How far will house prices fall [volume 4]

[Sheepshanks]

Hitch said:

House price rebound post-2008 just underlined confidence in the 'system' so everyone still wants to be an owner.

Depends where you are. Many areas in the NW haven't moved in 10yrs.

[kiethton]

Derek Chevalier said:

Why do lower house prices lose business money in the longer term?

House price growth is typically linked to the wealth effect:

http://www.investopedia.com/terms/w/wealtheffect.a...

Which in turn increases consumer and thus business confidence. Typically coincides with loosening credit conditions by banks etc precipitating growth.

Lower house prices, more people save/cut back and thus don't spend on goods or services

[Derek Chevalier]

kiethton said:

Derek Chevalier said:

Why do lower house prices lose business money in the longer term?

House price growth is typically linked to the wealth effect:

http://www.investopedia.com/terms/w/wealtheffect.a...

Which in turn increases consumer and thus business confidence. Typically coincides with loosening credit conditions by banks etc precipitating growth.

Lower house prices, more people save/cut back and thus don't spend on goods or services

Not sure how this is sustainable longer term - just leads to non-productive speculation and people taking on more debt. Conversely, with lower house prices, living costs are reduced meaning people will work for less making UK based companies more competitive in global markets.

[mike74]

kiethton said:

House price growth is typically linked to the wealth effect:

http://www.investopedia.com/terms/w/wealtheffect.a...

Which in turn increases consumer and thus business confidence. Typically coincides with loosening credit conditions by banks etc precipitating growth.

Lower house prices, more people save/cut back and thus don't spend on goods or services

Utter rubbish... it's higher house prices that force people to save/cut back, they're having to spend such large proportions of their income on rent/mortgage payments that they don't have any spare money to consume goods and services in the wider economy.

And how much economic growth have we seen precipitated in the last 8 years of extremely loose credit conditions and record high house prices?

[kiethton]

Derek Chevalier said:

kiethton said:

Derek Chevalier said:

Why do lower house prices lose business money in the longer term?

House price growth is typically linked to the wealth effect:

http://www.investopedia.com/terms/w/wealtheffect.a...

Which in turn increases consumer and thus business confidence. Typically coincides with loosening credit conditions by banks etc precipitating growth.

Lower house prices, more people save/cut back and thus don't spend on goods or services

Not sure how this is sustainable longer term - just leads to non-productive speculation and people taking on more debt. Conversely, with lower house prices, living costs are reduced meaning people will work for less making UK based companies more competitive in global markets.

Not quite, if people work for less our manufactured products would be cheaper however we are a net importer of goods so we'd be hugely worse off as a whole and living standards would fall hugely.

Also what the global banks and the IMF have been trying to do throughout this cycle is the opposite of what the above would cause - inflate the debt away. However the lack of global confidence to invest in core value-add businesses, poor productivity and piss poor allocation of QE has just led to asset inflation, not the wage inflation (with trickle-down) originally intended to provide stable balanced growth.

Recent changes (minimum wage increases, punitive SDLT rates) have tried to address this but its a stable door moment. With wages the huge increases in minimum wage have tried to address this but as the QE hasn't fed down to the wider economy (due in part to the requirement for banks to boost their capital requirements) so people can't afford to pay it/cheaper labour becomes attracted from abroad etc. and asset bubbles inflate further as people seek safety/return on capital to either house the new arrivals or provide places for them to work - the SDLT changes have tried to dissuade this. Until this capital flows down (more lending to core business and confidence returns to make them want to invest in their own businesses) this will continue to happen...

All the above is my opinion only

[Hitch]

Sheepshanks said:

Hitch said:

House price rebound post-2008 just underlined confidence in the 'system' so everyone still wants to be an owner.

Depends where you are. Many areas in the NW haven't moved in 10yrs.

Exactly. In that period the financial world was on life support, the UK was in and out of recession and your overpriced suburban home in Sheffield (or anywhere else with zero external factors influencing demand) didn't lost value!

[Sheepshanks]

Hitch said:

Sheepshanks said:

Hitch said:

House price rebound post-2008 just underlined confidence in the 'system' so everyone still wants to be an owner.

Depends where you are. Many areas in the NW haven't moved in 10yrs.

Exactly. In that period the financial world was on life support, the UK was in and out of recession and your overpriced suburban home in Sheffield (or anywhere else with zero external factors influencing demand) didn't lost value!

Well actually it did - they were down 20% at their lowest. Both my daughters bought houses in the last few years for less than the vendors paid for them. But recently they've been pretty well back at 2006 levels although anything that looks remotely "toppy" is just sitting there so that's keeping a lid on prices.

[Pork]

Derek Chevalier said:

Why do lower house prices lose business money in the longer term?

People don't have the perception of financial security so they spend less.

[NRS]

Pork said:

Derek Chevalier said:

Why do lower house prices lose business money in the longer term?

People don't have the perception of financial security so they spend less.

I guess it depends what you count as long term. If house prices crash it will stop people spending for a while, but it does theoretically mean that people will have more money once they get used to the new normal, and so less is going into the house (can spend more on other stuff). But obviously that ignores people being able to remortgage to free cash etc. Also at some point it has to slow down when wages are not growing at the same rate, so that longer term may be somewhat different to the normal cycles.

[Mr Whippy]

Hitch said:

Demand, general public sentiment that house prices only ever go up and government protectionist policy could suggest that periods of stagnation causing a limited correction in real terms may be the new house price crash. House price rebound post-2008 just underlined confidence in the 'system' so everyone still wants to be an owner.

London may indeed be a bubble on a bubble but if they've witnessed 10% growth YoY for the last 15 years will a 20% correction bother anyone who doesn't need to sell now? Probably not, and returning to my first point, that 20% correction just opens up a greater market of hungry buyers able to access virtually free money.

I think people won't see a crash in the price of assets.

They'll see a crash in the buying power of the money in their pocket.

The economy simply won't work if people spend all their money on a roof, food and taxes.

And the more we go down that route of making it sustainable, then all bets are off on the 'value' of anything as we'll be teetering towards a socialist state that'll just take ownership of your house.

[turbobloke]

Reports today of RICS saying that demand has fallen sharply and attributing it to Brexit, one report very early today also mentioned the parallel finding that supply has fallen off a cliff so the impact on prices overall may be marginal (though area-specific as usual) and with volumes down.

http://www.thisismoney.co.uk/money/mortgageshome/a...

http://www.mirror.co.uk/money/biggest-ever-drop-ho...

[Al U]

That's probably down to seller's putting plans to move/sell on hold as much as possible where they can.

I am in the middle of buying my first place right now, contracts likely to be exchanged in the next couple of weeks. Made our offer before brexit.

Have been watching the market in the area I am buying like a hawk and as you say, there are so few decent properties at the price point I am looking at that pulling out for me is a bad idea. Also the only properties that are getting reduced are ones that were optimistically priced before brexit in the area I am looking at anyway.

[NerveAgent]

thelittleegg said:

That's an interesting point you make there and my experience supports it. Although there has been a slew of price reductions and obvious lack of interest in properties, equally, I have not seen a single new property of interest come onto the market in my search areas since the referendum. It's been dross in general, whereas I was seeing 1 or 2 interesting places per week come to market pre referendum.

This is pretty much what I've seen.

Also I've noticed not a single one of my saved properties has sold since the referendum.

[simong800]

Interestingly my colleague went to see a place last week - 17 viewings booked in within 3 days of it coming on. Was up at £450k and has gone for £510k. It would seem to confirm that there are still buyers but not much is coming onto the market - it will be interesting to see what this does to prices.....

[p1stonhead]

NerveAgent said:

thelittleegg said:

That's an interesting point you make there and my experience supports it. Although there has been a slew of price reductions and obvious lack of interest in properties, equally, I have not seen a single new property of interest come onto the market in my search areas since the referendum. It's been dross in general, whereas I was seeing 1 or 2 interesting places per week come to market pre referendum.

This is pretty much what I've seen.

Also I've noticed not a single one of my saved properties has sold since the referendum.

Yep round my way too. Basically nothing new coming to the market. But a few price reductions and some old stock sitting around.

[superkartracer]

simong800 said:

Interestingly my colleague went to see a place last week - 17 viewings booked in within 3 days of it coming on. Was up at £450k and has gone for £510k. It would seem to confirm that there are still morons about but not much is coming onto the market - it will be interesting to see what this does to prices.....

How did it sell for 60k more? , is that the way they work these days??

PS. Amended

Edited by superkartracer on Thursday 14th July 15:38

[p1stonhead]

superkartracer said:

simong800 said:

Interestingly my colleague went to see a place last week - 17 viewings booked in within 3 days of it coming on. Was up at £450k and has gone for £510k. It would seem to confirm that there are still morons about but not much is coming onto the market - it will be interesting to see what this does to prices.....

How did it sell for 60k more? , is that the way are work these days??

PS. Amended

Depends on how many people want it. For a time, 20% over asking was quite common in some areas close to me..

[superkartracer]

I assume it states offers over etc? and people bid against each other , like an auction of sorts but for that to work the price must be low(er) .

Edited by superkartracer on Thursday 14th July 15:38

[walm]

superkartracer said:

I assume it states offers over etc? and people bid against each other , like an auction of sorts but for that to work the price must be low(er) .

Have you really never bought a house with someone else making an offer?

It can go any number of ways.
I have had a Dutch Auction twice.

Or the agent just keeps calling saying that the competition has raised their offer - can you beat it.
Like a slow-motion auction where you can't be sure there really is any competitive bid.

[simong800]

superkartracer said:

How did it sell for 60k more? , is that the way they work these days??

PS. Amended

Edited by superkartracer on Thursday 14th July 15:38

Supply and demand

People kept offering more - there aren't many houses about and a lot of people wanted this one I guess! It is a doer upper, needs a total renovation and certainly not in the "ready to move into" category.