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Why won't house prices increase if we have inflation caused by coronavirus?


HolyCow

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Well I’ll go slightly against the grain here. I think they’ll be sharper falls a lot quicker than anticipated.

Already Air BnB’ers in London are panicking and causing a drop in rents in the market for long term residence. 2 million BTL landlords, start heading for the exits, voids becoming a regular occurrence and the difficultly in kicking anyone out.

Estate agents going bust (yes the worlds smallest violin)

£1million flats in central London won’t be as desirable after all of this as the world turns more insular and cautious for liquidity in regards to foreign property investment. Demand dries up from Chinese/Russian/Arab buyers. Domestic family buyers may look for bigger Home Counties properties with land (save ever going into self isolation again). Central London’s peak was 2016, that will fall more rapidly now and gravitate out.

On the back of that lots of unfinished building projects (as well as plant hire/construction companies) that may go bust over the next few months. Construction work becoming more scarce, lots of unemployed EE’rs as well as our own in the short term (until we have the mass council housing/infrastructure building since WW2 later in the following years).

Banks will be more cautious on lending due to job security. Restriction of credit, will alone cause the market to stagnate. 

So for me it’s a 20% drop across the country by this time next year compounded to a 40% drop in Greater London and the SE followed by stagnation. Then as DB’s 10%+ interest rate predictions come in later in the decade another 20-30% nationally.

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9 hours ago, DurhamBorn said:

8% by 2028 i think.UK mortgages will be 10%+,

Im interested in how much spread mortgage rates will be over BoE rates.

At the mo, the BoE-SVR spread is pretty chunky - 5%.

Even if that falls to 3%-4%, a BoE historical average-to low BoE rate of 5% implies mortgages at ~10%.

I mentioned before that I have a school mate who took on 500k mortgage to buy a small, crappy ex council house in a not pretty nice bit of West London.

I reckon shes going to be down at least 50-100k over the last 4 years. Few years time and itll be ~4x local wages, so around 120k-150k.

Keep in mind that in 95ish, average London houses i.e. not some Mayfair palace,  was below 3x a single wage.

You are going to see a total reverse of the 'My house earns more than I do'

My house lost more money than Ive ever earned.

 

 

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16 hours ago, HolyCow said:

House prices should fall because people will lose jobs, have less money etc but with the Government printing so much, surely we will have (hyper)inflation? Can someone, @DurhamBorn  explain why house prices won't increase if we have inflation from the coronavirus handouts? I know it's not going to banks directly this time but I'm trying to work out the mechanism of how this is likely to play out when it comes to housing. Also, do you think property taxes will be increased to pay for all this as they are easy to tax and that is the way things were already going?

Id also point out that the concept of 'getting rich by banks increases assets (lending)' is deader than dead.

Its very unlikely to happen again - Basel regulation will see to that.

BoE have fixed the price of average UK house at ~4x UK household income minus costs.

You want HPI/ Then you need wage and employment increases.

London/Se are beyond screwed.

at the mo, the UK economy is still smothered by high house prices which are preventing compnaies employing people as very few can or will move.

 

 

 

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1 hour ago, spygirl said:

Id also point out that the concept of 'getting rich by banks increases assets (lending)' is deader than dead.

Its very unlikely to happen again - Basel regulation will see to that.

BoE have fixed the price of average UK house at ~4x UK household income minus costs.

You want HPI/ Then you need wage and employment increases.

London/Se are beyond screwed.

at the mo, the UK economy is still smothered by high house prices which are preventing compnaies employing people as very few can or will move.

 

 

 

When did Basel III come in or has it yet? I'm sceptical. Everything that has come in to reduce house prices has seen them keep rising. MMR, S24, changes to SDLT and CGT (and even the 2% surcharge on foreign buyers announced in the budget won't now come in until at least next year and that's pennies for the foreign rich). Before coronavirus hit, house prices had started to increase again. It's good if a cap has been put on them by Basel but how long will it take to filter into the system. My only glimmer of hope is that the Government hasn't given the money to the banks this time, so they must know the system has to change.

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1 minute ago, HolyCow said:

When did Basel III come in or has it yet? I'm sceptical. Everything that has come in to reduce house prices has seen them keep rising. MMR, S24, changes to SDLT and CGT (and even the 2% surcharge on foreign buyers announced in the budget won't now come in until at least next year and that's pennies for the foreign rich). Before coronavirus hit, house prices had started to increase again. It's good if a cap has been put on them by Basel but how long will it take to filter into the system. My only glimmer of hope is that the Government hasn't given the money to the banks this time, so they must know the system has to change.

Its being introduced over 5 years. We - andtheworldi half way.

If you  believe the banks are deleveraging and being gutted then you are not looking in the high streets and the financial pages.

Seriously.

We are seeing equivalent to Japan in the 90s.

Just look at the banks share prices/market cap FFS

Pick a bank - UK, Ireland, European. Look atthe share price graph since 2000.

What goes for  the price of equity, goes for their lending book.

 

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35 minutes ago, spygirl said:

Its being introduced over 5 years. We - andtheworldi half way.

If you  believe the banks are deleveraging and being gutted then you are not looking in the high streets and the financial pages.

Seriously.

We are seeing equivalent to Japan in the 90s.

Just look at the banks share prices/market cap FFS

Pick a bank - UK, Ireland, European. Look atthe share price graph since 2000.

What goes for  the price of equity, goes for their lending book.

 

Thanks but it will probably take 20+ years for all this to play out. 

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4 minutes ago, HolyCow said:

Thanks but it will probably take 20+ years for all this to play out. 

Nope.

It was always going to be the first slowdown.

Due to demographics, UK doesnt have 20 years.

Its bust at dueto OAPs in less than 5.

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Green Devil
42 minutes ago, Bobthebuilder said:

Beat me to it. This is effectively shutting down housing. If youre a cash buyer, there should be some once in a lifetime bargains out there soon.

8 minutes ago, JoeDavola said:

Just came here to post that.

Surely this is very very significant news? Kinda the death of the housing market?

 

8 minutes ago, JoeDavola said:

Just came here to post that.

Surely this is very very significant news? Kinda the death of the housing market?

 

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Green Devil

The problem i can see right now, is that all the scumbag EAs have shut up shop completely. So unless youve already viewed and decided on somewhere, youre stuffed. However, if youre at solicitors stage, id suggest a big gazunder should be on the cards!

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4 minutes ago, Green Devil said:

Beat me to it. This is effectively shutting down housing. If youre a cash buyer, there should be some once in a lifetime bargains out there soon.

I've got almost £200K in cash - if I could buy a nice house for life out of that I'd be very happy.

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15 hours ago, Wight Flight said:

Why do you think that?

I would be worried about renting from a private landlord (security of tenancy etc due to mortgage defaults). There are a couple of large country estates in the county and they always have properties available. I suspect we would compromise on the house type/location in order to feel more secure.

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2 hours ago, JoeDavola said:

I've got almost £200K in cash - if I could buy a nice house for life out of that I'd be very happy.

I'm in a similar situation. I do want to utilise my LISA but the small print states I need to take out a mortgage. Well a £100 mortgage is still a mortgage I guess.

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43 minutes ago, NeoGeo said:

I'm in a similar situation. I do want to utilise my LISA but the small print states I need to take out a mortgage. Well a £100 mortgage is still a mortgage I guess.

Hmm I wonder if the same is true for my help to buy ISA.

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Bobthebuilder
46 minutes ago, JoeDavola said:
1 hour ago, NeoGeo said:

I'm in a similar situation. I do want to utilise my LISA but the small print states I need to take out a mortgage. Well a £100 mortgage is still a mortgage I guess.

Hmm I wonder if the same is true for my help to buy ISA.

Dont quote me on this but i think, if you need a mortgage for a first time buy the minimum amount they will lend you is £28,000. Best check that though.

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I hope the Government at least has the decency to stop Chinese funny money flooding into UK property asap. Imagine you have lost your job yet you have to pay rent to a Chinese landlord laundering money via London. You'd feel pretty pissed off!

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Democorruptcy
20 hours ago, DurhamBorn said:

They have much more pressing problems like bringing back supply chains from China,food and energy security etc.House prices wont even register going forward.They would prefer they didnt crash,but down 15% and then down another 60% in inflation terms over the cycle they would bat an eyelid.House prices are so last cycle.

I think they might prefer they didn't crash given the governbankment owns more property than anyone else. Via their 20% and 40% liabilities on Help to Buy. I think the first 2 phases were £12bn and then £10bn? It's a lot of money to be handing bankers at the same time as they are raising taxes to pay for the coronavirus handouts.

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2 hours ago, Bobthebuilder said:

Dont quote me on this but i think, if you need a mortgage for a first time buy the minimum amount they will lend you is £28,000. Best check that though.

That's something I've looked into.

The overheads of mortgages are so high that the min mortgage most will do is 50k.

Even the, that excludes about 50% of ukpop from mortgage market - fail mmr.

Only way to get a cheap, low value is to take out 50k or whatever, then payback lumps.

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Bobthebuilder
55 minutes ago, spygirl said:

the min mortgage most will do is 50k.

I can believe that, the £28k i was talking about was many moons ago. I was going to buy a flat in Dorset, asked the bank for a £24k mortgage, they laughed in my face.

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Castlevania
4 hours ago, Bobthebuilder said:

Dont quote me on this but i think, if you need a mortgage for a first time buy the minimum amount they will lend you is £28,000. Best check that though.

Most banks will have a minimum amount. If that’s the case get an offset mortgage and offset the full amount outstanding. 

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Castlevania
1 hour ago, spygirl said:

That's something I've looked into.

The overheads of mortgages are so high that the min mortgage most will do is 50k.

Even the, that excludes about 50% of ukpop from mortgage market - fail mmr.

Only way to get a cheap, low value is to take out 50k or whatever, then payback lumps.

Quick google, suggest Co-Op have a minimum of £5k and Halifax £10k.

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