House Price Crash Coming?

[anonymous-user]

As things stand at the moment, 31 March 2021 is becoming quite the cliff edge: SDLT holiday and now Furlough both ending on that date

Here is what Lucian Cook at Savills Research says in conclusion of this piece

https://www.savills.co.uk/blog/article/307412/resi...

"But a second lockdown reinforces our view that next year will be a year of three parts.

First, a rush to beat the 31 March stamp duty deadline. Second, a lull in the middle part of the year, with the possibility of modest price falls given the economic hangover of Covid. And third, restored confidence in the latter part of the year as more sustained economic growth gains a foothold."

His broader forecast https://www.savills.co.uk/research_articles/229130... centres on these data

[Fusion777]

Unemployment only reaching 6.5% seems very optimistic. House prices being over 20% higher after 4 years is almost laughable. I also think now there's little point reading too much into cut off dates of government support, because it's changing as often as the weather.

[Phooey]

The SDLT holiday has become a red herring.

I had a quick scan of the Savilles article and this had me nodding at the computer screen..

"Because of this and changing lifestyle priorities, not all property types will fare the same over our forecast period. For example, good quality family housing with plenty of outside space is likely to perform better than smaller flats and houses in the short term at least. In particular, prime properties are expected to perform differently, that market having been the most robust to date"

That is definitely the case around here, but to be fair it's not just since Covid - the upper end of the market has always seen increased strength around my parts. A shortage of nice non-standard houses, limited building plots to build these "nice" houses and ridiculously cheap borrowing vs more buyers on big salaries = demand outstripping supply. Covid isn't going to break that rule.

[Francois de La Rochefoucauld]

Their predictions never change, always 20% growth over 5 years. Nothing like talking up your own book.

You just have to meet a few of these muppets to know their predictions are based on reading tea leaves and horoscopes.

[LaurasOtherHalf]

Phooey said:

Hi mate, I would of bet money on a short-term crash of some sort, and if i'm honest I'm actually disappointed it didn't happen

I see no crash coming at the mid-to-upper end of the market anytime soon.

There’s a reason I don’t gamble! It’s essentially done the opposite of what I expected to happen.

JPJPJP said:

As things stand at the moment, 31 March 2021 is becoming quite the cliff edge: SDLT holiday and now Furlough both ending on that date

Here is what Lucian Cook at Savills Research says in conclusion of this piece

https://www.savills.co.uk/blog/article/307412/resi...

"But a second lockdown reinforces our view that next year will be a year of three parts.

First, a rush to beat the 31 March stamp duty deadline. Second, a lull in the middle part of the year, with the possibility of modest price falls given the economic hangover of Covid. And third, restored confidence in the latter part of the year as more sustained economic growth gains a foothold."

His broader forecast https://www.savills.co.uk/research_articles/229130... centres on these data

That’s where my thinking lies, I’ve just bought a countryside plot in a nice farming village about 5 miles out of town.

I’m just going to keep my head down and build through the dip, nice 4.5 bed, detached garage with office that I won’t build unless the buyer wants it (means I can chop the price to attract a buyer).

I can do the bulk of the 1st and 2nd fix myself if I need to just provide wages for myself (I did this in the last one during lockdown 1).

The biggest problem is finding the finance, I’m self funding but this means I can only do one at a time. I’ve tried really hard to get a CBILS but no luck, 250k at those rates would have been great.

[stabilio]

Predictions and outlooks from 'experts' right now should be taken with a large pinch of salt.
No-one knows whats going to happen in the near future with things the way they are but 'The Great Reset' seems to be going to plan.

[bogie]

With inflation at near 3% a year house prices need to "go up" by 15% over 5 years just to maintain value .....

In all the sensational media headlines "property prices at all time high" they fail to mention inflation....inflation adjusted house prices are not even back in 2007 yet ...the market hasn't really recovered from that "correction"...

[Sheepshanks]

LaurasOtherHalf said:

The biggest problem is finding the finance, I’m self funding but this means I can only do one at a time. I’ve tried really hard to get a CBILS but no luck, 250k at those rates would have been great.

This stems from one our directors shooting his mouth off in his local about our bank balance, but we were recently offered 10% if we loaned a developer £300K.

[Bullet-Proof_Biscuit]

stabilio said:

the ridiculous waiting times on searches and getting surveyors in, approx 20 weeks to complete (if all goes smoothly)

Where and how does it take 20 weeks in your end? Mines looking like 7 all in, and that's with only 11% deposit!

[loafer123]

Fusion777 said:

Unemployment only reaching 6.5% seems very optimistic. House prices being over 20% higher after 4 years is almost laughable. I also think now there's little point reading too much into cut off dates of government support, because it's changing as often as the weather.

I do t see the max number mattering as much as the size of the bounce.

A lot of people have been laid off from hospitality, conferencing, etc and if we have a big bounce once the virus is over, given the latent spending power that has built up, we could see a lot rehired quite quickly.

[stabilio]

Bullet-Proof_Biscuit said:

Where and how does it take 20 weeks in your end? Mines looking like 7 all in, and that's with only 11% deposit!

Selling ours and buying another in a chain was average 20 weeks the solicitors told me.
Even the guy who was coming to ours to do the homebuyer report for our buyer couldn't come for close to 5 weeks as he was flat out.

[LaurasOtherHalf]

Sheepshanks said:

LaurasOtherHalf said:

The biggest problem is finding the finance, I’m self funding but this means I can only do one at a time. I’ve tried really hard to get a CBILS but no luck, 250k at those rates would have been great.

This stems from one our directors shooting his mouth off in his local about our bank balance, but we were recently offered 10% if we loaned a developer £300K.

I've seen the same "amongst friends". To be honest I don't need the extra workload of running a separate development for £30k cost of borrowing.

Worth doing on a 3 plot development if one were available but just to build another house up here (I'm up north so I'd be selling for under £400k) it's not worth the extra hassle.

Shows you hard hard it is to get finance at a reasonable cost for development at the moment though. No great re-set influence mind you, it's been like this for a few years.

[Fusion777]

loafer123 said:

I do t see the max number mattering as much as the size of the bounce.

A lot of people have been laid off from hospitality, conferencing, etc and if we have a big bounce once the virus is over, given the latent spending power that has built up, we could see a lot rehired quite quickly.

Remember unemployment is a lagging factor. It peaked here after we'd come out of recession in the last slump, rather than during the recession. We might not see the peak until next year or even 2022. It peaked at the end of 2011 last time, and didn't fall below 7.5% until Oct 2013. The economy started growing again in 2010 (there were 2 negative quarters in 2012/3, but not in succession).

[loafer123]

Fusion777 said:

loafer123 said:

I do t see the max number mattering as much as the size of the bounce.

A lot of people have been laid off from hospitality, conferencing, etc and if we have a big bounce once the virus is over, given the latent spending power that has built up, we could see a lot rehired quite quickly.

Remember unemployment is a lagging factor. It peaked here after we'd come out of recession in the last slump, rather than during the recession. We might not see the peak until next year or even 2022. It peaked at the end of 2011 last time, and didn't fall below 7.5% until Oct 2013. The economy started growing again in 2010 (there were 2 negative quarters in 2012/3, but not in succession).

Good points.

It is important to note that this time is very unusual....unemployment has been driven by the artificial closing of whole sectors of the economy.

When those reopen, there will be a substantial and immediate amount of hiring, rather than a gradual recovery like in previous recessions.

[Fusion777]

loafer123 said:

Good points.

It is important to note that this time is very unusual....unemployment has been driven by the artificial closing of whole sectors of the economy.

When those reopen, there will be a substantial and immediate amount of hiring, rather than a gradual recovery like in previous recessions.

Hopefully so. It's dropped pretty quickly in the states, though they have even more of a "hire and fire" culture than us. Some of those jobs won't be coming back though (high street retail, reductions at head offices of banks etc).

[loafer123]

Fusion777 said:

loafer123 said:

Good points.

It is important to note that this time is very unusual....unemployment has been driven by the artificial closing of whole sectors of the economy.

When those reopen, there will be a substantial and immediate amount of hiring, rather than a gradual recovery like in previous recessions.

Hopefully so. It's dropped pretty quickly in the states, though they have even more of a "hire and fire" culture than us. Some of those jobs won't be coming back though (high street retail, reductions at head offices of banks etc).

Yes, it will certainly settle at a higher rate than it was after everything is back open.

[cerberaperv]

LaurasOtherHalf said:

Sheepshanks said:

LaurasOtherHalf said:

The biggest problem is finding the finance, I’m self funding but this means I can only do one at a time. I’ve tried really hard to get a CBILS but no luck, 250k at those rates would have been great.

This stems from one our directors shooting his mouth off in his local about our bank balance, but we were recently offered 10% if we loaned a developer £300K.

I've seen the same "amongst friends". To be honest I don't need the extra workload of running a separate development for £30k cost of borrowing.

Worth doing on a 3 plot development if one were available but just to build another house up here (I'm up north so I'd be selling for under £400k) it's not worth the extra hassle.

Shows you hard hard it is to get finance at a reasonable cost for development at the moment though. No great re-set influence mind you, it's been like this for a few years.

I`ve used private funding from businessmen, on and off for over 15yrs and 10% on private/non mainstream funding, is quite common. The most I`ve paid on a rolled up interest is 1% per month but that was only on a 8mth term.

I`m currently talking to a guy who is coming into some money and he`s asked for 6%pa for 3yrs, which I find is very reasonable. I`d happily pay him 8% and still may do, if it comes off.

[Sheepshanks]

cerberaperv said:

I`ve used private funding from businessmen, on and off for over 15yrs and 10% on private/non mainstream funding, is quite common. The most I`ve paid on a rolled up interest is 1% per month but that was only on a 8mth term.

I`m currently talking to a guy who is coming into some money and he`s asked for 6%pa for 3yrs, which I find is very reasonable. I`d happily pay him 8% and still may do, if it comes off.

In our case it generated a 'discussion' about how the money could (and should) be better used within our own business and we went for that and took on a couple more people. A side isssue, as we never deeply looked into it, was security. The loan was going to be secured against the land, but once building has started, apparently that gets very complicated.

[cerberaperv]

Sheepshanks said:

cerberaperv said:

I`ve used private funding from businessmen, on and off for over 15yrs and 10% on private/non mainstream funding, is quite common. The most I`ve paid on a rolled up interest is 1% per month but that was only on a 8mth term.

I`m currently talking to a guy who is coming into some money and he`s asked for 6%pa for 3yrs, which I find is very reasonable. I`d happily pay him 8% and still may do, if it comes off.

In our case it generated a 'discussion' about how the money could (and should) be better used within our own business and we went for that and took on a couple more people. A side isssue, as we never deeply looked into it, was security. The loan was going to be secured against the land, but once building has started, apparently that gets very complicated.

If it`s a new build development on land, then yes, we would look to buy the land using private funding, then raise the debt finance to fund the build. A seperate Ltd company would be opened just for that project and the equity funder would be a shareholder.
The debt finance is paid/drawn-down monthly in arrears. Typically after a QS has viewed progress and reported back to lender.Funds from them are only drawndown at each stage of the project value increasing, in order to reduce their risk.
Afterall, it`s in the developement finance company`s interest to get the development built out and sold, so they can be repaid.

For smaller projects such as a property that required a refurb or a building to convert, it`s quite straight forward. A loan agreement is drafted and a charge is placed on the property for the funder`s security. When the sale completes, the solicitors pay the lender first to release the charge.

[Sheepshanks]

Thanks.