How Far Will House Prices Fall? [Volume 6]
Discussion
Siko said:
Friend and former neighbour of mine in Shropshire has just put his 4 bed executive detached house on the market for £825k, bought for £490k in 2015 and other than a lick of paint and a new kitchen, has had nothing done to it since it was built. Lovely house and location but plenty of those in Shropshire; it strikes me they are 18 months too late for the speculative price business and I think it is easily £100-150k overpriced. Will be an interesting one to watch though whether it flies off the market or stagnates, with a rapid series of price cuts....
I'm in the same area and bought in the height of the madness with offer accepted in Oct 21 completing last February.For comparison mine was £900k having sold for £750k in 2015 so a considerably smaller uplift.
Maybe I just got a good deal, or the vendor overpaid in 2015, but given the way things have gone now I would concur with your own impression.
Will be interesting to see what sort of interest there is at that price point. There's some nice houses at £800k round here, but it's not got to the point yet where I'm sat gazing at far better houses for less money than I paid. If anything it still feels very bubbly going by asking prices only (whether they shift or not is another matter).
Tango13 said:
brickwall said:
Tango13 said:
I must be getting old, the thought of a £285k mortgage terrifies me!
I know this was half in jest, but in all seriousness there does seem to be a mental disconnect between what people see as a reasonable house price and what they regard as a reasonable mortgage.If you don’t blink at a £400k house price, you shouldn’t blink at a £300k mortgage.
I'm definitely getting old...
If people regard an “average” house as £300k, and an “average” salary of £35k, then either
a) The average individual has to borrow a large salary multiple
b) There’s some massive gap of many years’ gross salary that has to be made up in the deposit
Or
c) The average individual does not buy an average house (and where does that leave people with below average incomes)
In reality of course it’s a mix of all three. But ultimately “sale and profits from another house” is not a sustainable source of funds - the next time someone says “£800k isn’t that much for a house”, think what income is actually required to sustain the mortgage.
brickwall said:
That’s sort of the point.
If people regard an “average” house as £300k, and an “average” salary of £35k, then either
a) The average individual has to borrow a large salary multiple
b) There’s some massive gap of many years’ gross salary that has to be made up in the deposit
Or
c) The average individual does not buy an average house (and where does that leave people with below average incomes)
In reality of course it’s a mix of all three. But ultimately “sale and profits from another house” is not a sustainable source of funds - the next time someone says “£800k isn’t that much for a house”, think what income is actually required to sustain the mortgage.
Nope, the average person buying the average priced house has an average amount of prior obtained property equity.If people regard an “average” house as £300k, and an “average” salary of £35k, then either
a) The average individual has to borrow a large salary multiple
b) There’s some massive gap of many years’ gross salary that has to be made up in the deposit
Or
c) The average individual does not buy an average house (and where does that leave people with below average incomes)
In reality of course it’s a mix of all three. But ultimately “sale and profits from another house” is not a sustainable source of funds - the next time someone says “£800k isn’t that much for a house”, think what income is actually required to sustain the mortgage.
Abdul Abulbul Amir said:
Nope, the average person buying the average priced house has an average amount of prior obtained property equity.
Perhaps, buta) Clearly that merry-go-round stops at some point (perhaps an FTB)
b) How much of that equity is the result of a leveraged bet come good on historic property price growth?
brickwall said:
Abdul Abulbul Amir said:
Nope, the average person buying the average priced house has an average amount of prior obtained property equity.
Perhaps, buta) Clearly that merry-go-round stops at some point (perhaps an FTB)
b) How much of that equity is the result of a leveraged bet come good on historic property price growth?
b) How much of that equity is the result of a leveraged bet come good on historic property price growth? - It'll be a combination of historic growth, capital elements of repayments and other lump sum dumps eg bonuses/inheritances etc....net of borrowings against the property
brickwall said:
Abdul Abulbul Amir said:
Nope, the average person buying the average priced house has an average amount of prior obtained property equity.
Perhaps, buta) Clearly that merry-go-round stops at some point (perhaps an FTB)
b) How much of that equity is the result of a leveraged bet come good on historic property price growth?
My daughter and her husband are a little above average - total gross income about £90K. Got two kids at primary school, so clear of nursery fees etc.
They're the very oppisite of the "leased white Audi" brigade many on here like to cite - his car is 14yrs old, and hers is 9. No Sky TV or latest phone etc.
They have £135K mortgage on a fix for a while (might be 5yrs, done at a lowish rate). House maybe £250K.
I asked if they were thinking about moving up and they were absolutely horrified that I'd think they should even consider it.
Sheepshanks said:
brickwall said:
Abdul Abulbul Amir said:
Nope, the average person buying the average priced house has an average amount of prior obtained property equity.
Perhaps, buta) Clearly that merry-go-round stops at some point (perhaps an FTB)
b) How much of that equity is the result of a leveraged bet come good on historic property price growth?
My daughter and her husband are a little above average - total gross income about £90K. Got two kids at primary school, so clear of nursery fees etc.
They're the very oppisite of the "leased white Audi" brigade many on here like to cite - his car is 14yrs old, and hers is 9. No Sky TV or latest phone etc.
They have £135K mortgage on a fix for a while (might be 5yrs, done at a lowish rate). House maybe £250K.
I asked if they were thinking about moving up and they were absolutely horrified that I'd think they should even consider it.
Because I live in Zone 6, if I want to take the next step to a 3 bedroom Victorian Terrace (Where the 3rd bedroom will be in the loft and the second bedroom tiny because of the added stairs) that is an additional £250K please.
£250K is a massive amount to borrow to get another 10 by 12 foot room, especially as it is in reality £500K once you have paid the interest over 25 years.
brickwall said:
That’s sort of the point.
If people regard an “average” house as £300k, and an “average” salary of £35k, then either
a) The average individual has to borrow a large salary multiple
b) There’s some massive gap of many years’ gross salary that has to be made up in the deposit
Or
c) The average individual does not buy an average house (and where does that leave people with below average incomes)
In reality of course it’s a mix of all three. But ultimately “sale and profits from another house” is not a sustainable source of funds - the next time someone says “£800k isn’t that much for a house”, think what income is actually required to sustain the mortgage.
Single individuals on 'average' salaries are not buying 'average' houses (except with help of bank of mum and dad gifting a large deposit). 'Average' couples would have combined income of 70k though, which gets them nearer your '300k average' house, with a 10% deposit.If people regard an “average” house as £300k, and an “average” salary of £35k, then either
a) The average individual has to borrow a large salary multiple
b) There’s some massive gap of many years’ gross salary that has to be made up in the deposit
Or
c) The average individual does not buy an average house (and where does that leave people with below average incomes)
In reality of course it’s a mix of all three. But ultimately “sale and profits from another house” is not a sustainable source of funds - the next time someone says “£800k isn’t that much for a house”, think what income is actually required to sustain the mortgage.
Joey Deacon said:
Problem is, there is no hope for the average person to buy and average house if you live in the SE anywhere near London. I live in a 2 bedroom Victorian Terrace, the sort of thing that in Bradford nobody would want and you could buy for £40K.
Because I live in Zone 6, if I want to take the next step to a 3 bedroom Victorian Terrace (Where the 3rd bedroom will be in the loft and the second bedroom tiny because of the added stairs) that is an additional £250K please.
£250K is a massive amount to borrow to get another 10 by 12 foot room, especially as it is in reality £500K once you have paid the interest over 25 years.
The irony is that after 4 bedrooms it doesn’t really make much odds then and other things become the drivers. I’ve got 5 officially but probably cost the same as if it had 4 and maybe even similar to 6. Certainly nothing like £250k difference. Because I live in Zone 6, if I want to take the next step to a 3 bedroom Victorian Terrace (Where the 3rd bedroom will be in the loft and the second bedroom tiny because of the added stairs) that is an additional £250K please.
£250K is a massive amount to borrow to get another 10 by 12 foot room, especially as it is in reality £500K once you have paid the interest over 25 years.
It’s what drives most people out of London, the cost of jumping from flat to house when they have more than one child. As you say it’s hundreds of thousands for the first leap then is largely about size, garden (and obviously location) after that. When I’m looking at houses I don’t really care if they have 5 or 7 bedrooms because you can easily find the former that is larger than the latter with more useable space.
this thread is not the place really but speaking of 900k and so on, I thought this is not too bad I guess! 
https://www.knightfrank.co.uk/properties/residenti...
https://www.knightfrank.co.uk/properties/residenti...
I feel sorry for the people with 500k+ mortgages when their 1% fixed deals come to an end & suddenly they are faced with 5 or more % deals, it’s going to hurt finding an extra £1600 - 2000 month. It’s not the people buying the houses fault, I blame the government for making money so cheap for the last 10 years, mind you I am bitter because I had to pay 10% for my 1st mortgage!
ooid said:
this thread is not the place really but speaking of 900k and so on, I thought this is not too bad I guess!
https://www.knightfrank.co.uk/properties/residenti...
Nice plot, but it looks like it's going to cost £1000+/month to heat in winter, and unless you want to live in the 1960s that entire interior needs a refresh. So well over £1million by the time you are done. Maybe not that expensive by Z3 London standards, but its still far from 'cheap'.https://www.knightfrank.co.uk/properties/residenti...
classicaholic said:
I feel sorry for the people with 500k+ mortgages when their 1% fixed deals come to an end & suddenly they are faced with 5 or more % deals, it’s going to hurt finding an extra £1600 - 2000 month. It’s not the people buying the houses fault, I blame the government for making money so cheap for the last 10 years, mind you I am bitter because I had to pay 10% for my 1st mortgage!
Why?It’s not the governments fault if people haven’t looked beyond the end of their own nose and notionally stress tested their household finances against a different economic landscape.
People who borrow are adults last I checked. The warnings when taking on a mortgage are tediously repetitive when last I checked.
I couldn’t disagree with your statement more.
Sheepshanks said:
brickwall said:
Abdul Abulbul Amir said:
Nope, the average person buying the average priced house has an average amount of prior obtained property equity.
Perhaps, buta) Clearly that merry-go-round stops at some point (perhaps an FTB)
b) How much of that equity is the result of a leveraged bet come good on historic property price growth?
My daughter and her husband are a little above average - total gross income about £90K. Got two kids at primary school, so clear of nursery fees etc.
They're the very oppisite of the "leased white Audi" brigade many on here like to cite - his car is 14yrs old, and hers is 9. No Sky TV or latest phone etc.
They have £135K mortgage on a fix for a while (might be 5yrs, done at a lowish rate). House maybe £250K.
I asked if they were thinking about moving up and they were absolutely horrified that I'd think they should even consider it.
We took on £365k mortgage against a £432k house when I was 29 and my wife was 26 with a similar joint income as I backed myself to progress at the time.
18 months later thats more like £120k joint now and if it wasnt for a bloody expensive wedding we are paying off we would be very comfortable especially as my student loan is about to go which costs me £400pm currently.
No kids however...
DoubleSix said:
Why?
It’s not the governments fault if people haven’t looked beyond the end of their own nose and notionally stress tested their household finances against a different economic landscape.
People who borrow are adults last I checked. The warnings when taking on a mortgage are tediously repetitive when last I checked.
I couldn’t disagree with your statement more.
It was mistakes by governments (throughout Europe) and the BOE that created today's inflation for the most part, Ukraine merely added another couple of percent. So yes they should be held accountable for their mistakes, and people who made rational decisions on the basis of a continuing low inflationary environment are the ones to suffer. It’s not the governments fault if people haven’t looked beyond the end of their own nose and notionally stress tested their household finances against a different economic landscape.
People who borrow are adults last I checked. The warnings when taking on a mortgage are tediously repetitive when last I checked.
I couldn’t disagree with your statement more.
In the end you cannot make financial decisions on the basis of worst case scenarios otherwise you would never do anything. An interest rate higher by a couple of percent should have been allowed for and budgeted for, but we are past that now.
You don’t have to look far back to observe that the low interest rate environment was historically unusual. It would seem incredibly naive to me, disingenuous even, to build one’s personal borrowing around the assumption these things will stay constant when they are known to be variable. If you aren’t making financial decisions with half an eye on “worst case” or even just “very bad” scenarios then you aren’t properly assessing risk in the first place.
The inflationary issues, and attempts to control them, have been a global phenomenon. Placing these issues at the door of UK Gov when unable to meet personal obligations is frankly to deny ones own agency.
(FWIW: i have very substantial personal borrowings, across multiple properties and projects. My choice. And im confident i can meet my obligations up to double digit interest rates. Beyond that its time to make hard choices and accept things didn’t go my way. I wont be blaming the government for my decision to leverage my own personal borrowing).
The inflationary issues, and attempts to control them, have been a global phenomenon. Placing these issues at the door of UK Gov when unable to meet personal obligations is frankly to deny ones own agency.
(FWIW: i have very substantial personal borrowings, across multiple properties and projects. My choice. And im confident i can meet my obligations up to double digit interest rates. Beyond that its time to make hard choices and accept things didn’t go my way. I wont be blaming the government for my decision to leverage my own personal borrowing).
Edited by DoubleSix on Friday 31st March 08:36
I wouldn't blame the government, or the individuals in the main.
We can't mitigate all risk, some we just have to accept.
However, we aren't at that stage yet, things aren't that bad. Rates are only at 4.25pc.
There's a lot of whining certainly, from individuals cherry picked by the media to give them the hard-done-by stories they're after.
We can't mitigate all risk, some we just have to accept.
However, we aren't at that stage yet, things aren't that bad. Rates are only at 4.25pc.
There's a lot of whining certainly, from individuals cherry picked by the media to give them the hard-done-by stories they're after.
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