Property crash, just maybe it really is different this time

[spygirl]

2 minutes ago, sancho panza said:

yeah,the main UK banks are more levered than in 2006 according to some eminent economists who aren't drinking the kool aid.

Every man and his dog can see the collapse in hospitality jobs as a minimum,let alone other spheres.Even if people have jobs,incomes going down.

Going to be interesting to see what the late entrants to BTL will do.

A combination of IO loans and zilch wage growth.

Doing fuckwitted Northern Rockesque crap like HTB doesn't help. Although most of that junk is on Nationwides n HBOS books.

London/SE which manages to be both the IO(2002-2012)  and HTB (2015-) ground zero looks insane esp post Covid.

 

 

[gibbon]

5 hours ago, sancho panza said:

yeah,the main UK banks are more levered than in 2006 according to some eminent economists who aren't drinking the kool aid.

Every man and his dog can see the collapse in hospitality jobs as a minimum,let alone other spheres.Even if people have jobs,incomes going down.

Going to be interesting to see what the late entrants to BTL will do.

They shouldn't be worried, the 500lb gorilla in the room (the gov and bank of England) has their back. Hospitality can fuck off and die for all they care, but property/BTL empires are good as gold least for a generation or two. Long way to go yet till we're all living in tenements. 

 

Edited December 27, 2020 by gibbon

[JoeDavola]

6 hours ago, sancho panza said:

It's very much an equity swapping market with HTB/FLS/BTL holding up the bottom end.

@spygirl LE2 transactions dropping already where I am.Average price is supposedly £300,000 but on next to no volume which supports @JoeDavolas thesis

Devil is in the details but very few flats/terraces selling .The figures should be the other way round and ususally are ie more terraces/flats selling than detached.

“an equity swapping market” <—— hadn’t heard that term before; perfect description of the market.

[Democorruptcy]

18 hours ago, sancho panza said:

Untill thsi thread I hadn't realsied how hosue prices were spiking higher mainly on the sales mix.Virtualy no flats/terraces selling

It's been in the media enough! Lots of stuff about people wanting outside space because of lockdown and can leave city centres now they can work from home. Plus the public sector are in clover in their secure jobs and they swap the larger houses between themselves.

[haroldshand]

58 minutes ago, Democorruptcy said:

It's been in the media enough! Lots of stuff about people wanting outside space because of lockdown and can leave city centres now they can work from home. Plus the public sector are in clover in their secure jobs and they swap the larger houses between themselves.

But where is all this money coming from?

On paper I am in the top 5% of earners, but there is just no way I can buy up some of the property people are talking about unless I take on loads of debt?

[reformed nice guy]

1 minute ago, haroldshand said:

But where is all this money coming from?

On paper I am in the top 5% of earners, but there is just no way I can buy up some of the property people are talking about unless I take on loads of debt?

I think the average family size is something like 1.7 children. This means that in a lot of cases two parents are passing down their wealth to a single child.

This level of wealth transfer/concentration wont happen again in my lifetime

[Democorruptcy]

16 minutes ago, haroldshand said:

But where is all this money coming from?

On paper I am in the top 5% of earners, but there is just no way I can buy up some of the property people are talking about unless I take on loads of debt?

All it needs is one person prepared to take on a lot of debt or a cash buyer then that triggers a chain of people who can sell, realise equity then re-invest it. The market is largely people who already owned being able to buy another without having to take on loads more debt. The mortgage payments on a step up might be smaller than on their previous purchase because rates are lower and the equity realised gives them a larger deposit for a better rate.

[Yadda yadda yadda]

4 hours ago, reformed nice guy said:

I think the average family size is something like 1.7 children. This means that in a lot of cases two parents are passing down their wealth to a single child.

This level of wealth transfer/concentration wont happen again in my lifetime

I could be wrong but isn't that the recent average? A generation who won't be inheriting for another 40 plus years.

People inheriting now are more likely to be splitting it. They're also likely to be in their 40s, 50s or 60s and already own a house. Some of it will be used to help the grandchildren of the deceased.

Obviously there will be a lot of outliers.

Edited December 28, 2020 by Yadda yadda yadda

[Frank Hovis]

This may be an exclusively Cornish phenomenon so not widely applicable but I know of a few people in this situation; I will use one couple for an example.

Cornish wages are generally amongst the lowest in the country and have been for a long time: seasonal, retail.

One retired couple who each worked all their lives in relatively low paid retail - and have either no or little pension above the state pension - live in the big four bed house he inherited and in which he has lived since he was a teenager and doesn't wish to move.

I don't know the details of their finances but estimating: 

UK state pension is £134.25 per week so x 52 x 2 = £14k income

Outgoings: council tax £4k (I think it's Band H - the top one), utilities £2k (big house), car £2k (running, fuel, depreciation), food and drink £2k = £10k

 Leaving £4k per year between them for holidays, maintenance of the house, and leisure.

That really isn't much - £40 a week each - and the big hit for them is the council tax.  They would be a lot more comfortable if they  could take that down to Band B and £1.500.

I would think that there a lot in this position and that it will only increase.

The net result will be a steady stream of big poorly-maintained houses coming onto the market that local people cannot afford to either buy or, with the council tax - run.

I well remember back in the early 90s when property in general was widely viewed as a liability and if I am correct in extending my small sample across the county then there are going to be a lot of big houses coming up for sale which will be viewed as a liability owing to their poor state of repair and high level of council tax.

I genuinely have sympathy for this couple.  He just wants to live out his days in the house in which he has lived for nearly seventy years.  He doesn't care what it's worth and never has; he has zero interest in money and has never had any.  Yet council tax increases look set to force him and his wife out.

https://www.gov.uk/state-pension

https://www.counciltax.info/council/cornwall

[Chewing Grass]

3 minutes ago, Frank Hovis said:

The net result will be a steady stream of big poorly-maintained houses coming onto the market that local people cannot afford to either buy or, with the council tax - run.

Within the next 10 years that will be common place and they will be chasing very few buyers.

The Pension most people who don't think, think they will get is the bottom row.

A £100,000 pot buys you just over £2500 a year above state pension at ~65 (if you don't have the 25%).

Big houses may be nice but they have big bills even if new eventually.

Feel free to multiply...

[Frank Hovis]

2 minutes ago, Chewing Grass said:

Within the next 10 years that will be common place and they will be chasing very few buyers.

The Pension most people who don't think, think they will get is the bottom row.

A £100,000 pot buys you just over £2500 a year above state pension at ~65 (if you don't have the 25%).

Big houses may be nice but they have big bills even if new eventually.

Feel free to multiply...

 

I can actually see Council Tax band mattering far more than the EPC rating about which the government wishes us to obsess.

For Cornwall Band A is £1,296 (£108 per month) and Band H £3,887 (£324 per month); difference £2,591 (£216 per month) which is more than the £100k pension pot is buying you.

With an impoverished generation of pensioners you could end up with an two-stream property market where the small two bed Band A bungalows are shooting up in price whilst the big Band H barns are tumbling in price.

[JoeDavola]

A flat in Belfast city centre has just sold less than two weeks after it was listed.

It was on for £200k, and the combined council tax/building maintenance is almost £3500 a year.

I was gobsmacked it sold so quick.

[JoeDavola]

@Frank Hovis earlier point reminded me that the pattern I see is generally the bigger a house is for sale, the worse condition it tends to be in.

I was talking about this earlier in the week with someone who was asking “how are people letting their houses get like this” and my guess was that the occupants had discovered that their pension was never enough to cover major repairs on the houses; so we were seeing, in some cases 20+ years of maintenance neglect.

Edited December 28, 2020 by JoeDavola

[Shamone]

Our sale finally completed just before Christmas. Took far longer than expected, buyers on a 90% mortgage and the lender made them do a survey. Couldn’t go with another lender. Expected it to fall through tbh. One of the biggest factors on our next place will be council (workers pension) tax. Hope for a B but won’t go higher than a C. To quote DB it’s a disgusting tax. I also think it’s a sitting duck.

[JoeDavola]

1 hour ago, Shamone said:

Our sale finally completed just before Christmas. Took far longer than expected, buyers on a 90% mortgage and the lender made them do a survey. Couldn’t go with another lender. Expected it to fall through tbh. One of the biggest factors on our next place will be council (workers pension) tax. Hope for a B but won’t go higher than a C. To quote DB it’s a disgusting tax. I also think it’s a sitting duck.

So what’s the plan are you renting for a while and looking for a low maintenance ‘retirement’ gaff?

[wherebee]

14 hours ago, haroldshand said:

But where is all this money coming from?

On paper I am in the top 5% of earners, but there is just no way I can buy up some of the property people are talking about unless I take on loads of debt?

been there, done that, Harold.  I worked out that the tax system is set up to fuck you royally if you are earning income from working for someone else.  

We bought a place in a smaller regional town in Australia to minimise borrowing need, much nicer place to live as you get older, then paid it down as soon as possible to become mortgage free.  Now self employed, on much less income, but about the same net income after tax and business expenses and much more time.

I would suggest work out where you want to live from 50+ onwards and aim for that in mind.

[Micky Roberts]

The council tax argument is a strong one. It has a direct negative impact on cashflow.

Against this is the coming inflation. Holding most or all of your wealth in a house at least ensures that a) you are worth one housing unit and b) you have somewhere to live ( if you can pay the council tax).

Perhaps the solution for many will be equity release schemes.

[spygirl]

3 hours ago, Micky Roberts said:

The council tax argument is a strong one. It has a direct negative impact on cashflow.

Against this is the coming inflation. Holding most or all of your wealth in a house at least ensures that a) you are worth one housing unit and b) you have somewhere to live ( if you can pay the council tax).

Perhaps the solution for many will be equity release schemes.

ER is not a solution, more of a desperation.

 

[Frank Hovis]

3 hours ago, Micky Roberts said:

The council tax argument is a strong one. It has a direct negative impact on cashflow.

Against this is the coming inflation. Holding most or all of your wealth in a house at least ensures that a) you are worth one housing unit and b) you have somewhere to live ( if you can pay the council tax).

Perhaps the solution for many will be equity release schemes.

As per my previous numbers, and this for Cornwall which combines a middling level of council tax with a high number of pensioners on only state pension, it makes a very material difference to downsize from H to A in terms of outgoings as well as freeing up a big lump of cash.

That's going to be far preferable to equity release with its compounding debt interest.

Incidentally if you are going to stay in your existing home then sale with reservation of title looks preferable; this means you sell your house at a big discount but can continue to live in it until you move / go into care / die.

As with equity release you have to maintain it yourself.

 

[Shamone]

14 hours ago, JoeDavola said:

So what’s the plan are you renting for a while and looking for a low maintenance ‘retirement’ gaff?

Not so much retirement but definitely low maintenance and low council tax.

[Democorruptcy]

1 minute ago, Shamone said:

Not so much retirement but definitely low maintenance and low council tax.

If inflation goes up folk with already high service charges on flats etc., are going to get well stuffed.

[Shamone]

Just now, Democorruptcy said:

If inflation goes up folk with already high service charges on flats etc., are going to get well stuffed.

We are avoiding new build estates with such charges and non- adopted roads etc for that reason.

[Democorruptcy]

5 minutes ago, Shamone said:

We are avoiding new build estates with such charges and non- adopted roads etc for that reason.

If they ever do anything about leasehold and ground rent charges, the cowboys will stick more onto the service/maintenance charges.

[JoeDavola]

18 minutes ago, Democorruptcy said:

If inflation goes up folk with already high service charges on flats etc., are going to get well stuffed.

Yes I know of a block in Belfast whose service charges have doubled in the last decade.

[JoeDavola]

29 minutes ago, Shamone said:

Not so much retirement but definitely low maintenance and low council tax.

Sounds like a plan - I know you and your wife are choosing to work less so need a house that enables you to live like that.

A recent discussion here saw many folks ideal house being a modest 2 bed detached bungalow; the only problem being they’re hard to come by.

And yes new builds are generally shit.