How Far Will House Prices Fall? [Volume 6]

[kingston12]

MX-6 said:

You're right about London/SE being an exception, what I said was a bit too much of a generalisation really.

Even where I work in Hert's there are those small 2 up, 2 down Victorian terrace cottages quite close to town that are over the £450k mark now (there's one for £475k on Rightmove). It must be young professionals who work in and commute to and from London that buy them, it's an old market town with some nice coffee shops, restaurants, etc. Come 20 miles north to Bedford and there are similar properties available for less than £200k in some areas (from about £185k), ones that people on minimum wage could afford.

Indeed. It shows how it's spreading. I can't imagine those houses now on the market at £475k would have gone to London commuters a few years ago, but now they are amongst the only ones that can afford them - pushing the traditional buyers of those houses further out or into rented accommodation.

It will definitely be interesting to see what effect changing working patterns has one all of this, if they do change in any meaningful way in the longer term, of course.

MX-6 said:

What has changed is the type of work people do, there are a lot more people now who are graduates or otherwise educated who work in offices and less manual workers that you mention, but housing is still essentially the same as it has been for decades. So there seems to have been a downwards adjustment in what some graduate level employees can expect to be able to buy.

I think it's worse than that. I don't want to get too SE focussed, but here the housing stock is changing, for the worse. Even in outer-commuter belt towns there seem to be quite a lot of high density flats being built. This has been going on for a while in places like Woking, but is quite new in Sevenoaks, for example, which has traditionally been an area dominated by detached houses.

Move a bit further in to London, and the high density flats are all that is being built.

So the demographic is becoming more aspirational and the housing stock is getting smaller and less aspirational (even though everyone is told they should be aspiring to these high rise flats by developers who make the most profit out of them).

[p1stonhead]

kingston12 said:

MX-6 said:

You're right about London/SE being an exception, what I said was a bit too much of a generalisation really.

Even where I work in Hert's there are those small 2 up, 2 down Victorian terrace cottages quite close to town that are over the £450k mark now (there's one for £475k on Rightmove). It must be young professionals who work in and commute to and from London that buy them, it's an old market town with some nice coffee shops, restaurants, etc. Come 20 miles north to Bedford and there are similar properties available for less than £200k in some areas (from about £185k), ones that people on minimum wage could afford.

Indeed. It shows how it's spreading. I can't imagine those houses now on the market at £475k would have gone to London commuters a few years ago, but now they are amongst the only ones that can afford them - pushing the traditional buyers of those houses further out or into rented accommodation.

It will definitely be interesting to see what effect changing working patterns has one all of this, if they do change in any meaningful way in the longer term, of course.

MX-6 said:

What has changed is the type of work people do, there are a lot more people now who are graduates or otherwise educated who work in offices and less manual workers that you mention, but housing is still essentially the same as it has been for decades. So there seems to have been a downwards adjustment in what some graduate level employees can expect to be able to buy.

I think it's worse than that. I don't want to get too SE focussed, but here the housing stock is changing, for the worse. Even in outer-commuter belt towns there seem to be quite a lot of high density flats being built. This has been going on for a while in places like Woking, but is quite new in Sevenoaks, for example, which has traditionally been an area dominated by detached houses.

Move a bit further in to London, and the high density flats are all that is being built.

So the demographic is becoming more aspirational and the housing stock is getting smaller and less aspirational (even though everyone is told they should be aspiring to these high rise flats by developers who make the most profit out of them).

HUGE block next to Redhill station which is my closest ‘useful’ station.

Last I heard not many were sold...

[kingston12]

p1stonhead said:

HUGE block next to Redhill station which is my closest ‘useful’ station.

Last I heard not many were sold...

I don't know Redhill, but I assume that its another place that hasn't had much of these high density developments, but is now getting them?

It's no wonder it is happening, I suppose.

Central Government pays the council a bonus for new homes built, and that seems to be based on total number of units (so the smaller the units the better). The developer will pay more for the land if they can build more units, and I guess a lot of town centre land could be council owned as well, so planning permission not really an issue.

https://www.gov.uk/government/publications/new-hom...

I see a lot of these blocks as the social housing of the future. Some of the 10+ year old ones around here already seem to have gone that way, while new ones being built nearby have asking prices of upto £1m per flat!

[p1stonhead]

kingston12 said:

p1stonhead said:

HUGE block next to Redhill station which is my closest ‘useful’ station.

Last I heard not many were sold...

I don't know Redhill, but I assume that its another place that hasn't had much of these high density developments, but is now getting them?

It's no wonder it is happening, I suppose.

Central Government pays the council a bonus for new homes built, and that seems to be based on total number of units (so the smaller the units the better). The developer will pay more for the land if they can build more units, and I guess a lot of town centre land could be council owned as well, so planning permission not really an issue.

https://www.gov.uk/government/publications/new-hom...

I see a lot of these blocks as the social housing of the future. Some of the 10+ year old ones around here already seem to have gone that way, while new ones being built nearby have asking prices of upto £1m per flat!

It’s certainly big compared to anything else around. It’s right next to the station which is very handy. It’s a very quick train line 28 mins into central london (London Bridge) but who knows if the demand will come back with WFH at least in the short term.

[711]

Someone best tell BlackRock if those flats aren’t selling because they are going to build a shedload more!

https://uk.news.yahoo.com/london-high-rises-invest...

[NickCQ]

711 said:

Someone best tell BlackRock if those flats aren’t selling because they are going to build a shedload more!

https://uk.news.yahoo.com/london-high-rises-invest...

I suspect that's a build-to-rent play rather than for individual unit sales to residents or BTL-ers

[Flooble]

I've been trying to get my head around how the market may end up being reshaped.

We've seen quite a lot of people "seeking space". Those in 3 bed semis with an hour commute are now happy to go to a four bed detached (with study for WFH) and a two hour commute (after all, if you have gone from 4 days in the office to two the time on a train in that exactly will end up the same).

It's the city centre people I wonder about. When in your 20s its great to be able to finish at the pub and be in bed 10 minutes later. The guy with an hour commute will lose two hours sleep (getting home later and getting up earlier). And you don't really spend much time in your flat.

But in the future there are several question marks that I can see

1) Will all the leisure and entertainment options actually come back? It'd be a brave business owner investing in pub/gym/restaurant/theatre/etc. If cities remain dead with limited entertainment, is a flat attractive?
2) Are we going to see a long period with lots of limitations on entertainment, such as mandatory prior booking. The days of "a swift drink after work" turning into a meal and after dinner drinks would be finished as you would only be able to stay out for the duration of the pre-booking, which would mean you could be confident of getting home at a decent hour even with a long commute.
3) If there is more WFH, falling into the house at midnight after an hour+ on the train isn't so bad if the day after is a WFH day so you can roll out of bed five minutes before your first meeting.

So that said, I could see why those would previously go for flats might choose to also stay out in the sticks. Which will inevitably increase the prices of houses.

Will there be enough people who still want a flat near to the city centre? Or are we going to have a badly distorted market where anyone with the money will be bidding up houses to new heights and flats will be left unwanted (or maybe converted back into houses?)

[kingston12]

As promised, the Government are launching Help to Buy on existing homes.

https://www.bbc.co.uk/news/uk-56218952

It’s definitely time to change the title of this thread now if it wasn’t already!

[DickP]

That feels like it’s going to put people like me at a further disadvantage now than before, and will drive prices even higher again. All because I’ve tried to save hard to get to as near 20% deposit that I could.

I was hoping that scheme wasn’t going to be introduced until a year or two down the line.

Maybe I shouldn’t have bothered and spent my money on more lifestyle things, as it sounding I would have been better off for it.

[kingston12]

DickP said:

That feels like it’s going to put people like me at a further disadvantage now than before, and will drive prices even higher again. All because I’ve tried to save hard to get to as near 20% deposit that I could.

I was hoping that scheme wasn’t going to be introduced until a year or two down the line.

Maybe I shouldn’t have bothered and spent my money on more lifestyle things, as it sounding I would have been better off for it.

Yes, first time buyers with a decent deposit will absolutely be disadvantaged unfortunately.

Rishi Sunak was quoted as saying "I will do whatever it takes to protect the British people through this crisis and I remain committed to that."

What he means of course is "I will do whatever it takes to protect house prices through this crisis and I remain committed to that."

Edited by kingston12 on Saturday 27th February 08:38

[Jim the Sunderer]

kingston12 said:

As promised, the Government are launching Help to Buy on existing homes.

https://www.bbc.co.uk/news/uk-56218952

It’s definitely time to change the title of this thread now if it wasn’t already!

This doesn't sound like it would benefit me, stood on the precipice of buying a ~£250k house.

Cash in the bank and a "sold" sign outside my [I]very[/] cheap one.

[kingston12]

Jim the Sunderer said:

kingston12 said:

As promised, the Government are launching Help to Buy on existing homes.

https://www.bbc.co.uk/news/uk-56218952

It’s definitely time to change the title of this thread now if it wasn’t already!

This doesn't sound like it would benefit me, stood on the precipice of buying a ~£250k house.

Cash in the bank and a "sold" sign outside my [I]very[/] cheap one.

Well, hopefully it won’t disadvantage you too much.

I don’t see this having the same effect as the Stamp Duty holiday in terms of causing large overnight increases in prices, so if you are already in the process of looking/buying then it shouldn’t make too much difference. I wouldn’t hang around though!

Longer term it will mean that the price of your new purchase will go up more once you’ve bought it, but will obviously widen the gap to get to the next ‘rung’ if that is something you want to do in the future.

[Shnozz]

Flooble said:

I've been trying to get my head around how the market may end up being reshaped.

We've seen quite a lot of people "seeking space". Those in 3 bed semis with an hour commute are now happy to go to a four bed detached (with study for WFH) and a two hour commute (after all, if you have gone from 4 days in the office to two the time on a train in that exactly will end up the same).

It's the city centre people I wonder about. When in your 20s its great to be able to finish at the pub and be in bed 10 minutes later. The guy with an hour commute will lose two hours sleep (getting home later and getting up earlier). And you don't really spend much time in your flat.

But in the future there are several question marks that I can see

1) Will all the leisure and entertainment options actually come back? It'd be a brave business owner investing in pub/gym/restaurant/theatre/etc. If cities remain dead with limited entertainment, is a flat attractive?
2) Are we going to see a long period with lots of limitations on entertainment, such as mandatory prior booking. The days of "a swift drink after work" turning into a meal and after dinner drinks would be finished as you would only be able to stay out for the duration of the pre-booking, which would mean you could be confident of getting home at a decent hour even with a long commute.
3) If there is more WFH, falling into the house at midnight after an hour+ on the train isn't so bad if the day after is a WFH day so you can roll out of bed five minutes before your first meeting.

So that said, I could see why those would previously go for flats might choose to also stay out in the sticks. Which will inevitably increase the prices of houses.

Will there be enough people who still want a flat near to the city centre? Or are we going to have a badly distorted market where anyone with the money will be bidding up houses to new heights and flats will be left unwanted (or maybe converted back into houses?)

You are posing exactly the same questions as I am.

I’ve lived in a city centre penthouse for a decade. I’m currently out of the market and when I return I’m really torn in buying another penthouse or getting a 3/4 bed house with a 1 hour commute. It all depends on whether city life properly returns, and I’m not confident that it will to the extent it did before, for the reasons you highlight. Added to that is the continuing issues of ever increasing management charges on apartments and the recent cladding and fire issues that are still ongoing in many cases.

[Rob_125]

This announcement is a bit of a kick in the teeth yet again for the financially responsible. We currently feel locked into our 3 bed semi, as the gap widens massively for something 4 bed detached. All this does is cause wreckless spending and will drive prices even higher.

[kiethton]

Definitely a benefit here - currently in what would be deemed a "starter" home - a 580 sqft 1.5 bedroom flat in a nice part of zone 4 @c325k - looking to make a big jump so I'll be selling into potential demand and buying above it, result!

[ghost83]

Havent noticed any prices fall around me,

[kingston12]

kiethton said:

Definitely a benefit here - currently in what would be deemed a "starter" home - a 580 sqft 1.5 bedroom flat in a nice part of zone 4 @c325k - looking to make a big jump so I'll be selling into potential demand and buying above it, result!

Yep, should be a definite advantage for second time buyers selling below £600k and buying above that level. It might be relatively short-lived though, as the extra money filters upwards through chains.

I’m actually surprised that this scheme is going to be limited this to £600k purchases. It might be to create the illusion that it is targeted at first time buyers, but £600k is way above what people in most of the country will spend on their first home.

There’s always time to extend it later on.

[MX-6]

kingston12 said:

As promised, the Government are launching Help to Buy on existing homes.

https://www.bbc.co.uk/news/uk-56218952

It’s definitely time to change the title of this thread now if it wasn’t already!

That's interesting, the government are showing again that they are committed to supporting the housing market, as if we ever doubted it.

Since I see the deposit as the main issue for FTB affordability, it seems to be a welcome development. It doesn't allow people to borrow more and inflate prices that way, it just allows people who are viable would-be owners who have the necessary income to service a mortgage to get on the ladder, particularly those who don't have access to the Bank of Mum and Dad. More FTB's coming into the market will help increase transaction volumes, which will likely lead to further rising prices I would think (all other things being equal).

If interest rates and lending multiples stay fairly static for the foreseeable future, then surely price growth has to plateau at some point and follow wage and monetary inflation more closely. With the government committed to offering support, I don't see much point in not borrowing to the max, providing you can get on a low rate.

[Leicester Loyal]

DickP said:

That feels like it’s going to put people like me at a further disadvantage now than before, and will drive prices even higher again. All because I’ve tried to save hard to get to as near 20% deposit that I could.

I was hoping that scheme wasn’t going to be introduced until a year or two down the line.

Maybe I shouldn’t have bothered and spent my money on more lifestyle things, as it sounding I would have been better off for it.

Same for me mate, got my 25% deposit and now this.

Just kick in the teeth after kick in the teeth constantly, everything I'm saving ends up getting eaten up straight away in rising house prices.

[kingston12]

MX-6 said:

That's interesting, the government are showing again that they are committed to supporting the housing market, as if we ever doubted it.

Since I see the deposit as the main issue for FTB affordability, it seems to be a welcome development. It doesn't allow people to borrow more and inflate prices that way, it just allows people who are viable would-be owners who have the necessary income to service a mortgage to get on the ladder, particularly those who don't have access to the Bank of Mum and Dad. More FTB's coming into the market will help increase transaction volumes, which will likely lead to further rising prices I would think (all other things being equal).

If interest rates and lending multiples stay fairly static for the foreseeable future, then surely price growth has to plateau at some point and follow wage and monetary inflation more closely. With the government committed to offering support, I don't see much point in not borrowing to the max, providing you can get on a low rate.

This will create much more demand up to £600k and that will push prices up in a few ways.

Firstly, people with larger deposits who were holding back and not borrowing the max will now have to up their game to to compete with the new entrants they wouldn’t have been.

Then there are the new entrants themselves. I would have thought that there are plenty of good earners that are currently locked out because they’ve got no saved deposit or BOMAD. That’s a lot of potential new funded demand.

Properties above £600k will take longer to be affected, but eventually the extra money that people get selling lower value properties must find its way into their next purchases.

The final part is investors who are likely to be encouraged by further evidence of Government support for prices and invest further.

A commenter on The Times article about the policy put it quite well: “As a multiple home owner I’m always tremendously supportive of measures to help our young people inflate the value of my assets.”

I definitely agree that they’ll need to do something else to keep things moving upwards, but this will have the desired effect for now.