How far will house prices fall? [Volume 3]

[spikeyhead]

Digga said:

DonkeyApple said:

Cost of housing could be an amusing element of the CPI which sees rates at 100% within weeks

Which also raises the other issue; what it costs nowadays to actually build a house - land prices aside.

When I bought my fist house in '93; a nice semi with garage, on a decent 70's estate, it cost me £49. It was cheapish, because it needed 'everything' doing -kitchen, bathroom, carpets, decor - but still representative.

Having done all that needed doing, we (my then gf, now wife had by that time joined me) sold in 200 for IIRC over £80k.

Today the house is worth somewhere between £140k and £150k.

So two things:

1. Could you ever possibly get back to those sorts of house prices, given build costs which must now be around £50k bare minimum?
2. Will we ever get back to houses being affordable - as they were in '93 - to families on average incomes? IIRC most of the neighbouring, young families (who were older than use), the husbands worked, I'd guess for about £18k p.a. max.and had wives who worked part time, so £10k p.a. max.

I too paid £49k for my three bed semi in 93. Still living in it, mostly as I can't be arsed to move. Peak value was about £190k, some identical houses have gone for £130k at the bottom of the market and whilst it has picked up from there with sales at £165k a year ago, it's heading south again, properties being advertised at £155k.

I'm not too sure where they'll bottom but I think the inflation adjusted minima is still three years away.

[Sam_68]

NoelWatson said:

Digga said:

back to those sorts of house prices, given build costs which must now be around £50k bare minimum?
2. Will we ever get back to houses being affordable - as they were in '93 - to families on average incomes?

2. I see no reason how we can have any other outcome, but it will take time

Wood for the trees, Old Boy. You can't see the basic realities for all the clever graphs and statistics you spend your life Googling.

You obviously grasp neither the basic laws of supply and demand nor the realities of modern construction costs: as Digga pointed out you can no longer build houses for what you consider to be 'affordable' multiples of the average income (there are many reasons for this; socio-economic, political and - not least - due to increased energy costs, but it's a fact, whether we like it or not).

The outcome that you see as inevitable would therefore result in the supply of new housing coming to a complete standstill, which just ain't gonna happen - the good old laws of supply and demand will see to that.

Sorry, Noel, but in the long term you're just going to have to get used to the fact that unless you do something dramatic about either the supply (numbers of new houses) or demand (population) parts of the equation, there will be a gentle but inexporable upward trend in the cost of houses as a multiple of income.

If people can't afford to buy houses on a 25 year (or whatever) mortgage, they will either have to rent them or come up with mortgage arangements that extend the debt beyond one person's lifetime.

[NoelWatson]

Digga said:

NoelWatson said:

turbobloke said:

"I see no reason how we can have any other outcome, but it will take time"

Opinion, shaken not stirred. There is no reason for anything until after it's happened then the 20:20 hindsighters and broken watch crews can claim infinite wisdom.

Another 'inevitable' outcome is that house ownership is more restricted on a semi-permanent basis with homes changing hands at current prices or broadly similar and the market remains contracted / stagnated.

Edited by turbobloke on Thursday 4th November 10:46

Agreed while rates are at historic lows. But when they rise, we will see forced sellers, and then we can get back to a proepr functioning market.

You know how you (and most of the rest of us) don;t beleive that teh propertaay boom of '03 to '08 was 'normal'? Well what is?

1. IMHO, bank lending is not going to go back to anything resembling what we've ever seem before.
2. Building starts on new homes has virtually stopped and the supply of new housing is never going to 'catch up'. (It's not an easy thing to just turn up production.)
3. Sovereign states are competing in some crazy downhill protectionism with IRs and QE.
4. The there's Lord Blackheath's morally suspect UK bailout.
5. There is significant inflation in the UK but it's being 'hidden' or fudged (your term).
6. Wage inflation seesm a fairly distant prospect.

Okay, that last one is plain pie in the sky but you get my gist?

I would say that the Coalition are actually making an attempt to return things to normal, unlike Helicopter Ben it would seem.

[NoelWatson]

anonymous said:

[redacted]

But Tonker, affordability has been discussed, it's just an illusion, as Imagination once sang. As for women working, hasn't changed dramtically since 1995 when house prices were half what they are now (relative to income)

[NoelWatson]

anonymous said:

[redacted]

They are not steep, the are preposterous. Someone needs to explain to me how people are going to pay all this debt off, or even service it

[NoelWatson]

Digga said:

NoelWatson said:

Digga said:

I don't actually see how prices will return to those levels; where the ratio of average salary to the price of an average family home is so affordable.

Unless it is true that the various report we have seen on here are based on a sample zsize of 3, I cannot see how people are going to cope when rates go back to something resembling normal levels.

Here is another, with sample size of 4

http://www.telegraph.co.uk/finance/personalfinance...


As one of the reports said yesterday, "There are many people living in a fool’s paradise because of low interest rates".

But there have always been spackers who don't save and are easily parted with their money.

I know one. He was a contractor and did very well in the boom years - and liked EVERYONE to know it. (If B&O made lawnmowers he'd have bought one.)

He never saved, spunked cash on ridiculous st and now...

But this isn't new or even a symptom of the credit boom - read Dickens and Mr McCawber.

Agreed on historically having a certain number of people that spend beyond their means, but never has such a percentage of the population been these exposed. Unless the surveys are wrong due to aforementioned sample size.

[NoelWatson]

Sam_68 said:

NoelWatson said:

Digga said:

back to those sorts of house prices, given build costs which must now be around £50k bare minimum?
2. Will we ever get back to houses being affordable - as they were in '93 - to families on average incomes?

2. I see no reason how we can have any other outcome, but it will take time

Wood for the trees, Old Boy. You can't see the basic realities for all the clever graphs and statistics you spend your life Googling.

You obviously grasp neither the basic laws of supply and demand nor the realities of modern construction costs: as Digga pointed out you can no longer build houses for what you consider to be 'affordable' multiples of the average income (there are many reasons for this; socio-economic, political and - not least - due to increased energy costs, but it's a fact, whether we like it or not).

The outcome that you see as inevitable would therefore result in the supply of new housing coming to a complete standstill, which just ain't gonna happen - the good old laws of supply and demand will see to that.

Sorry, Noel, but in the long term you're just going to have to get used to the fact that unless you do something dramatic about either the supply (numbers of new houses) or demand (population) parts of the equation, there will be a gentle but inexporable upward trend in the cost of houses as a multiple of income.

If people can't afford to buy houses on a 25 year (or whatever) mortgage, they will either have to rent them or come up with mortgage arangements that extend the debt beyond one person's lifetime.

But this upward trend was tiny prior to the turn of the century. The upturn just happened to coincide with the greatest credit bubble of all time. Could the two be related? It's a long shot!

[Digga]

NoelWatson said:

Sam_68 said:

NoelWatson said:

Digga said:

back to those sorts of house prices, given build costs which must now be around £50k bare minimum?
2. Will we ever get back to houses being affordable - as they were in '93 - to families on average incomes?

2. I see no reason how we can have any other outcome, but it will take time

Wood for the trees, Old Boy. You can't see the basic realities for all the clever graphs and statistics you spend your life Googling.

You obviously grasp neither the basic laws of supply and demand nor the realities of modern construction costs: as Digga pointed out you can no longer build houses for what you consider to be 'affordable' multiples of the average income (there are many reasons for this; socio-economic, political and - not least - due to increased energy costs, but it's a fact, whether we like it or not).

The outcome that you see as inevitable would therefore result in the supply of new housing coming to a complete standstill, which just ain't gonna happen - the good old laws of supply and demand will see to that.

Sorry, Noel, but in the long term you're just going to have to get used to the fact that unless you do something dramatic about either the supply (numbers of new houses) or demand (population) parts of the equation, there will be a gentle but inexporable upward trend in the cost of houses as a multiple of income.

If people can't afford to buy houses on a 25 year (or whatever) mortgage, they will either have to rent them or come up with mortgage arangements that extend the debt beyond one person's lifetime.

But this upward trend was tiny prior to the turn of the century. The upturn just happened to coincide with the greatest credit bubble of all time. Could the two be related? It's a long shot!

<cough>bks!</cough>

Did you not read mine and Spikehead's parallel experiences of bread-and-butter 3 bed semi prices in Stafford and Luton (pretty different areas) respectively?

From circa £50k in '93, to over £80k in 2000. Okay, so they then went up proportionally about as much from 2000 to 2008 (and present) at about £150k, but the rises in the nineties were huge. I wish I'd bought two or three!

Edited by Digga on Thursday 4th November 13:58

[NoelWatson]

Digga said:

NoelWatson said:

Sam_68 said:

NoelWatson said:

Digga said:

back to those sorts of house prices, given build costs which must now be around £50k bare minimum?
2. Will we ever get back to houses being affordable - as they were in '93 - to families on average incomes?

2. I see no reason how we can have any other outcome, but it will take time

Wood for the trees, Old Boy. You can't see the basic realities for all the clever graphs and statistics you spend your life Googling.

You obviously grasp neither the basic laws of supply and demand nor the realities of modern construction costs: as Digga pointed out you can no longer build houses for what you consider to be 'affordable' multiples of the average income (there are many reasons for this; socio-economic, political and - not least - due to increased energy costs, but it's a fact, whether we like it or not).

The outcome that you see as inevitable would therefore result in the supply of new housing coming to a complete standstill, which just ain't gonna happen - the good old laws of supply and demand will see to that.

Sorry, Noel, but in the long term you're just going to have to get used to the fact that unless you do something dramatic about either the supply (numbers of new houses) or demand (population) parts of the equation, there will be a gentle but inexporable upward trend in the cost of houses as a multiple of income.

If people can't afford to buy houses on a 25 year (or whatever) mortgage, they will either have to rent them or come up with mortgage arangements that extend the debt beyond one person's lifetime.

But this upward trend was tiny prior to the turn of the century. The upturn just happened to coincide with the greatest credit bubble of all time. Could the two be related? It's a long shot!

<cough>bks!</cough>

Did you not read mine and Spikehead's parallel experiences of bread-and-butter 3 bed semi prices in Stafford and Luton (pretty different areas) respectively?

From circa £50k in '93, to over £80k in 2000. Okay, so they then went up proportionally about as much from 2000 to 2008 (and present) at about £150k, but the rises in the nineties were huge. I wish I'd bought two or three!

Edited by Digga on Thursday 4th November 13:58

I did indeed, but I was talking about a trend from 1950 to 2000. IIRC 1993 was towards the trough of the market.

ETA. So using your experience, how can the market function going forward? Who will buy that now £150k home?

Edited by NoelWatson on Thursday 4th November 14:01

[NoelWatson]

Buy-to-let owners face losing trackers, to be sure.

"Permanent TSB has told investors they will lose their tracker mortgages unless they begin paying back capital along with the interest."

http://www.independent.ie/business/personal-financ...

Edited by NoelWatson on Thursday 4th November 14:03

[turbobloke]

NoelWatson said:

Buy-to-let owners face losing trackers, to be sure.

"Permanent TSB has told investors they will lose their tracker mortgages unless they begin paying back capital along with the interest."

http://www.independent.ie/business/personal-financ...

If these lenders made erroneous lending decisions, why are they themselves not shouldering the risk arising from their lack of wisdom and foresight? Yes I know what banks do which would in sex terms mean they would have to sign a register, but in reality, why?

[Digga]

NoelWatson said:

Digga said:

stuff

I did indeed, but I was talking about a trend from 1950 to 2000. IIRC 1993 was towards the trough of the market.

ETA. So using your experience, how can the market function going forward? Who will buy that now £150k home?

No one. Or very few people at any rate - I think prices will stagnate at best for some time. In fact, in Stafford, prospects are bleak since the end of the Soviet era beckons, with the demise of the overblown public sector. Luton may of course fare a little better.

1993 was a trough and, like the present time, there had been a dearth of new house builds up to that point. I remember that well - it was an exciting novely to see new sites begining. I think the rises in this period were to do with lack of supply - as is the current lack of expected price declines.

I'd guess that, conversely, rises in 2003 to 2008 were mostly credit driven.

[NoelWatson]

turbobloke said:

NoelWatson said:

Buy-to-let owners face losing trackers, to be sure.

"Permanent TSB has told investors they will lose their tracker mortgages unless they begin paying back capital along with the interest."

http://www.independent.ie/business/personal-financ...

If these lenders made erroneous lending decisions, why are they themselves not shouldering the risk arising from their lack of wisdom and foresight? Yes I know what banks do which would in sex terms mean they would have to sign a register, but in reality, why?

Because they are trying to survive and minimise their risk I guess

[NoelWatson]

Digga said:

I think the rises in this period were to do with lack of supply - as is the current lack of expected price declines.

I disagree. In 1993, houses were cheap. Today, the pain is being postponed thanks to Government intervention.

[Digga]

NoelWatson said:

Digga said:

I think the rises in this period were to do with lack of supply - as is the current lack of expected price declines.

I disagree. In 1993, houses were cheap. Today, the pain is being postponed thanks to Government intervention.

They were cheap - when I bough some roads on the estate had more places for sale than not - post the horrendous interest rates hikes of the late eighties and many of the sellers whose houses I viewed (who I guess 'had' to sell for some reason or other) were whining about negative equity.

However, pretty much fk all was being built between '90 and '92 - because house prices were in such a funk - and I beleive this, at least in part, enabled a period of pretty substantial rises.



ETA I can also cross refer the housing-start stats to sales of mini diggers in the UK and there is a clear correlation, aside from our own company sales figures.

Edited by Digga on Thursday 4th November 14:29

[turbobloke]

NoelWatson said:

turbobloke said:

NoelWatson said:

Buy-to-let owners face losing trackers, to be sure.

"Permanent TSB has told investors they will lose their tracker mortgages unless they begin paying back capital along with the interest."

http://www.independent.ie/business/personal-financ...

If these lenders made erroneous lending decisions, why are they themselves not shouldering the risk arising from their lack of wisdom and foresight? Yes I know what banks do which would in sex terms mean they would have to sign a register, but in reality, why?

Because they are trying to survive and minimise their risk I guess

Clearly but you are referring to the register element of my post. Instead they should take responsibility for their own bad decisions.

[DonkeyApple]

Digga said:

NoelWatson said:

Digga said:

I don't actually see how prices will return to those levels; where the ratio of average salary to the price of an average family home is so affordable.

Unless it is true that the various report we have seen on here are based on a sample zsize of 3, I cannot see how people are going to cope when rates go back to something resembling normal levels.

Here is another, with sample size of 4

http://www.telegraph.co.uk/finance/personalfinance...


As one of the reports said yesterday, "There are many people living in a fool’s paradise because of low interest rates".

But there have always been spackers who don't save and are easily parted with their money.

I know one. He was a contractor and did very well in the boom years - and liked EVERYONE to know it. (If B&O made lawnmowers he'd have bought one.)

He never saved, spunked cash on ridiculous st and now...

But this isn't new or even a symptom of the credit boom - read Dickens and Mr McCawber.

Very true but in Dickins' day we had debtors' prison and a society which looked down on these muppets rather than wking off over them.

[NoelWatson]

turbobloke said:

NoelWatson said:

turbobloke said:

NoelWatson said:

Buy-to-let owners face losing trackers, to be sure.

"Permanent TSB has told investors they will lose their tracker mortgages unless they begin paying back capital along with the interest."

http://www.independent.ie/business/personal-financ...

If these lenders made erroneous lending decisions, why are they themselves not shouldering the risk arising from their lack of wisdom and foresight? Yes I know what banks do which would in sex terms mean they would have to sign a register, but in reality, why?

Because they are trying to survive and minimise their risk I guess

Clearly but you are referring to the register element of my post. Instead they should take responsibility for their own bad decisions.

But then where do you stop? Why don't we raise IR rates now and make the reckless suffer?

[Daaaveee]

In response to: How far will house prices fall?

Hopefully not much further, as we're finally on the ladder, woohoo! 3 bed detached, garage, conservatory, nice gardens, pleased as punch. As a 24 and a 22 year old we're pretty pleased as we thought it would've taken us a good few years longer!

Still, the house can lose £475 a month and we'd still be happy, as thats what we have been 'wasting' on renting every month

Edited by Daaaveee on Thursday 4th November 15:50

[Digga]

NoelWatson said:

turbobloke said:

NoelWatson said:

turbobloke said:

NoelWatson said:

Buy-to-let owners face losing trackers, to be sure.

"Permanent TSB has told investors they will lose their tracker mortgages unless they begin paying back capital along with the interest."

http://www.independent.ie/business/personal-financ...

If these lenders made erroneous lending decisions, why are they themselves not shouldering the risk arising from their lack of wisdom and foresight? Yes I know what banks do which would in sex terms mean they would have to sign a register, but in reality, why?

Because they are trying to survive and minimise their risk I guess

Clearly but you are referring to the register element of my post. Instead they should take responsibility for their own bad decisions.

But then where do you stop? Why don't we raise IR rates now and make the reckless suffer?

How can they, when Uncle Sam is up to his eyeballs everyday in green ink?