How far will house prices fall [volume 5]

[Shnozz]

Carl_Manchester said:

Nick, the only indicator i am watching is unemployment.

Viewings, availability of credit, inflation, they are indicators but i would just encourage everyone in the thread to keep and eye mainly on unemployment. This has 1990 written all over it.

I am bearish for that same reason and think its irrelevant to a large extent looking at the current climate whilst it remains artificially supported. That is gradually being removed and we are seeing unemployment slowly rise rather than a great swathe all finding themselves out of work at once. The question will be of course how the government maintain artificial incomes by way of schemes outside of UC.

My fear is that we might see an increase in wealth divide brought about by the 85% who remain in employment, and enjoying low interest rates, to buy up the property that comes to market in distressed circumstances. The IO interest rate shown below shows how cheap that could be IF you qualify for the loans by retaining income levels. The tax burden (if not through a ltd) was initially viewed as prohibitive with BTLers but seemingly now isn't considered the nail in the coffin, or many more are structured through a business.

I don't think the current circumstances have much relationship with reality though to draw any real views as to whether prices might be sustained. One could argue these schemes since 2008 have been aplenty that there is never a "reality" with intervention on HTB, lending multiples, historically low rates etc etc, but I really feel the current climate is so removed from any reality its pointless to draw any sort of sense from what is happening to any asset class.

[MX6]

okgo said:

MX6 said:

No doubt. I suppose I'm picking on this type of house because having owned and lived in one, I think they are generally very humble houses for the kind of money mentioned, quite over inflated in my view. I found the noise through the walls intrusive and the space inadequate for any sort of family living. To buy for £400k+, your probably going to be what can be described as a middle class professional, you're going to have to have quite low expectations of what is a decent house to live in. I mean, there are plenty of folks on benefits in social housing, in Hert's say, that is a lot more generous space-wise. But London I guess.

A bit like my post earlier in this thread. I imagine the spec and work done on these sorts of properties in London makes them look unrecognisable from their counterparts further away.

Barnes is full of these https://www.rightmove.co.uk/property-for-sale/prop... - they're mostly all done to within an inch of their lives. Because people have no choice. A family home (aka, 1500-2000SqFt) property in the same area would require you to earn probably getting on for double what you'd need to buy the first one. https://www.rightmove.co.uk/property-for-sale/prop...

You can see how almost anything looks cheap to people if they're used to the above, and the above isn't exactly uncommon.

I can certainly see the point you make and don't disagree. Both of those houses look to have been extended and loft converted to maximise the internal space, nicely done and a decent size. At a considerable price though. London is a separate market to the rest of the country with it's own prices, I experience the ripple out effects though since I work in Hert's but live in Bed's due to the lower prices mainly. A way for me to make sence of London prices is that it's bolthole to invest in while you are making your money there and enjoying what the city has to offer, then at some point you exit the rat race and head for the hills as it were, the big gaff in the country. Otherwise it seems like too much of a compromise long term for me.

I guess my general point is that maybe a somewhat hidden cost of these ever increasing house prices is that some have to decrease their property expectations. So it's not just the fact that we have to pay more for houses than ever, it's we possibly have to live in smaller houses than ever too. It's probably something that many older people are aware of but younger buyers may take as a given because they've not known things any other way.

[number2]

okgo said:

MX6 said:

No doubt. I suppose I'm picking on this type of house because having owned and lived in one, I think they are generally very humble houses for the kind of money mentioned, quite over inflated in my view. I found the noise through the walls intrusive and the space inadequate for any sort of family living. To buy for £400k+, your probably going to be what can be described as a middle class professional, you're going to have to have quite low expectations of what is a decent house to live in. I mean, there are plenty of folks on benefits in social housing, in Hert's say, that is a lot more generous space-wise. But London I guess.

A bit like my post earlier in this thread. I imagine the spec and work done on these sorts of properties in London makes them look unrecognisable from their counterparts further away.

Barnes is full of these https://www.rightmove.co.uk/property-for-sale/prop... - they're mostly all done to within an inch of their lives. Because people have no choice. A family home (aka, 1500-2000SqFt) property in the same area would require you to earn probably getting on for double what you'd need to buy the first one. https://www.rightmove.co.uk/property-for-sale/prop...

You can see how almost anything looks cheap to people if they're used to the above, and the above isn't exactly uncommon.

Done up cheap to offload. They should have spent more, the specs are grim - the kitchens and flooring look cheap and nasty in the photos, they aren't going to look better in real life.

[richardxjr]

Both those Barnes examples are total batst mental!

[okgo]

richardxjr said:

Both those Barnes examples are total batst mental!

They're entirely normal, though. Agree, the more pricey one looks to be finished pretty poorly in part, though. But the point was more to illustrate the cost of a family home. I own the same house as the second, basically, they probably are just about the most common size of typical family home in London. Even just within z2/3 the price difference of the same thing can be £1m.

[MX6]

number2 said:

okgo said:

MX6 said:

No doubt. I suppose I'm picking on this type of house because having owned and lived in one, I think they are generally very humble houses for the kind of money mentioned, quite over inflated in my view. I found the noise through the walls intrusive and the space inadequate for any sort of family living. To buy for £400k+, your probably going to be what can be described as a middle class professional, you're going to have to have quite low expectations of what is a decent house to live in. I mean, there are plenty of folks on benefits in social housing, in Hert's say, that is a lot more generous space-wise. But London I guess.

A bit like my post earlier in this thread. I imagine the spec and work done on these sorts of properties in London makes them look unrecognisable from their counterparts further away.

Barnes is full of these https://www.rightmove.co.uk/property-for-sale/prop... - they're mostly all done to within an inch of their lives. Because people have no choice. A family home (aka, 1500-2000SqFt) property in the same area would require you to earn probably getting on for double what you'd need to buy the first one. https://www.rightmove.co.uk/property-for-sale/prop...

You can see how almost anything looks cheap to people if they're used to the above, and the above isn't exactly uncommon.

Done up cheap to offload. They should have spent more, the specs are grim - the kitchens and flooring look cheap and nasty in the photos, they aren't going to look better in real life.

I'd say they seem fine internally and typical for the size and type of house based on what I've gnerally seen more widely, but given the London asking prices I guess you'd be entitled to expect a higher standard.

[number2]

MX6 said:

I'd say they seem fine internally and typical for the size and type of house based on what I've gnerally seen more widely, but given the London asking prices I guess you'd be entitled to expect a higher standard.

Yeah. Expectations of a kitchen in a three bed terrace with a market value of £300k are different to those of a kitchen in a 3 bed terrace for £1m+.

Nothing wrong with the houses per se.

I'm especially sensitive re. quality of kitchens and fittings etc, as I'm going through the process right now

[MX6]

number2 said:

MX6 said:

I'd say they seem fine internally and typical for the size and type of house based on what I've gnerally seen more widely, but given the London asking prices I guess you'd be entitled to expect a higher standard.

Yeah. Expectations of a kitchen in a three bed terrace with a market value of £300k are different to those of a kitchen in a 3 bed terrace for £1m+.

Nothing wrong with the houses per se.

I'm especially sensitive re. quality of kitchens and fittings etc, as I'm going through the process right now

I prefer to see a bit of a somewhat rubbish but useable kitchen and dated/bad taste internal decor because I think along the lines of haggling points = cheap house, bit of a cheapskate I guess.

[NickCQ]

MX6 said:

I prefer to see a bit of a somewhat rubbish but useable kitchen and dated/bad taste internal decor because I think along the lines of haggling points = cheap house, bit of a cheapskate I guess.

9 times out of 10 you end up ripping it out and starting again anyway, feels better to rip out something cheap than something expensive!

[MX6]

NickCQ said:

MX6 said:

I prefer to see a bit of a somewhat rubbish but useable kitchen and dated/bad taste internal decor because I think along the lines of haggling points = cheap house, bit of a cheapskate I guess.

9 times out of 10 you end up ripping it out and starting again anyway, feels better to rip out something cheap than something expensive!

Yeah that's pretty much my way of looking at it, certainly if it's a place that I'm looking at staying in for a reasonable number of years. I guess there is a judgement to be made regarding how the numbers stack up, how much money/time you've got to do the work, etc.

[number2]

MX6 said:

NickCQ said:

MX6 said:

I prefer to see a bit of a somewhat rubbish but useable kitchen and dated/bad taste internal decor because I think along the lines of haggling points = cheap house, bit of a cheapskate I guess.

9 times out of 10 you end up ripping it out and starting again anyway, feels better to rip out something cheap than something expensive!

Yeah that's pretty much my way of looking at it, certainly if it's a place that I'm looking at staying in for a reasonable number of years. I guess there is a judgement to be made regarding how the numbers stack up, how much money/time you've got to do the work, etc.

I think we're all in agreement, that shouldn't happen!

[rm163603]

richardxjr said:

rm163603 said:

Shame IO mortgages aren't available to owner occupiers anymore.

That's an inequality right there, surely?!

Suppose it's something that can be kept in reserve until a bigger threat to house prices emerges. Because ultimately that is all that is holding up what is left of the economy.

Agreed, I don't understand the logic of offering them to BTL and not OO.

At least S24 has removed tax relief on the interest though.

[NickCQ]

rm163603 said:

Agreed, I don't understand the logic of offering them to BTL and not OO.

Much easier / faster / cheaper to repossess a BTL than an owner-occupied house.

[turbobloke]

NickCQ said:

rm163603 said:

Agreed, I don't understand the logic of offering them to BTL and not OO.

Much easier / faster / cheaper to repossess a BTL than an owner-occupied house.

It's all a bit rich when banks seem dodgier than their average domestic mortgage customer.

One-sided situations can be like that, particularly in challenging times when risk has a different taste.

[spreadsheet monkey]

okgo said:

richardxjr said:

Both those Barnes examples are total batst mental!

They're entirely normal, though. Agree, the more pricey one looks to be finished pretty poorly in part, though. But the point was more to illustrate the cost of a family home. I own the same house as the second, basically, they probably are just about the most common size of typical family home in London. Even just within z2/3 the price difference of the same thing can be £1m.

But will those prices remain "normal" in the near future? Post coronavirus (whenever that may be), will professional families still place such a premium on living in Z2/3?

[Thankyou4calling]

Yes they will in my opinion

The best areas have always been highly sought after.

For many Barnes (as an example) is idyllic.

I know I know.

It has what many want in abundance.

Individual Shops selling the right things run by their sort of people.

Nannies. Lots of nice young gels who will nanny.

Dog walkers, window cleaners, yoga studios.

A duck pond FFS! And a bird spotting wetland centre. You can watch the boat race and go to a nice pub or Rick Steins.

Plus it’s within spitting distance of the river and the Chertsey Road (M3)

All these things attract a ready supply of people willing to buy a terraced house for a million.

To them it’s a safe haven.

The only downside is the influx of refugees clamouring to live with Gary Lineker.

But funnily enough they’ll make it even MORE appealing.

[NickCQ]

Thankyou4calling said:

For many Barnes is idyllic

You forgot to mention the LHR approach flight path and closure of Hammersmith bridge...

[kingston12]

spreadsheet monkey said:

But will those prices remain "normal" in the near future? Post coronavirus (whenever that may be), will professional families still place such a premium on living in Z2/3?

Barnes is hardly a commuting hotspot, and not much else is likely to change. Other parts of z2-6 that are not as nice might suffer more because people live there primarily to ease their commute.

No one actually needs to live in Barnes, just as they don't need to live in Chelsea or any other prime area of London, they do so because they want to and can afford it.

This might change in the much longer term if slightly less of the 'right' type of people move there, but this would probably take decades to have a noticeable effect.

[number2]

Good and fair points above,

Another, is that people like to live among people who are like them.

People do frequently move away as they enter different stages in life, and then they are replaced again, by people who like living among people like themselves... in Barnes... or Chiswick... or.... etc..

[Thankyou4calling]

number2 said:

Good and fair points above,

Another, is that people like to live among people who are like them.

People do frequently move away as they enter different stages in life, and then they are replaced again, by people who like living among people like themselves... in Barnes... or Chiswick... or.... etc..

This is very true.

My brother and wife are these people. Live in Twickenham, absolutely no way would they set foot in Feltham or Hounslow.

Teddington, Richmond, Hampton etc.

That’s there stomping ground. Like minded people you see.

Always has been.