How far will house prices fall [volume 4]

[turbobloke]

p1stonhead said:

Pork said:

Housing market on the brink of collapse, warns economist.

https://www.ftadviser.com/mortgages/2017/07/03/hou...

"I doubt we’ll see falls of 40 per cent or so, 25 per cent is more likely, but with unpredictable elements such as Brexit it’s hard to predict where we will be in a couple of years’ time."

There has been hundreds of articles exactly the same over the past 7 or 8 years.

There sure has.

This time is no different - there's no agreement on what the latest data shows.

http://www.dailymail.co.uk/money/mortgageshome/art...

Article said:

Britain could be on the brink of a major 1990s-style house price collapse, according to an academic at the London School of Economics. Professor Paul Cheshire, who has advised the Government on housing policy, said: 'We are due a significant correction in house prices. I think we are beginning to see signs that correction may be starting'.

Article also said:

Noble Francis, economics director of the Construction Products Association, said: 'The data would suggest the housing market has slowed. If it were to slow further that wouldn't be a major surprise, but there's no data that suggests a collapse.'

[Welshbeef]

If thee ever was a full on crash what we would end up with is people buying and selling "1 house" which is its worth.

A crease would only impact those who had to sell. Someone on a 10% LTV as in 90% equity simply isn't going to care likewise I'd wager most people.
It's a potential cheap step up the ladder too if your so inclined.

[stuckmojo]

Welshbeef said:

If thee ever was a full on crash what we would end up with is people buying and selling "1 house" which is its worth.

A crease would only impact those who had to sell. Someone on a 10% LTV as in 90% equity simply isn't going to care likewise I'd wager most people.
It's a potential cheap step up the ladder too if your so inclined.

The last sentence being the key here. Unless you are at the top of the chain you'll always benefit from a widespread real estate crash

[Justayellowbadge]

stuckmojo said:

The last sentence being the key here. Unless you are at the top of the chain you'll always benefit from a widespread real estate crash

Always?

How does negative equity help you borrow more?

[Welshbeef]

Justayellowbadge said:

Always?

How does negative equity help you borrow more?

For the small % of people in that situation stepping up is high risk anyway + clearly you've only just got to that step anyway give others a chance who've been on it a while with a lot more equity than those to step up.

[stuckmojo]

Welshbeef said:

For the small % of people in that situation stepping up is high risk anyway + clearly you've only just got to that step anyway give others a chance who've been on it a while with a lot more equity than those to step up.

This

[Derek Smith]

Welshbeef said:

One point was raised re BTL and that the expectation was an exodus - well it simply hasn't happened. Instead what it's done is reduced the number of new entrants whereas those in the game are still buying & the view is very long term investment.

The age old
1. Highly educated areas
2. Very good schools
3. Low crime areas
4. Proximity to infrastructure- travel/commute.
Are the main points nothing has changed.

My personal area is seeing transactions certainly materially up at the £500-900k territory whereas it had frankly stalled for 18months or so.

The chap next door to me has just had his house valued. It is similar to mine, although a little smaller. I was surprised how much it had increased in value over the 5 years I've lived here. He said that the valuer had pointed out that there's only been one burglary in the road I live in for the time the records went back (oddly enough, just two days after I moved in). It is literally less than 10 mins walk from the main line railway station and the schools have an excellent record. This was given by the valuer as an underpinning for the value.

Whether to believe it or not is the question. We've only had two houses sold in the last two years and the valuation was, oddly enough, the average.

[Sa Calobra]

Estate agents are partly why prices rise. They have to win your business by providing you with a good price valuation and they are individually sales/target driven to turn over as much as possible in a area.

On an another note one of my neighbours is in negative equity (they were looking to downsize as they are struggling with debt repayment and behind on their mortgage). I fear that when a crash happens what happens to them? They already struggle with the bills and repayments (and on the mortgage). Scary if this is replicated. They aren't big spenders and don't live beyond their (whats visible to me) means. Their situation can happen to anyone; me, you etc. Unless we have big savings. We all stretch ourselves from time to time, go through periods of maybe a treat etc. What if there is another event coincidial along with a economy dip?

[kingston12]

Sa Calobra said:

On an another note one of my neighbours is in negative equity (they were looking to downsize as they are struggling with debt repayment and behind on their mortgage). I fear that when a crash happens what happens to them? They already struggle with the bills and repayments (and on the mortgage). Scary if this is replicated. They aren't big spenders and don't live beyond their (whats visible to me) means. Their situation can happen to anyone; me, you etc. Unless we have big savings. We all stretch ourselves from time to time, go through periods of maybe a treat etc. What if there is another event coincidial along with a economy dip?

I can imagine this is very widespread, and it is one of the reasons that the Government keeps doing everything they can to keep the bubble inflated. A price crash will be very painful for people who have bought relatively recently, even if it would have advantages for those who haven't.

I know that you are talking about possessions/lifestyle when you say your neighbours are living within their means, but it is all relative in terms of housing.

A couple with a £150k income may well have expected to live in quite a good house years ago, but if they have to find £1m to but a bog standard semi now, is that within their means? The answer is probably yes as long as interest rates don't go up too far, but if they do and a job is lost that could make a massive difference.

[Sa Calobra]

In our area a bogstandard semi is now hitting 500k which is bonkers. Looking at the purchase history and 5+yrs ago these were circa 140-180k.

No one in our area is in flashy jobs in Manchester. They wouldn't live where we do for a start!!

[Thankyou4calling]

Sa Calobra said:

In our area a bogstandard semi is now hitting 500k which is bonkers. Looking at the purchase history and 5+yrs ago these were circa 140-180k.

No one in our area is in flashy jobs in Manchester. They wouldn't live where we do for a start!!

Don't know where you are but find it hard to believe a standard semi has tripled in price in the last five years. Do you have any examples?

[kingston12]

Sa Calobra said:

In our area a bogstandard semi is now hitting 500k which is bonkers. Looking at the purchase history and 5+yrs ago these were circa 140-180k.

No one in our area is in flashy jobs in Manchester. They wouldn't live where we do for a start!!

You will probably find that the people with the flashy jobs will be there before long!

That is certainly what has happened in my area. It is just a totally different demographic to ten years ago. There are plenty of higher level professionals who in the past would either have bought a house in the more fashionable suburbs closer to London or moved out to a bigger house in the commuter belt. Now both are out of reach, so they end up stuck between the two.

[Moonhawk]

Thankyou4calling said:

Sa Calobra said:

In our area a bogstandard semi is now hitting 500k which is bonkers. Looking at the purchase history and 5+yrs ago these were circa 140-180k.

No one in our area is in flashy jobs in Manchester. They wouldn't live where we do for a start!!

Don't know where you are but find it hard to believe a standard semi has tripled in price in the last five years. Do you have any examples?

The fact that Manchester has been mentioned puzzles me.

We used to live on the outskirts of Manchester (within the M60 ringroad and less than 5 miles from the city centre). You can get a detached house round the corner from where we lived for much less than half that amount.

[hyphen]

Sa Calobra said:

In our area a bogstandard semi is now hitting 500k which is bonkers. Looking at the purchase history and 5+yrs ago these were circa 140-180k.

No one in our area is in flashy jobs in Manchester. They wouldn't live where we do for a start!!

Your profile says you live in London.Where about are you?

As in many areas you would struggle to get a terrace for that price.

[trowelhead]

hyphen said:

Your profile says you live in London.Where about are you?

As in many areas you would struggle to get a terrace for that price.

Might be wrong but i think he said old trafford in the past?

500k semi is about right in Didsbury / Chorlton

[Sa Calobra]

trowelhead said:

Might be wrong but i think he said old trafford in the past?

500k semi is about right in Didsbury / Chorlton

Good memory, yes Chorlton/Dids way and now it's spreading into Stretford which is now turning into a hotspot.

[Sheepshanks]

Sa Calobra said:

In our area a bogstandard semi is now hitting 500k which is bonkers. Looking at the purchase history and 5+yrs ago these were circa 140-180k.

No one in our area is in flashy jobs in Manchester. They wouldn't live where we do for a start!!

Who are the people paying £500K for bog-standard semis if they haven't got flashy jobs?


I note you didn't post up any examples, BTW. OK, you said "5+yrs" so at some point in the past what you said will be true, but you can go back 10yrs and those houses weren't £140-180K even then.

And this stuff is very area and house-type specific - I'm near Chester and big old semis are up about 50% over 10yrs. But plenty of other stuff hasn't changed in that time. We're starting to get young couples back in our village now as the bulk of the property has become affordable to them - it never dropped in price, it's just stayed the same for 10 yrs.

[Thankyou4calling]

Sheepshanks said:

Who are the people paying £500K for bog-standard semis if they haven't got flashy jobs?


I note you didn't post up any examples, BTW. OK, you said "5+yrs" so at some point in the past what you said will be true, but you can go back 10yrs and those houses weren't £140-180K even then.

And this stuff is very area and house-type specific - I'm near Chester and big old semis are up about 50% over 10yrs. But plenty of other stuff hasn't changed in that time. We're starting to get young couples back in our village now as the bulk of the property has become affordable to them - it never dropped in price, it's just stayed the same for 10 yrs.

I think that's because there aren't any examples. I'm not trying to be clever but the reality is that in most of the country houses haven't outpaced inflation in the last ten years.

[oyster]

Equilibrium25 said:

oyster said:

There is a very clear assumption on all these threads that somehow a couple has twice the buying power of a single. They don't.

Very rarely does the 2nd person in a couple earn as much as the 1st. And when kids come along, that couple takes a huge income hit - which very rarely recovers. And couples with children is a huge share of the housing demographic, so they can't be ignored.

Is there? I hadn't picked up on that assumption. And yet...

One person on £40k a year. Let's say they can borrow £160k mortgage (or about £90k in superkartracer's world).
They then pay bills...monthly £150 council tax, £250 a month on food, £100 on broadband/tv, £150 on utilities + £n on a single car.

Two people join together, both on £40k a year. They borrow double the single person £320k, but not all bills double.
Now we are at £200 council tax, £350 a month on food (great economies of scale in food shopping), £100 on broadband, £200 on utilities + 2 x £n on two cars.

Then there are huge savings in holidays (single vs. double rooms) and other things.

The couple do look a lot better off than the single person. They then compound that advantage with faster saving/debt reduction. I understand your point about income usually not being equal, but the £40k person plus the £25k person are still in a massively more powerful position than either are individually.

Some may have kids quickly, others will wait a few years. Often the ones that have kids quickly will have come into the relationship with existing assets/property equity and can therefore afford that.

I've owned two houses on my own, then two with my wife (who already owned her own property when we moved in together). I know which position was vastly easier than the other, as does she.

You still haven't understood the point about reduced income in families. It seems you're still making comparisons based on DINKies.

[lepill]

Thankyou4calling said:

I think that's because there aren't any examples. I'm not trying to be clever but the reality is that in most of the country houses haven't outpaced inflation in the last ten years.

You are quite right. Where you are in the country makes a huge difference to your perception of the market.
The last 10 years have seen a total 32.9% inflation rate.
National average house prices have risen 34.2% over the same period.
So a minor outpacing.
However, that national average has been achieved by only 25% of the 48 counties seeing an above inflation increase.
London the star performer, achieving an 84% increase. The South East makes up the other counties.
If you take out London and the South East, we have seen average house price deflation when compared to the rising cost of living.