How far will house prices fall [volume 4]

[okgo]

scenario8 said:

Without unnecessarily getting bogged down by specific numbers, and not paying too much attention to this specific property, some of the returns in East London during this last recession are astonishing. I don't know that part of Town very well at all but one can only wonder at how relatively low they must have been to have seen such growth. Bonkers. Good for all these astute all knowing investors.

Oh for a bit of Crossrail and/or underground investment in the far reaches of (Greater) South London. (That will never ever happen).

Thing is, they were not nice places before the recession, they're still in many cases not that nice now, Kingsland Road is a fking dump, but slowly as the ripple effect has pushed people with money (but not enough) further out from where they wanted to buy these places are becoming gentrified at quite a rate, SE (where that house is) clearly the same, doubt you'd find many people paying £700k to live next to Nunhead in the boom of 2008.

[z4chris99]

just bide your time and wait for the crash.. when were paying 800k for fulham townhouses in 2017 it will make that 650k 2 bed someone picked up in clapton in 2014 like a bit of a bad deal.

The guy below me just flogged his one bed this week for £1.5m, he picked it up for circa £100k in 98.

[NomduJour]

It's going to take a while before Nunhead starts to appeal, let alone at £700k.

[scenario8]

There's good reason why I don't know this part of London very well despite having lived here for not far off 40 years now. I appreciate much of this area really isn't very nice at all and much of it was even "worse" in very recent times. That's one of the reasons I've found East London's price growth all the more remarkable.

There are large chunks of the suburbs that while unfashionable and probably a bit dull to your typical graphic desigining Apple product using Hoxton bonnet sporting twenty something offer massive savings on house prices compared to some of these hotspots with lower crime - oh, but with an additional 20 minutes each way on the train. Prices can be half or less. Some of the prices are astonishing. If we consider the mathemtaics of it for a moment when considering fairly small mid terraced three bed houses go for £700k and two bed flats for £500,000 or thereabouts. How do the numbers stack up? I find it difficult to get my head around the salary multipliers + massive deposits/equity required (from Lord knows where).

It does seem slightly daft.

edited to add - don't even get me started on Fulham prices...how anyone outside of a tiny elite can pay seven figures for really quite small places baffles me.

Edited by scenario8 on Tuesday 15th April 17:30

[fido]

scenario8 said:

Oh for a bit of Crossrail and/or underground investment in the far reaches of (Greater) South London. (That will never ever happen).

London Overground Line has already happened. Wish I bought into that as I don't see some of the prices coming down substantially whatever happens.

[NomduJour]

scenario8 said:

How do the numbers stack up? I find it difficult to get my head around the salary multipliers + massive deposits/equity required (from Lord knows where)

Family, who else is going to bung someone a few hundred k for a house deposit? Lending multiples aren't rising.

When it does start to unravel, I really wouldn't want to be left holding the keys to anywhere in an up-and-coming, vibrant or cosmopolitan neighbourhood.

[turbobloke]

NomduJour said:

scenario8 said:

How do the numbers stack up? I find it difficult to get my head around the salary multipliers + massive deposits/equity required (from Lord knows where)

Family, who else is going to bung someone a few hundred k for a house deposit? Lending multiples aren't rising.

When it does start to unravel, I really wouldn't want to be left holding the keys to anywhere in an up-and-coming, vibrant or cosmopolitan neighbourhood.

It just doesn't seem likely any time soon - but if or when it does, the stampede will be heard around the world as most of the (rich) world has been buying there.

[NomduJour]

The international rich aren't buying up prime London just because interest rates are low though. Rate rise = price fall.

[anonymous-user]

NomduJour said:

The international rich aren't buying up prime London just because interest rates are low though. Rate rise = price fall.

Unlikely as rates will rise very very slowly allowing a gradual deleveraging while inflation erodes the mortgage.

London might come off a bit, but any proper crash won't be caused by rates alone.

[menousername]

anonymous said:

[redacted]

Correct

That's before you factor in quite hefty student loans...again unless BOMAD paid those too

And they will both be working pretty hellish hours so their property would have to be in tiptop shape...no time or money for renovations

[turbobloke]

NomduJour said:

The international rich aren't buying up prime London just because interest rates are low though.

Sure, but a different reason for getting in will be mere history if and when it's time to get out.

TopOnePercent said:

Unlikely as rates will rise very very slowly allowing a gradual deleveraging while inflation erodes the mortgage.

London might come off a bit, but any proper crash won't be caused by rates alone.

A significant proportion of London properties are being bought without a mortgage. Across the country as a whole more than a third of houses are currently being bought for cash, and for wealthy foreign buyers interested in a London property I'd be surprised if it wasn't mostly money on the table.

[Magog]

menousername said:

That's before you factor in quite hefty student loans...

Are student loans taken into consideration when a bank calculates how much it will lend at the moment?

[z4chris99]

NomduJour said:

The international rich aren't buying up prime London just because interest rates are low though. Rate rise = price fall.

it's mostly cash in prime London.

scary story of the day... a friend made 2.5x his cash on a off plan contract he's held for 11 months ... profit paid upfront.

bubbly bubble

[NomduJour]

Possible, new paradigm etc. but interest rate rises don't usually (historically) happen slowly, and London/SE property took a kicking in the early 1990s when rates rose. Interest rates are artificially low now, below inflation.

Cash purchases are less common in prime London now than a couple of years ago - ~75% down to ~50% according to Cluttons. Might as well mortgage when it's so cheap.

[turbobloke]

A majority of London buyers pay cash in the prime locations.
http://metro.co.uk/2014/03/25/london-property-cash...

The higher the London property price, the greater the proportion of cash buyers.
http://metro.co.uk/2014/03/13/is-cash-king-when-it...

Article said:

In Q4 2013, 48% of mortgage free buyers bought homes priced at under £500,000, while for properties priced over £2m the figure rose to 55%.

At £10m, £100m, what proportion will be mortgaged? Virtually none but somebody may have the detailed numbers.

[NomduJour]

turbobloke said:

A majority of London buyers pay cash in the prime locations.
http://metro.co.uk/2014/03/25/london-property-cash...

That appears to be telling us that a majority of Russians buying in Kensal Rise (two out of three?), via an agent nobody has heard of, pay cash.

[turbobloke]

NomduJour said:

turbobloke said:

A majority of London buyers pay cash in the prime locations.
http://metro.co.uk/2014/03/25/london-property-cash...

That appears to be telling us that a majority of Russians buying in Kensal Rise (two out of three?), via an agent nobody has heard of, pay cash.

Yes I mentioned the prime location nature of the information. One of the links gave a majority figure of 55% but I can't recall which one at the mo. That's a majority but not two-thirds. Re-click away for the details. Also mentioned is the increasing proportion of cash buyers as the price increases. Any single figure hides a wealth of detail.

The position on these high end cash purchases is getting hotter though as solicitors and EAs are referring more cash buyers to SOCA. No idea if you've heard of any solicitors or EAs doing this, but it's happening.

[z4chris99]

haven't heard of that happening, at all..

we have cbre savills and KF on our schemes.

KYC is done.

[turbobloke]

z4chris99 said:

haven't heard of that happening, at all..

we have cbre savills and KF on our schemes.

KYC is done.

Fair enough and after all your experience may well be of entirely legitimate transactions. Also I must add a correction in that the mention should have been NCA after the 2013 change.

Recent comment - "money laundering camouflaged in real estate...with some areas of London registering up to 80% of property sales to cash buyers...it may well be that the UK is perhaps one of the easiest jurisdictions in which to launder money through real estate"
http://www.renthusiast.com/2013/02/money-launderin...

Also in the past - occurrences involving NCIS which preceded SOCA which preceded NCA.
http://www.independent.co.uk/life-style/property-b...

The basic position which you will of course be aware of.
https://www.gov.uk/registration-guide-for-estate-a...

The number of estate agent SAR online registrants (Suspicious Activity Reports) increased by 98% in 2011/12 to over 90, but I don't have the figure for 2012/13.

[z4chris99]

I'm not saying your wrong, it would be very very easy to money launder.

your lawyer does KYC on you, you give him your cash. the checks are not massive.

your lawyer gives the sellers lawyer the cash. no checks are done

as developers we are now doing checks