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C-19.. Catalyst or trigger for the inevitable economy and property market crash?


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So, once we get back to work as normal in the months ahead and we then start witnessing the dive in the UK economy and the inevitable crash in property prices IMO, would C-19 have been the cause of it all or just the trigger that exposed he screwed up UK economy, or both even.

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I’ve posted my view on here in another thread on this topic, but may as well again here. I will nail my colours to the mast and say it will impact on the whole wider housing market and a lot quic

More anecdata - friends of mine selling a North London flat for an agreed pre-Covid £450k (which was £25k off asking) have been told by their buyer to knock another £50k off or lose them. They're

That is partly because rents were cheaper back then. Will rent reduce as food prices rise? No, because the LHA sets the floor. Tough times ahead.

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I have waited far too long for the "inevitable" crash in property prices to thnk that this is going to happen in this way.

If it does it won't be quick.  The long period of low interest rates has seen many pay off their mortgages; this is from 2017 so the number will now be higher.  Maybe 40% mortgage free; there's your illiquid market right there.

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A third of properties, 33.2 per cent, are now mortgage-free while 30.4 per cent are lived in by people still paying off home loans. 

https://www.express.co.uk/news/uk/773886/homeowners-more-likely-buy-to-let-than-mortgage-nationwide-figures-show

 

With no mortgage there is no push to sell.  Not anyway until a decent reform of property tax to make it proportional to value starts making the top end a liability.

In the early stages those required to sell - new home builders and those who can't meet the mortgage - will be relatively small and will be snapped up by "bargain hunters" and the BTL crowd.  Values may drift slightly but people will still power in to support the market.  There are also a lot of FTBs in their thrities or forties who are desperate to own; they will also pile in.

My prediction as I've noted on other threads is that the bigger more expensive houses will start falling first.  The supply will be the natural one of old people moving into care homes or dying plus the over-mortgaged who have lost their big incomes or a proportion of them; this latter effect will also reduce the demand so this will be the first sector that tips into supply exceeding demand with no decent way of withholding that demand as is more readily available on smaller houses where sit tight or rent it out are more easy to achieve.

Once those prices of big houses start seriously going in maybe three years' time then the falling differentials from smaller houses will start pushing down smaller houses like an approaching glacier and these will also go down albeit by a lower percentage.  As there is no reason to assume that there is anything taht is going to stop that slow approach to an average earnings multiple closer to 3.5x then  it will keep slowly rolling down.

It was eight long years to the bottom from 1988 and I can't see why this is going to be any quicker; though I do think that a real terms fall in house prices is definitely going to now happen.

 

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31 minutes ago, Frank Hovis said:

My prediction as I've noted on other threads is that the bigger more expensive houses will start falling first.  The supply will be the natural one of old people moving into care homes or dying plus the over-mortgaged who have lost their big incomes or a proportion of them; this latter effect will also reduce the demand so this will be the first sector that tips into supply exceeding demand with no decent way of withholding that demand as is more readily available on smaller houses where sit tight or rent it out are more easy to achieve.

I think that end of the market has always been propped up by people swapping equity 

That falls apart when people can`t afford those prices when upsizsing and that ladder starts at the bottom of the market 

If you look at all the places that actually had a proper crash in 2008> they have one thing in common forced sellers IMO unless we see similar there will be no crash ,it will be as you say a slow decline at best 

I also think LL are going to take an hiding from CV and it`s aftermath especially so now S24 comes into full effect 

Edited by Long time lurking
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11 minutes ago, Long time lurking said:

I think that end of the market has always been propped up by people swapping equity 

That falls apart when people can`t afford those prices when upsizsing and that ladder starts at the bottom of the market 

If you look at all the places that actually had a proper crash in 2008> they have one thing in common forced sellers IMO unless we see similar there will be no crash ,it will be as you say a slow decline at best 

I also think LL are going to take an hiding from CV and it`s aftermath especially so now S24 comes into full effect 

 

Re the top end well I'm going from my direct experience in Cornwall.  I frequently see the typical "new money" houses which are previous ones extended, Range Rover in the drive, and a couple of horses in the adjoiningfield.  It's like a checklist.  To me they reek of debt and over-stretched mortgage to pay for the rebuild.  I get the impression that the owner's position is precarious; obviously I could be wrong but flash car usually indicates debt-fuelled new money.

I agree that the amateur landlords are going to be taking a hiding and a lot of them are likely to sell up but these are the houses that the FTBs in their thirties and forties will be snapping up in the intial period because they are desperate to own somehwere.

I give it at least three years before there is any serious momentum downwards; by that point those desperate to buy will have done so and those struggling to maintain their mortgages will start throwing in the towel.

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House prices if anything have gone up aother 5/10% over the 3 month shutdown in Belfast IMO

It's absolutley mental.

I think what's happened is that one of the propery sites predicted a 10% drop so the 'savvy' sellers are pricing that drop in by charging 10% more to start off with :D

There is an awful lot not selling though. Even before this started there's a load of houses that are just sitting on the market for months with nobody biting, but no reduction in price either.

I think more than ever when buying a house you should be aware that selling the thing might be a very very slow process.

Edited by JoeDavola
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Another factor that will play a part here will be deposit requirements set by the banks. Mortgage products are being taken off the market at a fair pace at the moment - I recall seeing a bank just recently removing their 85% LTV offering so that now a minimum 20% deposit is required. If the banks keep tightening the lending criteria then the number of FTBs able to meet the deposit requirements will fall off a cliff at current prices. A 20% deposit for a bog standard £250,000 house is £50,000.

Edited by DownwardSpiral
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9 minutes ago, DownwardSpiral said:

Another factor that will play a part here will be deposit requirements set by the banks. Mortgage products are being taken off the market at a fair pace at the moment - I recall seeing a bank just recently removing their 85% LTV offering so that now a minimum 20% deposit is required. If the banks keep tightening the lending criteria then the number of FTBs able to meet the deposit requirements will fall off a cliff at current prices. A 20% deposit for a bog standard £250,000 house is £50,000.

Good point.

Combine current average wages with average rents and £50k becomes an unattainable level.

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14 minutes ago, DownwardSpiral said:

Another factor that will play a part here will be deposit requirements set by the banks. Mortgage products are being taken off the market at a fair pace at the moment - I recall seeing a bank just recently removing their 85% LTV offering so that now a minimum 20% deposit is required. If the banks keep tightening the lending criteria then the number of FTBs able to meet the deposit requirements will fall off a cliff at current prices. A 20% deposit for a bog standard £250,000 house is £50,000.

Well to add additional detail to my post above, the houses that just seem completely unsellable at the moment are those over 250K, especially if they're outside of Belfast.

So again even if you have the money for it, I'd think twice about buying a house that's significantly more expensive than the average house if you ever see yourself wanting to sell it to free up the money e.g. to emigrate/downsize.

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1 hour ago, Frank Hovis said:

Re the top end well I'm going from my direct experience in Cornwall.  I frequently see the typical "new money" houses which are previous ones extended, Range Rover in the drive, and a couple of horses in the adjoiningfield.  It's like a checklist.  To me they reek of debt and over-stretched mortgage to pay for the rebuild.  I get the impression that the owner's position is precarious; obviously I could be wrong but flash car usually indicates debt-fuelled new money.

I think your top end is a bit more top than mine xD

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1 hour ago, DownwardSpiral said:

Another factor that will play a part here will be deposit requirements set by the banks. Mortgage products are being taken off the market at a fair pace at the moment - I recall seeing a bank just recently removing their 85% LTV offering so that now a minimum 20% deposit is required. If the banks keep tightening the lending criteria then the number of FTBs able to meet the deposit requirements will fall off a cliff at current prices. A 20% deposit for a bog standard £250,000 house is £50,000.

That will have a major effect on the bottom end if it persists ,my prediction would be another tweak to HTB though

IMO there will be no middle ground when it comes to this it will be nothing or everything including the kitchen sink ,i think we might well find out how much power Cummings really holds ,as he knows the systemic problems built in to the property market and the youngsters  as well as most on here do,he`s on record saying as much

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3 minutes ago, Long time lurking said:

That will have a major effect on the bottom end if it persists ,my prediction would be another tweak to HTB though

IMO there will be no middle ground when it comes to this it will be nothing or everything including the kitchen sink ,i think we might well find out how much power Cummings really holds ,as he knows the systemic problems built in to the property market and the youngsters  as well as most on here do,he`s on record saying as much

Agreed LTL - the deposit requirements / HTB is where my attention is with property at the moment as I am considering buying a house in a rural area - get away from the shambles of city living.

If there is to be an “all-in” move involving HTB, what form will that take? At a rather selfish level it would be beneficial if the HTB ISA government contribution were to be increased. I have recently reached the £12,000 + £3,000 limit with that so any expansion to say 50%, 75% ... contribution would be money for nothing - though won’t touch the sides if the bank deposit requirements stick around at 20%. Is it allowing more people in on the HTB loans? Wiping out existing HTB interest?

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2 minutes ago, DownwardSpiral said:

Agreed LTL - the deposit requirements / HTB is where my attention is with property at the moment as I am considering buying a house in a rural area - get away from the shambles of city living.

If there is to be an “all-in” move involving HTB, what form will that take? At a rather selfish level it would be beneficial if the HTB ISA government contribution were to be increased. I have recently reached the £12,000 + £3,000 limit with that so any expansion to say 50%, 75% ... contribution would be money for nothing - though won’t touch the sides if the bank deposit requirements stick around at 20%. Is it allowing more people in on the HTB loans? Wiping out existing HTB interest?

Other than the main beneficiaries will be the banks and builders i have not got a clue 

If they are raising deposit requirements as of now i see that as a form of lobbying/blackmail,i just can`t see any real justification in doing so other than that 

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I am finding some of these comments really fascinating, I have probably been Bullish on property for several years plus  now, so much so I had to reign in my opinions on housepricecrash.com in order not to be kicked out as a troll :)

The month I turn as close to 100% bear as is possible everyone has now turned Bullish when to me it is clear that the world has totally changed, it really is not the case where people can say "well the government will just.....".I think it has now been taken out of their hands or maybe C-19 is a convenient way to now to get the serving government off the hook for what was always going to be an inevitable property crash, no government would have survived a property crash without being seen to do something, like basically what many of you are saying in a way.

I can totally understand people being jaded now, thinking something will always prevent a crash, but this time is different. It has come to something when housepricecrash.com has now become mostly bullish and has turned to radical left wing politics for a comfort blanket :)

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2 minutes ago, haroldshand said:

I am finding some of these comments really fascinating, I have probably been Bullish on property for several years plus  now, so much so I had to reign in my opinions on housepricecrash.com in order not to be kicked out as a troll :)

The month I turn as close to 100% bear as is possible everyone has now turned Bullish when to me it is clear that the world has totally changed, it really is not the case where people can say "well the government will just.....".I think it has now been taken out of their hands or maybe C-19 is a convenient way to now to get the serving government off the hook for what was always going to be an inevitable property crash, no government would have survived a property crash without being seen to do something, like basically what many of you are saying in a way.

I can totally understand people being jaded now, thinking something will always prevent a crash, but this time is different. It has come to something when housepricecrash.com has now become mostly bullish and has turned to radical left wing politics for a comfort blanket :)

Haven’t been on HPC for quite some time so not sure of the politics going on there.

For what it is worth, my view is that there will be a post-lockdown “boom” for property (define that as you wish) and then a sustained decline before inflation kicks in to do the rest. With my current financial position I am looking for a good opportunity to jump in and let the debt be inflated away. It all depends really on what your view is of a property price crash. Prices coming right the way down or inflation making today’s prices look reasonable in 5-10 years time?

Every decision made on a personal level should now be viewed through the lens of where does the money printing end up - but there is a whole thread for that :)

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1 hour ago, DownwardSpiral said:

Haven’t been on HPC for quite some time so not sure of the politics going on there.

For what it is worth, my view is that there will be a post-lockdown “boom” for property (define that as you wish) and then a sustained decline before inflation kicks in to do the rest. With my current financial position I am looking for a good opportunity to jump in and let the debt be inflated away. It all depends really on what your view is of a property price crash. Prices coming right the way down or inflation making today’s prices look reasonable in 5-10 years time?

Every decision made on a personal level should now be viewed through the lens of where does the money printing end up - but there is a whole thread for that :)

All I can say about myself is that I am in a good place financially and nothing that is threatened at the public through the media is scaring me. I have spent a couple of years or maybe three preparing, getting my business on solid ground with zero debt holding it or me up personally. I factored in that on a bad turnaround in the economy I could take a -70% hit turnover wise and still pay the bills and live OK.

I just honestly think those that lived by the credit card are now going to die by the credit card, I know so many people with great looking lives from the outside who were living with every hard earned penny accounted for with no room for error, no safety net at all.

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I’ve posted my view on here in another thread on this topic, but may as well again here.

I will nail my colours to the mast and say it will impact on the whole wider housing market and a lot quicker than the other posters opinions on here.

Imagine it as pendulum, and every ounce of conceivable energy (government props, BTL incentives, low IRs and bank products like springboard mortgages) has been squeezed out of it as it’s swung up and up. It’s now hit the COVID backstop, and we’re at the ‘pause moment’ while we look back at the long way down (i.e. greatest recession in 300 years) facing it.

Yes historically, death, debt, divorce will always be the major factors in a stagnant market. But the major factor here is the banks refusal to lend. No further government action will stave off the inevitable and they know it, so will most likely shuffle the deckchairs on the titanic to look as though they’re appeasing the HPI crack addicted masses.

Mass unemployment of service sector staff and no work will make HMOs untenable. This combined with S24 and eviction red tape will make the over leveraged BTL landlords head for the exits. There are 2.7 million of them with 60% 55 years and over, they’ll want to cash in their chips when even the most dense know the game is up.

First we have a flurry of activity and pre-COVID sales. WFH locations like Cornwall/Devon will remain sort after for some time. Overpriced city properties will drop like a stone however, especially luxury flats and their corresponding building sites mothballed.

These will lead the way and ripple out to the rest of the country. It won’t be just us however, this will happen globally in major cities. 

So my reckoning is we will start to see this unfold in earnest by this time next year. Once it’s starts it’ll be a rolling stone. We may however have a much wider economic shitshow to worry about rather than just house prices.

 

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11 hours ago, Sideysid said:

I’ve posted my view on here in another thread on this topic, but may as well again here.

I will nail my colours to the mast and say it will impact on the whole wider housing market and a lot quicker than the other posters opinions on here.

Imagine it as pendulum, and every ounce of conceivable energy (government props, BTL incentives, low IRs and bank products like springboard mortgages) has been squeezed out of it as it’s swung up and up. It’s now hit the COVID backstop, and we’re at the ‘pause moment’ while we look back at the long way down (i.e. greatest recession in 300 years) facing it.

Yes historically, death, debt, divorce will always be the major factors in a stagnant market. But the major factor here is the banks refusal to lend. No further government action will stave off the inevitable and they know it, so will most likely shuffle the deckchairs on the titanic to look as though they’re appeasing the HPI crack addicted masses.

Mass unemployment of service sector staff and no work will make HMOs untenable. This combined with S24 and eviction red tape will make the over leveraged BTL landlords head for the exits. There are 2.7 million of them with 60% 55 years and over, they’ll want to cash in their chips when even the most dense know the game is up.

First we have a flurry of activity and pre-COVID sales. WFH locations like Cornwall/Devon will remain sort after for some time. Overpriced city properties will drop like a stone however, especially luxury flats and their corresponding building sites mothballed.

These will lead the way and ripple out to the rest of the country. It won’t be just us however, this will happen globally in major cities. 

So my reckoning is we will start to see this unfold in earnest by this time next year. Once it’s starts it’ll be a rolling stone. We may however have a much wider economic shitshow to worry about rather than just house prices.

 

So many people seem fixated on the fact that the housing market is so important that once it show signs that it is about to fall in value or even crash the powers that be "just won't let it happen", people are now saying that phrase as if it is no more difficult than putting the dustbins out on a Tuesday morning.

So many people just cannot seem to acknowledge there will come a time when the markets will say no and there will be nothing any government can do about it.  There has been so many instances of great societies or civilisations that were convinced they had nailed it and would last for an eternity only to find years later they took their eye off the ball and their "great" expensive and hard built society reclaimed by time and nature as it rotted into the ground.

You can only keep putting life expenses on that credit card for so long, they will always max out at some point. And to be fair I think UK politicians have known this as far back as the post Gordon Brown, Tony Blair days, but they politically could not commit suicide and let the property market crash.

Covid 19 is just the perfect solution, anything that now happens to the property market can now be attributed to C-19 and not political parties, even the problems Brexit may or may not cause can now be pinned on C-19, it's perfect timing. That's why I personally do not think C-19 will be the cause of a property crash, that started in 1997.

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19 hours ago, haroldshand said:

So, once we get back to work as normal in the months ahead and we then start witnessing the dive in the UK economy and the inevitable crash in property prices IMO, would C-19 have been the cause of it all or just the trigger that exposed he screwed up UK economy, or both even.

They wont crash till either:

a) The whole system collapses ( nailed on IMHO )

b) Interest rates rise ( they're going negative )

c) The government need them to.

 

c) is the interesting one right now.  Boris knows prices are in a bubble, someone on HPC heard his mansion house speech ( or some such bollocks ) a couple of years ago where he said something like he knew the prices were ridiculous but they couldn't afford to let them fall.  With a country full of under 40s ready to protest at the slightest thing, best thing they can do it get prices down and people into debt, keep 'em quiet. Maybe now is the time.

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The media will have a large part to play in managing reactions.

The only people that benefit from prices rising above inflation are second home owners and landlord's. The vast majority of people are neither; in fact they usually dislike these groups.

Yet rising prices are always reported as good. That perception needs to be changed.

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2 hours ago, Wight Flight said:

The media will have a large part to play in managing reactions.

The only people that benefit from prices rising above inflation are second home owners and landlord's. The vast majority of people are neither; in fact they usually dislike these groups.

Yet rising prices are always reported as good. That perception needs to be changed.

second home owners and landlord', people who own land, the Tory voting old people.....the people in charge defectively.

You think they're going to take a 50% hit on their wealth when the can print money, called it QE so everyone things is some sort of complicated thing and steal everyone else's ?

These people send young men out to die to protect their position i'm pretty sure they'll see us all burn financially than lose a penny.

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15 hours ago, Sideysid said:

I’ve posted my view on here in another thread on this topic, but may as well again here.

I will nail my colours to the mast and say it will impact on the whole wider housing market and a lot quicker than the other posters opinions on here.

Imagine it as pendulum, and every ounce of conceivable energy (government props, BTL incentives, low IRs and bank products like springboard mortgages) has been squeezed out of it as it’s swung up and up. It’s now hit the COVID backstop, and we’re at the ‘pause moment’ while we look back at the long way down (i.e. greatest recession in 300 years) facing it.

Yes historically, death, debt, divorce will always be the major factors in a stagnant market. But the major factor here is the banks refusal to lend. No further government action will stave off the inevitable and they know it, so will most likely shuffle the deckchairs on the titanic to look as though they’re appeasing the HPI crack addicted masses.

Mass unemployment of service sector staff and no work will make HMOs untenable. This combined with S24 and eviction red tape will make the over leveraged BTL landlords head for the exits. There are 2.7 million of them with 60% 55 years and over, they’ll want to cash in their chips when even the most dense know the game is up.

First we have a flurry of activity and pre-COVID sales. WFH locations like Cornwall/Devon will remain sort after for some time. Overpriced city properties will drop like a stone however, especially luxury flats and their corresponding building sites mothballed.

These will lead the way and ripple out to the rest of the country. It won’t be just us however, this will happen globally in major cities. 

So my reckoning is we will start to see this unfold in earnest by this time next year. Once it’s starts it’ll be a rolling stone. We may however have a much wider economic shitshow to worry about rather than just house prices.

 

 

With a start point being thet we none of us actually know I disagree.

Not in any point of detail - I can't fault you there - but because of the illogicality of the property "market".

I invest in equities.  One day my share is worth £4; the next year my share is worth £3.  I  do not then think that is really worth £4 but is undervalued ; I think that I have lost £1.  I may still not sell it but I accept the loss in value.  

Homeowners / homedebtors don't however think like that.  If their house is valued at £400k now and is put up for sale at the price and doesn't move for a year.  Then when next year an identical house in the street sells for £300k they think that house has been sold far too cheaply and still think that their house is worth £400k despite the evidemce so will keep it on the market unsold.

They will not accept that their house has lost £100k and will only sell it for £400k; which nobody will pay because it is now only worth £300k.

Houses sit like this for years and years before change of circumstance, perosnal or financial, forces the sale.

This emotional attachment is why I think that crashes happen in slow motion.

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21 hours ago, Long time lurking said:

I think that end of the market has always been propped up by people swapping equity 

That falls apart when people can`t afford those prices when upsizsing and that ladder starts at the bottom of the market 

If you look at all the places that actually had a proper crash in 2008> they have one thing in common forced sellers IMO unless we see similar there will be no crash ,it will be as you say a slow decline at best 

I also think LL are going to take an hiding from CV and it`s aftermath especially so now S24 comes into full effect 

Round me, the (very) low transaction that have happened have mainly been idiots withdrawing equity to buy 2nd homes/holiday cottages.

A rise in IRs, increase in 2nd home/holiday let taxes, will rapidly reverse that.

One thing I am seeing i n the South is young people jacking it in a moving elsewhere.

Each years that goes by sees the pool of possible buyers decrease. And the number of people wholl be selling in the next 10 year increase.

 

 

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3 hours ago, TheCountOfNowhere said:

They wont crash till either:

a) The whole system collapses ( nailed on IMHO )

b) Interest rates rise ( they're going negative )

c) The government need them to.

 

c) is the interesting one right now.  Boris knows prices are in a bubble, someone on HPC heard his mansion house speech ( or some such bollocks ) a couple of years ago where he said something like he knew the prices were ridiculous but they couldn't afford to let them fall.  With a country full of under 40s ready to protest at the slightest thing, best thing they can do it get prices down and people into debt, keep 'em quiet. Maybe now is the time.

What has happened to you Count? :), seen so much of your posts on housepricecrash that were bearish on property

Yes, you have just made my point for me, no they cannot afford to let house prices fall and every action they have put in place since 2008 is yet another dip into the silverware and family nest egg. Everytime a gimmick has been put in place to stop a property crash thousands of town public loos in the UK shut for good, Libraries close, low end wages are cut and staff laid off in the public sector, stealth tax rises, and of course more and more money goes on the rent or mortgage, bit by bit by bit real wages are dwindling and personal debt rising.

The country is now complaining and even rioting about social injustices(not just BLM), we are using food banks, poverty in the inner city and Boris must be screaming in his head " well it's either public services or high house price, which the f*** is it because you cannot have both".

We are just at that point now where this is being taken out of the control of politicians, and no "they cannot just" events are taking over.

Anyway, I see many of housepricecrash are bearish with you now :), there are some total pricks on there now since it was overrun by Momentum and those anti Brexit dicks, was once such a good website, though wrong for so long and now going wrong yet again and going against it's website name

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34 minutes ago, spygirl said:

Round me, the (very) low transaction that have happened

I think the higher end swapping equity coupled with low transactions overall is whats keeping the price indexes high/+ the average is calculated from top end heavy data which gives the illusion of a rising market which then filterers into lower transactions due to unrealistic pricing 

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