How far will house prices fall [volume 5]
Discussion
I think lots of people need a dose of reality and understanding as to what has been happening in the last 12/months...
BREXIT uncertainty and a worldwide pandemic have hugely affected peoples ability/desire to buy and sell houses. Suddenly a huge backlog of stock and customers are released onto the market and demand is outstripping supply and so we are seeing people talking up the market.
The only clear indicator of where the market is going for me is the banks LTV mortgages. There are isolated examples of 10% but all the qualified people I know and speak to who have direct access to banks, underwriters and mortgage professionals say it's moving towards a 20% - 40% industry and severely limiting the equity % you can release.
Everything else I hear is waffle and blind optimism; 20% - 40% LTV is a self-fulfilling prophecy. It tells you where the market is going...buyer beware.
BREXIT uncertainty and a worldwide pandemic have hugely affected peoples ability/desire to buy and sell houses. Suddenly a huge backlog of stock and customers are released onto the market and demand is outstripping supply and so we are seeing people talking up the market.
The only clear indicator of where the market is going for me is the banks LTV mortgages. There are isolated examples of 10% but all the qualified people I know and speak to who have direct access to banks, underwriters and mortgage professionals say it's moving towards a 20% - 40% industry and severely limiting the equity % you can release.
Everything else I hear is waffle and blind optimism; 20% - 40% LTV is a self-fulfilling prophecy. It tells you where the market is going...buyer beware.
Turfy said:
I think lots of people need a dose of reality and understanding as to what has been happening in the last 12/months...
BREXIT uncertainty and a worldwide pandemic have hugely affected peoples ability/desire to buy and sell houses. Suddenly a huge backlog of stock and customers are released onto the market and demand is outstripping supply and so we are seeing people talking up the market.
The only clear indicator of where the market is going for me is the banks LTV mortgages. There are isolated examples of 10% but all the qualified people I know and speak to who have direct access to banks, underwriters and mortgage professionals say it's moving towards a 20% - 40% industry and severely limiting the equity % you can release.
Everything else I hear is waffle and blind optimism; 20% - 40% LTV is a self-fulfilling prophecy. It tells you where the market is going...buyer beware.
Agreed. A few of my clients who have recently moved/remortgaged have really had to jump through the hoops to satisfy the underwriters. And that's with 60%+ equity and very low multiples of income.BREXIT uncertainty and a worldwide pandemic have hugely affected peoples ability/desire to buy and sell houses. Suddenly a huge backlog of stock and customers are released onto the market and demand is outstripping supply and so we are seeing people talking up the market.
The only clear indicator of where the market is going for me is the banks LTV mortgages. There are isolated examples of 10% but all the qualified people I know and speak to who have direct access to banks, underwriters and mortgage professionals say it's moving towards a 20% - 40% industry and severely limiting the equity % you can release.
Everything else I hear is waffle and blind optimism; 20% - 40% LTV is a self-fulfilling prophecy. It tells you where the market is going...buyer beware.
Sheepshanks said:
cml24 said:
Presumably your house would not be now affordable if you were in the position you were 34 years ago? If that makes sense.
It wouldn't be possible if my job was the same so salary just adjusted up to today's level - especially if it was the same position for my wife, who didn't work when the kids were small and then only ever had a part-time Civil Service admin job.That same effect means few of the houses - reasonable size 3 & 4 bed detached - in the road sell to young couples these days. The last two that sold went to an older couple and a single old bloke - both downsizing and moving to be near to family.
When they first moved there (late 70's) they will have been approx. 30 years old and every house had young families in it. Today only about 10% have young families (with kids of same age as then but parents 10-15 years older than they were in 70s), with about the same percentage of houses still having the same occupiers 40 years later. Although in my mid 40s now I can afford it, there's no way I would have been able to do so at their age and also no way my parents would have been able to if they were in the same position today.
Interestingly, values of similar properties have stagnated in recent times yet smaller bungalows opposite have now reached the same value and nearby townhouses have risen from a lower base value. Their house is early 70s build with little scope for improvement or alteration, unfortunately it's appeal relative to the competition diminishes as time goes on.
TheFungle said:
This.
My wife and I have a good PAYE household income and with a 10% deposit would be able to borrow about £650k.
In a town with a buoyant market (Harrogate) it means that to truly upgrade from the house we are in we have almost no chance. Even if we could move our existing house in an average postcode to a desirable postcode it would require us spending at least £500k.
It feels crazy that with such a strong income we have very little chance of moving up the ladder unless we really, really stretch ourselves.
It isn't as strong as you thought?My wife and I have a good PAYE household income and with a 10% deposit would be able to borrow about £650k.
In a town with a buoyant market (Harrogate) it means that to truly upgrade from the house we are in we have almost no chance. Even if we could move our existing house in an average postcode to a desirable postcode it would require us spending at least £500k.
It feels crazy that with such a strong income we have very little chance of moving up the ladder unless we really, really stretch ourselves.
This is a bit like when people go out looking for houses and can't find what they want. They won't confront the elephant in the room which is that their budget is too low/expectations too high. Same for salary, the fact is, whatever way you want to look at it, there are tens of thousands of houses that are being bought and sold at the level you mention and of course far far higher, ergo, the money exists somewhere.
Two grads going into professional roles in finance or law in London are going to be able to borrow £500k at 23 years old. I think folk have perhaps forgotten how many people earn lots of money out there. And then when you factor in all of the BOMAD and this that and the other you have your answer.
Do you feel for us in London? To move from my terraced house to a detached one with another 1k sqft and a large garden I'd need to find another 2 million. No, I didn't think you did. Everyone has their problems and it doesn't matter where you live.
SteadyAsSheGoes said:
It is something of a mystery to me how prices in some parts of the country (namely London, the surrounding areas and certain other hot spots) are quite so high.
It does still surprise me at times quite how much money some people make to be fair, but on the face of it, it doesn't seem to account for some of the sky high prices, at least in my mind. It does seems that the large inheritance is now priced in, such that it is hard to get particularly far on the ladder without it, for most people.
Totally agree, my mum worked with a lot of middle class women who as soon as they started work after university were living in the nice Victorian house with lots of original features on their own. As soon as they got married they then moved into the £1 million+ house with their husbands despite being on maybe £50k a year. As you say the sums just do not add up, even if you never went out and lived on Tesco Value food there is no way you can save enough to buy that house on that salary.It does still surprise me at times quite how much money some people make to be fair, but on the face of it, it doesn't seem to account for some of the sky high prices, at least in my mind. It does seems that the large inheritance is now priced in, such that it is hard to get particularly far on the ladder without it, for most people.
I would imagine that the majority of them were given the £500K inheritance from granny long before she passed away and hubby got the same.
If you are not receiving the same then there is no way you can compete, not many people could save £500k in their lifetime.
I also used to work with a middle class girl fresh out of uni who was earning maybe £30K a year. I was looking at houses online in the £400K range and she was saying how she could never live in one of those as they looked council. She proceeded to show me the houses she would be prepared to live in which were all over £1 million. It's a totally different world when the amount you earn has no bearing on the house you are going to live in due to family money.
Edited by anonymous-user on Wednesday 22 July 14:59
okgo said:
It isn't as strong as you thought?
This is a bit like when people go out looking for houses and can't find what they want. They won't confront the elephant in the room which is that their budget is too low/expectations too high.
Mathematically what you say is true, but it does make me think that the salary percentile calculators underestimate how much people really earn.This is a bit like when people go out looking for houses and can't find what they want. They won't confront the elephant in the room which is that their budget is too low/expectations too high.
Per the IFS, £100k household income puts you in the top 5% of the UK. £100k allows you to borrow £500k and, at 80% LTV, live in a £625k house if you can save up £125k plus costs (which you should be able to over a reasonable timeframe).
Is that £625k house going to be in the most expensive 5% of the country? Of course not. It's probably not in the most expensive 5% of the town. Hence a lot of people feel that they are a lot further down the housing ladder than they should be based on their income.
TheFungle said:
This.
My wife and I have a good PAYE household income and with a 10% deposit would be able to borrow about £650k.
In a town with a buoyant market (Harrogate) it means that to truly upgrade from the house we are in we have almost no chance. Even if we could move our existing house in an average postcode to a desirable postcode it would require us spending at least £500k.
It feels crazy that with such a strong income we have very little chance of moving up the ladder unless we really, really stretch ourselves.
This doesn't make sense - your household income is somewhere in the region of £150k p.a. and you a) can't raise more than 10% deposit in North Yorks (where's all your money going?) and b) don't want to "stretch" to a c.£1,500 per month mortgage (£500k)?My wife and I have a good PAYE household income and with a 10% deposit would be able to borrow about £650k.
In a town with a buoyant market (Harrogate) it means that to truly upgrade from the house we are in we have almost no chance. Even if we could move our existing house in an average postcode to a desirable postcode it would require us spending at least £500k.
It feels crazy that with such a strong income we have very little chance of moving up the ladder unless we really, really stretch ourselves.
Joey Deacon said:
SteadyAsSheGoes said:
It is something of a mystery to me how prices in some parts of the country (namely London, the surrounding areas and certain other hot spots) are quite so high.
It does still surprise me at times quite how much money some people make to be fair, but on the face of it, it doesn't seem to account for some of the sky high prices, at least in my mind. It does seems that the large inheritance is now priced in, such that it is hard to get particularly far on the ladder without it, for most people.
Totally agree, my mum worked with a lot of middle class women who as soon as they started work after university were living in the nice Victorian house with lots of original features on their own. As soon as they got married they then moved into the £1 million+ house with their husbands despite being on maybe £50k a year. As you say the sums just do not add up, even if you never went out and lived on Tesco Value food there is no way you can save enough to buy that house on that salary.It does still surprise me at times quite how much money some people make to be fair, but on the face of it, it doesn't seem to account for some of the sky high prices, at least in my mind. It does seems that the large inheritance is now priced in, such that it is hard to get particularly far on the ladder without it, for most people.
I would imagine that the majority of them were given the £500K inheritance from granny long before she passed away and hubby got the same.
If you are not receiving the same then there is no way you can compete, not many people could save £500k in their lifetime.
I also used to work with a middle class girl fresh out of uni who was earning maybe £30K a year. I was looking at houses online in the £400K range and she was saying how she could never live in one of those as they looked council. She proceeded to show me the houses she would be prepared to live in which were all over £1 million. It's a totally different world when the amount you earn has no bearing on the house you are going to live in due to family money.
On the other side of the coin, I know quite few people, generally younger than me, who seemingly have very unrealistic expectations (with regards to both career and house). The kind who think they are something a little bit posh and special because they went to a half decent uni and mum and dad made some money once by buying property a long time ago. I would personally consider some of these to be a bit snobby about where they want to live. Maybe some family money does come through for some of them, but there seems to be more high expectation graduates now than there is high paying career positions for them to fill. Not sure the bank of mum and dad can bankroll all of them, but who knows?
NickCQ said:
Mathematically what you say is true, but it does make me think that the salary percentile calculators underestimate how much people really earn.
Per the IFS, £100k household income puts you in the top 5% of the UK. £100k allows you to borrow £500k and, at 80% LTV, live in a £625k house if you can save up £125k plus costs (which you should be able to over a reasonable timeframe).
Is that £625k house going to be in the most expensive 5% of the country? Of course not. It's probably not in the most expensive 5% of the town. Hence a lot of people feel that they are a lot further down the housing ladder than they should be based on their income.
True, but there is a big difference between a £100k earning household straight out of university and one earning the same at, say, age 45. The latter are the group that traditionally would have lived in a nicer house, mainly because they’ve paid down one mortgage already and are getting ready to start on a second.Per the IFS, £100k household income puts you in the top 5% of the UK. £100k allows you to borrow £500k and, at 80% LTV, live in a £625k house if you can save up £125k plus costs (which you should be able to over a reasonable timeframe).
Is that £625k house going to be in the most expensive 5% of the country? Of course not. It's probably not in the most expensive 5% of the town. Hence a lot of people feel that they are a lot further down the housing ladder than they should be based on their income.
The main factor now is when BOMAD comes into view. If it is for the new graduates, they might catch up with the 45 year old house hold immediately. If it is for the older household, they might be able to choose no mortgage on their new house, or push to an even bigger one.
the-photographer said:
TheFungle said:
Flooble said:
Bullet-Proof_Biscuit said:
Another statistic; My broker just told me he is convinced I can borrow £280k if I put 10% down (62k basic paye).
Beans on toast until Autumn it is! Hopefully a probate/period project becomes available in the area where I'm shopping (Hampshire).
Just wondering how far they'll fall in the meantime!
This is the thing that confuses me completely. What am I missing? Beans on toast until Autumn it is! Hopefully a probate/period project becomes available in the area where I'm shopping (Hampshire).
Just wondering how far they'll fall in the meantime!
Maybe I am driving this incorrectly, £60,000 only get you £230,000 with the Halifax (as a new home)
Edited by the-photographer on Wednesday 22 July 07:42
Update; Currently looking at a bridging loan as I am considering houses so bad the banks don't consider them 'liveable'..
I'll spare room the empty beds with some minions to cover it, don't worry everyone
In essence, refurbishments are the only way I see a viable way up out the sewer to achieve what's being discussed above. Although owning a company seems to be the success route for many I know, shame I'm too lazy and laid back for that jive, besides, I like fixing things...
off topic slightly, but if this takes off, whats that going to do to prices in areas people take advantage of double storey extensions? i'm thinking only inner city houses would be worth converting. Not to mention how odd a house on your street with a double storey extension would look.
https://www.bbc.co.uk/news/business-53492191
https://www.bbc.co.uk/news/business-53492191
I periodically say something similar on this thread, so apologies, but I really think you have to look at houses in terms of funding and not outright 'value' and numbers, and comparing 'family' homes on single average incomes is archaic at best.
If you have a relatively stable income, why are people adverse to borrowing money at below inflation to buy a hard asset that hugely effects their quality of life?
Within reason, i will borrow all i can at below inflation please, its a long game, but fairly proven, yes there will be bumps in the road but housing is not a short term bet, find somewhere you love, buy it, enjoy life.
I cannot think of a single other way out of where we find ourselves in terms of the global economy other than medium to gentle, controlled but continuous inflation. Why would houses be exempt from this?
I remember when £2 a pint was expensive, then it was £3, then £4, now it is £6, and im still in my 30s.
If you have a relatively stable income, why are people adverse to borrowing money at below inflation to buy a hard asset that hugely effects their quality of life?
Within reason, i will borrow all i can at below inflation please, its a long game, but fairly proven, yes there will be bumps in the road but housing is not a short term bet, find somewhere you love, buy it, enjoy life.
I cannot think of a single other way out of where we find ourselves in terms of the global economy other than medium to gentle, controlled but continuous inflation. Why would houses be exempt from this?
I remember when £2 a pint was expensive, then it was £3, then £4, now it is £6, and im still in my 30s.
Edited by gibbon on Wednesday 22 July 18:50
s1962a said:
off topic slightly, but if this takes off, whats that going to do to prices in areas people take advantage of double storey extensions? i'm thinking only inner city houses would be worth converting. Not to mention how odd a house on your street with a double storey extension would look.
https://www.bbc.co.uk/news/business-53492191
More aspiration than reality. I can't see many houses having foundations to cope with two more storeys (compared with a straight loft conversion that adds no actual mass to the property)https://www.bbc.co.uk/news/business-53492191
Regarding incomes, you can see the ONS values.
https://www.gov.uk/government/statistics/percentil...
But they have even done the crunching for us
https://www.ons.gov.uk/peoplepopulationandcommunit...
So in the expensive parts of the country, where the high salaries are (by and large) you still have extreme ratios compared with mortgage offers. Hence if the only way to build equity is paying off the mortgage it's going to be interesting for people to climb the ladder.
Flooble said:
More aspiration than reality. I can't see many houses having foundations to cope with two more storeys (compared with a straight loft conversion that adds no actual mass to the property.
It would be a 2 storey extension to the rear (possibly side) of a property already 2 or more stories high.It’s not to increase the height of your current house by 2 additional stories.......
I was pretty confused thinking loads of people have 2 storey extensions...until I realised what they thought it meant.
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