How far will house prices fall [volume 5]
Discussion
V6Alfisti said:
There are absolutely stacks, I know people across finance, consultancy, aerospace and IT that have recently been let go (or rather given notice/packages). These are people in the £70-150k type bracket.
Let alone some consultancies still paying 10-15% below contracted salaries and bonuses being kept flat or cut (public sector work flying, private sector not)
Thankfully it hasn't reached your friendship group, it has mine
V6, you're back, what's your thoughts on the impending house price inflation?Let alone some consultancies still paying 10-15% below contracted salaries and bonuses being kept flat or cut (public sector work flying, private sector not)
Thankfully it hasn't reached your friendship group, it has mine
Edited by V6Alfisti on Wednesday 7th October 19:11
JPJPJP said:
Not so. Consider if prices fall by, say, 30%. On a £200k house that would be £60k. If that happens 6 months after she buys, it would be an ouch moment. Especially as for £7.8k rent, she could have bought the same house later and be £52.2k in front
Never works out like that though
Except, they won't.Never works out like that though
V6Alfisti said:
PrinceRupert said:
Yup. I don't know any professional who is at risk of redundancy. In fact one US law firm in London just chucked its NQs a 25k pay rise (from 105k to 130k, at 25...) ...
There are absolutely stacks, I know people across finance, consultancy, aerospace and IT that have recently been let go (or rather given notice/packages). These are people in the £70-150k type bracket.Let alone some consultancies still paying 10-15% below contracted salaries and bonuses being kept flat or cut (public sector work flying, private sector not)
Thankfully it hasn't reached your friendship group, it has mine
Edited by V6Alfisti on Wednesday 7th October 19:11
Re. loosening underwriting for mortgages: that sounds downright irresponsible. Increasing LTV I understand, but giving credit to people who can't manage credit doesn't sound like a good idea... even at risk adjusted rates which benefit the bank rather than the underwriter (tax payer).
Joey Deacon said:
The 20% deposit is on the residential mortgage.
The 1.61% BTL rate is on a property with 47% equity, I think it is virtually impossible to get a BTL mortgage with only a 20% deposit. I think you really need 35% depending on the price/monthly rent to pass the BTL stress test rules.
Cheers for clarifying, thought it sounded a bit too good! BTL mortgages seem to be offered at 25%, but more equity is desirable to get the best rates as you say.The 1.61% BTL rate is on a property with 47% equity, I think it is virtually impossible to get a BTL mortgage with only a 20% deposit. I think you really need 35% depending on the price/monthly rent to pass the BTL stress test rules.
PrinceRupert said:
JPJPJP said:
Not so. Consider if prices fall by, say, 30%. On a £200k house that would be £60k. If that happens 6 months after she buys, it would be an ouch moment. Especially as for £7.8k rent, she could have bought the same house later and be £52.2k in front
Never works out like that though
Except, they won't.Never works out like that though
number2 said:
V6Alfisti said:
PrinceRupert said:
Yup. I don't know any professional who is at risk of redundancy. In fact one US law firm in London just chucked its NQs a 25k pay rise (from 105k to 130k, at 25...) ...
There are absolutely stacks, I know people across finance, consultancy, aerospace and IT that have recently been let go (or rather given notice/packages). These are people in the £70-150k type bracket.Let alone some consultancies still paying 10-15% below contracted salaries and bonuses being kept flat or cut (public sector work flying, private sector not)
Thankfully it hasn't reached your friendship group, it has mine
Edited by V6Alfisti on Wednesday 7th October 19:11
Re. loosening underwriting for mortgages: that sounds downright irresponsible. Increasing LTV I understand, but giving credit to people who can't manage credit doesn't sound like a good idea... even at risk adjusted rates which benefit the bank rather than the underwriter (tax payer).
711 said:
PrinceRupert said:
JPJPJP said:
Not so. Consider if prices fall by, say, 30%. On a £200k house that would be £60k. If that happens 6 months after she buys, it would be an ouch moment. Especially as for £7.8k rent, she could have bought the same house later and be £52.2k in front
Never works out like that though
Except, they won't.Never works out like that though
If it’s spaff on a gaff now, it’ll be government doing ‘spaff’ on universal credit next year so no one can lose out, ever.
They’ve already kinda done it. What’s to stop them carrying on?
In any environment like that, malinvestment will be rife as money seeks yield ahead of inflation.
It’s such a dangerous game to play as those who feel like beneficiaries of this windfall of support, the common pleb and their children, are actually the ones who’ll be paying for it all.
The wealthy who live off assets are clearly doing fine while the house of cards is kept standing at the plebs cost!
Jimboka said:
With the stamp duty holiday & high rents here in the SE, now looks a good time for new buyers..
My daughter is about to press the button on a nice apartment. A lot nicer than the first house/dump we bought in the early 80s!
With a reasonable deposit, the monthly costs are far lower than renting around this way.
Must be nuts to spend £1300+ a month to rent the 2020 equivalent of my 1980s dump!
Thankfully she steered clear of renting in the last few years
As long as buying is cheap compared to renting, it’s a good time to buy.
This is the thing, rents look high when compared to a mortgage with a low interest rate. If you have money to put a healthy deposit down and plan to stop in the property for a number of years then it makes sound sence financially. As long as this remains the case it's hard to see demand falling away enough to cause a crash. I reckon my house would cost me around 40% more per month to rent, I doubt I could justify it to myself. My daughter is about to press the button on a nice apartment. A lot nicer than the first house/dump we bought in the early 80s!
With a reasonable deposit, the monthly costs are far lower than renting around this way.
Must be nuts to spend £1300+ a month to rent the 2020 equivalent of my 1980s dump!
Thankfully she steered clear of renting in the last few years
As long as buying is cheap compared to renting, it’s a good time to buy.
Commuter town SE, gross rental yield c. 4%. [say 12k p.a. rent on a 300k flat - my flat yielded gross 4.7%] vs. mortgage interest of sub 2%.
You'd need to be taking some risk with your deposit investment (esp. when you expect to use it in the near future) and hope the gamble for a price drop for the property you want to buy happens.
You'd need to be taking some risk with your deposit investment (esp. when you expect to use it in the near future) and hope the gamble for a price drop for the property you want to buy happens.
richardxjr said:
711 said:
Spaff on a Gaff scheme .
To be honest, having been pretty bearish on UK resi at the beginning of this year and through lockdown / unlock, I have now capitulated.
There is just no point trying to link house prices to fundamentals... while the music is playing you have to keep dancing.
number2 said:
Commuter town SE, gross rental yield c. 4%. [say 12k p.a. rent on a 300k flat - my flat yielded gross 4.7%] vs. mortgage interest of sub 2%.
You'd need to be taking some risk with your deposit investment (esp. when you expect to use it in the near future) and hope the gamble for a price drop for the property you want to buy happens.
Need to look at the net yield (at least post maintenance) as that's your cost if you own. In London that's more in the 2% range so the decision is narrower (unless you have a capital growth thesis).You'd need to be taking some risk with your deposit investment (esp. when you expect to use it in the near future) and hope the gamble for a price drop for the property you want to buy happens.
But I have come to believe that the intangibles of owning your own place + security of tenure + hedge against future house price inflation probably outweigh the flexibility and potentially cost benefits of renting.
NickCQ said:
Need to look at the net yield (at least post maintenance) as that's your cost if you own. In London that's more in the 2% range so the decision is narrower (unless you have a capital growth thesis).
But I have come to believe that the intangibles of owning your own place + security of tenure + hedge against future house price inflation probably outweigh the flexibility and potentially cost benefits of renting.
Security of tenure is, I think, the biggest one. If we had proper council housing, with security of tenure, as an alternative to the private rented sector, the desirability of home ownership may drop amongst the working classes.But I have come to believe that the intangibles of owning your own place + security of tenure + hedge against future house price inflation probably outweigh the flexibility and potentially cost benefits of renting.
NickCQ said:
number2 said:
Commuter town SE, gross rental yield c. 4%. [say 12k p.a. rent on a 300k flat - my flat yielded gross 4.7%] vs. mortgage interest of sub 2%.
You'd need to be taking some risk with your deposit investment (esp. when you expect to use it in the near future) and hope the gamble for a price drop for the property you want to buy happens.
Need to look at the net yield (at least post maintenance) as that's your cost if you own. In London that's more in the 2% range so the decision is narrower (unless you have a capital growth thesis).You'd need to be taking some risk with your deposit investment (esp. when you expect to use it in the near future) and hope the gamble for a price drop for the property you want to buy happens.
But I have come to believe that the intangibles of owning your own place + security of tenure + hedge against future house price inflation probably outweigh the flexibility and potentially cost benefits of renting.
Your latter point is important as buying a home is not wholly about numbers on paper. BTL sure, but not your main residence.
Edited by number2 on Thursday 8th October 11:21
PrinceRupert said:
V6, you're back, what's your thoughts on the impending house price inflation?
Yes, not posted since...literally hours Exactly the same as it was a few months ago and confirmed about a month ago.
As predicted months ago, this is the period after an enforced lockdown that will see an average increase in demand, resulting with mini booms in some areas (but not all), and certainly not at all values. The average UK value certainly seems to be up.
However this is only part of the picture, there already signs of some areas that were very busy in August, some of September turning backwards (i.e comments from commentators on here, my own searches, friends e.t.c). Not to say that is every area of course, I am sure some are still busy, particularly in the sub £800k mark. I know that desirable areas like the Corbett Estate are still moving but equally, in that £650-700k terraced home in London sweet spot. Whilst the £1-1.5m homes in my London search areas were moving a little in August/September but now has slowed to a crawl in terms of SSTC but with new property coming on every day now.
My previous/current thought was that when the reality of post furlough (ps: we arent there yet
) starts to kick in and the wider economic news then houseprice growth will reverse. What is important is seeing what is happening on the ground and not the very delayed reports that come through. It's a bit like the miner chap says, he couldn't see the demand in his business when the agents were shouting that things were going mad, however a couple of months (or a period later) it then filters through. Equally land registry is months behind, I would expect the next few to show growth (on average) as they are so slow to show the past/current.Basically everything is largely as planned, but with the difference that the stamp duty has brought forward a lot of future focussed demand into a smaller period.
Seemingly my views are not alone, as pretty much most professional analysts, mortgage companies, RICS e.t.c are all warning about the cliff edge but equally enjoying this period.
Edited by V6Alfisti on Thursday 8th October 11:33
PrinceRupert said:
NickCQ said:
Need to look at the net yield (at least post maintenance) as that's your cost if you own. In London that's more in the 2% range so the decision is narrower (unless you have a capital growth thesis).
But I have come to believe that the intangibles of owning your own place + security of tenure + hedge against future house price inflation probably outweigh the flexibility and potentially cost benefits of renting.
Security of tenure is, I think, the biggest one. If we had proper council housing, with security of tenure, as an alternative to the private rented sector, the desirability of home ownership may drop amongst the working classes.But I have come to believe that the intangibles of owning your own place + security of tenure + hedge against future house price inflation probably outweigh the flexibility and potentially cost benefits of renting.
MX-6 said:
I very much agree with that assessment.
I've said it previously here, I don't think house prices are too high as such, it's more an issue of wages for working class/unskilled/semi-skilled type jobs have lagged real inflation.
And thats the issue, most of these jobs are in the goods / retail sector. You want 39p loaf of bread then production cost savings come from somewhere. I've said it previously here, I don't think house prices are too high as such, it's more an issue of wages for working class/unskilled/semi-skilled type jobs have lagged real inflation.
For wages to rise then the cost of basic goods and services needs to rise - by a lot. I always raise a bit of an eyebrow at people who say they went to Minsk and a full 3 course meal with drinks was £3. Yeah, it is but the person making the food is probably earning about £40 a week.
Its pretty simple in my mind, you make the minimum wage £25k a year (or whatever) but accept goods costs go up by 20,30% etc. The thing is working in retail myself, people will almost always search out the cheapest deal they dont care if the employees of that company are earning the bare minimum wage so long as they save 10 quid on their order.
MX-6 said:
This maybe something of a separate issue, but I'm a bit against a complete security of tenure with social housing. You see quite a number of instances where you've a singe older person on their own (perhaps because their family moved out for example) in a good size 3 bedroom local authority property. Meanwhile there are young families squashed into flats or smaller houses. I think people should be moved around more to better allocate the publicly owned housing resources.
I think the problem is looking at in light of today's council housing stock, which is severely limited and oversubscribed. If we hadn't had Right to Buy and had kept building sufficient council housing over the last thirty years, then it would be less of a problem. Security of tenure is important to ensure council housing estates have a sense of community and permanence - much of the problems that council housing estates have today, I feel, is down to their transient nature and the fact that many who live on council housing estates today are there because the private rented sector won't have them. You have to get lucky that the property you want, is available to buy, and at the price you want.
It's pretty specific.
If one is after a property of homogeneous type, and is currently bidding, say £1m, but the sellers of all these similar properties all want £1.2m, then in 12 months time a seller of one of said properties accepts £1m then it would be worth hanging on for, and one can demonstrate that they have indeed benefited from a change in sentiment/fall in market. Or if these properties have sold very recently for £1.2m and then you pick the one you want for £1.0m in the next year or so.
Otherwise, it's all just a bit too theoretical, comparing apples and oranges.
It's pretty specific.
If one is after a property of homogeneous type, and is currently bidding, say £1m, but the sellers of all these similar properties all want £1.2m, then in 12 months time a seller of one of said properties accepts £1m then it would be worth hanging on for, and one can demonstrate that they have indeed benefited from a change in sentiment/fall in market. Or if these properties have sold very recently for £1.2m and then you pick the one you want for £1.0m in the next year or so.
Otherwise, it's all just a bit too theoretical, comparing apples and oranges.
MX-6 said:
This maybe something of a separate issue, but I'm a bit against a complete security of tenure with social housing. You see quite a number of instances where you've a singe older person on their own (perhaps because their family moved out for example) in a good size 3 bedroom local authority property. Meanwhile there are young families squashed into flats or smaller houses. I think people should be moved around more to better allocate the publicly owned housing resources.
Interesting - I agree but only to the extent that there is a shortage (which needn't be the case).Ironically, the 'bedroom tax' was on paper a good policy to promote efficient usage of limited stock, but was destroyed in the press by sob story anecdotes.
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