Property crash, just maybe it really is different this time

[HousePriceMania]

Top called.

[haroldshand]

3 hours ago, HousePriceMania said:

Top called.

Links do not work,

More info?

Will not get too excited yet as I have heard this a thousand times

Edited July 8, 2022 by haroldshand

[haroldshand]

18 hours ago, Ina said:

Just back from drinks with a big York estate agent.  He said in the last 2 weeks the tide has turned.  It will pop big time.  He’s always been a bull in the past.

Honestly I seriously want this and would even put off a Portugal move for it, but I just cannot get excited about it at the moment as there has been zero evidence.

Yes the data shows it could happen, but the data has sown that for several years and something was always pulled out of the hat

[haroldshand]

6 hours ago, JoeDavola said:

Yes I’m getting the same feeling in NI regarding the two tiers.

I think there is also a LOT of cash out there still looking for a ‘home’ - there’s a hell of a lot of cash buyers out there from anecdotes I’m hearing.

So even if IR’s do increase I wonder will houses still sell it’ll just be the very rich buying them.

Yep, I am with you Joe, I will believe it when I see it as I have heard this too often before.

Cash is rapidly turning to shit and like you said there is a lot of cash out there, yes property is risky but cash is far riskier right now

[Wight Flight]

11 minutes ago, haroldshand said:

Honestly I seriously want this and would even put off a Portugal move for it, but I just cannot get excited about it at the moment as there has been zero evidence.

Yes the data shows it could happen, but the data has sown that for several years and something was always pulled out of the hat

There is a marked difference this time though.

Interest rates have been too low for too long, allowing house prices to escalate wildly.

It has also allowed the massive boon in highly leveraged BTL.

Previous interest rate highs have come with high wage inflation, allowing people to sit tight for a year or so and things improve.

Also, a 2% rise from 6% to 8% on an 80k mortgage is much less painful than a 2% rise from 1% to 3% on a £300k mortgage.

Anything above 3% and most new entrant BTLers are toast. Especially those that have rapidly expanded to create a large portfolio. Losing £300 a month on one house is painful. Losing it on 50 houses is not survivable.

A lot of people are already underwater. They just don't know it yet.

[Chewing Grass]

On 02/07/2022 at 09:13, Chewing Grass said:

Crossed the 200 mark, now have a virtually unprecedented  202 properties listed for sale, I literally cannot remember when this many were actually previously listed its such a long time ago.

Next week will be interesting as this one has seen another 6% increase in listed properties with some barely being up for 10 days before disappearing.

Can see another 5%+ increase happening next week.

Well its Friday and we are now down to 188, the market at the bottom end is hot-hot-hot.

The extended 1960s 3-bed semi went for £525K with its extra 2 bedrooms, full width folding patio doors, plastic grass and electric gates sold within a week.

Other more sensibly priced sub 200K properties are also going in an estate agents blink of an eye.

All the FTBs are desperately trying to buy now before its too late.

[haroldshand]

31 minutes ago, Wight Flight said:

There is a marked difference this time though.

Interest rates have been too low for too long, allowing house prices to escalate wildly.

It has also allowed the massive boon in highly leveraged BTL.

Previous interest rate highs have come with high wage inflation, allowing people to sit tight for a year or so and things improve.

Also, a 2% rise from 6% to 8% on an 80k mortgage is much less painful than a 2% rise from 1% to 3% on a £300k mortgage.

Anything above 3% and most new entrant BTLers are toast. Especially those that have rapidly expanded to create a large portfolio. Losing £300 a month on one house is painful. Losing it on 50 houses is not survivable.

A lot of people are already underwater. They just don't know it yet.

I tend to agree with you and have edged(only edged) towards yes there will be a correction, big or small I have no idea yet.

But i swear to you mate, the times I have heard over several years "this time it is different" I would sooner take a wait and see approach because I am not going to bed at night thinking it's 100% on to yet again find out they have pulled yet again another rabbit out of the hat.

If it was 100% on then my life would be perfect right now even though I have had a big hit on crypto this year

[Wight Flight]

14 minutes ago, haroldshand said:

I tend to agree with you and have edged(only edged) towards yes there will be a correction, big or small I have no idea yet.

But i swear to you mate, the times I have heard over several years "this time it is different" I would sooner take a wait and see approach because I am not going to bed at night thinking it's 100% on to yet again find out they have pulled yet again another rabbit out of the hat.

If it was 100% on then my life would be perfect right now even though I have had a big hit on crypto this year

I am of the belief that the bottom has to prop up the top.

Cheapest 3 bed terrace you can buy here is £250k.

https://www.rightmove.co.uk/properties/124772330#/?channel=RES_BUY

LHA rate for a 3 bedder is £725 - £8,700 per year.

You might be able to push it to £900 - but you are starting to compete against nicer places.

https://www.rightmove.co.uk/properties/124399055#/?channel=RES_LET

So if we assume the best rent that 'cheap' place can command is £10,800, your best possible yield is 4.3%

BTL rates seem to be about 4% currently. Right on the edge of making a loss.

Of course .gov does have one trick left in the bag. A serious increase in LHA rates. There is the risk.

 

[haroldshand]

15 minutes ago, Wight Flight said:

I am of the belief that the bottom has to prop up the top.

Cheapest 3 bed terrace you can buy here is £250k.

https://www.rightmove.co.uk/properties/124772330#/?channel=RES_BUY

LHA rate for a 3 bedder is £725 - £8,700 per year.

You might be able to push it to £900 - but you are starting to compete against nicer places.

https://www.rightmove.co.uk/properties/124399055#/?channel=RES_LET

So if we assume the best rent that 'cheap' place can command is £10,800, your best possible yield is 4.3%

BTL rates seem to be about 4% currently. Right on the edge of making a loss.

Of course .gov does have one trick left in the bag. A serious increase in LHA rates. There is the risk.

 

Yep you can sit and do the maths and it just does  not make sense and the only outlook using commonsense is down down down, but you know my views and still for me the best option  is wait and see, there is no way I am making plans right now that involves a property crash, cost of living crisis yes.

[Noallegiance]

1 hour ago, Chewing Grass said:

 

All the FTBs are desperately trying to buy now before its too late.

In a world gone mad I just don't understand.

Too late for locking in negative equity? Too late for paying peak bubble prices?

In any case, I say let them pile in. I'm now of the view that the more this goes on, the greater house I'll eventually get for the lower price.

[dnb24]

On 25/06/2022 at 19:28, dnb24 said:

Anecdotal another 100+ listings this week, from a steady 900 2 months ago to well over 1200 now. 

Steady couple of weeks at 1205-1220 listings until today- now at 1260. 

[UmBongo]

Quite a few properties in my area seem to have got listed in the last 48 hours < £200k. hmmm...

[spygirl]

10 hours ago, Wight Flight said:

There is a marked difference this time though.

Interest rates have been too low for too long, allowing house prices to escalate wildly.

It has also allowed the massive boon in highly leveraged BTL.

Previous interest rate highs have come with high wage inflation, allowing people to sit tight for a year or so and things improve.

Also, a 2% rise from 6% to 8% on an 80k mortgage is much less painful than a 2% rise from 1% to 3% on a £300k mortgage.

Anything above 3% and most new entrant BTLers are toast. Especially those that have rapidly expanded to create a large portfolio. Losing £300 a month on one house is painful. Losing it on 50 houses is not survivable.

A lot of people are already underwater. They just don't know it yet.

Highly leveraged, low yield IO BTL.

 

[Boon]

https://www.mumsnet.com/talk/_chat/4585922-we-very-soon-wont-be-able-to-afford-our-life

This is good stuff, probably one of the first of the adverse stories you need to get forced sellers. There must be a London edition coming soon where there is the double whammy of can't afford to stay, but can't afford to sell because of neg equity.

TL:DR - high mortage, can't afford higher rate.

[Guest]

1 hour ago, Boon said:

https://www.mumsnet.com/talk/_chat/4585922-we-very-soon-wont-be-able-to-afford-our-life

This is good stuff, probably one of the first of the adverse stories you need to get forced sellers. There must be a London edition coming soon where there is the double whammy of can't afford to stay, but can't afford to sell because of neg equity.

TL:DR - high mortage, can't afford higher rate.

I like that she is suspicious of the advice she is getting from older relatives:

Quote

I keep getting told by my parents and grandparents we will get through it but how?! My grandparents were post war so it was hard but my gran could be a SAHM for 3 kids on a my grandads teacher salary. This is a pipe dream for us now and DH earns more than a NQ teacher.

'It will all work out' say innumerate older relatives who never in their lives owed a 5x joint income mortgage at a time of rising interest rates.

[Axeman123]

Interesting quote from the OP in that thread:

"Sorry I didn’t phrase it very well. For the one extra day I’d bring in £250 ish for the month so after childcare for the younger it would only be £90 odd and then the issue of the older child from 3:15.
I might have to start job hunting I love my job and it’s flexibility. I’m public sector so little scope to negotiate more pay and currently mid way through a masters in an attempt to boost earning potential."

Going from four days a week to five would only add about £90/month to take home, which clearly implies her part-time job is a pointless ego thing that adds nothing materially to the finances net. She is also public sector, and doing a pointless midlife masters degree!

She needs to be taking in laundry or something, not out working just to pay a childminder!

[reformed nice guy]

I flicked through some of the pages mainly reading the green replies.

Axeman is correct - she is a university arts lecturer!

Wealthy parents paid for their deposit and "We were encouraged to stretch ourselves at the time" when they didnt have kids. Now they have two.

Her work are paying for her masters degree and they have taken some hours off her working week for her to do some of it.

Top advice is to extend mortgage to end when she is aged 70.

 

[spygirl]

1 hour ago, reformed nice guy said:

I flicked through some of the pages mainly reading the green replies.

Axeman is correct - she is a university arts lecturer!

Wealthy parents paid for their deposit and "We were encouraged to stretch ourselves at the time" when they didnt have kids. Now they have two.

Her work are paying for her masters degree and they have taken some hours off her working week for her to do some of it.

Top advice is to extend mortgage to end when she is aged 70.

 

Extending mortgage does not work with medium to high rates.

Suicidally expensive.

[spygirl]

1 hour ago, reformed nice guy said:

I flicked through some of the pages mainly reading the green replies.

Axeman is correct - she is a university arts lecturer!

Wealthy parents paid for their deposit and "We were encouraged to stretch ourselves at the time" when they didnt have kids. Now they have two.

Her work are paying for her masters degree and they have taken some hours off her working week for her to do some of it.

Top advice is to extend mortgage to end when she is aged 70.

 

PT university art lecturer...

 

[JohnnyB]

2 hours ago, reformed nice guy said:

I flicked through some of the pages mainly reading the green replies.

Axeman is correct - she is a university arts lecturer!

Wealthy parents paid for their deposit and "We were encouraged to stretch ourselves at the time" when they didnt have kids. Now they have two.

Her work are paying for her masters degree and they have taken some hours off her working week for her to do some of it.

Top advice is to extend mortgage to end when she is aged 70.

 

That's the problem with gifted deposits - having to build up 15/20k yourself takes self-discipline both to consciously not spend all your income (£400 tacky pcp cars, woo let's go to America and post on Instagram so everyone knows, etc ), plus not to spunk the cash sum once it looks juicy. When the storm hits just because one family are on £30k and the other £70k doesn't mean the higher income one will necessarily survive.

All the MMR calculations are going to be worthless - 4.5x joint income mortgages facing reality now a few years down the line like this example - couple of kids means one parent either has to drop out and scrape for PT work, or they have £1k+ childcare costs.

[Wight Flight]

43 minutes ago, JohnnyB said:

That's the problem with gifted deposits - having to build up 15/20k yourself takes self-discipline both to consciously not spend all your income (£400 tacky pcp cars, woo let's go to America and post on Instagram so everyone knows, etc ), plus not to spunk the cash sum once it looks juicy. When the storm hits just because one family are on £30k and the other £70k doesn't mean the higher income one will necessarily survive.

All the MMR calculations are going to be worthless - 4.5x joint income mortgages facing reality now a few years down the line like this example - couple of kids means one parent either has to drop out and scrape for PT work, or they have £1k+ childcare costs.

I think the interesting point in that is they are trapped in their banks svr as they won't pass the mmr checks to move to another lender.

The bank now owns them. And millions like them.

[Guest]

4 hours ago, Axeman123 said:

Going from four days a week to five would only add about £90/month to take home, which clearly implies her part-time job is a pointless ego thing that adds nothing materially to the finances net. She is also public sector, and doing a pointless midlife masters degree!

I'd say it's a bit more subtle than that, probably her first 3 or 4 days a week at work are worth the trouble as that will be the least taxed income and she can use free hours and tax-free childcare to reduce the cost of going to work, but on day 5 she's paying full whack PAYE+NI+childcare which means she gets to keep about £20 for a day's work.

Here is the inevitable consequence of overtaxing wages relative to other forms of income: people choose to do less paid work.

Edited July 9, 2022 by Guest

[Axeman123]

1 minute ago, Darude said:

I'd say it's a bit more subtle than that, probably her first 3 or 4 days a week at work are worth the trouble as that will be the least taxed income, but on day 5 she's paying full whack PAYE+NI and childcare which means she gets to keep about £20 for a day's work.

Here is the inevitable consequence of overtaxing wages relative to other forms of income: people choose to do less paid work.

I hear that, but even I can't escape the feeling that the bigger problem here is her doing a job that barely covers childcare. If she had married a private surgeon etc that might well just have been a luxury lifestyle choice, but clearly she is pursuing something unaffordable for her. Without this pointless job they may well be able to ditch a car, and avoid all the other spending that goes with the job. 

[reformed nice guy]

53 minutes ago, Axeman123 said:

I hear that, but even I can't escape the feeling that the bigger problem here is her doing a job that barely covers childcare. If she had married a private surgeon etc that might well just have been a luxury lifestyle choice, but clearly she is pursuing something unaffordable for her. Without this pointless job they may well be able to ditch a car, and avoid all the other spending that goes with the job. 

And given her kids a better upbringing.

Everything has a price but price isn't always the same as value

Edited July 9, 2022 by reformed nice guy

[Guest]

1 hour ago, Axeman123 said:

I hear that, but even I can't escape the feeling that the bigger problem here is her doing a job that barely covers childcare. If she had married a private surgeon etc that might well just have been a luxury lifestyle choice, but clearly she is pursuing something unaffordable for her. Without this pointless job they may well be able to ditch a car, and avoid all the other spending that goes with the job. 

Playing devil's advocate for a second, as a university lecturer she will be building up a defined benefit pension worth far more than she would get in the private sector. It doesn't solve their cashflow problems today but it likely means her working is pretty good for the household finances in the long run.