How far will house prices fall [volume 4]

[Welshbeef]

Helicopter123 said:

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.

The stamp duty changes have stagnated the high value properties as they are rediciously high - that then prevents people moving up to them so they sit tight meaning the run below them has fewer to go after thus pushing up values.

Why isn't it just one rate from zero upwards else you have issues.

[kingston12]

Helicopter123 said:

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.

As I say, those factors have put the brakes on a previously very buoyant market in my area, just as the intervention the other way increased the speed and level of growth in the previous years.

That is not to say it will continue of course. Welshbeef has already seen the market turn the corner again in his area, I haven't yet but definitely wouldn't write it off.

On thing is for sure, the Government need to be very careful what they do going forward. Loosening the rules for a long time and then suddenly tightening them again has already angered a lot of voters. They can't keep tightening whilst remaining popular and if they don't tighten house prices keep going up...

[kingston12]

Welshbeef said:

The stamp duty changes have stagnated the high value properties as they are rediciously high - that then prevents people moving up to them so they sit tight meaning the run below them has fewer to go after thus pushing up values.

Why isn't it just one rate from zero upwards else you have issues.

It was a miscalculation by the Government. They had to reform the previous system, and felt that the public would accept much higher taxation because they were making so much money on their houses. A lot of the public refused and stopped buying so many houses.

I am sure I read somewhere that the total take on Stamp Duty was now less than it was before, but I'll prepare to be corrected on that.

Stamp Duty will be the first thing to be moved downwards when the Government feel the market needs it's next little boost in my opinion.

Edited by kingston12 on Monday 29th May 15:19

[Ian Geary]

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.

From my distant studies of economics, I do recall quite a bit about characteristics needed for markets to work properly.

I don't think the housing market is functioning like a "perfect" theoretical market is. And furthermore, availability of clean, safe housing should not be left to the vagaries of a theoretical market.

Example: Croydon, outer london. Huge shortage of housing. Small 2-3 bed flats going for £300k that imo are poorly converted office space giving poor quality of life for families.

Yet there are nearly a thousand homes empty in Croydon. They are being held by owners, some of which are overseas, for future value increases, and council attempts (bribes) to owners to take tenants are dismissed.

So the provision of housing has got muddled up with the investment market.

Any new builds going up will likely be hoovered up by landlords (probably larger chains now rather than individual btl speculators) which freezes out many who have jobs, but no chance of finding a deposit without mum and dad.

I think the demand for housing (London in particular) has become decoupled from purely a population issue. The population issue is that the poor suckers stuck in generation rent are helping a tranche of people get very wealthy, and no real answer to it.

I think the "bubble" is the image of a future increase in revenue stream from housing, so much of the se property market is orientated around investors accessing that future revenue streams. Tenants then just become battery hens, laying the proverbial golden egg.

The tories are parring back housing benefits soon (where single people who don't need/deserve a house will only get cash at a shared accommodation rate)

This"might" cool rental growth (and therefore cool prices) but it will be painful for those involved.

But I can't see a way of unwinding this without someone getting the drop, and frankly the politics of the country is pretty clear about who is / is not going to get burnt financially.

Re other posts

I agree with sentiments about needing a population strategy to align with a housing strategy (this sounds a bit third Reich so I should clarify this is about thinking where jobs are, where infrastructure and education is, what skills are needed, what public infrastructure needs there are etc)

But I don't see or agree with the link that immigrants are causing the problem by being the "wrong" sort of families (more than 2.4 kids etc). If anything, the extra population will be needed to counter balance the massive weight of retired/ elderly needing public funding vs a proportionally lower number of working age people.

(This isn't the immigration thread though, but obviously the working age population need to be working, regardless of where they hail from)

I don't blame the boomers either- they were just doing what was best for them, which is what pretty much everyone would do, if they could.


Ian

[Rovinghawk]

Ian Geary said:

council attempts (bribes) to owners to take tenants are dismissed.

A huge factor in this is the way councils have screwed over LLs over the last couple of years; their tenants aren't worth the almost-inevitable aggravation.

[Helicopter123]

Rovinghawk said:

Ian Geary said:

council attempts (bribes) to owners to take tenants are dismissed.

A huge factor in this is the way councils have screwed over LLs over the last couple of years; their tenants aren't worth the almost-inevitable aggravation.

This.

The government/councils have effectively destroyed the private rental market at the lower end.

[AstonZagato]

Welshbeef said:

Why isn't it just one rate from zero upwards else you have issues.

Because it's a miwwionaire's tax break, innit? Them rich pay less than they should.

[AstonZagato]

I think a property tax is inevitable. It would solve many of the current issues (empty housing, foreign ownership not contributing, encouraging the older generation to downsize). It would probably also address the affordability issue as it would make property a less attractive asset class to own.

It would have to be applied equally to all properties (i.e. NOT a mansion tax) based off a percentage of their value (so mansions do pay more). I would make the tax payable on the first property owned offsettable against UK tax but second homes come out of taxed income. That would mean the offshore brigade pay.

However, firstly, it would be a huge vote loser and secondly, the chance of this not turning into a "soak the rich" wkfest by the left is precisely zero. So it won't ever happen in a sensible way.

[fido]

Ian Geary said:

Yet there are nearly a thousand homes empty in Croydon. They are being held by owners, some of which are overseas, for future value increases, and council attempts (bribes) to owners to take tenants are dismissed.

Easy to blame foreigners but the underlying reasons - currency flows due to the drop in sterling, and the UK perceived as a safe haven - are actually good things - and they already have to pay a capital gains tax when they sell it. I suppose you could add an annual tax (on top of stamp duty for second homes) for the first X years which can be used to offset rental income, thus encouraging investors to let out their properties .. maybe they've thought of this but don't want to increase long-term sovereign risk for foreign investors which might have detrimental effects to our trade with those countries?

Edited by fido on Monday 29th May 16:06

[Welshbeef]

A mansion tax simply doesn't work - someone could have bought a house in Islington back in the 1960's normal 3 bed semi and had meanial jobs throughout their working lives now have state pension plus very small private pension.

They own a house worth £1m+++ however they don't want to sell they love the community they have lived in all their lives why on esrth should bother or anyone be forced to move by the govt unless compulsaey purchase for a big infrastructure build?

[fido]

Welshbeef said:

A mansion tax simply doesn't work - someone could have bought a house in Islington back in the 1960's normal 3 bed semi and had meanial jobs throughout their working lives now have state pension plus very small private pension.

Indeed - which is why the looney LibDems never got their way - but a tax on second homes or new-builds aimed at foreign investors is a different matter. And of course if they sell the property on to a primary resident then no issue either.

[p1stonhead]

anonymous said:

[redacted]

That seems remarkably good value for the location.

[Justayellowbadge]

p1stonhead said:

That seems remarkably good value for the location.

It does, but it looks like the sort of place that would be owned by someone that buys BMWs for the image.

[Welshbeef]

p1stonhead said:

anonymous said:

[redacted]

That seems remarkably good value for the location.

Shame about the postage stamp garden.

Personally prefer older houses not new build far more character & generally vastly bigger plots.

[Welshbeef]

anonymous said:

[redacted]

[AstonZagato]

Welshbeef said:

A mansion tax simply doesn't work - someone could have bought a house in Islington back in the 1960's normal 3 bed semi and had meanial jobs throughout their working lives now have state pension plus very small private pension.

They own a house worth £1m+++ however they don't want to sell they love the community they have lived in all their lives why on esrth should bother or anyone be forced to move by the govt unless compulsaey purchase for a big infrastructure build?

Easy to deal with. Transitional arrangement. No-one living in a house bought before 1960 where it is their primary residence is liable. Or those retired at the date of the legislation are not liable. In the future, one has to downsize (or provision for paying the tax). It becomes part of life. Plenty of places have property taxes.

[Welshbeef]

AstonZagato said:

Easy to deal with. Transitional arrangement. No-one living in a house bought before 1960 where it is their primary residence is liable. Or those retired at the date of the legislation are not liable. In the future, one has to downsize (or provision for paying the tax). It becomes part of life. Plenty of places have property taxes.

But who decides what time frame is the starting point & why? There will be some big losers.

[AstonZagato]

Welshbeef said:

AstonZagato said:

Easy to deal with. Transitional arrangement. No-one living in a house bought before 1960 where it is their primary residence is liable. Or those retired at the date of the legislation are not liable. In the future, one has to downsize (or provision for paying the tax). It becomes part of life. Plenty of places have property taxes.

But who decides what time frame is the starting point & why? There will be some big losers.

Yes. There always are. Especially if you need to create change (and generate serious revenue). The trick is to make people think it isn't them that will lose, or that it is so far in the future that they don't really need to worry about it (cf. raising the pension age).

[Graemsay]

Helicopter123 said:

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.

Strictly speaking, demand is when someone has both the desire and means to purchase something.

For example, I might want a mews house in Chelsea. However, since I can't afford the £2 million price tag, I'm not contributing to demand, and therefore not affecting prices.

An Eastern European working for the minimum wage wouldn't put upwards pressure on London prices, however one who's been well educated, and works as an IT contractor (there are a few around) would, because he or she would have the purchasing power to afford something.

[Derek Chevalier]

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.

Bubbles typically don't take long to deflate