How Far Will House Prices Fall? [Volume 6]

[number2]

Shnozz said:

number2 said:

Why would a crash be good? What you mean is, you want to buy a house you currently can't.

The poster suggesting it would be good in fact stated he had a "handful" of 2 bed rental flats.

It was an odd comment regardless of the posters status. Why would it be better for society if there was a house price crash? I mean that rhetorically, I don't expect an answer because there isn't one, at least one that would fit on this forum.

[dmahon]

Shnozz said:

number2 said:

Why would a crash be good? What you mean is, you want to buy a house you currently can't.

The poster suggesting it would be good in fact stated he had a "handful" of 2 bed rental flats.

I am very long on property but also spent a decade as a House Price Crash poster and think high prices are bad for individuals and overall for society.

By this, I am referring to the individuals ability to buy their own property and build wealth without being stuck on the hamster wheel of paying a rich BTL landlord. That just damages everyone’s own life’s prospects and is not the world I would want to see my kids enter. This rolls up to a happier and wealthier society rather than see the rich gets richer.

I personally bought into BTL after thinking how insane and rigged the market was for a long time, and eventually concluded “if you can’t beat them, join them”.

The whole concept of things like “Help To Buy” demonstrates how rigged the market is. The fact that the first economic intervention in the pandemic shows the political will to keep the bubble inflated.

I also personally wanted a return without playing in the stock market.

So not a fan of BTL, but the market is definetly booming in the right area.

Edited by dmahon on Thursday 25th February 11:11

Edited by dmahon on Thursday 25th February 11:14

[number2]

But why are they bad for society?

What outcomes have you identified as bad, what are the causes of these outcomes, and what interventions are required to change these outcomes? What are the consequences of these interventions over the short and long term, and what is the distributional impact of these interventions - who benefits and who pays?

I don't expect detailed analysis but come on, "house price crash good for society". I'd just like a bit more detail as I'm interested in the poster's view.

[MX-6]

dmahon said:

The whole concept of things like “Help To Buy” demonstrates how rigged the market is. The fact that the first economic intervention in the pandemic shows the political will to keep the bubble inflated.

HTB quite often seems to get a bum rap, but I don't really see what peoples issue is with it? It's just an assumption really that it is propping up a bubble market.

I was able to get on the housing ladder with a relatively small deposit via shared ownership, then progressed to HTB, then another property, I'm now on my fourth. These scheme help affordability and people get into ownership, not everyone has high earnings to allow big savings, or access to middle class parents and the bank of mum and dad to bankroll the big deposit (I didn't)

[Pit Pony]

okgo said:

Also most people waiting for a crash still wouldn't buy if there was one.

I remember paying our lender £982.52 in 1994, in order to be able to move house, to a job in a different area. There was a guy there who had £35k in negative equity on a flat 200 miles away, He was the finance manager, and the flat had cost him £140k.
He rented a room in the production manager's house.
And another who moved up from another site, who had been repossed, following a split with his partner, who refused to pay her share of the mortgage on a one bed flat, at a time when the interest rate had gone from 9% to.15% and the flat had dropped from £60k to £45k
The lender sold it in auction and was chasing them.both for the arrears and the negative equity, plus costs. He said they wanted £35k and he was earning £18k. The sister company had let him live in a borrowed camper van in the corner of the car park, but he was milking the relocation package and he was staying in a bnb for 9 months..all expences paid

So I don't think we want house prices to crash too far or interest rates too high. .

[NickCQ]

number2 said:

But why are they bad for society?
What outcomes have you identified as bad, what are the causes of these outcomes, and what interventions are required to change these outcomes? What are the consequences of these interventions over the short and long term, and what is the distributional impact of these interventions - who benefits and who pays?

I'll have a go.

The housing market in the UK in the last 30 years has generally acted to transfer wealth free of tax to those that already had the most of it:

• regional disparities in price rises shift wealth to London / SE. This has spillover effects in retirement / second home towns pricing out local workers
• BOMAD (funded by house price rises) perpetuates wealth inequality between generations and means that even high paid youth have trouble buying property without a deposit from granny
• BTL has created a class of amateur landlords that, in the main, provide a worse service than commercial landlords on the continent
• large portfolios of mortgage debt create systemic risk in UK bank balance sheets
• individuals living in houses with a value far detached from their salary / pension meaning that ad valorem taxes don't work

Nominal stagnation and real terms deflation (vs wages) of prices over the next 5-10 years would be a Good Thing (speaking as someone levered 5x on London property). That can only be achieved by tightening lending criteria to deleverage the whole jig.

[dmahon]

number2 said:

But why are they bad for society?

What outcomes have you identified as bad, what are the causes of these outcomes, and what interventions are required to change these outcomes? What are the consequences of these interventions over the short and long term, and what is the distributional impact of these interventions - who benefits and who pays?

I don't expect detailed analysis but come on, "house price crash good for society". I'd just like a bit more detail as I'm interested in the poster's view.

Wealth disparity is why it’s bad for society. The 99% stay on the treadmill paying rent till they are 70, whilst the rich get richer and live in bigger and bigger mansions.

Wealth disparity leads to worse outcomes for health, more crime, slower growing economies and generally a worse life experience for the man on the street. Lower prices and therefore more participation in the property market is therefore good for society.

Of course some people want to rent and some people want to be landlords, but ridiculously high house prices are bad for society in my opinion.

Not sure if that’s the type of answer you were after but I think it’s pretty unarguable?

[kingston12]

number2 said:

But why are they bad for society?

What outcomes have you identified as bad, what are the causes of these outcomes, and what interventions are required to change these outcomes? What are the consequences of these interventions over the short and long term, and what is the distributional impact of these interventions - who benefits and who pays?

I don't expect detailed analysis but come on, "house price crash good for society". I'd just like a bit more detail as I'm interested in the poster's view.

Isn't it really two separate questions? Lower house prices would be good for society, but the crash required to get them there is bad for society?

[MX-6]

NickCQ said:

Nominal stagnation and real terms deflation (vs wages) of prices over the next 5-10 years would be a Good Thing (speaking as someone levered 5x on London property). That can only be achieved by tightening lending criteria to deleverage the hole jig.

Presuming this is a Good Thing, how would you like to see that fascilitated? A reduction in lending multiples or a rise in interest rates perhaps? I'm sure both would have a negative effect on prices, but also affordability of borrowing as well. It would only help FTB's in terms of potentially making the desposit side of things more doable and less reliance on BOMAD.

[MX-6]

dmahon said:

Wealth disparity is why it’s bad for society. The 99% stay on the treadmill paying rent till they are 70, whilst the rich get richer and live in bigger and bigger mansions.

I think that's a bit of a myth, the majority of UK households are owner occupied, it's almost two thirds, around 65% (down from a high of about 70%).



The trend has actually been on the up since 2017 as well.

[kingston12]

MX-6 said:

dmahon said:

The whole concept of things like “Help To Buy” demonstrates how rigged the market is. The fact that the first economic intervention in the pandemic shows the political will to keep the bubble inflated.

HTB quite often seems to get a bum rap, but I don't really see what peoples issue is with it? It's just an assumption really that it is propping up a bubble market.

I was able to get on the housing ladder with a relatively small deposit via shared ownership, then progressed to HTB, then another property, I'm now on my fourth. These scheme help affordability and people get into ownership, not everyone has high earnings to allow big savings, or access to middle class parents and the bank of mum and dad to bankroll the big deposit (I didn't)

I definitely think that HtB could help buyers outside the SE, but inside that area it has just helped them to pay more money for housing.

There is the argument that developers would just have banked more land for longer unless the Government had made their contribution and increased sales prices, so it probably had a benefit in getting more housing built.

The Persimmon CEO trying to justify his £100m+ bonus was one of the most bizarre things to come out of housing policy in the last decade for me (although the recent claim that buyers rushing to claim a £15k reduction in Stamp Duty caused a £58k increase in house prices would run it close if it is true!)

It will be interesting to see if there is a noticeable effect now that the HtB limits have been reduced in all areas apart from London (where it's become virtually irrelevant anyway).

[Francois de La Rochefoucauld]

dmahon said:

number2 said:

But why are they bad for society?

What outcomes have you identified as bad, what are the causes of these outcomes, and what interventions are required to change these outcomes? What are the consequences of these interventions over the short and long term, and what is the distributional impact of these interventions - who benefits and who pays?

I don't expect detailed analysis but come on, "house price crash good for society". I'd just like a bit more detail as I'm interested in the poster's view.

Wealth disparity is why it’s bad for society. The 99% stay on the treadmill paying rent till they are 70, whilst the rich get richer and live in bigger and bigger mansions.

Wealth disparity leads to worse outcomes for health, more crime, slower growing economies and generally a worse life experience for the man on the street. Lower prices and therefore more participation in the property market is therefore good for society.

Of course some people want to rent and some people want to be landlords, but ridiculously high house prices are bad for society in my opinion.

Not sure if that’s the type of answer you were after but I think it’s pretty unarguable?

Emotive nonsense.

[NickCQ]

MX-6 said:

NickCQ said:

Nominal stagnation and real terms deflation (vs wages) of prices over the next 5-10 years would be a Good Thing (speaking as someone levered 5x on London property). That can only be achieved by tightening lending criteria to deleverage the whole jig.

Presuming this is a Good Thing, how would you like to see that fascilitated? A reduction in lending multiples or a rise in interest rates perhaps? I'm sure both would have a negative effect on prices, but also affordability of borrowing as well. It would only help FTB's in terms of potentially making the desposit side of things more doable and less reliance on BOMAD.

I think you can take leverage out of the system in a couple of ways. The one with least impact on FTBs is probably reducing LTVs / increasing rent cover multiples on BTL mortgages? The latter might see some pass through to tenants - the industry always squeals about this but it doesn't seem to happen in practice as rents are in so many cases affordability constrained anyway.

Increasing interest rates would just be a subsidy to banks unless you sterilise the intervention with some kind of tax increase.

[MX-6]

If normal market forces apply, then what I would expect to see is the bottom of the ladder flats and "starter home" type properties reduce or stagnate in price if FTB affordability really is contrained, and prices of your larger family homes inflate further due to the effects of higher incomes and maybe inheritance for those higher up the pecking order.

This pretty much seems to be reflected in the figures, the price of detached houses have grown more in most areas than the smaller stuff in recent times and demand for flats seems subdued. It does seem to mean that there is more of a leap to do to go up the ladder now with prices of property types/sizes more spread, owners will move less and find it harder to bridge the gap to the next rung.

[NickCQ]

Yes, you would expect stagnation to ripple up the chain as the generation that benefitted from past price rises get progressively older and earn more.
Lowering IHT thresholds to capture a bit more of those untaxed gains wouldn't be a bad thing either (dons flame suit)

[MX-6]

NickCQ said:

Yes, you would expect stagnation to ripple up the chain as the generation that benefitted from past price rises get progressively older and earn more.
Lowering IHT thresholds to capture a bit more of those untaxed gains wouldn't be a bad thing either (dons flame suit)

If the IHT thresholds stay the same then you will get a "fiscal drag" effect in time where they will end up lower in real terms due to inflation, might be a more gentle effect and more politically satisfactory.

[number2]

Francois de La Rochefoucauld said:

dmahon said:

number2 said:

But why are they bad for society?

What outcomes have you identified as bad, what are the causes of these outcomes, and what interventions are required to change these outcomes? What are the consequences of these interventions over the short and long term, and what is the distributional impact of these interventions - who benefits and who pays?

I don't expect detailed analysis but come on, "house price crash good for society". I'd just like a bit more detail as I'm interested in the poster's view.

Wealth disparity is why it’s bad for society. The 99% stay on the treadmill paying rent till they are 70, whilst the rich get richer and live in bigger and bigger mansions.

Wealth disparity leads to worse outcomes for health, more crime, slower growing economies and generally a worse life experience for the man on the street. Lower prices and therefore more participation in the property market is therefore good for society.

Of course some people want to rent and some people want to be landlords, but ridiculously high house prices are bad for society in my opinion.

Not sure if that’s the type of answer you were after but I think it’s pretty unarguable?

Emotive nonsense.

Good to hear some views. Francois, not far from the truth.

House prices are not a cause, are they?

An issue in this country is the number of low skilled workers, and the lack of employment for them, or perhaps training.

This contributes to the vicious circle of unemployment in families, leading to lower incomes and standards of living and social issues. Why is it that some families get stuck in this vicious circle? We have universal healthcare, education and social services. If we had the answer of course...

[anonymous-user]

dmahon said:

I am very long on property but also spent a decade as a House Price Crash poster and think high prices are bad for individuals and overall for society.

By this, I am referring to the individuals ability to buy their own property and build wealth without being stuck on the hamster wheel of paying a rich BTL landlord. That just damages everyone’s own life’s prospects and is not the world I would want to see my kids enter. This rolls up to a happier and wealthier society rather than see the rich gets richer.

I personally bought into BTL after thinking how insane and rigged the market was for a long time, and eventually concluded “if you can’t beat them, join them”.

I have dipped in and out of that website for over 15 years, the thing is their arguments and use of past data is very convincing. However, what they have not foreseen is the lengths the government will go to keep house prices increasing

1)0.1% Interest rates.
2)Help to Buy.
3)Quantitative easing.
4)Stamp duty holidays.

So what you end up with is a website full of very bitter people terrified to buy a house just incase the prophecy is eventually correct. Some of them have been renting for a decade because they are so terrified of buying and prices subsequently dropping. All the while watching "crazy" friends and family buy a house, get on with life and not have to constantly worry about HPC. Then the slow realisation that they can't even afford to buy a house like the one their friends bought years previously.

What is funny is they get excited about the prospect of prices falling 10 or 15%. If this did happen it would only take prices back a few years, to the levels they were when the HPCers though they were too high and anybody who bought was crazy. Or they will try and use man maths to convince themselves renting is cheaper or that they have made more money out of Bitcoin than buying a house.

There are some posts about people who have bought houses, usually they came to the same realisation that you did. Yes it may be a rigged game, but I would rather be in the game taking advantage than getting screwed over.

I assume you keep quiet about have BTL property, they consider landlords the lowest of the low.

[MX-6]

number2 said:

An issue in this country is the number of low skilled workers, and the lack of employment for them, or perhaps training.

This contributes to the vicious circle of unemployment in families, leading to lower incomes and standards of living and social issues. Why is it that some families get stuck in this vicious circle? We have universal healthcare, education and social services. If we had the answer of course...

It's sometimes easy to forget that for the vast extent of human history people led very simple lives, often agrarian, basic agriculture. I'm not sure everyone is cut out for high information, high complexity modern work and living.

We're living the uptopian free information dream whereby almost the totality of human knowledge is accessable via an incredibly well engineered, complex but cheap technological device that fits in ones pocket, aka the smart phone. In theory we could sit around reading about rocket science and brain surgery, but the fact is the majority seem to want to watch cat videos on youtube or argue about nonsensical trival on social media... Is it human nature or learned behaviour, probably something of both.

I've dabbled with the idea that we will need some kind of universal income in future to effectively support the poor, otherwise we could end up with some sort of neo-victorian wealth distribution, a society of haves and have nots...

[NickCQ]

number2 said:

Why is it that some families get stuck in this vicious circle? If we had the answer of course...

Come on then, don't be coy, what do you think the answer is?