How far will house prices fall [volume 5]
Discussion
oyster said:
PrinceRupert said:
https://www.ft.com/content/f3640c3a-1a4e-4d37-8226... - Household deposits soar by record amount as lockdown hits spending
"Household deposits increased by a record £25.6bn in May to £1.5tn, following strong increases in March, when they rose by £14.3bn, and April, with a £16.7bn increase, the Bank of England reported."
As it's a firewalled article I can't read it. What's the definition of household deposit?"Household deposits increased by a record £25.6bn in May to £1.5tn, following strong increases in March, when they rose by £14.3bn, and April, with a £16.7bn increase, the Bank of England reported."
In any case, to rise by £25.6bn in May is an average of approx £1,000 per household in one month? How can that be possible? I highly doubt the average household reduced spending by anyway near that amount.
So assumption is deposit means cash in bank therefore average household has put aside £900 in May.
Bearing in mind its an average - lower incomes will not have saved much - but also wonder how much is attributable to payment holidays - are those still ongoing?
menousername said:
I do agree entirely about the new build premium risk and the fact that HTB only pushed that up higher
Where I am thousands of new builds are still being built and at premium prices to existing houses with the same no. bedrooms etc. Although you seem to get less sq footage, less parking, smaller gardens etc. So (these) new builds seem to be bad value.
However - I am not sure the market needs stimulating - my opinion only of course - but the previous stimulating is now part if the problem today. We are starting to see LTV requirements on mortgages get tougher- making up the difference with more HTB loans at this stage feels like an intervention too far.
Whether we like it or not, house prices need to come down. The debt cycle needs to be rebalanced.
Yeah, I see no real plus side to new builds compared to the older stuff. Where I am thousands of new builds are still being built and at premium prices to existing houses with the same no. bedrooms etc. Although you seem to get less sq footage, less parking, smaller gardens etc. So (these) new builds seem to be bad value.
However - I am not sure the market needs stimulating - my opinion only of course - but the previous stimulating is now part if the problem today. We are starting to see LTV requirements on mortgages get tougher- making up the difference with more HTB loans at this stage feels like an intervention too far.
Whether we like it or not, house prices need to come down. The debt cycle needs to be rebalanced.
I think once you start to think about the politics behind it as TJ mentioned above, it starts to look a bit different. No surprise Labour got voted out in 2010, so I'd imagine the government will have an eye on damage limitation from a political point.
I think it's a strange one because the economic problems and redundancies will be seen as the result of the government responding to coronavirus, so rather than blaming the banks like 2008, people will look back and blame the government for the lockdown, and without getting in to the details of whether it was necessary or not, it was the decision to lockdown that will ultimately be the cause of the hardship. I don't think people will separate it as a what was needed to be done V the government causing it, so the anger will 100% be with the government and not coronavirus.
I agree house prices are too high and there seems to be an obsession that house price rising is always a good thing, but I think the circumstance this time might require them to intervene to stop it becoming a complete mess.
ant1973 said:
There's no easy fix to the UK housing problem. I always said that the easiest way to bring lockdown to an end would be for the Wail to print a headline about an imminent 50% collapse in prices...
I would be relaxed about CGT being applied to house price growth. I realise it may impact on the supply side as people sit tight in the hope of a change in policy. However, the taxation of equity withdrawals may alleviate the situation somewhat. The imposition of a surchage on death would also help. And I suspect this will never happen because it is probably the most politically toxic policy to anyone to the right of Corbyn (and I say this as someone who is centre right). Then there is an LVT but again it is a wealth tax and the Wail would be full of headlines of Granny rattling round her falling to pieces 5 bed house but being forced to leave...
Another Help to Buy Scheme is the last thing anyone needs. There is a fundamental issue in all of this which needs to be grasped: a significant minority of society cannot afford to buy a house. You only have to look at the link between average earnings and house prices. They have become increasingly detached. The subsidy of low interest rates has simply masked the problem. Moreover, Developer profits are not enormous in % terms, so you are left with the cost of the build, land prices and dealing with local authorities and their extraction of theoretical gains. Even if the land was free and you were building all in at say £1400m2, a 1000 sq ft house is outwith the reach of someone on average earnings. The holy grail is cheaper build costs and we need a revolution in house building to achieve that.
As I often say to my FIL who bemoans the lack of interest on his savings: "You can have 5% from the bank when you accept that your house is 33% less than it is currently worth...."
I think any extra sort of taxation is political suicide. But for 2nd homes etc, then maybe they could do more on that. The amount of Airbnbs in big cities is crazy and definitely not helping supply. I think the government realise a lot of people's houses are essentially their pension plan as well. So you can imagine the complications that brings with care and welfare etc in to old age.I would be relaxed about CGT being applied to house price growth. I realise it may impact on the supply side as people sit tight in the hope of a change in policy. However, the taxation of equity withdrawals may alleviate the situation somewhat. The imposition of a surchage on death would also help. And I suspect this will never happen because it is probably the most politically toxic policy to anyone to the right of Corbyn (and I say this as someone who is centre right). Then there is an LVT but again it is a wealth tax and the Wail would be full of headlines of Granny rattling round her falling to pieces 5 bed house but being forced to leave...
Another Help to Buy Scheme is the last thing anyone needs. There is a fundamental issue in all of this which needs to be grasped: a significant minority of society cannot afford to buy a house. You only have to look at the link between average earnings and house prices. They have become increasingly detached. The subsidy of low interest rates has simply masked the problem. Moreover, Developer profits are not enormous in % terms, so you are left with the cost of the build, land prices and dealing with local authorities and their extraction of theoretical gains. Even if the land was free and you were building all in at say £1400m2, a 1000 sq ft house is outwith the reach of someone on average earnings. The holy grail is cheaper build costs and we need a revolution in house building to achieve that.
As I often say to my FIL who bemoans the lack of interest on his savings: "You can have 5% from the bank when you accept that your house is 33% less than it is currently worth...."
You can kind of see how it all interweaves and how certain policy might affect people's actions.
I thought the usual argument usually came back to supply and demand, build enough new houses that are actually affordable and the market will calm. I remember reading about developers landbanking, but a quick Google suggests that might be an exaggeration, so not as bigger deal as first thought. i agree developers margins aren't always great, but the volume builders seem to be doing OK - Persimmon £1B profit not that long ago etc.
It's a strange situation at the moment, so will be very interesting to see what happens. The funny thing is constantly fluctuating prices and people finding themselves in negative equity after a recession and having to sell are what cause the biggest problems, and it seems history tells us recessions/global financial problems happen, war happens, pandemics happen etc. So in light of that volatility, why little seems to get done to stop such massive fluctuations seems strange. Like you know another recession is going to happen at some point and a lot of people will be in trouble again.
Last time it was get stricter with lending, but that all seems to have been undone even without the help to buy mortgages, as plenty were offering 95% mortgage outside of the schemes? But if prices weren't so ridiculous, people wouldn't need 95% mortgages over 35 years. And that seems to be the case now if mass redundancies happen and people are forced to sell and have little/no equity, problems are coming.
kingston12 said:
As you say, the Help to Buy scheme was always about supporting developers rather than buyers.
I think it's actually much more poisonous for most buyers than that article suggests. They refer to a 'new build premium', but that was only a few percent before HTB kicked off, now it is huge.
Say someone buys a flat at £500k in London now, using the scheme to mean they only have to fund £300k themselves. Who is going to buy that from them in five years time? Most of the buyers are likely to prefer to use Help to Buy themselves and get a brand new flat than pay the full price for one that is now five years old.
These have built-in negative equity even if underlying prices go up, and it's even worse if they don't.
The situation changes slightly if they were to discontinue the HTB scheme, not least because developers would start to either land bank or go bust so the supply of new flats would dry up.
Yeah, the home builders have no incentive to produce anything affordable knowing the schemes are in place and for a lot of people it's their only option. It also makes sense that since the schemes were introduced in 2013, that extra demand and availability of mortgages would create a lot more demand in a area that was already lacking in supply, so prices shoot up.I think it's actually much more poisonous for most buyers than that article suggests. They refer to a 'new build premium', but that was only a few percent before HTB kicked off, now it is huge.
Say someone buys a flat at £500k in London now, using the scheme to mean they only have to fund £300k themselves. Who is going to buy that from them in five years time? Most of the buyers are likely to prefer to use Help to Buy themselves and get a brand new flat than pay the full price for one that is now five years old.
These have built-in negative equity even if underlying prices go up, and it's even worse if they don't.
The situation changes slightly if they were to discontinue the HTB scheme, not least because developers would start to either land bank or go bust so the supply of new flats would dry up.
It's funny how as these conversations have developed and the more I've thought about it over the day, the help to buy schemes have not really done any good for anyone other than the housebuilders. I guess they are at least massive employers. Maybe the ISA was a good one!
Sheepshanks said:
Slagathore said:
Sheepshanks said:
In what way?
I thought it was more telling for the outlook on the market that approvals were running at 70k a month before coronavirus.I thought that more of an indicator of the market in general than the analysts being wrong about expecting approvals to increase to 25k in May, up from the 15k in April against the actual of 9k May.
What would be interesting is to see the number of applications to go alongside the approvals.
Bearing in mid everything housing related appeared to be pretty well stopped in April and May I'm amazed any mortgage approvals were issued. That the number was in the thousands is astonishing.
The prediction by the analysts being out so much didn't seem as bigger an indicator of problems coming as the fact that 70k approvals a month was the norm before coronavirus. That drop from 70k to 15k and then 9k, I thought, was more the indicator that problems were coming.
Obviously, you'd expect a massive drop in applications/approvals in light of what is expected to come, but the anecdotal evidence was that things were king of as normal and prices remain high and demand is there. I can't see that lasting.
Chimune said:
We have an agreed offer on a house, done via solicitors not ea. They are purchasing nb off plan. Builder says their move in date is Jan Feb (6 months late now) no reduction in list price, so our vendor says same / nothing has changed.
I think everything has changed and will review our offer once mortgage & price info becomes clearer. This leaves plenty of time to put ours up and complete before Feb. However, builder wants ours on market now. Cheaky w
kers.
Just told the seller that offer is still live but he should get his house on the market, as we won't until Sept.
So instead of nice pre covid offer, they now going to be exposed to the actual market.
Gonna be interesting what they get!
This been going on for 2years now (we had good offer on ours from ftb, but they refused to move into rental while theirs was built so we all sat and waited another 8months, then Covid) and I've lost all enthusiasm tbh so not really fussed of we get it or not....
Just a snapshot into this tiny bit of housing market.
I've tried reading this a few times and can't make any sense of it. I think everything has changed and will review our offer once mortgage & price info becomes clearer. This leaves plenty of time to put ours up and complete before Feb. However, builder wants ours on market now. Cheaky w
kers. Just told the seller that offer is still live but he should get his house on the market, as we won't until Sept.
So instead of nice pre covid offer, they now going to be exposed to the actual market.
Gonna be interesting what they get!
This been going on for 2years now (we had good offer on ours from ftb, but they refused to move into rental while theirs was built so we all sat and waited another 8months, then Covid) and I've lost all enthusiasm tbh so not really fussed of we get it or not....
Just a snapshot into this tiny bit of housing market.
"Just told the seller that offer is still live but he should get his house on the market, as we won't until Sept. "
You told the seller to get the house your supposed to be buying on the market? Huh?
Slagathore said:
Obviously, you'd expect a massive drop in applications/approvals in light of what is expected to come, but the anecdotal evidence was that things were king of as normal and prices remain high and demand is there.
I'd have expected a massive drop in approvals due to the likelyhood of everyone processing approvals being furloughed or sheltering or whatever.
caymanbill said:
I've tried reading this a few times and can't make any sense of it.
"Just told the seller that offer is still live but he should get his house on the market, as we won't until Sept. "
You told the seller to get the house your supposed to be buying on the market? Huh?
Yes because we won't put ours on until September and by then the maths may not work. We don't want to lead them down the path then have to pull out (as they have stated that TW won't drop the price, and neither will they. "Just told the seller that offer is still live but he should get his house on the market, as we won't until Sept. "
You told the seller to get the house your supposed to be buying on the market? Huh?
It's complicated.
Slagathore said:
It's funny how as these conversations have developed and the more I've thought about it over the day, the help to buy schemes have not really done any good for anyone other than the housebuilders. I guess they are at least massive employers. Maybe the ISA was a good one!
If in doubt, follow the money, and it ultimately ends up with the builders. As additional evidence, if you look at house builder share prices when HTB was announced, they received a significant boost.xeny said:
If in doubt, follow the money, and it ultimately ends up with the builders. As additional evidence, if you look at house builder share prices when HTB was announced, they received a significant boost.
Possibly more business coming their way as well. Mr Johnson moves on to discuss the "chronic failure of British state", saying it has "failed to build enough homes".
He pledged to build "fantastic new homes on brownfield sites and other areas with better transport".
And the PM promises to "address that inter-generational injustice" by helping young people "get on the housing ladder the way their parents and grandparents could".
He says he will do this by introducing the "most radical reforms of our planning system since the end of the Second World War".
A lot of planning stuff looks quite good. Will be interesting to see what happens with actually building more new houses, and I wonder if we even have enough tradesman to actually be able to have a meaningful impact on new houses built.
xeny said:
If in doubt, follow the money, and it ultimately ends up with the builders. As additional evidence, if you look at house builder share prices when HTB was announced, they received a significant boost.
You'd have thought housebuilder's shares might have had a bit of a fillip today but Persimmon and Barratt were amongst the day's biggest losers.could post this is any of the covid threads - sign of the times?
https://www.worcesternews.co.uk/news/18550836.worc...
A FAMILIAR estate agents office in Worcester has closed as Andrew Grant has gone into administration with the loss of 54 jobs.
The Andrew Grant brand will continue online in lettings and sales after successful sales but after 50 years it will no longer have a branch in the city.
Some of the current team will be involved in the new enterprises.
They have stressed that sales and lettings will not be affected.
Due to substantial trading losses over the last two years and the impact of the Covid-19 pandemic offices were immediately closed and do not have the funds to re-open.
https://www.worcesternews.co.uk/news/18550836.worc...
A FAMILIAR estate agents office in Worcester has closed as Andrew Grant has gone into administration with the loss of 54 jobs.
The Andrew Grant brand will continue online in lettings and sales after successful sales but after 50 years it will no longer have a branch in the city.
Some of the current team will be involved in the new enterprises.
They have stressed that sales and lettings will not be affected.
Due to substantial trading losses over the last two years and the impact of the Covid-19 pandemic offices were immediately closed and do not have the funds to re-open.
UpBeats said:
More housing equals an epic crash so they wont do it
But as was discussed earlier, if they start more help to buy schemes, they can keep an element of demand there and prop prices up for a bit.Construction industry is a big employer as well, so benefit of job creation comes along with it, but I genuinely don't think they could build fast enough to have a major impact.
Mining stuff is still quiet according to my peers. I have some utility work that needs some stuff, but the residential has ground to a halt.
I'll poke a few of my chums and see how the contaminated land/environmental gang are.
It seems there are some big sites carrying on and apart from a few ultra rich doing projects that would be done anyway, it is slow.
I'll poke a few of my chums and see how the contaminated land/environmental gang are.
It seems there are some big sites carrying on and apart from a few ultra rich doing projects that would be done anyway, it is slow.
menousername said:
Quick google on # households in UK suggests closer to £900 (pedantic hat on)
So assumption is deposit means cash in bank therefore average household has put aside £900 in May.
Bearing in mind its an average - lower incomes will not have saved much - but also wonder how much is attributable to payment holidays - are those still ongoing?
They're not averages. They're cumulative amounts so averaging them by household is by and large a waste of time. Clearly there is an awful lot of families and individuals who can now afford to put away many thousands extra each month. So assumption is deposit means cash in bank therefore average household has put aside £900 in May.
Bearing in mind its an average - lower incomes will not have saved much - but also wonder how much is attributable to payment holidays - are those still ongoing?
It's something that we've seen since February. Just this month it's been £10bn extra into current accounts and near enough £15bn into instant access type savings. Not just that but net debt repayment is also seeing record repayments, and retail investment has been up a fair chunk in April Vs the last 12 months too.
Nationwide reporting 3.1% fall in the last 2 months already, data includes May and June.
I think this is going to get a lot worse before it gets better.
https://www.theguardian.com/money/2020/jul/01/uk-a...
I think this is going to get a lot worse before it gets better.
https://www.theguardian.com/money/2020/jul/01/uk-a...
whatleytom said:
menousername said:
Quick google on # households in UK suggests closer to £900 (pedantic hat on)
So assumption is deposit means cash in bank therefore average household has put aside £900 in May.
Bearing in mind its an average - lower incomes will not have saved much - but also wonder how much is attributable to payment holidays - are those still ongoing?
They're not averages. They're cumulative amounts so averaging them by household is by and large a waste of time. Clearly there is an awful lot of families and individuals who can now afford to put away many thousands extra each month. So assumption is deposit means cash in bank therefore average household has put aside £900 in May.
Bearing in mind its an average - lower incomes will not have saved much - but also wonder how much is attributable to payment holidays - are those still ongoing?
It's something that we've seen since February. Just this month it's been £10bn extra into current accounts and near enough £15bn into instant access type savings. Not just that but net debt repayment is also seeing record repayments, and retail investment has been up a fair chunk in April Vs the last 12 months too.
Point of averaging it is to get a proper feel for the amount. Obviously some households will have put 2 or 3k aside. As a result, some households will not have put any aside.
Net debt coming down might be as a result of paying off, or just not taking it in first place. Money hitting those deposits might just be money that would previously have gone into servicing the debt / repayment holidays.
Its a good sign but one that will not continue (to the same extent) once we reopen and commuting and expenses return, and repayment holidays end. So its temporary. Only positive is that people might now be much more aware of the possibility of an unforeseen curve ball and the fact (as per 2020 names in trouble thread) there is only so much Govt intervention can control.
Harry7612 said:
Nationwide reporting 3.1% fall in the last 2 months already, data includes May and June.
I think this is going to get a lot worse before it gets better.
https://www.theguardian.com/money/2020/jul/01/uk-a...
"Annual house price growth ground to a halt in June, with property values down by 0.1% year on year, according to Nationwide building society."I think this is going to get a lot worse before it gets better.
https://www.theguardian.com/money/2020/jul/01/uk-a...
Slightly less scary.
Mind you, I expect falls in London, which will disproportionately affect the index due to the much higher values.
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