How far will house prices fall [volume 4]

[anonymous-user]

This is an interesting topic for me as I tried to buy a small house in November 2013 but unfortunately it all fell through. This was just after the government announced the help to buy scheme and things were absolutely crazy. The estate agents were having a ball as all they had to do was organise an open house viewing and 25 couples would turn up at the same time, desperate to buy. The estate agent would announce there had already been a full asking price offer from someone who had only seen the details and that it would be going to sealed bids. You could see the panic and fear on everyone's faces that if they didn't find somewhere now they would miss out.

I am actually living in Australia now, but once again I am trying to buy somewhere in the UK. I am feeling sick at just how much prices have gone up in the past 18 months alone. The small two bedroom house I tried to buy last time was on the market for £230K in November 2013 is now on sale again for £270K. I make that a 17.4% increase in 18 months, or £2,222 a month.

A bungalow I used to live next door to sold in 2004 for £250K, it sold again last year for £425K. It went up on average £1458 every month for the last 10 years.

I have now come to the conclusion that prices are never going to fall (not in the South East anyway). I actually believe I could buy somewhere on a buy to let mortgage and still make money if I just left it empty and didn't bother with the hassle of tenants.

[XGT]

98elise said:

I predicted the last crash......about 3 years before it actually happened

I knew it was going to happen (all the hallmarks of the previous one) but I couldn't believe how high prices and how long it went on for, before it happened.

So what "crash" exactly did you predict?

All I can see is a long term upward trend with some relatively minor adjustments along the way.

[DoubleSix]

Indeed.

The term 'crash' is over used and incorrectly applied, mostly by the media it had to be said.

What we're really discussing is a correction which is perfectly healthy in any market.

Long term investors ignore, short term investors exploit.

[p1stonhead]

XGT said:

98elise said:

I predicted the last crash......about 3 years before it actually happened

I knew it was going to happen (all the hallmarks of the previous one) but I couldn't believe how high prices and how long it went on for, before it happened.

So what "crash" exactly did you predict?

All I can see is a long term upward trend with some relatively minor adjustments along the way.

Nothing like a crash round my way. Dont even think prices dropped slightly. A slight slowdown in rises before a massive spike again is all that happened.

[98elise]

XGT said:

98elise said:

I predicted the last crash......about 3 years before it actually happened

I knew it was going to happen (all the hallmarks of the previous one) but I couldn't believe how high prices and how long it went on for, before it happened.

So what "crash" exactly did you predict?

All I can see is a long term upward trend with some relatively minor adjustments along the way.

some quite large drops in my area. I bought a 3 bed reasonable modern house in the SE for £130k because it had dropped significantly. About a year later an identical house in the same row sold for £110k.

[Ari]

W124 said:

I still reckon that whoever gets in will have less incentive to keep the thing afloat. And anyway, all the easy levers have been pulled.

Indeed. Having zeroed interest rates, brought in Help To Buy, and started under-writing mortgages, the fact that they are now effectively paying first time buyers money to carry on buying (via topping up savings if used as a deposit for a house) rather says it all. Apart from actually buying houses and gifting them to people, what's left to keep the great ponzi scheme rolling? Or do they just need to do it till they're past the general election?

I feel genuinely sorry for anyone trying to buy a house for the first time. All the schemes do, all of them, is help prices go up, not actually help the buyer. Come up with a scheme that puts another £10,000 in first time buyers pockets and they don't benefit a penny, prices just rise to absorb it because the amount people can physically pay back remains the same.

So if you 'help' them (via ZIRP, Help-To-Buy or whatever else) the prices just rise to a level where they still pay back the same - everything they can possibly afford.

[Mr Whippy]

Ari said:

We've had that though, and more than just a crack. Northern Rock, Lehmans, recession, doom, gloom, disaster and still (after a wobble) the prices continue to climb.

People seem convinced that the government 'won't let prices fall'. And so far they've been dead right!

But the recent round of borrowing is based on both growth mania, and cheaper than ever borrowing.

There is no ammunition left in the governments arsenal to keep everyone solvent.


This time the property markets will act somewhat 'free' in nature, rather than be manipulated with the promises of stimulation.


Which arguably they should any way. Why should any given market be 'propped' from responding to natural market forces? All it does it create more distortion and the whole law of unintended consequences.

And since markets require a diverse work-force for a city to be sustainable fundamentally, and costs need to be viable for them to live or commute from nearby, then something has to give.


Best case and salaries rise fast, rapid inflation will mean interest rates rise hard too... leaving stretched speculator investors exposed.


Where is the easy way out this time?

[LdnShtr]

Would I be right in thinking that retired people who can now get access to their pension pots may be the next group of people to come in and prop up the housing market? I could see that keeping things afloat for whomever is elected into government next.

[p1stonhead]

LdnShtr said:

Would I be right in thinking that retired people who can now get access to their pension pots may be the next group of people to come in and prop up the housing market? I could see that keeping things afloat for whomever is elected into government next.

I know of a few who are going to buy BTLs with their pension which can be released soon. It certainly will happen a lot I think.

[princeperch]

I don't regret selling my flat in bow in q2 2014. I think it's probably worth 10pc less than I sold it for now (which I think was a record in e3- as far as I know no one has ever achieved 435 for a 1 bed in that area). I could have remortgaged the backside out of it but the figures only just stacked up and to be honest I was stting myself over the service chRge fun and games. 220 quid a month for fk all - no porter, no facilities, nothing.

In the meanwhile my little victorian terrace in leytonstone appears to be worth about 430 which is about 10pc more than I paid last year. The market for these little houses is pretty strong.

[98elise]

anonymous said:

[redacted]

[menousername]

p1stonhead said:

LdnShtr said:

Would I be right in thinking that retired people who can now get access to their pension pots may be the next group of people to come in and prop up the housing market? I could see that keeping things afloat for whomever is elected into government next.

I know of a few who are going to buy BTLs with their pension which can be released soon. It certainly will happen a lot I think.

do that many people honestly have any significant pension to put down though? Or will they be using almost all of it to put down a deposit, and taking a mortgage too, renting out... thinking that the balance will be more than the pension income, and just holding that until they are gone and letting it be repossessed

Edited by menousername on Friday 1st May 13:35

[NerveAgent]

Prices seem to have shot up again in my area (Sale, South Manchester)

Bought in July 2012 for 210k, they jumped up to 250k about a year ago, now a few selling for 275k+

[Mark Benson]

menousername said:

p1stonhead said:

LdnShtr said:

Would I be right in thinking that retired people who can now get access to their pension pots may be the next group of people to come in and prop up the housing market? I could see that keeping things afloat for whomever is elected into government next.

I know of a few who are going to buy BTLs with their pension which can be released soon. It certainly will happen a lot I think.

do that many people honestly have any significant pension to put down though? Or will they be using almost all of it to put down a deposit, and taking a mortgage too, renting out... thinking that the balance will be more than the pension income, and just holding that until they are gone and letting it be repossessed

Edited by menousername on Friday 1st May 13:35

Plenty. It's the 'pension du jour' at the moment among my parent's friends.

While few of our pension pots may never see enough to buy a house, the previous generation benefited from final salary pensions and principal residences that have risen in value significantly - and if the pension pot doesn't stretch they can now downsize and buy a couple of BTLs with the proceeds.

I think Osbourne knew precisely what he was doing giving pensioners access to a chunk of money at the time when the only game in town for the layman is property.

[dazwalsh]

Not really been keeping an eye on prices in the last 12 months, I'm in Leeds and zoopla is telling me a 9% drop on one of my houses, should I believe that or has prices tended to creep up during the last year?

[LdnShtr]

Mark Benson said:

menousername said:

p1stonhead said:

LdnShtr said:

Would I be right in thinking that retired people who can now get access to their pension pots may be the next group of people to come in and prop up the housing market? I could see that keeping things afloat for whomever is elected into government next.

I know of a few who are going to buy BTLs with their pension which can be released soon. It certainly will happen a lot I think.

do that many people honestly have any significant pension to put down though? Or will they be using almost all of it to put down a deposit, and taking a mortgage too, renting out... thinking that the balance will be more than the pension income, and just holding that until they are gone and letting it be repossessed

Edited by menousername on Friday 1st May 13:35

Plenty. It's the 'pension du jour' at the moment among my parent's friends.

While few of our pension pots may never see enough to buy a house, the previous generation benefited from final salary pensions and principal residences that have risen in value significantly - and if the pension pot doesn't stretch they can now downsize and buy a couple of BTLs with the proceeds.

I think Osbourne knew precisely what he was doing giving pensioners access to a chunk of money at the time when the only game in town for the layman is property.

This is my thinking too. I think them being something tangible, that you can go and touch, makes them attractive for anyone who knows someone who has had their fingers burnt by "invisible" investments. I wonder if traditionally harder to mortgage properties are going to see growth higher than normal if there is an influx of new cash buyers.

[p1stonhead]

LdnShtr said:

Mark Benson said:

menousername said:

p1stonhead said:

LdnShtr said:

Would I be right in thinking that retired people who can now get access to their pension pots may be the next group of people to come in and prop up the housing market? I could see that keeping things afloat for whomever is elected into government next.

I know of a few who are going to buy BTLs with their pension which can be released soon. It certainly will happen a lot I think.

do that many people honestly have any significant pension to put down though? Or will they be using almost all of it to put down a deposit, and taking a mortgage too, renting out... thinking that the balance will be more than the pension income, and just holding that until they are gone and letting it be repossessed

Edited by menousername on Friday 1st May 13:35

Plenty. It's the 'pension du jour' at the moment among my parent's friends.

While few of our pension pots may never see enough to buy a house, the previous generation benefited from final salary pensions and principal residences that have risen in value significantly - and if the pension pot doesn't stretch they can now downsize and buy a couple of BTLs with the proceeds.

I think Osbourne knew precisely what he was doing giving pensioners access to a chunk of money at the time when the only game in town for the layman is property.

This is my thinking too. I think them being something tangible, that you can go and touch, makes them attractive for anyone who knows someone who has had their fingers burnt by "invisible" investments. I wonder if traditionally harder to mortgage properties are going to see growth higher than normal if there is an influx of new cash buyers.

Exactly.

Also, the people I am talking about have mostly already made masses of money through rising property prices over the last 30 years. Some downsized and put money into pensions and have big pots waiting to go. Undoubtably some will be able to buy a few.

It may prop things up for a while I think especially for cheaper properties which again, is what FTB's are trying to get - they just wont be able to compete with cash rich older people unfortuantely.

[Sheepshanks]

p1stonhead said:

Exactly.

Also, the people I am talking about have mostly already made masses of money through rising property prices over the last 30 years. Some downsized and put money into pensions and have big pots waiting to go. Undoubtably some will be able to buy a few.

It may prop things up for a while I think especially for cheaper properties which again, is what FTB's are trying to get - they just wont be able to compete with cash rich older people unfortuantely.

I suppose it depends on where you buy (it needs to be local if people are going to want to touch and feel and it) but for "old" people, do the net yields on BTL make sense?

Edited by Sheepshanks on Saturday 2nd May 10:35

[Sheepshanks]

anonymous said:

[redacted]

It must bother you though, to have given it that much thought.

[Magog]

Sheepshanks said:

p1stonhead said:

Exactly.

Also, the people I am talking about have mostly already made masses of money through rising property prices over the last 30 years. Some downsized and put money into pensions and have big pots waiting to go. Undoubtably some will be able to buy a few.

It may prop things up for a while I think especially for cheaper properties which again, is what FTB's are trying to get - they just wont be able to compete with cash rich older people unfortuantely.

I suppose it depends on where you (it needs to be local if people are going to want to touch and feel and it) but for "old" people, do the net yields on BTL make sense?

Presumably with BTL property, it also gives those of pensionable age the chance of handing down a capital asset to their children in a manner that isn't possible if they've simply purchased an annuity.