How far will house prices fall [volume 4]

[Muncher]

£490k doesn't sound right for that, surely?

[Welshbeef]

I've been on PH for nearly 10 years and a member a touch less than that.

In all that time we have had these threads about house prices crashing and some selling up and renting in the hope that the vision will come true.

Facts
Supply v demand
In the areas where there are jobs there are not enough houses so prices go up to meet that demand.
Comes a point where workers have to travel longer and longer into work thus pushing prices in those other areas up.

We build c220k houses a year but just from our current population relationships splitting bigger families etc that rate of house building doesn't meet with current demand and certainly doesn't do anything about he legacy snowball of decades of under building houses.

Now we have strong forecasts that over the next decade we will see our population go up by 10million!!!! If that turns out to be true building at a rate of 220k a year would take 45 years to build enough. Now clearly many of those will be couples and families but I'd wager that greater than 1 in 4 would be hence its an issue.
However that would mean we have to build 220k houses above what we currently do just to stay static.... Prices will not go down until demand abates

[NomduJour]

Welshbeef said:

Prices will not go down until demand abates

Demand isn't just lots and lots of people who would like to buy a house.

[anonymous-user]

Welshbeef said:

I've been on PH for nearly 10 years and a member a touch less than that.

In all that time we have had these threads about house prices crashing and some selling up and renting in the hope that the vision will come true.

Facts
Supply v demand
In the areas where there are jobs there are not enough houses so prices go up to meet that demand.
Comes a point where workers have to travel longer and longer into work thus pushing prices in those other areas up.

We build c220k houses a year but just from our current population relationships splitting bigger families etc that rate of house building doesn't meet with current demand and certainly doesn't do anything about he legacy snowball of decades of under building houses.

Now we have strong forecasts that over the next decade we will see our population go up by 10million!!!! If that turns out to be true building at a rate of 220k a year would take 45 years to build enough. Now clearly many of those will be couples and families but I'd wager that greater than 1 in 4 would be hence its an issue.
However that would mean we have to build 220k houses above what we currently do just to stay static.... Prices will not go down until demand abates

This post makes far too much sense to be on here.

[z4RRSchris99]

St John Smythe said:

This post makes far too much sense to be on here.

that is pretty country wide, london is a different market.

[walm]

St John Smythe said:

This post makes far too much sense to be on here.

Not really.
It completely ignores price elasticity, affordability, wage inflation, government intervention and interest rates.

Essentially it says: population growth > housing supply growth therefore permanent house price inflation.

Unfortunately that is woefully simplistic and empirically wrong (e.g. 2008, 1989).

[anonymous-user]

St John Smythe said:

This post makes far too much sense to be on here.

It can't make sense, it's from Welshbeef.

[loafer123]

garyhun said:

St John Smythe said:

This post makes far too much sense to be on here.

It can't make sense, it's from Welshbeef.

The exception often proves the rule.

[Randy Winkman]

Does The Express really occupy a world where the only thing their middle aged readers care about is the value of their house without giving a thought for younger people in their families?

[z4RRSchris99]

yes. The home owning generation has fked us

[turbobloke]

Randy Winkman said:

Does The Express really occupy a world where the only thing their middle aged readers care about is the value of their house without giving a thought for younger people in their families?

It's like déja vu all over again

Daily Express tells us in 2013 that house prices have risen £2000 per month

[ClaphamGT3]

walm said:

St John Smythe said:

This post makes far too much sense to be on here.

Not really.
It completely ignores price elasticity, affordability, wage inflation, government intervention and interest rates.

Essentially it says: population growth > housing supply growth therefore permanent house price inflation.

Unfortunately that is woefully simplistic and empirically wrong (e.g. 2008, 1989).

What it does do however is to correctly recognise a general 44 year trend in house price movements. In that 44 year period, despite huge fluctuations in interest rates and rates of inflation, a plethora of different Govt interventions, and levels of supply, the market as a whole has seen sustained growth with only four brief periods of downward pressure on housing prices.

Now we see a rise of what, potentially, is the biggest game changer in the housing market in all that time; the rise of a large scale PRS market. Probably not since the time of the great industrialists building communities to house their work forces have we seen such an appetite for corporate investment in housing as an asset class. It is entirely possible (though not of course inevitable) that we will, very soon, see a situation where, in certain areas, the value of housing is determined more by an investor appraisal of commercial return than on the ability of the individual citizen's ability to pay

[Sheepshanks]

ClaphamGT3 said:

It is entirely possible (though not of course inevitable) that we will, very soon, see a situation where, in certain areas, the value of housing is determined more by an investor appraisal of commercial return than on the ability of the individual citizen's ability to pay

I've said before that that's been the case for some time where my daughter lives, on the outskirts of Chester. While prices of more expensive houses dropped 20% since 2007 and are only now starting to creep back, BTLers put a floor under the 3 bed modern terrace houses at around £150K so they never dropped at all.

[okgo]

Sheepshanks said:

I've said before that that's been the case for some time where my daughter lives, on the outskirts of Chester. While prices of more expensive houses dropped 20% since 2007 and are only now starting to creep back, BTLers put a floor under the 3 bed modern terrace houses at around £150K so they never dropped at all.

Be interested to know how gt3 doesn't think this is already and has been for a while the case in London...

[walm]

ClaphamGT3 said:

Now we see a rise of what, potentially, is the biggest game changer in the housing market in all that time; the rise of a large scale PRS market. Probably not since the time of the great industrialists building communities to house their work forces have we seen such an appetite for corporate investment in housing as an asset class.

I am not sure if it is that much of a game changer since it has been going on since the credit crunch as the desperate search for yield continues.

If we ever get to a proper macro recovery and the central banks finally raise rates then all that investor demand will evaporate faster than you can say "JAPAN!".

[gibbon]

The other thing that is happening is investors perception of a 'good yield' is changing.

A 5% return once scoffed at is looking rather good in a world of negative yields.

[ClaphamGT3]

The game changer is major funds and institutional investors moving into this area at scale.

Historically, PRS has been mom & pop shop - at best SME - in scale. Increasingly, we are seeing investors looking to take large scale, long term positions in residential property, attracted by an asset-backed investment with predictable returns over the long term.

I am now beginning to see investors showing serious interest in assembling portfolios of non-new build stock rather than just new build and an increasingly sophisticated secondary market in residential asset management is growing up in support of this market shift.

The game changer is not PRS per se; it is the increasingly industrial scale at which it is occurring

[turbobloke]

ClaphamGT3 said:

The game changer is major funds and institutional investors moving into this area at scale.

Historically, PRS has been mom & pop shop - at best SME - in scale. Increasingly, we are seeing investors looking to take large scale, long term positions in residential property, attracted by an asset-backed investment with predictable returns over the long term.

I am now beginning to see investors showing serious interest in assembling portfolios of non-new build stock rather than just new build and an increasingly sophisticated secondary market in residential asset management is growing up in support of this market shift.

The game changer is not PRS per se; it is the increasingly industrial scale at which it is occurring

Agreed, and the small investor can still take a slice with this sort of thing (below) around.

http://www.thisismoney.co.uk/money/investing/artic...

[Digga]

The black swan event for London high-end domestic property (and New York for that matter) would be the need for the BRICS property owners to liquidate their assets. We all know many places have been bought not even for status and occasional use, but merely as safe havens for chunks of capital. The question is how many distressed sales might it take to cause a change and what spill-down would there be to lower levels of the property ladder.

[Maxf]

okgo said:

Be interested to know how gt3 doesn't think this is already and has been for a while the case in London...

I think the difference now is that some of the major players, who previously wouldnt have touched the PRS with a bargepole are now actively investing. I'm talking about major pension funds buying xxxx units, rather than BTL investors. This is certainly new.