How far will house prices fall [volume 5]

[NickCQ]

A.J.M said:

Seller doesn’t have and isn’t wanting to get a home report though. Which has me concerned.

Assume you are in Scotland.

I thought the home report value was crucial to getting a mortgage (i.e. the house is valued at the lesser of the purchase price and the home report value)?
Vendor is setting themselves up for a nasty surprise if this value comes in down and the buyer can't complete.

[Mr Whippy]

A.J.M said:

So a property has come up that’s in budget and meets our needs for a first house.
Viewed it last night and it seems nice enough, the bathroom is a bodge job though and would be ripped out and changed even though it’s under 2 years old.

Seller doesn’t have and isn’t wanting to get a home report though. Which has me concerned.
Zoopla, which isn’t hugely accurate but I use as a ball park figure has the house valued at 7 grand under his asking price.

Which is bang on Zoopla’s upper range.
Emma wants to go for it but my gut feeling isn’t sitting right on it.

Thoughts?

Get an offer in that you’d be happy paying and go from there.

[AyBee]

A.J.M said:

So a property has come up that’s in budget and meets our needs for a first house.
Viewed it last night and it seems nice enough, the bathroom is a bodge job though and would be ripped out and changed even though it’s under 2 years old.

Seller doesn’t have and isn’t wanting to get a home report though. Which has me concerned.
Zoopla, which isn’t hugely accurate but I use as a ball park figure has the house valued at 7 grand under his asking price.

Which is bang on Zoopla’s upper range.
Emma wants to go for it but my gut feeling isn’t sitting right on it.

Thoughts?

Perhaps it's just the way you've phrased it, but a home report is something you'd get done as the potential buyer, not something they'd have and be able to provide you with. If they won't let you get one done, then that would make my alarm bells ring too. Either bid accordingly, or move on.

ETA: maybe different in Scotland?

[z4RRSchris]

offer accepted, bingo bongo.

[number2]

Congrats.

Was that the prop that already had the offer? What were the differentials do you know, or were you in a stronger position to proceed?

Questions, questions!

[z4RRSchris]

number2 said:

Congrats.

Was that the prop that already had the offer? What were the differentials do you know, or were you in a stronger position to proceed?

Questions, questions!

no idea to be honest, my position must be better, and the offer was higher.

time to get the builders in.

[Helicopter123]

Stock market has soared 7% this week following news of the vaccine.

I wonder if the property market will follow suit?

All this additional QE money usually ends up in real assets.

[V6Alfisti]

Helicopter123 said:

Stock market has soared 7% this week following news of the vaccine.

I wonder if the property market will follow suit?

All this additional QE money usually ends up in real assets.

You need the context, the FTSE was about 7400 before COVID, it was about 5900 before this week boom and is now at 6400. i.e the stock market suffered a MASSIVE fall and it's only just recovered some of that on the hope of an interim recovery. Typically I didn't have time to pull my finger out and move money into my share account as there were certainly some opportunities there.

So still quite a way below where it was, whilst housing has had the mini boom (although not all areas/types of property/values e.t.c) given it pulled demand forward into a small window, and is now tailing off.

Therefore no doubt QE will have some impact, but most forecasters seem to be predicting some level of impact through 21/22 (varies from anywhere between +2% to -2x% with most seemingly around the -8 to 10% mark.

Ultimate answer, who knows...no-one can categorically state what will happen.

[okgo]

Yet you keep trying

[Helicopter123]

V6Alfisti said:

Helicopter123 said:

Stock market has soared 7% this week following news of the vaccine.

I wonder if the property market will follow suit?

All this additional QE money usually ends up in real assets.

You need the context, the FTSE was about 7400 before COVID, it was about 5900 before this week boom and is now at 6400. i.e the stock market suffered a MASSIVE fall and it's only just recovered some of that on the hope of an interim recovery. Typically I didn't have time to pull my finger out and move money into my share account as there were certainly some opportunities there.

So still quite a way below where it was, whilst housing has had the mini boom (although not all areas/types of property/values e.t.c) given it pulled demand forward into a small window, and is now tailing off.

Therefore no doubt QE will have some impact, but most forecasters seem to be predicting some level of impact through 21/22 (varies from anywhere between +2% to -2x% with most seemingly around the -8 to 10% mark.

Ultimate answer, who knows...no-one can categorically state what will happen.

Very true, and forecasters invariably get it wrong.

I'm a believer in history repeating itself though, and I can see the QE money again getting into housing this time around.

Many areas have already dipped, and perhaps the worst is behind us now.

Good time to be buying I suspect, especially with the stamp duty reduction.

[V6Alfisti]

Helicopter123 said:

Very true, and forecasters invariably get it wrong.

I'm a believer in history repeating itself though, and I can see the QE money again getting into housing this time around.

Many areas have already dipped, and perhaps the worst is behind us now.

Good time to be buying I suspect, especially with the stamp duty reduction.

Talking of history, the last time (2008) housing dropped 18% on average, but it recovered later of course (in most but not all areas). That was largely through massive levers like collapsing interest rates, are we going to have -5% interest? We are already seeing banks become a lot more risk adverse i.e reducing availability of credit.

Of course some areas like London have only just gone back to their 2016 numbers. (according to land registry)

House prices have dipped and the worst is behind us? I would arguably say we have had a mini artificial boom which is already starting to reverse, and never really took off in large swathes of London. I wouldn't be surprised if we see further "softening" in some areas.

Edited by V6Alfisti on Wednesday 11th November 17:50

[kingston12]

V6Alfisti said:

Talking of history, the last time (2008) housing dropped 18% on average, but it recovered later of course (in most but not all areas). That was largely through massive levers like collapsing interest rates, are we going to have -5% interest?

Of course some areas like London have only just gone back to their 2016 numbers. (according to land registry)

What they'll ultimately need to do is boost the income multiples for mortgage borrowing to 6-7x joint income. Two of the key priorities of the past few governments have been keeping house prices high and wage inflation low and it's obviously difficult to maintain both in the long term.

Lower interest rates and all of the cheats like Help To Buy definitely make it easier for a while, but eventually more people are going to reach the maximum they can borrow and it still won't be enough to buy a house.

[V6Alfisti]

kingston12 said:

What they'll ultimately need to do is boost the income multiples for mortgage borrowing to 6-7x joint income. Two of the key priorities of the past few governments have been keeping house prices high and wage inflation low and it's obviously difficult to maintain both in the long term.

Lower interest rates and all of the cheats like Help To Buy definitely make it easier for a while, but eventually more people are going to reach the maximum they can borrow and it still won't be enough to buy a house.

Indeed, agree it's definitely top of gov's agenda to keep house prices up but it also was in 2008 and even despite multiple levers being pulled and massive QE, it still fell but of course did largely come back after a period. What is more astonishing this time is how much the gov is frittering away on things like £150m for masks that can't be used, not putting in place the controls for what seems to be high levels of fraud re: furlough and business loans.

Also it seems there are fears of BTL defaults which I think don't have the same level of protection/sympathy as self owned. There was something more recent than this, but the same gist https://www.propertyreporter.co.uk/landlords/btl-r...

What will be interesting if banks support any potential move to 6-7x affordability, as they are showing more signs of being risk adverse than supportive of this move imo.

What I can see driving the market will be the more cash rich who get nothing in savings, unless they invest in suitable funds (equally London probably won't be top of the list as the yield is typically quite poor and rents in the top zones have fallen hard). When I get a few moments, I will be doing my analysis to make my money work harder for me in the market.

What people often forget is that large amounts of areas (London specific...sorry) i.e the average of all London boroughs have only just got back to their 2016 levels. This speaks to unaffordability, the housing market is typically driven by available credit (interest rates are now going up, loans are harder to get and certain products pulled) and sentiment.

Edited by V6Alfisti on Wednesday 11th November 18:32

[kingston12]

V6Alfisti said:

Indeed, agree it's definitely top of gov's agenda to keep house prices up but it also was in 2008 and even despite multiple levers being pulled and massive QE, it still fell but of course did largely come back after a period. What is more astonishing this time is how much the gov is frittering away on things like £150m for masks that can't be used, not putting in place the controls for what seems to be high levels of fraud re: furlough and business loans.

For me, 2008 was the turning point. The government had already done everything they reasonably could to support house prices by then, but such was the severity of that situation that they really needed to double-down if they were going to get through that unscathed.

That's what they did - as you say, unprecedented low interest rates and levels of QE, but it was still only enough to turn what would have been a full blown crash into a major blip.

The cat was out of the bag by then, though, and they are much less wary about pressing the QE button now than they were back then and it isn't just for house price support either (although they know where a lot of the money will end up).

I don't think that the banks will be made to feel all of the risk of increasing lending multiples, the government will support it in the same way they are currently proposing to support a return to 95% mortgages with the risk borne by the taxpayer.

The only way I can see significant falls in prices is if the underlying market gets so bad and their response is too little, too late.

The problem is one of public perception - lots of people like rising house prices because they've made a lot of money out of them, but most of the rest seem to like increases as well even though it makes them worse off. That makes it a very difficult proposition to be the government in power when the music stops and that justifies stronger action to stop that being the case.

[V6Alfisti]

kingston12 said:

For me, 2008 was the turning point. The government had already done everything they reasonably could to support house prices by then, but such was the severity of that situation that they really needed to double-down if they were going to get through that unscathed.

That's what they did - as you say, unprecedented low interest rates and levels of QE, but it was still only enough to turn what would have been a full blown crash into a major blip.

The cat was out of the bag by then, though, and they are much less wary about pressing the QE button now than they were back then and it isn't just for house price support either (although they know where a lot of the money will end up).

I don't think that the banks will be made to feel all of the risk of increasing lending multiples, the government will support it in the same way they are currently proposing to support a return to 95% mortgages with the risk borne by the taxpayer.

The only way I can see significant falls in prices is if the underlying market gets so bad and their response is too little, too late.

The problem is one of public perception - lots of people like rising house prices because they've made a lot of money out of them, but most of the rest seem to like increases as well even though it makes them worse off. That makes it a very difficult proposition to be the government in power when the music stops and that justifies stronger action to stop that being the case.

I see what you are saying, but the market doesn't have many of the levers it had back then i.e they can't drop interest rates "significantly", they have already played the HTB card and that did little for London in recent years (average, not all, as clearly some more up and coming have gone up) hence why it's only just back to 2016 values i.e a real loss, let alone those that are already selling below 2017/2016 value .

e.g. the first couple of pages of recently sold properties shows these few :

This one is down 9.1% on 2016 values in the "boom" period

Flat 2, Canterbury Court, Bromyard Avenue,
London, W3 7BQ
02 Sep 2020 £318,000
06 Jul 2016 £350,000

The now famous E11 area (terrace property), this one is down -6.2% in 2 years

6 Elm Road,
Leytonstone,
London, E11 4DN

28 Aug 2020 £680,000
23 Jul 2018 £725,000

I could reel off pages of similar performance (it's there in land reg for anyone to see), I know it's boring but it's also something that is happening. Not to say this is universal, clearly not.

Just 18k growth over 8 years ago, let alone 2015/2016

Flat 72, Croft House, 21, Heritage Avenue,
London, NW9 5XY

01 Sep 2020 £630,000
16 Mar 2012 £612,500

I guess there is the question of what is a significant fall, even 5-10% (which has already happened in some areas) can realise some big benefits to both core value, LTV and stamp duty at the higher levels. What it will actually be for every street/area/value in the UK, nobody knows.

People do like rising house prices but they equally typically run (for a period) when prices are falling.

The reality is the position will quite likely be somewhere between the optimist and the pessimist.

Edited by V6Alfisti on Wednesday 11th November 19:56

[Jiebo]

V6Alfisti said:

Indeed, agree it's definitely top of gov's agenda to keep house prices up but it also was in 2008 and even despite multiple levers being pulled and massive QE, it still fell but of course did largely come back after a period. What is more astonishing this time is how much the gov is frittering away on things like £150m for masks that can't be used, not putting in place the controls for what seems to be high levels of fraud re: furlough and business loans.

Also it seems there are fears of BTL defaults which I think don't have the same level of protection/sympathy as self owned. There was something more recent than this, but the same gist https://www.propertyreporter.co.uk/landlords/btl-r...

What will be interesting if banks support any potential move to 6-7x affordability, as they are showing more signs of being risk adverse than supportive of this move imo.

What I can see driving the market will be the more cash rich who get nothing in savings, unless they invest in suitable funds (equally London probably won't be top of the list as the yield is typically quite poor and rents in the top zones have fallen hard). When I get a few moments, I will be doing my analysis to make my money work harder for me in the market.

What people often forget is that large amounts of areas (London specific...sorry) i.e the average of all London boroughs have only just got back to their 2016 levels. This speaks to unaffordability, the housing market is typically driven by available credit (interest rates are now going up, loans are harder to get and certain products pulled) and sentiment.

Edited by V6Alfisti on Wednesday 11th November 18:32

This seems like nonsense to me, but I could imagine them doing something so utterly idiotic. If interest rates become negative, and long term fixes become normal, we could have a Denmark style situation where you are getting 10 year fix at 0%. If multipliers go up, then the market will become absolutely mental.

I hope they keep it all restricted and the prices fall stagnate and fall in real terms. Keep this up for 10 years and prices may become more affordable for the next generation.

Policies to artificially create the constant rising of house prices needs to die with the boomers. The concept is so moronic it hurts my brain, why on earth do people think prices will always rise? They rise because of some other idiot at the bottom of the ponzi scheme having pay more for the same thing.

Edited by Jiebo on Wednesday 11th November 19:59

[ooid]

Alfa, I do not know the particular property in that Elm Road, but it really is not a true reflection of E11 properties in general. The ones going quite quick and healthy in E11 usually, close to the Wanstead Flats or Forest Gate. The properties on that area is quite location specific, you can literally find two similar houses in 0.5 miles distance between them nearly double price difference due to its location and some school catchments.

I'm seeing three properties next week at Petts Wood area btw, fingers crossed.

[V6Alfisti]

ooid said:

Alfa, I do not know the particular property in that Elm Road, but it really is not a true reflection of E11 properties in general. The ones going quite quick and healthy in E11 usually, close to the Wanstead Flats or Forest Gate. The properties on that area is quite location specific, you can literally find two similar houses in 0.5 miles distance between them nearly double price difference due to its location and some school catchments.

I'm seeing three properties next week at Petts Wood area btw, fingers crossed.

It certainly isn't the only one in E11 to lose money though ooid (to be clear I generally would expect the east to be up though, as young folk move in that direction), in the last 2 months i.e the last 40 most recent sales.

Two are straight out losses, 8 others are a loss with inflation as they typically sold within a few £k over 2016 sold values

The ones that have gone up seem to either be up about £50k in 6-7 years, ones that hadn't sold in 20+ years, one is up £190k in 3 years but had a full rear extension (I understand from a friend looking at an extension on a smaller terrace, that work is worth £70-80k by itself) and full "renovation" according to the blurb.

So that's a 1/4 of all actual sold stock in E11 that is either as close to flat as you can get or lost money, not to say there aren't roads which are far more desirable in E11 and perhaps that changes over the next few months as more sales go through, but this is what land registry shows today and frankly this is all any of us have public sight/access to.

Good luck ooid, nothing personal btw but it's not 100% clear cut, joy of housing !

Edited by V6Alfisti on Wednesday 11th November 20:19

[Bullet-Proof_Biscuit]

All property on the south of England are up markedly since pre 2020, the only place at all that seems to be going down is this E11 Leytonstone you bang on about? Could it just a sthole?

[Matt p]

Then we have these. Looking across 100yds away it’s all empty.