How far will house prices fall [volume 4]
Discussion
The bubble at present in many things is crazy. Classic cars are doubling in value every 2 years. 996 gt2, gt3, m3 csl, z3m etc and people are buying without viewing and just offering asking price. People are panic buying.
It is and has been this way in London re houses. People offering asking price as they're scared of getting left behind.
It's amazing to think 2008-2009 was that long ago now but you couldn't give things away. V8 vantage a cheaper than they are even today, cars and assets sat without takers and dealers in a race to the bottom.
It will happen with property eventually and that will cause a headache. I don't think it will be interest rates that does it as I think they could go down. I'm not sure what the black swan event will be that will start it perhaps some kind of flooding in London, terrorism, recession, more remote working etc. It will probably be something unseen such as us leaving the eu and non uk citizens being priced out due to exchange rates or the flight of businesses to Paris etc.
My bet is on the budget becoming so unsustainable that there needs to be more tax on income, higher stamp duty, higher iht and an asset tax wher people suddenly see owning property as less attractive. Going the way the economy is with our deficit it's inevitable. In addition, btl tax will be clamped down on and people forced to pay income tax.
Once it starts it becomes self fulfilling and eventually will spiral downwards.
It is and has been this way in London re houses. People offering asking price as they're scared of getting left behind.
It's amazing to think 2008-2009 was that long ago now but you couldn't give things away. V8 vantage a cheaper than they are even today, cars and assets sat without takers and dealers in a race to the bottom.
It will happen with property eventually and that will cause a headache. I don't think it will be interest rates that does it as I think they could go down. I'm not sure what the black swan event will be that will start it perhaps some kind of flooding in London, terrorism, recession, more remote working etc. It will probably be something unseen such as us leaving the eu and non uk citizens being priced out due to exchange rates or the flight of businesses to Paris etc.
My bet is on the budget becoming so unsustainable that there needs to be more tax on income, higher stamp duty, higher iht and an asset tax wher people suddenly see owning property as less attractive. Going the way the economy is with our deficit it's inevitable. In addition, btl tax will be clamped down on and people forced to pay income tax.
Once it starts it becomes self fulfilling and eventually will spiral downwards.
stuckmojo said:
gibbon said:
Oh come off it.
I'm serious. Unless you want to live like someone on minimum wage anywhere else.
Economics are totally distorted there.
Sure you end up spaffing a ridiculous amount on finding somewhere to live but people flipping burgers aren't exactly moving into mansions ANYWHERE!
p1stonhead said:
No they are not. You are making ridiculous statements.
so, you think then this is logical and good value?http://www.galliardhomes.com/The-Fusion
695,000 GBP for a s
t box. In Shoreditch. What kind of salary would one (or a miserable couple) need to afford living in all of 50.4 square metres?
Assume you need 150 grand in cash or granny's pension, and then 2,500 quid per month for 25 years to afford the luxury.
Seriously?
rovermorris999 said:
It won't happen to property in the same way that it possibly could with classic cars for the simple reason that people need a roof, they don't need a classic car.
True but that didn't stop homes crashing in value in Spain, Portugal, Florida etc recently and in Japan in the late 80s or even the uk in 2008-2010.As daft as it sounds people don't need a home as much as they'll have you believe. What I mean by this slightly tongue in cheek comment is let's say every house rose 10 fold in value overnight. People would still find somewhere to live. They would live with friends, rent a room, go back to parents, club together with others, live in a caravan, emigrate, move north, move to a smaller house, many young people will tell you how they 'had to' spend £750k on a flat but they didn't really have to, they did and do have other options.
Let's say we stopped mortgage borrowing tonight. Property would collapse in value as very few could afford to buy. People still would need a home but property would still crash so it can happen even if the demand is there and supply is there,
Let's say tax went up to 70% on all income above £40k - sounds daft now but it may not sound so daft in 2020/2025 then again people would still want a home but prices would come down
Granted, these things sound far fetched but at what point will things change? Eventually the government will have to look at income vs expenditure - we are doing a great job of kicking the can down the road and this could go on for years but at some point it will become a problem.
stuckmojo said:
p1stonhead said:
No they are not. You are making ridiculous statements.
so, you think then this is logical and good value?http://www.galliardhomes.com/The-Fusion
695,000 GBP for a s
t box. In Shoreditch. What kind of salary would one (or a miserable couple) need to afford living in all of 50.4 square metres?
Assume you need 150 grand in cash or granny's pension, and then 2,500 quid per month for 25 years to afford the luxury.
Seriously?
p1stonhead said:
No one would probably say thats good value but my house is worth as much and I dont earn that much nor struggle (my mortgage is £1200 a month). Im not in London but Surrey. As a first time buyer yes perhaps you are screwed unless a banker, but most people are on their 2nd or 3rd property before spending so much.
Agreed, for a house in Surrey with a 1,200£ a month mortgage and a shoe box with no parking or amenities are not remotely comparable as they don't belong to the same market.Note that such blocks of flats are marketed directly at landlords with cash, not owner occupiers.
That in itself is a massive distortion. I pity young people that want to move to London if not for the opportunistic career springboard sharing a room with strangers.
To give some context: For not much more:
http://www.zoopla.co.uk/overseas/details/38965838?...
stuckmojo said:
p1stonhead said:
No one would probably say thats good value but my house is worth as much and I dont earn that much nor struggle (my mortgage is £1200 a month). Im not in London but Surrey. As a first time buyer yes perhaps you are screwed unless a banker, but most people are on their 2nd or 3rd property before spending so much.
Agreed, for a house in Surrey with a 1,200£ a month mortgage and a shoe box with no parking or amenities are not remotely comparable as they don't belong to the same market.Note that such blocks of flats are marketed directly at landlords with cash, not owner occupiers.
That in itself is a massive distortion. I pity young people that want to move to London if not for the opportunistic career springboard sharing a room with strangers.
To give some context: For not much more:
http://www.zoopla.co.uk/overseas/details/38965838?...
That said, I was only comparing value. The size of the property is irrelevant. You said you cant live in London on less than £200k. You then gave an example of a £700k property.
I said that it is possible to earn less and still have a property of similar value. Size doesnt matter (
). Plenty of people can afford that flat without earning £200k, its just about the route you take to get there.My house happens to be much larger but Surrey isnt exactly cheap!
stuckmojo said:
With an aviary!I need to emigrate.
(And learn French. And get a job in France. And find the wife a job in France. And find an English school in the middle-of-buttf
k-nowhere in France. And move the aged parents out to France. And find new friends who aren't cheese eating etc...)It just isn't that easy.
Its a central flat near the city, if you want to FTB there then you should expect to be in a job that is above average, like the flat is.
No getting away from the fact you'll need a lump to put down, but fairly easy for two late twenties people to be over 150k joint income in professional jobs from grad age, and for that, 2500 per month is fairly small as a percentage.
No getting away from the fact you'll need a lump to put down, but fairly easy for two late twenties people to be over 150k joint income in professional jobs from grad age, and for that, 2500 per month is fairly small as a percentage.
stuckmojo said:
Agreed, for a house in Surrey with a 1,200£ a month mortgage and a shoe box with no parking or amenities are not remotely comparable as they don't belong to the same market.
Note that such blocks of flats are marketed directly at landlords with cash, not owner occupiers.
That in itself is a massive distortion. I pity young people that want to move to London if not for the opportunistic career springboard sharing a room with strangers.
To give some context: For not much more:
http://www.zoopla.co.uk/overseas/details/38965838?...
Ha! How is that adding context? One could argue the shoreditch flat is more affordable given employment propositions of the two! What has a french chateaux in north west france got to do with a 1 bed in central london? Ha! Context! Note that such blocks of flats are marketed directly at landlords with cash, not owner occupiers.
That in itself is a massive distortion. I pity young people that want to move to London if not for the opportunistic career springboard sharing a room with strangers.
To give some context: For not much more:
http://www.zoopla.co.uk/overseas/details/38965838?...
Stuckmojo, the more i think about it, the more your point has absolutely no relevance to this debate, i dont really see how you think that flat is overvalued, well, thats not quite right, i do, I just dont think you can realistically justify that the price should be significantly lower, particularly using any metric or reasoning you have so far.
The flat may not be to your taste, but its a new, relatively high spec flat built in what is now one of the trendiest, most desirable streets in the world for young ish urbanites, placed right in the centre of one of the most thriving, successful cities in the world. In a shocking turn of events, it costs quite a lot to live there, how this has any relevance to average income couples, first time buyers, or any other similar parameter is irrelevant, it is not an average location or flat. If you happen to hit that demographic then im afraid you will be looking at a two bed in luton and a train pass. Such is life.
That area has undergone massive change in the last decade or more, i know, i've lived and worked around there for the last decade, but to say the prices are wrong is short sighted, to say they are astonishing considering their recent historic levels is a different point, and one that can be debated but we are where we are, and i would actually argue they could go higher.
We shall see.
The flat may not be to your taste, but its a new, relatively high spec flat built in what is now one of the trendiest, most desirable streets in the world for young ish urbanites, placed right in the centre of one of the most thriving, successful cities in the world. In a shocking turn of events, it costs quite a lot to live there, how this has any relevance to average income couples, first time buyers, or any other similar parameter is irrelevant, it is not an average location or flat. If you happen to hit that demographic then im afraid you will be looking at a two bed in luton and a train pass. Such is life.
That area has undergone massive change in the last decade or more, i know, i've lived and worked around there for the last decade, but to say the prices are wrong is short sighted, to say they are astonishing considering their recent historic levels is a different point, and one that can be debated but we are where we are, and i would actually argue they could go higher.
We shall see.
gibbon said:
Mr Whippy said:
£2000 a month for 25 years for a roof over your head?
I suppose things cost what they cost, but when you really look at what a house costs to make then London is just stupendously expensive.
Sustainable? Lets see.
£2k a month with a set entrance point in the debt then you own the asset outright versus renting for ever with ever increasing rent for inflation? Buying is cheap compared to the alternatives!I suppose things cost what they cost, but when you really look at what a house costs to make then London is just stupendously expensive.
Sustainable? Lets see.
People seem to forget that living somewhere, anywhere, isnt free. Renting long term is inefficient and leaves you totally exposed to future moves, up, or down.
It still *seems* expensive for what is ultimately inanimate concrete, wood and plaster and a few flappy bits for doors.
In an ideal world houses should be cheap as chips.
It's only society and government that seem to have created an environment where it's expensive and that is seen as "a good thing"
Yet in reality is shafting the next generation... which begs the question why do parents hate their kids and grandkids so much to force them to having to pay such huge amounts of their income into a nice roof over their heads?
rovermorris999 said:
jonah35 said:
True but that didn't stop homes crashing in value in Spain, Portugal, Florida etc recently and in Japan in the late 80s or even the uk in 2008-2010.
Those market crashes were fuelled by oversupply, the very opposite of here. I know you are right in a way but oversupply happens when people go off things, oversupply could happen in London tomorrow.
If I want a house in London I could g on rightmove and pick from thousands so the supply is there it is not as if it's hard to find a house in London for sale.
gibbon said:
Stuckmojo, the more i think about it, the more your point has absolutely no relevance to this debate, i dont really see how you think that flat is overvalued, well, thats not quite right, i do, I just dont think you can realistically justify that the price should be significantly lower, particularly using any metric or reasoning you have so far.
The flat may not be to your taste, but its a new, relatively high spec flat built in what is now one of the trendiest, most desirable streets in the world for young ish urbanites, placed right in the centre of one of the most thriving, successful cities in the world. In a shocking turn of events, it costs quite a lot to live there, how this has any relevance to average income couples, first time buyers, or any other similar parameter is irrelevant, it is not an average location or flat. If you happen to hit that demographic then im afraid you will be looking at a two bed in luton and a train pass. Such is life.
That area has undergone massive change in the last decade or more, i know, i've lived and worked around there for the last decade, but to say the prices are wrong is short sighted, to say they are astonishing considering their recent historic levels is a different point, and one that can be debated but we are where we are, and i would actually argue they could go higher.
We shall see.
Oh I don't question that the prices might even go higher, it only takes a few people with either the cash or the access to finance. Unless those young-ish urbanites have landed the dream job at Goldman and have a huge deposit, they'll be renting that very flat from the speculator who bought it and not own it, despite the direct link to "Help to buy" on the builder's page.The flat may not be to your taste, but its a new, relatively high spec flat built in what is now one of the trendiest, most desirable streets in the world for young ish urbanites, placed right in the centre of one of the most thriving, successful cities in the world. In a shocking turn of events, it costs quite a lot to live there, how this has any relevance to average income couples, first time buyers, or any other similar parameter is irrelevant, it is not an average location or flat. If you happen to hit that demographic then im afraid you will be looking at a two bed in luton and a train pass. Such is life.
That area has undergone massive change in the last decade or more, i know, i've lived and worked around there for the last decade, but to say the prices are wrong is short sighted, to say they are astonishing considering their recent historic levels is a different point, and one that can be debated but we are where we are, and i would actually argue they could go higher.
We shall see.
I have lived in London and I maybe gave the impression I don't like the place. Not the case. I very much like London, but I can't (personally) accept the huge compromise in space/lifestyle/access to stuff one has to take to live there, unless on 200k or more. Anyway, sorry to have waylaid the thread. FYI I do expect a massive correction in prices in the UK (downwards). London may just be the one that bucks the trend due to scarcity of supply and appetite from speculators, as you say, we'll see.
jonah35 said:
rovermorris999 said:
jonah35 said:
True but that didn't stop homes crashing in value in Spain, Portugal, Florida etc recently and in Japan in the late 80s or even the uk in 2008-2010.
Those market crashes were fuelled by oversupply, the very opposite of here. I know you are right in a way but oversupply happens when people go off things, oversupply could happen in London tomorrow.
If I want a house in London I could g on rightmove and pick from thousands so the supply is there it is not as if it's hard to find a house in London for sale.
There may not be shortages in other price brackets but first time buyer to middle class are limited.
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