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


HolyCow

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On 30/03/2020 at 15:53, DurhamBorn said:

Property taxes will increase yes,pension tax relief will also be cut,and i expect NI to be paid after 65 on any income over £12.5k.It will be done under the guise of paying for our wonderful NHS.

 

Does anyone know the potential tax take from this NI change?

If the covid emergency measures cost 150Bln and the tax gain using save the clappy-NHS [new appropriate name so all those of us who are not fans can think yes a diseased organ with the clap] as a BS excuse gains 70Bln a year that would quids in this parliament and explain a lot.

[I made the numbers up, does anyone know the real ones?]

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5 minutes ago, Castlevania said:

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

Nah, they might say that but wont offer a mortgage.

Theres no enough margin to cover the work.

You need at least 1k to cover the admin.

5k 10k theyll push a loan which has a lot less regulation n checks.

 

 

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When this lockdown is finished we will see the biggest breakup of relationships ever recorded. Domestic violence has gone through the roof. Forget the death of older people. There will be more younger breakups and house put on the market than estate sales.

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12 hours 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.

...

LOL. I read that and think fabulous agree. Right up until that bolded bit.

Nope not screwed you mean saved.

London is the fabulous incredible capital of the world because of its performance art from low-brow to hi-brow, it's diversity and acceptance of all, it's melting pot, it's what NYC used to be and is still perhaps in a way not as extreme as London.

Problem with all that in the last few years is only rich boring cunts who work in the city and only care for money can afford to live here.

London HPC needs to happen so what is wonderful about London can be saved and those who make the city fabulous can afford to live. We will still not only tolerate but even accept the rich cunts but the rest are needed too.

[I am an owner-occupier in London, many of us would welcome HPC]

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Bobthebuilder
31 minutes ago, Castlevania said:

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

The amount of red tape rings i had to jump through to get a offset mortgage would say to me that wont be a option for everyone. Hours on the phone, 2 bank visits and proof of pension to pay it off if i didnt in the mortgage term. You deal with the repo guys with an offset.

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7 minutes ago, RJT1979 said:

When this lockdown is finished we will see the biggest breakup of relationships ever recorded. Domestic violence has gone through the roof. Forget the death of older people. There will be more younger breakups and house put on the market than estate sales.

The HTB estate near me is full of mid 20s 5% down two lease cars on the drive.I reckon minimum 40% over valued.Even if they only fall 25% then flat line against inflation most will be stuck,unable to sell,and end up on SVR and a cycle of rising rates.Looking at most new estates id be surprised if most havent been bulldozed in 30 years.They are terrible.Once they cant live the dream like you say a lot splitting up and both probably get bad credit and be unable to buy again.

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13 hours ago, spygirl said:

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.

 

 

Back to 1982 Spy roughly i expect.10% rates are coming on mortgages,i think probably 2028.Of course that could only be for a year or so and the build up between say 2022 and 2026 will be slow increase.However it will be an increasing grind.People will slowly feel they are struggling more and more.Like you say the kicker is there is no way out.If they sell they will likely be in big negative equity and chased for the extra,so cant buy again.Anyone in the south should sell as soon as they can and move north.Highly likely inflation adjusted southern house prices wont see last years levels again for 40 or 50 years,if ever.

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10 minutes ago, Bobthebuilder said:

The amount of red tape rings i had to jump through to get a offset mortgage would say to me that wont be a option for everyone. Hours on the phone, 2 bank visits and proof of pension to pay it off if i didnt in the mortgage term. You deal with the repo guys with an offset.

Offset mortgages are classed as sophisticated products now, like they used to be 20 years ago.

Not for plebs.

Furst direct require 75k income.

BoE want 80% on simple, repayment mortgages. The pain of sorting out the mess of endowments then io mortgage was too painful.

 

 

 

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Green Devil
3 minutes ago, DurhamBorn said:

Back to 1982 Spy roughly i expect.10% rates are coming on mortgages,i think probably 2028.Of course that could only be for a year or so and the build up between say 2022 and 2026 will be slow increase.However it will be an increasing grind.People will slowly feel they are struggling more and more.Like you say the kicker is there is no way out.If they sell they will likely be in big negative equity and chased for the extra,so cant buy again.Anyone in the south should sell as soon as they can and move north.Highly likely inflation adjusted southern house prices wont see last years levels again for 40 or 50 years,if ever.

Really? Sorry i cant see that personally. The UK economy is housing, so itll be kept on the floor, even if the currency crashes.

What event are you basing the 10% on? Some almighty hyper inflation zimbabwe style?

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11 minutes ago, DurhamBorn said:

Back to 1982 Spy roughly i expect.10% rates are coming on mortgages,i think probably 2028.Of course that could only be for a year or so and the build up between say 2022 and 2026 will be slow increase.However it will be an increasing grind.People will slowly feel they are struggling more and more.Like you say the kicker is there is no way out.If they sell they will likely be in big negative equity and chased for the extra,so cant buy again.Anyone in the south should sell as soon as they can and move north.Highly likely inflation adjusted southern house prices wont see last years levels again for 40 or 50 years,if ever.

Only about 30% of houses have finance on them.

I'd guess about 50% of 30% are in trouble zones.

However - a lot of people are very overexposed, in complex, interconnected ways. Too many people have way too much riding on property.

If you've one house, with under  3x income, with a 10 year fix, repayment, then you're not going to have a huge issue.

Hopefully htb can either go bust or sue the house builder.

I constantly bang on about probate risk in certain. Property ownership is grossly over skewed to over 55s. The Corona virus is just bringing it forward a few years.

My mum doesn't like some of my 'bad news' story. However, last 24 months have seen several people we grew up with die. That's a hefty percentage of the village.

 

13 minutes ago, Green Devil said:

Really? Sorry i cant see that personally. The UK economy is housing, so itll be kept on the floor, even if the currency crashes.

What event are you basing the 10% on? Some almighty hyper inflation zimbabwe style?

No, it really isn't.

EAs always overplay housings importance.

To a certain level, house drive consumption. Prices are so high they've drained consumption - see the whole high street crisis.

 

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Noallegiance
17 minutes ago, DurhamBorn said:

Anyone in the south should sell as soon as they can and move north.Highly likely inflation adjusted southern house prices wont see last years levels again for 40 or 50 years,if ever.

I'm renting in the south. If the time comes in the next few years when I can finally afford a place I'll stay here unless social conditions take a real nosedive. 

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25 minutes ago, Green Devil said:

Really? Sorry i cant see that personally. The UK economy is housing, so itll be kept on the floor, even if the currency crashes.

What event are you basing the 10% on? Some almighty hyper inflation zimbabwe style?

Im basing it on over 50 data sets going back into the 1920s built by the best macro strategy team of the last 50 years from Fidelity.There will be no hyper inflation,that isnt even a 1% risk.There will be very high inflation though as the world enters its first re-flation cycle since the 70s.The UK economy isnt housing.The UK is an industrial economy.Its just its fallen to a smaller part of the economy due to cycles.Its about to grow again.

There will be a risk of hyper inflation when things collapse around 2028 when inflation is running hot and CBs wont be able to print because of that.

You are looking backwards at a key inflection point.Did government save the pits or the factories in the early 80s?,no they had to get on top of inflation.Today,they have to get on top of deflation.What Susan paid for her slave box isnt here or there.Whats coming is industrial.The consumer isnt driving whats ahead.They are the Dodo and the sailors have arrived.

 

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sancho panza
22 hours ago, AQUAMAN said:

Why won't rents increase with inflation? So house prices drop and everyone will just live for 5% of their salary?

I'm sure your leveraged BTLer will get cunted but if you don't buy then you have to rent unless you live with your parents (wish I still did this)

I would have spent 45k GBP in rent up to this July since I bought. That's about 30% of the value of the purchase price. Will I lose that much money if I sell it in the first month after corona? Probably, so what's the difference?

There's a posbility that we get some sort of depopulationas work opportunities dry uip.ALso as per pprevious post,rents are paid out of cash left after food n fuel,not with credit(generally).Hosues are generally purachsed with credit and even cash purchasers will take th chance to reduce the orice they pay.

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sancho panza
15 hours ago, Sideysid said:

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.

I was watching a tv shor today on rogue tenants/LL's.Only briefly but saw an old bloke with the 'its my pension and it's not been paid for four months' problem.Sad in some respects but it was surprising how little he was prepared for a non ayer and seemed generally shocked that someone wouldn't pay the rent.

The tenant it turned out had been subletting on Air BnB which the LL seemed genuienly outraged about on a moral level.Interesting to see the LLs attitudes given he's in a business that's riven with sub letting and non payment.

I psoted an excellent govt report a while back that had a lot of data on the demogprahic proflie of LL's and the 60+/white/retired were by far the most prominent

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3 minutes ago, sancho panza said:

I was watching a tv shor today on rogue tenants/LL's.Only briefly but saw an old bloke with the 'its my pension and it's not been paid for four months' problem.Sad in some respects but it was surprising how little he was prepared for a non ayer and seemed generally shocked that someone wouldn't pay the rent.

The tenant it turned out had been subletting on Air BnB which the LL seemed genuienly outraged about on a moral level.Interesting to see the LLs attitudes given he's in a business that's riven with sub letting and non payment.

I psoted an excellent govt report a while back that had a lot of data on the demogprahic proflie of LL's and the 60+/white/retired were by far the most prominent

My 'test' btlers are a couple. Hes a crap plumber, always chasing money but, going by house much his wife says he bring back, not getting much. I think hes still not learned the lesson of avoiding travelling too far for money.

Anyhow, v late to io btl, only buying 1st one 7 8 years ago. Niw have 3.

They have no money - they spend everything they earn. The btl yield about 100/m a ove the mortgage.

I was expecting them to be wiped out in a recession. Looks like hell be wiped out by the virus o the following slowdown.

Hes got to be due 4 months unpaid. I'd imagine some or all if the btls will default.

That's 2.5 earnings, almost 4k/m rental income gone, and 4k if rent n mortgage to find. Fucked.

As far as Airbnb- worse than io btlers

https://www.wired.co.uk/article/airbnb-scam-london

 

 

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sancho panza
1 hour ago, DurhamBorn said:

Back to 1982 Spy roughly i expect.10% rates are coming on mortgages,i think probably 2028.Of course that could only be for a year or so and the build up between say 2022 and 2026 will be slow increase.However it will be an increasing grind.People will slowly feel they are struggling more and more.Like you say the kicker is there is no way out.If they sell they will likely be in big negative equity and chased for the extra,so cant buy again.Anyone in the south should sell as soon as they can and move north.Highly likely inflation adjusted southern house prices wont see last years levels again for 40 or 50 years,if ever.

Also worth cosndiering which aspects of inflation will be runnign higher especially non core ie food n fuel

58 minutes ago, spygirl said:

Only about 30% of houses have finance on them.

I'd guess about 50% of 30% are in trouble zones.

However - a lot of people are very overexposed, in complex, interconnected ways. Too many people have way too much riding on property.

If you've one house, with under  3x income, with a 10 year fix, repayment, then you're not going to have a huge issue.

Hopefully htb can either go bust or sue the house builder.

I constantly bang on about probate risk in certain. Property ownership is grossly over skewed to over 55s. The Corona virus is just bringing it forward a few years.

My mum doesn't like some of my 'bad news' story. However, last 24 months have seen several people we grew up with die. That's a hefty percentage of the village.

 

No, it really isn't.

EAs always overplay housings importance.

To a certain level, house drive consumption. Prices are so high they've drained consumption - see the whole high street crisis.

 

28 million homes in the UK,70% owner occupied,and there are 11mn mortgages including BTL give or take.

The BTL data is really quite alarming when you consider how exposed some of them are to falling rents/non payents and how many of those BTLers may not realsie their family home is in the default chain.

https://www.finder.com/uk/mortgage-statistics

https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/families

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/775002/EPLS_main_report.pdf

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sancho panza
15 minutes ago, spygirl said:

My 'test' btlers are a couple. Hes a crap plumber, always chasing money but, going by house much his wife says he bring back, not getting much. I think hes still not learned the lesson of avoiding travelling too far for money.

Anyhow, v late to io btl, only buying 1st one 7 8 years ago. Niw have 3.

They have no money - they spend everything they earn. The btl yield about 100/m a ove the mortgage.

I was expecting them to be wiped out in a recession. Looks like hell be wiped out by the virus o the following slowdown.

Hes got to be due 4 months unpaid. I'd imagine some or all if the btls will default.

That's 2.5 earnings, almost 4k/m rental income gone, and 4k if rent n mortgage to find. Fucked.

As far as Airbnb- worse than io btlers

https://www.wired.co.uk/article/airbnb-scam-london

 

I remember reading in the FT years ago that a 5% increase in supply could lead to a 20% drop in prices

COuples like those above are jsut in way over theri heads.My own LL is probably getting a 5% gross yield on price paid.He has a few houses,nice bloke,I only hope he stays afloat or I may have to deploy out of oil and PM miners if Mrs P puts her foot down.

I'm genuneily amazed that soemone lent these people money at hsoe rates.I have my own stories such as friends of Mrs P who were running negative cashflow on their BTL's two years agomdidn't know what S24 was etc etc.......The Landlord survey is well wortha read.

30 minutes ago, Loki said:

Spycho guyza?

Possibly the only person with worse spelling than me on here:D

Aslo knwos far too much about accoutns to be my alter geog

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sancho panza
59 minutes ago, DurhamBorn said:

Im basing it on over 50 data sets going back into the 1920s built by the best macro strategy team of the last 50 years from Fidelity.There will be no hyper inflation,that isnt even a 1% risk.There will be very high inflation though as the world enters its first re-flation cycle since the 70s.The UK economy isnt housing.The UK is an industrial economy.Its just its fallen to a smaller part of the economy due to cycles.Its about to grow again.

There will be a risk of hyper inflation when things collapse around 2028 when inflation is running hot and CBs wont be able to print because of that.

You are looking backwards at a key inflection point.Did government save the pits or the factories in the early 80s?,no they had to get on top of inflation.Today,they have to get on top of deflation.What Susan paid for her slave box isnt here or there.Whats coming is industrial.The consumer isnt driving whats ahead.They are the Dodo and the sailors have arrived.

 

excellent point

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I guess we'll see if the gov have enough ammunition to do the bailout of the "everything bubble". If the next few weeks rumble on like the past two the list of companies, whole industries, citizens and households going to the gov cap in hand for a handout may become too overwhelming in practicality terms. They are adept at pumping funny money into the financial economy but abundantly clear from just trying to speak to a bank clerk at the moment that they are less set up to manage getting money into the real economy. Popcorn is at the ready as this s**t is about to get interesting.

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8 hours ago, sancho panza said:

Also worth cosndiering which aspects of inflation will be runnign higher especially non core ie food n fuel

28 million homes in the UK,70% owner occupied,and there are 11mn mortgages including BTL give or take.

The BTL data is really quite alarming when you consider how exposed some of them are to falling rents/non payents and how many of those BTLers may not realsie their family home is in the default chain.

https://www.finder.com/uk/mortgage-statistics

https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/families

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/775002/EPLS_main_report.pdf

My rough n ready housing rules is - about 20-30% live in social housing, and 50% private property dont have mortgages.

IO BTL is a problem due to the 'IO' bit.

IO, be it it BTL or OO, is a  clusterfuck. Just look at how long its took the boe/FCA to sort out all the OO IO loans. 10 years, ZIRP, and theyve only managed to defuse 50% of loans

The assumption that you can keep remortgaging and remortgaging at advantageous terms is wrong. Borrowers will reach the end of the road as they no longer have the income to service  the loan.

Boe/FCA dotn really care about he IO BTL LL. They are goign down, its that obvious. MOst of the IO BTL are away from the importnant banks, just parked wit the small, dontcare if they blow up banks and fianncial companies, who the BoE dont touch.

IO BTL will result in all the rentals and the OO house being sold.

 

 

 

 

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8 hours ago, sancho panza said:

I remember reading in the FT years ago that a 5% increase in supply could lead to a 20% drop in prices

COuples like those above are jsut in way over theri heads.My own LL is probably getting a 5% gross yield on price paid.He has a few houses,nice bloke,I only hope he stays afloat or I may have to deploy out of oil and PM miners if Mrs P puts her foot down.

I'm genuneily amazed that soemone lent these people money at hsoe rates.I have my own stories such as friends of Mrs P who were running negative cashflow on their BTL's two years agomdidn't know what S24 was etc etc.......The Landlord survey is well wortha read.

Possibly the only person with worse spelling than me on here:D

Aslo knwos far too much about accoutns to be my alter geog

The leverage on IO BTL is beyond frocking belief.

Just in Scabby alone, I keep coming across small business type who have borrowed huge sums - think a few million. All to house dossers.

They are getting sub 2% yields. All of the debt is IO..

Gormless banks got into it post 2002 as FTB could not longer borrow, so they chased IO BTL where there was much more leverage - IO BTL out borrowed OO.

The only sane way to allow individuals borrow for property investment is to lend if the LL can cover  the BTL mortgage without rental income.

And theres no such thing as IO BTL. These are  commercial bridging loan. And need to priced accordingly.

 

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10 hours ago, Green Devil said:

Really? Sorry i cant see that personally. The UK economy is housing, so itll be kept on the floor, even if the currency crashes.

What event are you basing the 10% on? Some almighty hyper inflation zimbabwe style?

If you think the UK economy is housing, then you think the mortgage are the pinnacle.

News this morning.

BoE has *told*, thats told not asked, that banks are not paying dividend or senior staff bonuses.

 

 

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46 minutes ago, spygirl said:

If you think the UK economy is housing, then you think the mortgage are the pinnacle.

News this morning.

BoE has *told*, thats told not asked, that banks are not paying dividend or senior staff bonuses.

 

 

...and if the banks flip the BoE the finger what can they do about it, threaten not to bail them out?...if you are a small bank this threat may work, but if you are too big to fail?

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2 minutes ago, MrXxxx said:

...and if the banks flip the BoE the finger what can they do about it, threaten not to bail them out?...if you are a small bank this threat may work, but if you are too big to fail?

The BoE can shut down the bank,remove its license.

 

 

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