How far will house prices fall [volume 4]

[turbobloke]

These days, and based only on my experience of working with education trusts setting up the new schools up and down the country, the S106 agreement won't be countersigned without a new school. Depending on the type of housing and other local fators, typically the yield is between 2.5 and 3.5 pupils per year group per 100 homes. If we take 3 then a 2000 home development will need at least a 2-form entry primary school.

[Welshbeef]

turbobloke said:

These days, and based only on my experience of working with education trusts setting up the new schools up and down the country, the S106 agreement won't be countersigned without a new school. Depending on the type of housing and other local fators, typically the yield is between 2.5 and 3.5 pupils per year group per 100 homes. If we take 3 then a 2000 home development will need at least a 2-form entry primary school.

For us there is a high chance of kids in 3 different primary schools. Now pick up drop off would mean 2 of the 3 will be continually late for their entire primary school lives.


Another great thing is one of the schools is about to close as it has a terrible ofstead report - to guess what ... for houses to be built on the schools land! Madness

[Derek Chevalier]

Welshbeef said:

But what can you do?

All the Government need to do to unwind the credit bubble is to take out the props, but it would be political suicide. Will be an interesting chapter in economic textbooks when it does come crashing down.

[Welshbeef]

Derek Chevalier said:

All the Government need to do to unwind the credit bubble is to take out the props, but it would be political suicide. Will be an interesting chapter in economic textbooks when it does come crashing down.

That would take decades.

[Helicopter123]

Property, like stock prices, will always rise over time. There will always be short-term declines. With houses, so many waiting to get into the market, I can't ever see a serious blip in prices however.

How many of those renting and waiting for 'the big one' would already have paid off their mortgages by now?

I really feel for generation rent, especially in London but the market is the market.

[turbobloke]

Welshbeef said:

Derek Chevalier said:

All the Government need to do to unwind the credit bubble is to take out the props, but it would be political suicide. Will be an interesting chapter in economic textbooks when it does come crashing down.

That would take decades.

And therefore not a (sudden) crash.

Rises may well be slower in future as wages start to catch up.

[Welshbeef]

turbobloke said:

And therefore not a (sudden) crash.

Rises may well be slower in future as wages start to catch up.

Exactly. There simply wouldn't be a crash - if one did happen it would destroy the banks leading to a massive problem worse than 2007/8

[mike74]

Helicopter123 said:

Property, like stock prices, will always rise over time. There will always be short-term declines. With houses, so many waiting to get into the market, I can't ever see a serious blip in prices however.

How many of those renting and waiting for 'the big one' would already have paid off their mortgages by now?

I really feel for generation rent, especially in London but the market is the market.

You say ''the market is the market'' but let's just look at the property market over, say, the last 2 decades which is the time period we've seen rampant house price inflation, prior to that House price inflation was pretty much in line with all other forms of inflation, including wage growth....

-Late 1990's - 2007... We saw rampant house price inflation due to reckless, irresponsible and often fraudulent lending on the part of the banks.

-Post 2008 - present day... We've seen rampant house price inflation due to huge and previously unprecedented levels of intervention in the market by the govt and the BoE

How do you think the property market would have performed over the last 2 decades and where do you think it would be now if it wasn't for the various issues I've mentioned above?

[turbobloke]

mike74 said:

... if it wasn't for the various issues I've mentioned above...

Sure, but we are where we are, and my aunty would be my uncle if it wasn't for ovaries etc

[kingston12]

Welshbeef said:

But again where are the new hospitals the new primary schools the new secondary schools the new road networks to support the new population. The new motorways (current ones are full to he max -M25/M4/M3/M1/M11/M40)

Indeed. This is the part of it that is going to make everyone that lives in a relatively highly populated area worse off. Some will gain financially from the house price bubble, some will lose, but everyone loses if they have less health, education and travel provision per person.

What I am seeing is local authorities keen to let property developers deal with the so-called 'housing crisis' whilst conveniently forgetting that what we actually have is a population crisis. That is much more difficult and expensive to solve.

The housing part is quite easy - build a new estate funded either by people borrowing too much, buying a 'share' of a property or both. The facilities to support the community have to come from public funds, and that is a link that has been totally lost.

The worst example I have seen of this is the CrossRail 2 proposal. A perceived benefit of this scheme is that a new town can be sited somewhere between Epsom and Chessington in Surrey. I am not sure why they think this is possible given that CR2 provides no new infrastructure anyway and even if it does massively improve rail capacity, there are no plans for any other new infrastructure to supports thousands of new homes.

[kingston12]

mike74 said:

How do you think the property market would have performed over the last 2 decades and where do you think it would be now if it wasn't for the various issues I've mentioned above?

It's obviously impossible to say, but I'd expect it to be up by 50% or so overall with a couple of drops along the way rather than 500% or more that it is in some areas since 1997.

I often see these comments that house prices always go up over time. I definitely agree, but that shouldn't be confused with the type and level of growth we have seen during this period.

I could have bought a flat for £50k in 1997 that would be worth about £400k now. If prices grow at the same rate until 2037, it will be worth £3.2m. How will anyone be able to afford it unless we see massive wage growth and more Government schemes?

[Helicopter123]

mike74 said:

Helicopter123 said:

Property, like stock prices, will always rise over time. There will always be short-term declines. With houses, so many waiting to get into the market, I can't ever see a serious blip in prices however.

How many of those renting and waiting for 'the big one' would already have paid off their mortgages by now?

I really feel for generation rent, especially in London but the market is the market.

You say ''the market is the market'' but let's just look at the property market over, say, the last 2 decades which is the time period we've seen rampant house price inflation, prior to that House price inflation was pretty much in line with all other forms of inflation, including wage growth....

-Late 1990's - 2007... We saw rampant house price inflation due to reckless, irresponsible and often fraudulent lending on the part of the banks.

-Post 2008 - present day... We've seen rampant house price inflation due to huge and previously unprecedented levels of intervention in the market by the govt and the BoE

How do you think the property market would have performed over the last 2 decades and where do you think it would be now if it wasn't for the various issues I've mentioned above?

If demand exceeds supply, prices rise. Houses, classic cars, baked beans. That is the market.

Demand is driven primarily by population growth, with availability of credit a secondary consideration. If you only focus on the latter, you risk being trapped as a serial 'renter' paying off someone else's mortgage.

Supply is limited by availability of land and planning regulations.

Its really not difficult and no need to go hunting or a conspiracy theory to support alternative views when the facts are right in front of you.

[kingston12]

Helicopter123 said:

If demand exceeds supply, prices rise. Houses, classic cars, baked beans. That is the market.

Demand is driven primarily by population growth, with availability of credit a secondary consideration. If you only focus on the latter, you risk being trapped as a serial 'renter' paying off someone else's mortgage.

Supply is limited by availability of land and planning regulations.

Its really not difficult and no need to go hunting or a conspiracy theory to support alternative views when the facts are right in front of you.

So your view is that as long as demand keeps going up, prices will keep increasing even if wages don't increase and credit doesn't loosen any further?

I'd agree that the supply/demand problem underlies everything, but isn't there a point that the money just runs out?

[Welshbeef]

kingston12 said:

So your view is that as long as demand keeps going up, prices will keep increasing even if wages don't increase and credit doesn't loosen any further?

I'd agree that the supply/demand problem underlies everything, but isn't there a point that the money just runs out?

The next step is inter generational mortgages let's say a 70year mortgage etc.

Otherwise where are people going to live where will they learn where will they get a dentist where will they get a GP.


If we had some emigration that would be a great bonus.

However
1 we are in a baby boom
2. The original baby boomers have a far longer life expectancy than any previous generation
3. Immigration over the last 2 decades which has seen year on year cities the size of Newcastle added to our population
4. We are seeing certain ethnic groups in the U.K. With way way more than 2.4 kids and now as they represent such a large % of our population it's having a big impact.

[Helicopter123]

kingston12 said:

Helicopter123 said:

If demand exceeds supply, prices rise. Houses, classic cars, baked beans. That is the market.

Demand is driven primarily by population growth, with availability of credit a secondary consideration. If you only focus on the latter, you risk being trapped as a serial 'renter' paying off someone else's mortgage.

Supply is limited by availability of land and planning regulations.

Its really not difficult and no need to go hunting or a conspiracy theory to support alternative views when the facts are right in front of you.

So your view is that as long as demand keeps going up, prices will keep increasing even if wages don't increase and credit doesn't loosen any further?

I'd agree that the supply/demand problem underlies everything, but isn't there a point that the money just runs out?

Playing devils advocate, what do you think will happen to house prices when wage growth does ultimately pick up?

Recent years have seen very modest nominal growth in wages, while the BoE has actually tightened availability of mortgage finance. And yet house prices advance. When nominal wage growth does pick up - where do you think the money is headed?

[Welshbeef]

Helicopter123 said:

Playing devils advocate, what do you think will happen to house prices when wage growth does ultimately pick up?

Recent years have seen very modest nominal growth in wages, while the BoE has actually tightened availability of mortgage finance. And yet house prices advance. When nominal wage growth does pick up - where do you think the money is headed?

One key change which is overlooked is the traditional 25 year mortgage is now 35 and pushing towards 40 years

[kingston12]

Welshbeef said:

kingston12 said:

So your view is that as long as demand keeps going up, prices will keep increasing even if wages don't increase and credit doesn't loosen any further?

I'd agree that the supply/demand problem underlies everything, but isn't there a point that the money just runs out?

The next step is inter generational mortgages let's say a 70year mortgage etc.

Otherwise where are people going to live where will they learn where will they get a dentist where will they get a GP.


If we had some emigration that would be a great bonus.

However
1 we are in a baby boom
2. The original baby boomers have a far longer life expectancy than any previous generation
3. Immigration over the last 2 decades which has seen year on year cities the size of Newcastle added to our population
4. We are seeing certain ethnic groups in the U.K. With way way more than 2.4 kids and now as they represent such a large % of our population it's having a big impact.

Totally agree. I don't think that house prices are going down in the long term.

However, I also agree with Mike74's point that it is Government intervention that has caused a bubble in prices as big as the one we have got. Intergenerational mortgages and higher immigration are just two more examples of that intervention.

[kingston12]

Helicopter123 said:

Playing devils advocate, what do you think will happen to house prices when wage growth does ultimately pick up?

Recent years have seen very modest nominal growth in wages, while the BoE has actually tightened availability of mortgage finance. And yet house prices advance. When nominal wage growth does pick up - where do you think the money is headed?

Straight into housing, no question in my mind about that. I can't see any on the horizon, though.

Mortgage finance might have been tightened recently, but it is still a completely different world to where it was 20 years ago. If I was under 30 now, I could probably borrow 5-6 times my salary for 35 years for not much more than 1% interest. No chance of that in 1997, and that must have had some influence on where prices are?

In my area in the past year or so, asking prices seem to have completely stabilised, and transaction volume has gone through the floor. I put this down to lower credit availability and higher stamp duty rates rather than lower overall demand. Once people get used to those factors, prices will probably start to rise again, but it must be partially dependant on what the Government decide to do next.

[Welshbeef]

kingston12 said:

Straight into housing, no question in my mind about that. I can't see any on the horizon, though.

Mortgage finance might have been tightened recently, but it is still a completely different world to where it was 20 years ago. If I was under 30 now, I could probably borrow 5-6 times my salary for 35 years for not much more than 1% interest. No chance of that in 1997, and that must have had some influence on where prices are?

In my area in the past year or so, asking prices seem to have completely stabilised, and transaction volume has gone through the floor. I put this down to lower credit availability and higher stamp duty rates rather than lower overall demand. Once people get used to those factors, prices will probably start to rise again, but it must be partially dependant on what the Government decide to do next.

In my locality from Apr 2016 to the start of this year the market was totally dead v what it had been like. No one buying and prices decreasing / on a very small number which were for sale.

However so far in 2017 things seem to be changing and gathering pace - lots of transactions lots more sold prices and sold very quickly. These asking prices are not lower either they are strong prices - in pretty anal and check daily for new sales and as I'm looking in a very small area you notice & remember length of time they are for sale to sold.

[Helicopter123]

kingston12 said:

Helicopter123 said:

Playing devils advocate, what do you think will happen to house prices when wage growth does ultimately pick up?

Recent years have seen very modest nominal growth in wages, while the BoE has actually tightened availability of mortgage finance. And yet house prices advance. When nominal wage growth does pick up - where do you think the money is headed?

Straight into housing, no question in my mind about that. I can't see any on the horizon, though.

Mortgage finance might have been tightened recently, but it is still a completely different world to where it was 20 years ago. If I was under 30 now, I could probably borrow 5-6 times my salary for 35 years for not much more than 1% interest. No chance of that in 1997, and that must have had some influence on where prices are?

In my area in the past year or so, asking prices seem to have completely stabilised, and transaction volume has gone through the floor. I put this down to lower credit availability and higher stamp duty rates rather than lower overall demand. Once people get used to those factors, prices will probably start to rise again, but it must be partially dependant on what the Government decide to do next.

I seeing rising stamp duty coupled with tightening in mortgage lending criteria as a direct attempt by the government to limit growth in the market. Changes to taxation in the BTL space are another example. And yet, prices have kept going.