How far will house prices fall [volume 5]
Discussion
kingston12 said:
Removing Principal Private Residence Relief so people have to pay CGT on their home would be the quickest way for the Government to crash the housing market. The next quickest would be to raise interest rates, followed by withdrawing all of the developer support mechanisms like Help to Buy.
The problem is that we are well past the phase where they could sensibly do any of those things. Prices and debt levels are far too high and it would cause waves throughout the whole economy.
Instead, I’d expect to see more support for price growth and that will make it sustainable for a while longer.
The longer term will be further foreign investment and a greater proportion of people renting their homes. The aspiration to buy will decrease over the next few generations. Even now it only seems to be the well paid 20-somethings that talk about eventually buying, with a lot of the others struggling even to get a rental deposit together.
I would be interested to explore a property tax system actually based on house values, unlike the mess that is council tax where you can be paying less on your Kensington mansion than someone in a much cheaper and smaller property elsewhere. Our council tax is going to be £1,489.55. The 34m quid house linked below? £1507.70 The problem is that we are well past the phase where they could sensibly do any of those things. Prices and debt levels are far too high and it would cause waves throughout the whole economy.
Instead, I’d expect to see more support for price growth and that will make it sustainable for a while longer.
The longer term will be further foreign investment and a greater proportion of people renting their homes. The aspiration to buy will decrease over the next few generations. Even now it only seems to be the well paid 20-somethings that talk about eventually buying, with a lot of the others struggling even to get a rental deposit together.
https://www.zoopla.co.uk/for-sale/details/53896022...
And yes, when a couple in their twenties on a combined household salary approaching 200k are buying in SE London Z4 (for which we needed around 55k in cash), where are all the people on more normal salaries buying? They're not. I do wonder what happens when those in 2m quid houses look to sell in twenty years - who are they selling them to? I can't imagine we will be able to get a mortgage on a house like that in ten or fifteen years time even if we manage to pull together 2/3/4 hundred k in equity/savings - especially if we have kids.
Edited by 156651 on Friday 6th March 10:12
p1stonhead said:
oyster said:
s1962a said:
156651 said:
NickCQ said:
Exactly. In nicer areas, £2 mm gets you a <1,500 sqft 2 up 2 down that would have been built for the Victorian lower middle classes / workers.
Your neighbours will be a mix of "normal" people who have lived there 20+ years and higher earners that have arrived in the last 5-10.
I'm not seeing the problem in applying an increased tax on people who have earned large sums of unearned and untaxed wealth through house price inflation ...Your neighbours will be a mix of "normal" people who have lived there 20+ years and higher earners that have arrived in the last 5-10.
Their core voter base is now working class North and retired South.
The metropolitan Tory vote is much smaller now.
t about them. The rich Tory vote is still all that really matters to him. And is still a huge proportion of their voters. Back at election time there were an awful lot of Lib Dem and Labour posters in windows in Holland Park and around Ken HS.
156651 said:
I would be interested to explore a property tax system actually based on house values, unlike the mess that is council tax where you can be paying less on your Kensington mansion than someone in a much cheaper and smaller property elsewhere. Our council tax is going to be £1,489.55. The 34m quid house linked below? £1507.70
https://www.zoopla.co.uk/for-sale/details/53896022...
And yes, when a couple in their twenties on a combined household salary approaching 200k are buying in SE London Z4 (for which we needed around 55k in cash), where are all the people on more normal salaries buying? They're not. I do wonder what happens when those in 2m quid houses look to sell in twenty years - who are they selling them to? I can't imagine we will be able to get a mortgage on a house like that in ten or fifteen years time even if we manage to pull together 2/3/4 hundred k in equity/savings - especially if we have kids.
I feel its because you're looking at it from the POV of a FTB. https://www.zoopla.co.uk/for-sale/details/53896022...
And yes, when a couple in their twenties on a combined household salary approaching 200k are buying in SE London Z4 (for which we needed around 55k in cash), where are all the people on more normal salaries buying? They're not. I do wonder what happens when those in 2m quid houses look to sell in twenty years - who are they selling them to? I can't imagine we will be able to get a mortgage on a house like that in ten or fifteen years time even if we manage to pull together 2/3/4 hundred k in equity/savings - especially if we have kids.
Edited by 156651 on Friday 6th March 10:12
In two properties time, it's entirely likely that you'll have getting on for half a million cash as a deposit, maybe more?
okgo said:
I feel its because you're looking at it from the POV of a FTB.
In two properties time, it's entirely likely that you'll have getting on for half a million cash as a deposit, maybe more?
Possibly, but what we have to remember is we are very fortunate to both have high salaries - if individuals and couples on more normal salaries cannot afford to buy (as a first time buyer you effectively need a (combined) salary of at least £80-100k plus £50kish in up front cash to buy in Zones 1 to 4), then surely there is a limited pool of individuals who could both buy in their twenties AND have the disposable income to pay down their mortgage / save quickly enough to then have 500k in equity/savings in twenty years? Particularly when you consider that if we have kids either we go down to one salary or we start paying thousands of pounds a month in childcare fees. In two properties time, it's entirely likely that you'll have getting on for half a million cash as a deposit, maybe more?
156651 said:
And yes, when a couple in their twenties on a combined household salary approaching 200k are buying in SE London Z4 (for which we needed around 55k in cash), where are all the people on more normal salaries buying? They're not. I do wonder what happens when those in 2m quid houses look to sell in twenty years - who are they selling them to? I can't imagine we will be able to get a mortgage on a house like that in ten or fifteen years time even if we manage to pull together 2/3/4 hundred k in equity/savings - especially if we have kids.
People on more normal salaries in London are buying new build flats with a 40% ‘discount’ from the Government.They’re the ones who could be in real trouble in five years time when/if they have to start paying back the interest on the 40% loan. Even if prices have rocketed again by then, who is going to buy their flat from them when they can get a brand new one in the next block along with a 40% discount?
I think you have been very sensible by today’s standards, buying a house at 2.5 times your joint household income. That’s how it was done in the ‘old days’ (1990s and prior). If more people had stuck to that, we wouldn’t be in the mess that we are now. Then again, a lot of people would have made a lot less money.
My only advice would be not to expect the market to snap back to ‘normal’. This is the new normal!
My first property wasn't in a very desirable area, nor was the 2nd one when we moved. If someone really wants to get on the property ladder, and 'work their way up' to a nice area it's entirely possible on 2 decent salaries, but I don't know many people that bought in the best area for their first property.
kingston12 said:
People on more normal salaries in London are buying new build flats with a 40% ‘discount’ from the Government.
They’re the ones who could be in real trouble in five years time when/if they have to start paying back the interest on the 40% loan. Even if prices have rocketed again by then, who is going to buy their flat from them when they can get a brand new one in the next block along with a 40% discount?
I think you have been very sensible by today’s standards, buying a house at 2.5 times your joint household income. That’s how it was done in the ‘old days’ (1990s and prior). If more people had stuck to that, we wouldn’t be in the mess that we are now. Then again, a lot of people would have made a lot less money.
My only advice would be not to expect the market to snap back to ‘normal’. This is the new normal!
Thanks. We could have saved for a few more years and stretched ourselves to an 800 / 900k / 1m property in a more desirable area, but the mortgage we have taken could be paid easily on one salary and so if we have kids, one person loses their job, one person decides the high pressure City life is not for them, we would do okay - not stuck in a 'mortgage prison'. I also think that 'luxury' flat developments available on H2B are more likely to drop in a recession than freehold houses (aren't building many more of them in London...). They’re the ones who could be in real trouble in five years time when/if they have to start paying back the interest on the 40% loan. Even if prices have rocketed again by then, who is going to buy their flat from them when they can get a brand new one in the next block along with a 40% discount?
I think you have been very sensible by today’s standards, buying a house at 2.5 times your joint household income. That’s how it was done in the ‘old days’ (1990s and prior). If more people had stuck to that, we wouldn’t be in the mess that we are now. Then again, a lot of people would have made a lot less money.
My only advice would be not to expect the market to snap back to ‘normal’. This is the new normal!
I don't expect house prices will drop significantly - it would impoverish too many people, and simply people are not going to cut their prices heavily to sell (unless of course everyone loses their jobs and the banks start mass repossessions...). I am not however confident of stratospheric price rises as per the last ten years!
156651 said:
Thanks. We could have saved for a few more years and stretched ourselves to an 800 / 900k / 1m property in a more desirable area, but the mortgage we have taken could be paid easily on one salary and so if we have kids, one person loses their job, one person decides the high pressure City life is not for them, we would do okay - not stuck in a 'mortgage prison'. I also think that 'luxury' flat developments available on H2B are more likely to drop in a recession than freehold houses (aren't building many more of them in London...).
I don't expect house prices will drop significantly - it would impoverish too many people, and simply people are not going to cut their prices heavily to sell (unless of course everyone loses their jobs and the banks start mass repossessions...). I am not however confident of stratospheric price rises as per the last ten years!
Not only aren’t they building many new houses in London, a lot of existing ones are being pulled down and replaced with flats.I don't expect house prices will drop significantly - it would impoverish too many people, and simply people are not going to cut their prices heavily to sell (unless of course everyone loses their jobs and the banks start mass repossessions...). I am not however confident of stratospheric price rises as per the last ten years!
New build flats make the worst possible investment, but the sheer volume of them being built affects the rest of the market as well.
I’m out in zone 6, but in one of the worst affected areas for new build towers. In the past five years, I’d estimate the price of houses has gone up by 25% while established flats have seen no price growth at all.
It makes some sort of sense - why pay £300k for a tatty 1-bed flat that needs work when you can pay less for a brand new one and move straight in? You sound like you think similarly to me, so you’d be considering rip-off ground rents and service charge, the interest on the 40% loan, the inability to sell etc., but most people just don’t think that way anymore.
kingston12 said:
Not only aren’t they building many new houses in London, a lot of existing ones are being pulled down and replaced with flats.
New build flats make the worst possible investment, but the sheer volume of them being built affects the rest of the market as well.
I’m out in zone 6, but in one of the worst affected areas for new build towers. In the past five years, I’d estimate the price of houses has gone up by 25% while established flats have seen no price growth at all.
It makes some sort of sense - why pay £300k for a tatty 1-bed flat that needs work when you can pay less for a brand new one and move straight in? You sound like you think similarly to me, so you’d be considering rip-off ground rents and service charge, the interest on the 40% loan, the inability to sell etc., but most people just don’t think that way anymore.
£2k+ a year leasehold charges put us off leasehold flats, plus the fact we get a driveway and a garden where we are and about 400 sq ft more for the same cash. I suppose if you're stretching yourself on the mortgage and deposit and don't have spare cash to do things like fix the boiler, or repair the roof, or w/e then a new build might be attractive. New build flats make the worst possible investment, but the sheer volume of them being built affects the rest of the market as well.
I’m out in zone 6, but in one of the worst affected areas for new build towers. In the past five years, I’d estimate the price of houses has gone up by 25% while established flats have seen no price growth at all.
It makes some sort of sense - why pay £300k for a tatty 1-bed flat that needs work when you can pay less for a brand new one and move straight in? You sound like you think similarly to me, so you’d be considering rip-off ground rents and service charge, the interest on the 40% loan, the inability to sell etc., but most people just don’t think that way anymore.
156651 said:
Thankyou4calling said:
It’s ridiculous to say £1.5 million “Only” gets you a 2 up 2 down.
In the vast majority of London half of that will get you a nice family house.
I accept it won’t be in Kensington but plenty of decent areas a bit further out.
London property is expensive but you don’t have to spend £1.5 mill.
I believe there was a poster , Bussolini ? Who recently bagged a 3 bed for £500,000 so it’s emminently possible.
That was me, name changes every now and again.In the vast majority of London half of that will get you a nice family house.
I accept it won’t be in Kensington but plenty of decent areas a bit further out.
London property is expensive but you don’t have to spend £1.5 mill.
I believe there was a poster , Bussolini ? Who recently bagged a 3 bed for £500,000 so it’s emminently possible.
I am sure Mr Clapham wouldn't dream of living in SE London. It is certainly not the case that an average family is living in an average 1.5m to 2m house in London though.
How does one even afford something like that unless you are a) spectacularly well paid or independently wealthy or b) benefitted from enormous (unearned and untaxed) house price inflation.
Edited by 156651 on Friday 6th March 08:30
156651 said:
Possibly, but what we have to remember is we are very fortunate to both have high salaries - if individuals and couples on more normal salaries cannot afford to buy (as a first time buyer you effectively need a (combined) salary of at least £80-100k plus £50kish in up front cash to buy in Zones 1 to 4), then surely there is a limited pool of individuals who could both buy in their twenties AND have the disposable income to pay down their mortgage / save quickly enough to then have 500k in equity/savings in twenty years? Particularly when you consider that if we have kids either we go down to one salary or we start paying thousands of pounds a month in childcare fees.
Your salary a bit above average in the city isn't it? Nobody is doing it straight out of the gate, that's the point I made, a couple of properties in, and it will start to look quite straight forward to get into a 7 figure house I'd have thought. 60% of people buying in London have help to buy their first place so that's how its done. Myself and wife both bought places about 8 years ago, I didn't have help, just had a partner and we saved, and the place didn't cost much. My wife had an inheritance and earned decent money. Fast forward to now, we're early 30's and have 400k in cash upon selling this flat (I sold mine last year), and 300 of that is equity from two 1 bed flats. Means 7 figure house is actually quite a low multiplier of salary. We work in tech, I think the city forgets there are s
t loads of well paid jobs outside banking and law these days, £200k HHI can be earned by two people selling advertising at 28 years old, I know because I know plenty who did/do just that. Obviously the difference is that in Law/Banking the chance to earn hundreds of thousands is there, not so much in other industries, but you get my point.What you have mentioned is why people have kids later in London, so they can get on top of things before nursery fees (about £1200-1400 per month per kid), also people try and stagger it so only one is there at a time.
156651 said:
I would be interested to explore a property tax system actually based on house values, unlike the mess that is council tax where you can be paying less on your Kensington mansion than someone in a much cheaper and smaller property elsewhere. Our council tax is going to be £1,489.55. The 34m quid house linked below? £1507.70
https://www.zoopla.co.uk/for-sale/details/53896022...
And yes, when a couple in their twenties on a combined household salary approaching 200k are buying in SE London Z4 (for which we needed around 55k in cash), where are all the people on more normal salaries buying? They're not. I do wonder what happens when those in 2m quid houses look to sell in twenty years - who are they selling them to? I can't imagine we will be able to get a mortgage on a house like that in ten or fifteen years time even if we manage to pull together 2/3/4 hundred k in equity/savings - especially if we have kids.
Why are you so angry about the system? I'm not saying you are wrong per se, but you are making the choice to buy at roughly twice your household income, good for you, I am sure its a considered choice, but why?https://www.zoopla.co.uk/for-sale/details/53896022...
And yes, when a couple in their twenties on a combined household salary approaching 200k are buying in SE London Z4 (for which we needed around 55k in cash), where are all the people on more normal salaries buying? They're not. I do wonder what happens when those in 2m quid houses look to sell in twenty years - who are they selling them to? I can't imagine we will be able to get a mortgage on a house like that in ten or fifteen years time even if we manage to pull together 2/3/4 hundred k in equity/savings - especially if we have kids.
Edited by 156651 on Friday 6th March 10:12
I think you are fortunate to be able to do make that choice, many dont have that luxury, but it is a choice. Couples with an income of 50k each, and the same deposit could buy the same home as you. Is it hugely unusual to have an income of £50k each in london and surrounding areas for a couple at the age of buying a family house? Fortunate, but not unusual.
Edited by gibbon on Friday 6th March 14:04
gibbon said:
Why are you so angry about the system? I'm not saying you are wrong per se, but you are making the choice to buy at roughly twice your household income, good for you, I am sure its a considered choice, but why?
I think you are fortunate to be able to do make that choice, many dont have that luxury, but it is a choice. Couples with an income of 50k each, and the same deposit could buy the same home as you. Is it hugely unusual to have an income of £50k each in london and surrounding areas for a couple at the age of buying a family house? Fortunate, but not unusual.
I am not angry at the system - but I think it is clear that the housing market in London does not work well for most. Our purchase is a considered choice, partly because we didn't have the £150k cash we would need to buy at 5x income, partly because we don't want to be tied down to an enormous mortgage. We are very aware we are very fortunate. Joint income of 100k is not particularly unusual, but when you consider the average income in London is 36k, you can see that is still a minority, and how large swathes of society simply cannot get on the housing ladder - and even those earning more than that will find it tricky to save the vast sums required for a deposit and fees etc. whilst paying very high rent. I think you are fortunate to be able to do make that choice, many dont have that luxury, but it is a choice. Couples with an income of 50k each, and the same deposit could buy the same home as you. Is it hugely unusual to have an income of £50k each in london and surrounding areas for a couple at the age of buying a family house? Fortunate, but not unusual.
Edited by gibbon on Friday 6th March 14:04
100k combined puts you in the top 5% of UK households (not sure what the figure is for London).
Edited by 156651 on Friday 6th March 14:19
People on combined incomes of 50-100k mostly rent in Central London then move a bit further out when they decide to buy.
A high percentage of people will never get even close to 100k combined, let alone 200k...and your are in your 20's...and are moaning about the system? 200k is a take home of about 10k per month isn't it? Sounds like you will have a very comfortable life paying down 90% of 500k house.
A high percentage of people will never get even close to 100k combined, let alone 200k...and your are in your 20's...and are moaning about the system? 200k is a take home of about 10k per month isn't it? Sounds like you will have a very comfortable life paying down 90% of 500k house.
156651 said:
I am not angry at the system - but I think it is clear that the housing market in London does not work well for most. Our purchase is a considered choice, partly because we didn't have the £150k cash we would need to buy at 5x income, partly because we don't want to be tied down to an enormous mortgage. We are very aware we are very fortunate. Joint income of 100k is not particularly unusual, but when you consider the average income in London is 36k, you can see that is still a minority, and how large swathes of society simply cannot get on the housing ladder - and even those earning more than that will find it tricky to save the vast sums required for a deposit and fees etc. whilst paying very high rent.
100k combined puts you in the top 5% of UK households (not sure what the figure is for London).
I cant really argue with any of that, i was simply intrigued at your rationale.100k combined puts you in the top 5% of UK households (not sure what the figure is for London).
Edited by 156651 on Friday 6th March 14:19
I wonder, if we have say a 25% growth in house price in the next 5 years (not HUGELY above inflation), if you would be happy paying some kind of 'income' tax on your sale price should you decide you want to move house for whatever reason, being that the corresponding house you move to will have likely increased by the same amount.
RanchoGrande said:
People on combined incomes of 50-100k mostly rent in Central London then move a bit further out when they decide to buy.
A high percentage of people will never get even close to 100k combined, let alone 200k...and your are in your 20's...and are moaning about the system? 200k is a take home of about 10k per month isn't it? Sounds like you will have a very comfortable life paying down 90% of 500k house.
We have it pretty easy, not going to lie. I'm not really moaning about my situation though, quite happy with what we are buying and the choices we have made. It really does make you wonder about how sustainable it is though. A high percentage of people will never get even close to 100k combined, let alone 200k...and your are in your 20's...and are moaning about the system? 200k is a take home of about 10k per month isn't it? Sounds like you will have a very comfortable life paying down 90% of 500k house.
I bought my first house in London with my wife, aged 26, a two. bed terrace.
When in our 30’s we wanted something bigger we were faced with the choice that many have to make .. move to Beds/Cambs etc and commute or get out completely. We chose the latter.
Cheaper property/better quality of life and now in my early 50’s am completely mortgage free. Ok we chose lower salaries, less career development/promotion prospects but we gained our lives back. In hindsight the best decision we ever made
When in our 30’s we wanted something bigger we were faced with the choice that many have to make .. move to Beds/Cambs etc and commute or get out completely. We chose the latter.
Cheaper property/better quality of life and now in my early 50’s am completely mortgage free. Ok we chose lower salaries, less career development/promotion prospects but we gained our lives back. In hindsight the best decision we ever made
Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff