Property crash, just maybe it really is different this time

[haroldshand]

On 23/07/2022 at 10:41, Formerly said:

I welcome alternative (or should that be mainstream?) points of view. I was wrong in 2004 about the scale of the forthcoming HPC. Those who said the government wouldn't let it happen were right. I truly underestimated the burden that the government was willing to inflict on future generations.

Having said that you are conflating the circumstances of an individual with the circumstances of plenty.  Averages, by definition, are more representative than exceptions.

I could argue that plenty have bought houses that they cannot afford. If they pay them off then my argument was wrong.

I don't know how this will all pan out, but I do feel than the can has been kicked close to the end of the road now.

My concern is that governments have proven their recklessness. What will they do next?

I remember years ago all my mates and my Sisters buying houses in our early 20's, my younger Sister got her first house at 19. Without a doubt it gave you something positive mentally and all our lives were made easier with the incentive of being able to do this.

Trouble is todays 20 to 30 age group have no idea what it felt like for us over 50's and if they did know that feeling they were be rioting in the streets now.

[haroldshand]

18 hours ago, Hardhat said:

It's actually really annoying. We are early 30s, 100k+ household income and large deposit but we literally can't find anything to buy or are instantly outbid. 

However there is very, very little coming on thr market in the town we live in, less than 10 properties transacting a month, so anyone who wants to live here has little choice, which I think explains the mad competition for every property. When you walk around town there are loads of houses having work done/ extensions which I assume is instead of selling up for a bigger place.

Higher prices on lower volume can also be a sign of an impending correction.

Just anecdotal.

One of these days an over looked beautiful  underpopulated country is going to get it's act together(politics) and poach Europe's finest with the incentive of good house and community with little crime whicj values skilled workers etc.

That would be poetic justice for the youngsters in the UK today who work their bollocks off for nothing.

Portugal(forget the Algarve)  is such a place and being singled out now, many from the US pissed of with their politics are heading there and many high profile people from the EU are now living there

[sancho panza]

On 22/07/2022 at 10:13, HousePriceMania said:

The Isle Of Man is one region of Britain the UKPL tracks but the number of listings are so low it's not worth following...although I am starting to see a trend.

 

 

 

I get the feeling this is significant.

 

https://www.globalwitness.org/en/campaigns/tax-haven-next-door/

Why would people be selling up in a tax haven, anyone have any theories ?

 

I don't know which data you're tracking but the problem with the Isle of man is that most of the agents use zoopla not RMV.

Zoopla has 560 for sale

https://www.zoopla.co.uk/for-sale/property/isle-of-man/

Rightmove has 140

https://www.rightmove.co.uk/property-for-sale/find.html?locationIdentifier=REGION^706&insId=1&minBedrooms=4&radius=1.0&includeSSTC=true&_includeSSTC=on&googleAnalyticsChannel=buying

 

 

The price data is totally misrepresentative if you look at zoopla.  Most likely skewed by the few houses on RMV.id say you get more for your money than northants/ leicestershire there

There are probably some agents there not even on zoopla 

 

[JoeDavola]

Some horror stories in this topic about estimated vs actual renovation costs...makes you think will there be a tipping point where it doesn't actually make sense to buy a house because of the huge liability of looking after the fucker, the cost of doing so inflating way faster than wages:

 

[Axeman123]

9 hours ago, JoeDavola said:

Some horror stories in this topic about estimated vs actual renovation costs...

With Reddit demographics the biggest issue will probably be needing trades for everything, and also putting the tradesman's back up.

There is a weird flex associated with renovations where people always downplay the spend, like everyone with good grades claiming not to have studied for exams. Homes under the hammer always took that one stage further ("we needed double glazing, new boiler, loft conversion and replaster throughout, totalling £13,500"). Anyone using those figures as a basis for estimation would be in for a shock.

[belfastchild]

9 hours ago, JoeDavola said:

Some horror stories in this topic about estimated vs actual renovation costs...makes you think will there be a tipping point where it doesn't actually make sense to buy a house because of the huge liability of looking after the fucker, the cost of doing so inflating way faster than wages:

 

Its the idiots who are overpaying for a doer upper without getting a full survey done (usually useless but at least a guide) and prioritising decor over actual stuff. The ones with no trades in the family or no idea of cost and more importantly lead times on things.
Ive mentioned the tale of people on the same road buying at current peak prices for their forever home and not moving in until it was finished as she wanted it perfect before she moved in. Well after 6 months they had to move in and are still waiting on windows, eaves, gutters, etc etc. They have scrapped the new kitchen and new bathroom idea.

My cousin is a builder, his advice to me buying this one was make sure it was sound (was only 15 years old at that point), check the heating works properly, kitchen and bathroom were good, everything else is liveable or a paint job until its liveable.
I built my own conservatory 18 months ago. If I had waited for the company supplying the double glazing to come out and measure up I would have been probably a year into it and maybe 1/2 to 2/3 extra in price. I was told if I wanted to wait on glass roof and frame I would probably still be waiting now. I made it out of poly insulated material. I ordered an extra sheet in case I fucked up cutting the one that needed a shape cut out of it. I sold it for 50% more than it cost me 6 months previous, dunno what it would cost now.

Friend rang a well known reputable tarmac company to do his drive when they moved in at the start of the year. They said they would get back to him in July. They did, told him to look somewhere else. He had contacted someone to do block paving 3 months ago. Bought the blocks and they are in his garage, still waiting on the guy doing it but he has the blocks at March prices.

You can get hot tubs and bbqs straight off the shelves for close to 10 years ago prices, boilers, kitchens, bathrooms, not so much.

I remember when I moved in here, we used fold out garden furniture for a dining room table for a year until we could 'afford' a proper one. Bearing in mind our combined income was more than we paid for the house.

[JoeDavola]

16 minutes ago, belfastchild said:

Its the idiots who are overpaying for a doer upper without getting a full survey done (usually useless but at least a guide) and prioritising decor over actual stuff. The ones with no trades in the family or no idea of cost and more importantly lead times on things.
Ive mentioned the tale of people on the same road buying at current peak prices for their forever home and not moving in until it was finished as she wanted it perfect before she moved in. Well after 6 months they had to move in and are still waiting on windows, eaves, gutters, etc etc. They have scrapped the new kitchen and new bathroom idea.

My cousin is a builder, his advice to me buying this one was make sure it was sound (was only 15 years old at that point), check the heating works properly, kitchen and bathroom were good, everything else is liveable or a paint job until its liveable.
I built my own conservatory 18 months ago. If I had waited for the company supplying the double glazing to come out and measure up I would have been probably a year into it and maybe 1/2 to 2/3 extra in price. I was told if I wanted to wait on glass roof and frame I would probably still be waiting now. I made it out of poly insulated material. I ordered an extra sheet in case I fucked up cutting the one that needed a shape cut out of it. I sold it for 50% more than it cost me 6 months previous, dunno what it would cost now.

Friend rang a well known reputable tarmac company to do his drive when they moved in at the start of the year. They said they would get back to him in July. They did, told him to look somewhere else. He had contacted someone to do block paving 3 months ago. Bought the blocks and they are in his garage, still waiting on the guy doing it but he has the blocks at March prices.

You can get hot tubs and bbqs straight off the shelves for close to 10 years ago prices, boilers, kitchens, bathrooms, not so much.

I remember when I moved in here, we used fold out garden furniture for a dining room table for a year until we could 'afford' a proper one. Bearing in mind our combined income was more than we paid for the house.

When my folks bought the house that I grew up in in about 1985 - we were in it about 15 years - I think Dad said that he knew it needed stuff done to it and that he'd have to budget I think a 5-10 year timeline to get it all done, now this included stuff like building a large brick garage from scratch. It should also be noted my Dad was in the trades so could do most of the work himself or get someone in to help him if need be at a knockdown price.

With the huge inflation in materials and what appears to be an inability to even get a tradesman sometimes...surely the first domino of the housing market to fall is the 'fixer upper'.

For example this has been on for months; I don't get why anyone would buy this, but they're not interested in reducing the price it seems. Mind you I'd not be interested at £100K less....

https://www.propertypal.com/63-martinez-avenue-belfast/762786

 

[belfastchild]

1 minute ago, JoeDavola said:

For example this has been on for months; I don't get why anyone would buy this, but they're not interested in reducing the price it seems. Mind you I'd not be interested at £100K less....

https://www.propertypal.com/63-martinez-avenue-belfast/762786

 

Thats the problem people dont understand at the minute with a lot of the houses coming up as a result of moving into old folks home/probate/divorce. Most will probably have had no maintenance done in a few years as it wasnt worth the while or were fighting over it/bloke lived somewhere else.

[JoeDavola]

1 minute ago, belfastchild said:

Thats the problem people dont understand at the minute with a lot of the houses coming up as a result of moving into old folks home/probate/divorce. Most will probably have had no maintenance done in a few years as it wasnt worth the while or were fighting over it/bloke lived somewhere else.

It looks like some haven't been maintained in decades, and I just wonder assuming prices of fixer uppers don't absolutely collapse will many of them just sit in limbo for years as not financially viable restoration projects.

[TMM]

Quote

Kettel Homes, the rent-to-own platform empowering first time buyers, today announces that is has been backed by Nationwide Building Society.

Kettel purchases existing freehold single-family homes between £125k – £400k outside of London, making up 47% of all transactions in 2021 based on Land Registry data.  Kettel’s appeal to sellers is that it is a professional cash buyer who can move quickly and provide certainty on the transaction.

 

Surely this isn't correct?

 

https://www.propertywire.com/news/kettel-homes-launches-uks-first-open-market-rent-to-own-program-to-help-first-time-buyers/

[hapax legomenon]

Starting to build some weird houses, this one looks like a block of flats but is actually a detached house:

https://www.rightmove.co.uk/properties/125287943#/?channel=RES_NEW

[eek]

1 hour ago, hapax legomenon said:

Starting to build some weird houses, this one looks like a block of flats but is actually a detached house:

https://www.rightmove.co.uk/properties/125287943#/?channel=RES_NEW

Yep Bussey and Armstrong's architect seems to have built that for a dare - the windows are f**ing awful... 

[Axeman123]

1 hour ago, hapax legomenon said:

Starting to build some weird houses, this one looks like a block of flats but is actually a detached house:

https://www.rightmove.co.uk/properties/125287943#/?channel=RES_NEW

If they had put the same windows elsewhere as on that bay down the side, and spaced them traditionaly, that could almost have been "ok".

There was clearly a lot of effort put into details on that, but it fundamentally looks wrong. I would actually like to see that bay/turret arrangement make a come back, 270 degree natural light would make those rooms at the back corner very pleasant.

[JoeDavola]

https://www.theguardian.com/business/2022/jul/25/uk-mortgage-brokers-deals-interest-rates-banks-low-rate-inflation

"Mendes is now advising borrowers to consider longer-term fixed rates, lasting 10, 15 or even 30 years, to avoid paying more due to future rate rises that are expected to continue into 2023. “The continued risks mentioned will undoubtably mean we are likely to see further increases to the cost of a mortgage,” he said."

Are 15-30 year mortgages even a thing in the UK??

[spygirl]

51 minutes ago, JoeDavola said:

https://www.theguardian.com/business/2022/jul/25/uk-mortgage-brokers-deals-interest-rates-banks-low-rate-inflation

"Mendes is now advising borrowers to consider longer-term fixed rates, lasting 10, 15 or even 30 years, to avoid paying more due to future rate rises that are expected to continue into 2023. “The continued risks mentioned will undoubtably mean we are likely to see further increases to the cost of a mortgage,” he said."

Are 15-30 year mortgages even a thing in the UK??

About 6-7 years ago there was a brief period when you could get a 10y fix.

I hummed n ahhed about getting one.

In the end, I went for 5y.

5y fixes used to be rare. 10y+ unheard of.

 

[hapax legomenon]

1 hour ago, Axeman123 said:

If they had put the same windows elsewhere as on that bay down the side, and spaced them traditionaly, that could almost have been "ok".

There was clearly a lot of effort put into details on that, but it fundamentally looks wrong. I would actually like to see that bay/turret arrangement make a come back, 270 degree natural light would make those rooms at the back corner very pleasant.

Agree on the turret, nice design feature but is usually found on blocks of flats. Whole design looks wrong for a large detached house, not to my taste anyway. Here is a block of flats in the same town for comparison

[sancho panza]

4 hours ago, JoeDavola said:

https://www.theguardian.com/business/2022/jul/25/uk-mortgage-brokers-deals-interest-rates-banks-low-rate-inflation

"Mendes is now advising borrowers to consider longer-term fixed rates, lasting 10, 15 or even 30 years, to avoid paying more due to future rate rises that are expected to continue into 2023. “The continued risks mentioned will undoubtably mean we are likely to see further increases to the cost of a mortgage,” he said."

Are 15-30 year mortgages even a thing in the UK??

@Barnsey got a 15 year fix last year,that was the best I heard from a trusted source.I know other firends who took ten years last year but as I understand it the 15 yrs got pulled pretty quickly and now there's none avaialble,ten years now require lower LTV ratios than last year and also I think income checks more generally have got more stringent at some banks.

But I'm not a mortgage broker.

[Bobthebuilder]

6 minutes ago, sancho panza said:

@Barnsey got a 15 year fix last year,that was the best I heard from a trusted source.I know other firends who took ten years last year but as I understand it the 15 yrs got pulled pretty quickly and now there's none avaialble,ten years now require lower LTV ratios than last year and also I think income checks more generally have got more stringent at some banks.

But I'm not a mortgage broker.

My old apprentice got a ten year fix around 2% last year, no longer available.

[JoeDavola]

2 minutes ago, Bobthebuilder said:

My old apprentice got a ten year fix around 2% last year, no longer available.

Quite incredible how rates have gone up in the last year; and they may well have a lot further to go.

Edited July 25, 2022 by JoeDavola

[sancho panza]

20 hours ago, JoeDavola said:

Some horror stories in this topic about estimated vs actual renovation costs...makes you think will there be a tipping point where it doesn't actually make sense to buy a house because of the huge liability of looking after the fucker, the cost of doing so inflating way faster than wages:

 

Our current rental has some work that needs doing in the next 5 years,eg roof(pretty much all of it  lol),radiators-all of them,double glazing.It's biggish bungalow prob 2 times more floor space than our old 3 bed semi.Tha's a lot of roof/radiators and windows.On the surface looks ok/good but there are costly problems looming

One man band developed it on a shoestring from what I understand sand sold to our LL(who builds 20-30 houses per year) in 2021 after a year or two on the market.LL paid top dollar in April 21,for the hosue and a few acres at the back of it with no planning.

Can't see how he'll get his moeny back.Our heating bills are ok but Im heavily invested in fossil fuels so price hikes aren't an issue,think hell struggle to find an older couple that want to heat this sort of size place a way from town so problems getting carers/cleaners.

[sancho panza]

3 minutes ago, JoeDavola said:

Quite incredible how rates have gone up in the last year; and they may well have a lot further to go.

It's also about bank balance sheets as well,given that many are prepping for a draw down,it's pure Fishers debt deflation territory as banks reigning in credit lines causes asset prices to fall causing banks to rein in credit lines

We have to follow the price action which is still upward/neutral but I'm glad I'm not exposed to the interest rate risk that is out there at the minute

Fisher's formulation (1933)

In Fisher's formulation of debt deflation, when the debt bubble bursts the following sequence of events occurs:

Assuming, accordingly, that, at some point in time, a state of over-indebtedness exists, this will tend to lead to liquidation, through the alarm either of debtors or creditors or both. Then we may deduce the following chain of consequences in nine links:

1. Debt liquidation leads to distress selling and to
2. Contraction of the money supply, as bank loans are paid off, and to a slowing down of velocity of circulation. This contraction of the money supply and its velocity, precipitated by distress selling, causes
3. A fall in the level of prices, in other words, a swelling of the dollar. Assuming, as above stated, that this fall of prices is not interfered with by reflation or otherwise, there must be
4. A still greater fall in the net worths of business, precipitating bankruptcies and
5. A like fall in profits, which in a "capitalistic," that is, a private-profit society, leads the concerns which are running at a loss to make
6. A reduction in output, in trade and in employment of labor. These losses, bankruptcies and unemployment, lead to
7. pessimism and loss of confidence, which in turn lead to
8. Hoarding and slowing down still more the velocity of circulation.

   The above eight changes cause

9. Complicated disturbances in the rates of interest, in particular, a fall in the nominal, or money, rates and a rise in the real, or commodity, rates of interest.

— (Fisher 1933)

 

Edited July 25, 2022 by sancho panza

[JoeDavola]

Just now, sancho panza said:

It's also about bank balance sheets as well,given that many are prepping for a draw down,it's pure Fishers debt deflation territory as banks reigning in credit lines causes asset prices to fall causing banks to rein in credit lines

We have to follow the price action which is still upward/neutral but I'm glad I'm not exposed to the interest rate risk that is out there at the minute

I assume you rent and have no intention of buying soon?

[sancho panza]

25 minutes ago, JoeDavola said:

I assume you rent and have no intention of buying soon?

Nailed on.We might buy somewhere in the Isle of Man down the line but that's because I intedn to retire there and love it there.

Mrs P always wanted to buy before she met me as 'hosues only go up in value etc'.But I showeed her how, using a hosue we looked at in SOuth Africa,that whislt it's price in Rand had gone from ZAR 600k or so to ZAR 3mn ,in dollar terms it hadn't gone up at all ie it was $150k in 2003 and $150k in 2016(figures from memory) and that actually all the gains were due to a loss of purcahsing power for ZAR.

This sowed the first seed of doubt,sterling is a different beast admittedly but the principle of price being a relative concept was clearly shwon imho.

We rent at the nicer end of the rental market.LL had to install a £1000 bath last week as the developer he bought had put one in where the waste pipe was part of the bath and it cracked.Felt sorry for him.He had to replace a £600 water pump when we moved in 6 months back.

He's hoping to shift it on once he's hived off the back garden but I think the money has moved from hsi financing point.He may offer to extend our 2 year deal or hope well buy it.

I don't like mentioning nominal figures but we currently rent it at a 2.5% gross yield,so I've shown Mrs P that our mortgage repayments would be 3 times our retn if we bought using a 100% mortgage and a 3% fixed rate.I use those figures to demonstrate,and accet at 75% LTV the repayment figures woud be different.Obviously the liabiliteis I describe above would be added to our purcahse price,likely circa £150kto £200k for roof,windows,rads,bolier etc

On top of that I would have the opporutnity cost of tying our capital up in something that will likely depreciate with sterling voer the coming years.We're currently using our incometo pay the rent and reinvesting the proceeds from our invesments

If needed,-I alwyas have plan B's,then I could use the current divi from our oilies bought 2020to clear the rent.So if the hosue is worht £75,I would need the income from £30 of BP say to pay the rent.With thsoe figures,I dont see any point in buying it

I'm far more worried about the price of oil and food going forward.I think rents will come down in terms of ounces of gold/barrel of oil tokens and Im happy to take that trade.

Sorry for the long answer but I know youre weighing your options at the minute Joe so wanted to explain

Edited July 25, 2022 by sancho panza

[Chewing Grass]

4 hours ago, hapax legomenon said:

Agree on the turret, nice design feature but is usually found on blocks of flats. Whole design looks wrong for a large detached house, not to my taste anyway. Here is a block of flats in the same town for comparison

Perhaps the turret design reflects Scottish Border Tower (Peel) House design.

[leonardratso]

15 minutes ago, Chewing Grass said:

Perhaps the turret design reflects Scottish Border Tower (Peel) House design.

its for easier conversion into a minaret when it eventually becomes a mosque.