction bother anyone who doesn't need to sell now? Probably not, and returning to my first point, that 20% correction just opens up a greater market of hungry buyers able to access virtually free money.

Is it as high as 10% YOY since 2001? I thought it was high in the last few years (and nearer 14%) but not as crazy before.

I guess you also have to consider the differential of increases on a smaller amount, to decreases on a bigger amount.

E.g.

500
550
605
665
730

Vs

730-20% = 584k

So it may only really cause concern for those with neg equity, or for those that bought more recently, or for those that rely on buying and selling houses to pay off mortgages on their portfolio etc

Also I believe that btl was a large source of demand following the last crash and I can't see that demand being as high now given the additional stamp duty and taxation. Also this was about the time that interest rates dropped about 5%. They can't really do that now.

That's not to say there isn't a lot of demand still there, there certainly is but mindful that we aren't in the same position we were in 2008 in terms of levers of demand.

Edited by V6Alfisti on Thursday 7th July 12:31

[Derek Chevalier]

Pork said:

jonah35 said:

I used to follow what text books and economists said about inflation and the boe 2% target etc etc but the past 10 years or so have proven it all to be rubbish.

The underlying issue is for the government to keep house prices propped up forever. If they fall in any big way, say 30% plus then it will be a disaster so i truly cant see rates going up any time soon, 10 years plus really, unless theres a black swan event.

This broadly aligns with my thinking too. Theory is great, reality is house price falls lose votes and lose businesses money.

Why do lower house prices lose business money in the longer term?