How far will house prices fall? [Volume 3]

[Deva Link]

Derek Chevalier said:

Pork said:

rover 623gsi said:

price will not fall while there is more demand than supply

Well, I'm sure your right, but what drives demand? Avaialble credit, for the most part.

Most being >99%

I don't know - 40% of properties are owned outright, and 30% are owned by councils and housing associations etc. So credit is only an issue for part fo the market.

[Pork]

rover 623gsi said:

the demand is driven by the fact that people need somewhere to live

No it isn't. You can rent somewhere to live. Prices are driven by the avaliablity of people to pay, which in house terms, is driven hugely by available credit.

[groak]

I agree with pork. Credit availability (largely, though not exclusively) fuels demand for property.

[Ozzie Osmond]

groak said:

Credit availability (largely, though not exclusively) fuels demand for property.

Not so. POopulation growth drives the demand. All credit availability does is finesse the price of the plot. Bricks, wires and pipes cost whatever they cost.

Or to put it another way, people will always be willing to spend a large proportion of their income on food and housing.

[groak]

Ozzie Osmond said:

groak said:

Credit availability (largely, though not exclusively) fuels demand for property.

Not so. Population growth drives the demand. All credit availability does is finesse the price of the plot. Bricks, wires and pipes cost whatever they cost.
Or to put it another way, people will always be willing to spend a large proportion of their income on food and housing.

See pork's post above. The essentiality of 'having a place to live' drives a demand for property which can be satisfied by rental which doesn't require credit availability. But the demand for property for sale is (almost) entirely driven by credit availability.

Put it this way, I would buy twice as many properties if I could get 50% funding. And I could sell TEN times as many if others could get credit.

[rover 623gsi]

Pork said:

No it isn't. You can rent somewhere to live. Prices are driven by the avaliablity of people to pay, which in house terms, is driven hugely by available credit.

the latent demand exists even if people can't get credit

[RYH64E]

rover 623gsi said:

the latent demand exists even if people can't get credit

There's a huge latent demand for Ferraris, but if most potential buyers can't afford the asking price the demand is meaningless and sales volumes low.

With houses, the price will largely depend on what people can pay, which is hugely affected by availability and cost of credit.

[rover 623gsi]

but the demand for Ferraris is based on wants, whereas the demand for houses is based (largley) on needs

[RYH64E]

rover 623gsi said:

but the demand for Ferraris is based on wants, whereas the demand for houses is based (largely) on needs

Unless you're part of the benefits brigade, if you can't afford it you can't have it no matter how much you think you need it. People don't 'need' a four bed detached in the countryside, they need somewhere to live.

[Derek Chevalier]

rover 623gsi said:

but the demand for Ferraris is based on wants, whereas the demand for houses is based (largley) on needs

Why did rents stay boradly in line with inflation during the bubble if there was such a need - surely they would've increased in line with prices?

[Road Pest]

Well finally got a firm offer on my flat and I believe the wait was largely due to credit not being available. Even at 105k I only got 2 offers, one that fell through and the other luckily was still there. So at 102k the flat is now under offer and in the process of selling. Fingers crossed for no hiccups on the way.

[Derek Chevalier]

Road Pest said:

I believe the wait was largely due to credit not being available.

Are you saying that not one person in the UK was able to get a mortgage last month?

[Randy Winkman]

rover 623gsi said:

but the demand for Ferraris is based on wants, whereas the demand for houses is based (largley) on needs

People don't need houses. People need a bed for the night. And there are spare bedrooms in the homes of most people I know.

[Trommel]

Derek Chevalier said:

Are you saying that not one person in the UK was able to get a mortgage last month?

It is the reason why the bottom end of the market has stalled - most people at that level can't find a 10-15% deposit overnight.

[Derek Chevalier]

Trommel said:

Derek Chevalier said:

Are you saying that not one person in the UK was able to get a mortgage last month?

It is the reason why the bottom end of the market has stalled - most people at that level can't find a 10-15% deposit overnight.

But the market has been like this for a couple of years?

[Trommel]

Derek Chevalier said:

But the market has been like this for a couple of years?

Not sure what your point is.

[Derek Chevalier]

Trommel said:

Derek Chevalier said:

But the market has been like this for a couple of years?

Not sure what your point is.

They have had a few years to save that 10p-15% deposit.

[Deva Link]

Derek Chevalier said:

Trommel said:

Derek Chevalier said:

Are you saying that not one person in the UK was able to get a mortgage last month?

It is the reason why the bottom end of the market has stalled - most people at that level can't find a 10-15% deposit overnight.

But the market has been like this for a couple of years?

We've been through this a million times now, but some PHer' just can't relate to the average person.

Even if they've got the deposit and the income multiple works, lenders are relectant to lend to borrowers where they think the affordability might be an issue, and that's particularly a problem for people at the bottom end as a lot of life's costs are pretty fixed - ie it costs the same to get the train to work however much you earn etc.

[Derek Chevalier]

Deva Link said:

Derek Chevalier said:

Trommel said:

Derek Chevalier said:

Are you saying that not one person in the UK was able to get a mortgage last month?

It is the reason why the bottom end of the market has stalled - most people at that level can't find a 10-15% deposit overnight.

But the market has been like this for a couple of years?

We've been through this a million times now, but some PHer' just can't relate to the average person.

Even if they've got the deposit and the income multiple works, lenders are relectant to lend to borrowers where they think the affordability might be an issue, and that's particularly a problem for people at the bottom end as a lot of life's costs are pretty fixed - ie it costs the same to get the train to work however much you earn etc.

They are lending to people on a 3.5x single income multiple basis? Or are the multiples involved greater than this?

[Deva Link]

Derek Chevalier said:

They are lending to people on a 3.5x single income multiple basis? Or are the multiples involved greater than this?

Are they? Apparently, in practice, not to people at the lower end of the income scale.

I'm not saying they should, by the way. Average income (say £25K ish) people don't have the slack in their nett income that your typical PHer on £100K+ has.