How far will house prices fall [volume 5]

[SteadyAsSheGoes]

untakenname said:

SteadyAsSheGoes said:

I've heard some say that these schemes help to prop up an over-inflated housing market, but I think prices are what they are, there is a lot of money out there. With couples now generally both working, lending multiples being what they are, and rock bottom interest rates, I don't see there being any significant crash in house prices. Yes a recession is bound to impact jobs and demand but as long as many people have decent jobs and it looks cheaper than renting long term then people will continue to be able to afford to buy at current levels or close to.

I'm guessing you got in at the start of the help to buy scheme so house prices have appreciated across the board, anyone late 2015 onwards is going to most likely be in negative equity and with both couples needing to be in work to afford the mortgage it makes it even more precarious when one (or both) is made unemployed.

Help to buy also enabled those who couldn't save/budget or afford the property to get on the ladder, people are having trouble just paying the interest on the 20% (or 40% in London) that kicks in five years into scheme.
The fact that it tracks RPI means it can fluctuate massively, it's at one percent now but was four percent in 2018 and will rise again once the world gets back to normal.

Well I bought the HTB in October 2014 for £295k, sold September 2015 for £327.5k. In fairness I've been lucky that there has been a rising market but I do know the market in the area well and there is always a judgement to be made as to when to buy and sell. I didn't intend to sell so soon but did want to get out before 5 years when the repayments on the 20% loan kicked in.

Anyhow, Zoopla now values the house at £409-452k which seems fairly realistic, I would have made somewhat more if I'd stayed there.

[SteadyAsSheGoes]

kingston12 said:

SteadyAsSheGoes said:

I've heard some say that these schemes help to prop up an over-inflated housing market, but I think prices are what they are, there is a lot of money out there.

Genuine question then. If house prices are high because ‘there is a lot of money out there’, what effect do you think that the government pumping extra billions into the market will do to those prices?

I guess this stimulus will go some way towards offsetting the deflationary effects of a CV induced recession.

[princeperch]

ooid said:

That's really lovely.

I would actually be tempted by that myself if I were ten years older than I am. It's 5 mins from my parents in bengeo and a really nice road.

[franki68]

SteadyAsSheGoes said:

Regarding buying schemes including Help To Buy and shared ownership, I've heard it mentioned numerous times in this thread that these schemes only benefit house builders, and that new builds are overpriced, inferior to existing housing stock, etc. I have to disagree with that consensus, I have experience of these schemes benefitting me personally and helped me move up the housing ladder.

About 10 years ago I was privately renting (ex council house), and was able to not spend anything and save up enough to buy a shared ownership 2 bed semi off-plan new build via the local housing association. Beside the fact the I made some equity via price inflation, it was quite significantly cheaper than renting on the private market so I was able to continue saving as well. Several years later I was able to sell my share and use the proceeds to buy a Help To Buy 4 bed detached off plan new build with my then partner. Due to us spliting I then sold this 11 months later (at an increase of £32.5k on the purchase price) to solely own a 150 year old "doer-upper" 2 bed cottage in a village (had a decent plot with a large detached garage). Then last year I sold this and bought a 4 bed detached in a somewhat cheaper area, I now have a decent amount of equity.

I've heard some say that these schemes help to prop up an over-inflated housing market, but I think prices are what they are, there is a lot of money out there. With couples now generally both working, lending multiples being what they are, and rock bottom interest rates, I don't see there being any significant crash in house prices. Yes a recession is bound to impact jobs and demand but as long as many people have decent jobs and it looks cheaper than renting long term then people will continue to be able to afford to buy at current levels or close to.

It unquestionably works helping people step onto the property ladder,the problem is according to a report I read a few weeks ago ,is that the likes of Taylor Wimpey Etc overpriced their houses and well over half of people who used the scheme are currently in negative equity.

[okgo]

ooid said:

That's really lovely.

It needs another £50k-75k spent on it probably though. Redecorated, new kitchen, etc.

[SteadyAsSheGoes]

UpBeats said:

You just described a pyramid scheme. You were lucky that it had longer to run. Those joining now will be pissed in a few years. The Govt cannot make what happened to you go on forever unless we go hyper inflation.

Why just say that Help to Buy is a pyramid scheme, why not the housing market more widely? Why not the whole of capitalism? New money has to be constantly created through debt to expand the money supply exponenially, to pay back the previous debt, etc.

[SteadyAsSheGoes]

franki68 said:

It unquestionably works helping people step onto the property ladder,the problem is according to a report I read a few weeks ago ,is that the likes of Taylor Wimpey Etc overpriced their houses and well over half of people who used the scheme are currently in negative equity.

I've not seen that, hasn't happened in the area I was in. As mentioned, I bought a HTB place in 2014 at £295k, it's now worth £400k+

[SteadyAsSheGoes]

kingston12 said:

SteadyAsSheGoes said:

Regarding buying schemes including Help To Buy and shared ownership, I've heard it mentioned numerous times in this thread that these schemes only benefit house builders, and that new builds are overpriced, inferior to existing housing stock, etc. I have to disagree with that consensus, I have experience of these schemes benefitting me personally and helped me move up the housing ladder.

It’s good to hear that it has worked for you.

There are two factors that are key to HTB working for buyers in my opinion:

1. House prices must rise sharply throughout the period of the initial loan.

2. The developer has to have asking prices at near to the underlying market level for existing equivalent housing stock, not just 20/40% higher because of the HTB bung.

In my area neither of these things have happened and HTB will be a time bomb for a lot of buyers.

HTB is just like any housing market stimulus, it will work for so long to increase prices, but then more will be required if we want prices to keep rising.

As long as there is no recession then house prices tend to always rise in my experience, in the south of England at least.

The new builds like the one I bought do seem to sell above the prices of similar types of older properties in the wider area, but there is demand for them at the prices they've sold for. Second owners who aren't doing HTB seem prepared to pay prices as well.

[kingston12]

SteadyAsSheGoes said:

kingston12 said:

SteadyAsSheGoes said:

I've heard some say that these schemes help to prop up an over-inflated housing market, but I think prices are what they are, there is a lot of money out there.

Genuine question then. If house prices are high because ‘there is a lot of money out there’, what effect do you think that the government pumping extra billions into the market will do to those prices?

I guess this stimulus will go some way towards offsetting the deflationary effects of a CV induced recession.

Indeed, so helping to prop up the market then?

Anyway, as I say I’m glad it worked out for you and I hope too many others don’t get burned.

[kingston12]

franki68 said:

It unquestionably works helping people step onto the property ladder,the problem is according to a report I read a few weeks ago ,is that the likes of Taylor Wimpey Etc overpriced their houses and well over half of people who used the scheme are currently in negative equity.

Let’s not forget the poster-boy of HTB (I’m sure the government would prefer we did)

https://www.theguardian.com/business/2018/jan/09/p...

[SteadyAsSheGoes]

kingston12 said:

Indeed, so helping to prop up the market then?

Anyway, as I say I’m glad it worked out for you and I hope too many others don’t get burned.

To prop up the economy generally as well as the housing market I would say.

There seems to be a political consensus for keynesian economic policy now, rightly or wrongly. I can see the thinking behind it if stimulates more growth and inflation than there would have otherwise been, hopefully everyone's a winner.

[franki68]

kingston12 said:

Let’s not forget the poster-boy of HTB (I’m sure the government would prefer we did)

https://www.theguardian.com/business/2018/jan/09/p...

He not only built every house himself but he actually made all the bricks himself .

[kingston12]

SteadyAsSheGoes said:

As long as there is no recession then house prices tend to always rise in my experience, in the south of England at least.

They do, but the stimulus has to continue for that to happen. In the old days, increasing salaries led to increasing prices, then it was dual income households, then deregulation in the mortgage market.

Those all took the market up to a certain level, so then we had to rely on ‘Bank of Mum & Dad’, shared ownership and Help to Buy.

What’s next is the question. I can’t see much wage inflation anytime soon, so we’ll need more government stimulus to make it happen.

SteadyAsSheGoes said:

The new builds like the one I bought do seem to sell above the prices of similar types of older properties in the wider area, but there is demand for them at the prices they've sold for. Second owners who aren't doing HTB seem prepared to pay prices as well.

This is the part that interests me. I can understand paying a bit of a premium for a new build house, but not why the next buyer is prepared to pay a premium for a ‘second hand’ house when new ones with the HTB ‘discount’ are presumably still available instead.

Edited by kingston12 on Thursday 2nd July 14:29

[kingston12]

franki68 said:

kingston12 said:

Let’s not forget the poster-boy of HTB (I’m sure the government would prefer we did)

https://www.theguardian.com/business/2018/jan/09/p...

He not only built every house himself but he actually made all the bricks himself .

That’s right and the taxpayer was happy to pay him for that work.

[franki68]

kingston12 said:

That’s right and the taxpayer was happy to pay hime for that work.

and so they should.

[kingston12]

SteadyAsSheGoes said:

kingston12 said:

Indeed, so helping to prop up the market then?

Anyway, as I say I’m glad it worked out for you and I hope too many others don’t get burned.

To prop up the economy generally as well as the housing market I would say.

There seems to be a political consensus for keynesian economic policy now, rightly or wrongly. I can see the thinking behind it if stimulates more growth and inflation than there would have otherwise been, hopefully everyone's a winner.

Totally agree. The total cost of HTB looked massive to save one industry when it was introduced, but as you say the housing market is too big to fail now without wider impact.

HTB will end up looking tiny to the similar economy-wide schemes that have been used to respond to CV19 - furlough and self-employed support, massive extra tranches of QE etc.

It will be interesting to see where it all ends, but I don’t think it will be in my lifetime.

[John Locke]

House hunting now in East Anglia, moving upmarket. We’re finding asking prices really firm, even on property which has been on sale for several months; we honestly don’t know how to bid.

[franki68]

John Locke said:

House hunting now in East Anglia, moving upmarket. We’re finding asking prices really firm, even on property which has been on sale for several months; we honestly don’t know how to bid.

There has been a pent up demand for houses due to the lockdown creating a mini bubble,I personally think that will burst as we see the economic consequences of the impact of Covid 19.

[menousername]

SteadyAsSheGoes said:

Well I bought the HTB in October 2014 for £295k, sold September 2015 for £327.5k. In fairness I've been lucky that there has been a rising market but I do know the market in the area well and there is always a judgement to be made as to when to buy and sell. I didn't intend to sell so soon but did want to get out before 5 years when the repayments on the 20% loan kicked in.

Anyhow, Zoopla now values the house at £409-452k which seems fairly realistic, I would have made somewhat more if I'd stayed there.

If you sell still owing HTB repayments doesnt the Govt take the corresponding equity gain?

[menousername]

franki68 said:

There has been a pent up demand for houses due to the lockdown creating a mini bubble,I personally think that will burst as we see the economic consequences of the impact of Covid 19.

I think not so much pent up demand but sellers cant believe their house isnt worth / going to achieve what their neighbours got in 2016/2017.