How far will house prices fall [volume 4]
Discussion
z4RRSchris said:
crankedup said:
House price falls? Not any time soon with the Pacific Basin major areas in investment difficulties, Europe likewise it leaves rock solid London property attracting money from these areas as relatively safe investments. This confidence in the property market from overseas will sure as heck prop up the market as those City prices continue to ripple out.
lol. overseas investors are long gone. the market has already crashed.
I ask because it isn't chiming with what I was hearing just a few weeks ago. You are sure it's the city market that has collasped!, I f so then a lot of speculators and developers are going to get their fingers burnt.
The developments of high rise along the Thames is rampant. Some people have sunk multi millions or billions into these projects which are under construction and late stage planing.
I agree that turnover of property has dropped significantly and the lower end property of upto two million may be struggling due to the stamp duties changes 2014 but I don't see the mega wealhy affected by this and I am with the side that is with the City being a safe haven for property investment. Perhaps we have a pause for breath. I am genuinely interested in your take on the top end of the city market.
Edited by crankedup on Wednesday 10th February 19:38
RYH64E said:
crankedup said:
House price falls? Not any time soon with the Pacific Basin major areas in investment difficulties, Europe likewise it leaves rock solid London property attracting money from these areas as relatively safe investments. This confidence in the property market from overseas will sure as heck prop up the market as those City prices continue to ripple out.
What do you consider to be 'rock solid London property'? How about this fantastic opportunity in Stratford? A veritable bargain at just £750k I'm sure, overseas investors must be queuing up.Redrow boss says Stamp Duty is killing London property:
http://www.standard.co.uk/business/redrow-chairman...
http://www.standard.co.uk/business/redrow-chairman...
anonymous said:
[redacted]
The thing that is most amusing is when we get the oft repeated comment that those "kids" would be able to afford it if they give up the gym memberships and expensive mobile phones.Yes with massive sacrifice you might be able to afford a starter home in a crap area, whoopy do. That doesn't mean that the market is working as it should when professionals in their thirties are struggling to buy houses built for factory workers.
JagLover said:
Yes with massive sacrifice you might be able to afford a starter home in a crap area, whoopy do. That doesn't mean that the market is working as it should when professionals in their thirties are struggling to buy houses built for factory workers.
I could not agree with this more.What I don't understand is what mechanisms or catalysts are available to push prices the other way.
walm said:
JagLover said:
Yes with massive sacrifice you might be able to afford a starter home in a crap area, whoopy do. That doesn't mean that the market is working as it should when professionals in their thirties are struggling to buy houses built for factory workers.
I could not agree with this more.What I don't understand is what mechanisms or catalysts are available to push prices the other way.
The cost of technology has gone down a lot, the cost of cars has gone down a lot such that around 80% of the population has one or has access to one - and the cost of housing has gone up a lot.
Do what you can, accept the rest, carry on. What's the alternative? Relying on politicians isn't an alternative!
anonymous said:
[redacted]
walm said:
JagLover said:
Yes with massive sacrifice you might be able to afford a starter home in a crap area, whoopy do. That doesn't mean that the market is working as it should when professionals in their thirties are struggling to buy houses built for factory workers.
I could not agree with this more.What I don't understand is what mechanisms or catalysts are available to push prices the other way.
- Extravagant SDLT rates
- Affordability relative to salaries and expectation
- Falling compensation in the City
- Bank balance sheets getting hit again meaning lending will be more difficult to come by
- Falling commodity prices stifling the growth of some economies where the citizens have wanted overseas assets
- Falls in faux-prime causing overseas investors to question the "London Prime is as good as gold" orthodoxy
Or maybe not.
The "nothing safer than bricks and mortar" mantra of the British is very ingrained. The majority of our wealth and our parents' wealth has been made from property (albeit in a higher inflation period than today). Pension changes mean that there are many 50-60 yo with a nest egg and their first (and last) instinct is to pour it into UK property. Every investment thread on here ends up with the conclusion being "put it in property" (and that has by and large been the right advice over the last 50 years).
AstonZagato said:
The catalysts aren't obvious - but that doesn't mean they don't exist. If they were obvious then the prices would have moved already (as faux-prime already has). There are some straws on the camel's back already:
Or maybe not.
The "nothing safer than bricks and mortar" mantra of the British is very ingrained. The majority of our wealth and our parents' wealth has been made from property (albeit in a higher inflation period than today). Pension changes mean that there are many 50-60 yo with a nest egg and their first (and last) instinct is to pour it into UK property. Every investment thread on here ends up with the conclusion being "put it in property" (and that has by and large been the right advice over the last 50 years).
Allot of is mentality you are right.- Extravagant SDLT rates
- Affordability relative to salaries and expectation
- Falling compensation in the City
- Bank balance sheets getting hit again meaning lending will be more difficult to come by
- Falling commodity prices stifling the growth of some economies where the citizens have wanted overseas assets
- Falls in faux-prime causing overseas investors to question the "London Prime is as good as gold" orthodoxy
Or maybe not.
The "nothing safer than bricks and mortar" mantra of the British is very ingrained. The majority of our wealth and our parents' wealth has been made from property (albeit in a higher inflation period than today). Pension changes mean that there are many 50-60 yo with a nest egg and their first (and last) instinct is to pour it into UK property. Every investment thread on here ends up with the conclusion being "put it in property" (and that has by and large been the right advice over the last 50 years).
Historically, since the lows seen in the mid 1970s, property has been a very good investment and so there is an expectation this will continue even when it seems more and more like a Ponzi scheme. There is an expectation that prices will continue the same upward trajectory hence the desperation to get “on the ladder”. Ironically the post above yours is advising BR to spend £400k on a house he won’t actually live in all to get “on the ladder”. If BR is a higher rate tax payer, given the change in interest tax relief, he might well end up paying for the privilege of his stake “on the ladder”
You are talking about various short term factors that may prick the bubble one major short term factor acting the other way of course is that extremely low interest rates, by historical standards, have become the new norm to keep the show on the road.
Looking further back to longer term trends. Ever since government, both local and central, became involved in the planning for housing the non-build element of the cost of a new home has been on a steep upward trajectory.
We responded to the depression of the 1930s with a house building boom. We responded to the depression caused by the financial crash by desperately re-inflating the bubble and “growth” returned once this was done.
A house is a place to live and the higher the proportion of income devoted to this the lower the standard of living.
Government got us in to this mess so only a change of course can fundamentally change the situation.
turbobloke said:
...and the cost of housing has gone up a lot.
Could (and should, imo) go down a lot as well. I won't be holding my breath waiting for the correction, partly because I've been expecting it to happen for about 20 years and been comprehensively wrong, but I just don't see how current London prices are sustainable. Looking at the prices one would would assume that London is exclusively populated by powerfully built PH Director types, but it isn't, and even those of us who might be considered to be very comfortably off would struggle to buy anything more than a hovel in parts of London that were little more than slums when I was a lad.JagLover said:
That doesn't mean that the market is working as it should when professionals in their thirties are struggling to buy houses built for factory workers.
JL, sorry to burst your bubble but now that almost all young people go to university then end up in an open plan office, "professionals in their 30's" are the factory workers of today. As for affordability. Houses aren't cheap to build. A 4 bed house will cost about £200k to put up in the SE. The building plot it goes on will cost about the same, add in a small profit and you get the price around £450-500k.
In more central areas the price of the plot just goes up.
Ok, if you abolish planning permission maybe plot prices would fall, but that's not going to happen.
Nationally are houses really that over priced? As I say it costs between £150-300k to build them, depedning on size then you have to add on the cost of the plot.
If blocks were still 10p each rather than 60p maybe prices would be lower, but I don't see the cost of materials and labour returning to levels of 20 years ago anymore than I expect to be able to get a can of coke for 10p because that's what it cost when I was at school.
turbobloke said:
Mr Whippy said:
crankedup said:
I am with the side that is with the City being a safe haven for property investment.
Is there such a thing as a safe haven in property?I had completely took my eye of the Prime London property market! My living in Suffolk somehow seems sensible now, not that I could afford prime London or particularly want to live there!
But replacement cost isn't the only factor. If you look in the Property Prawn thread, there are plenty of large houses that one couldn't buy the land and build at that price. Hell, some almost look like you couldn't (even getting the shell for nothing) refurbish at the sale price.
There has been a demographic change though. More people, more single family dwellings, less shared occupancy. We have not built as much as we should - and that is near impossible in London. That will change the affordability, no question.
But that affordability eventually feeds into other things. If you are a junior doctor, you have the choice of working in London or Newcastle. One you live in a hovel, the other your money goes further. Where do you choose? Not all professions are equally mobile - and there is a gravitational pull to the largest concentration of talent/customers/decision-makers that is self-fulfilling and self-perpetuating. But housing cost is strong enough to break that cycle. Eventually. Is that at 10x average earning? 20x? 30x?
There has been a demographic change though. More people, more single family dwellings, less shared occupancy. We have not built as much as we should - and that is near impossible in London. That will change the affordability, no question.
But that affordability eventually feeds into other things. If you are a junior doctor, you have the choice of working in London or Newcastle. One you live in a hovel, the other your money goes further. Where do you choose? Not all professions are equally mobile - and there is a gravitational pull to the largest concentration of talent/customers/decision-makers that is self-fulfilling and self-perpetuating. But housing cost is strong enough to break that cycle. Eventually. Is that at 10x average earning? 20x? 30x?
crankedup said:
City prices crashed? I see you are professionally part of the property market so I guess you should know. Can you advise when the market crashed please, you say long ago!
I ask because it isn't chiming with what I was hearing just a few weeks ago. You are sure it's the city market that has collasped!, I f so then a lot of speculators and developers are going to get their fingers burnt.
The developments of high rise along the Thames is rampant. Some people have sunk multi millions or billions into these projects which are under construction and late stage planing.
I agree that turnover of property has dropped significantly and the lower end property of upto two million may be struggling due to the stamp duties changes 2014 but I don't see the mega wealhy affected by this and I am with the side that is with the City being a safe haven for property investment. Perhaps we have a pause for breath. I am genuinely interested in your take on the top end of the city market.
the prime I think has fallen by 10/15% in the last few months. I ask because it isn't chiming with what I was hearing just a few weeks ago. You are sure it's the city market that has collasped!, I f so then a lot of speculators and developers are going to get their fingers burnt.
The developments of high rise along the Thames is rampant. Some people have sunk multi millions or billions into these projects which are under construction and late stage planing.
I agree that turnover of property has dropped significantly and the lower end property of upto two million may be struggling due to the stamp duties changes 2014 but I don't see the mega wealhy affected by this and I am with the side that is with the City being a safe haven for property investment. Perhaps we have a pause for breath. I am genuinely interested in your take on the top end of the city market.
Edited by crankedup on Wednesday 10th February 19:38
the sub prime I think you can safely say has gone 20%+
mega wealthy have been hit. oil prices, currency, capital controls, stamp, IHT, ATED,
the only people buying are those who want to live in it, not investors,
Edited by z4RRSchris on Thursday 11th February 13:00
Timmy40 said:
JL, sorry to burst your bubble but now that almost all young people go to university then end up in an open plan office, "professionals in their 30's" are the factory workers of today.
Perhaps you and I have a different definition of the word "professional". Admin & clerical roles have been with us for centuries an executive paperclip assistant is no more a professional now than Gladys from the typing pool was back in the 1960s.Yes as business services become more important to the economy there are now more professionals, but going to an university alone does not make you one, neither does merely working in an office. It is easy to forget, working in central London, that average earnings for even the fourth quintile of households is only £40K before adjusting for tax and benefits.
Timmy40 said:
As for affordability. Houses aren't cheap to build. A 4 bed house will cost about £200k to put up in the SE. The building plot it goes on will cost about the same, add in a small profit and you get the price around £450-500k.
In more central areas the price of the plot just goes up.
Ok, if you abolish planning permission maybe plot prices would fall, but that's not going to happen.
Nationally are houses really that over priced? As I say it costs between £150-300k to build them, depedning on size then you have to add on the cost of the plot.
If blocks were still 10p each rather than 60p maybe prices would be lower, but I don't see the cost of materials and labour returning to levels of 20 years ago anymore than I expect to be able to get a can of coke for 10p because that's what it cost when I was at school.
Well the LSE have calculated that removing planning constraints would lower the cost of new houses 35% (not necessarily sales price of course). Certainly there has been a meteoric rise since the 1930s in the proportion of the house cost that is land.In more central areas the price of the plot just goes up.
Ok, if you abolish planning permission maybe plot prices would fall, but that's not going to happen.
Nationally are houses really that over priced? As I say it costs between £150-300k to build them, depedning on size then you have to add on the cost of the plot.
If blocks were still 10p each rather than 60p maybe prices would be lower, but I don't see the cost of materials and labour returning to levels of 20 years ago anymore than I expect to be able to get a can of coke for 10p because that's what it cost when I was at school.
It has been claimed that nationally the land proportion of the value of a house is 70%.
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