Property crash, just maybe it really is different this time

[roundhouse]

14 hours ago, Onsamui said:

Nephew buying late FIL bungalow off us, large plot and very sunny aspect. No EA fees. Probate told us 16 weeks before final decision, was 8 when I was selling my late parent's house during the plandemic. Spent 3 hours on phone trying to get through to Probate to find out what was happening after 18 months of nothing off them, first one cut us off after sitting there for 30 minutes because she had to speak to her line manager. They had lost some info apparently, got an apology and Probate same day as phone call, but we lost two buyers due to this. Price went up though. 

Something on R4 Moneybox today re probate delays. Sorry I didn,t really listen so don't know why but seems widespread atm.

[tank]

2 hours ago, Axeman123 said:

Here is an interesting (if slightly schizophrenic) Telegraph article:

Headline: Wealthy homeowners forced to dramatically cut asking prices

Already we are wrong-footed, "wealthy" is that intended as praise or damning? Normally those are the two kinds of wealthy in newspaper land, but which are these? How can they even be wealthy in an article about selling houses, and with buyers setting the price too. Its all very confusing.

"Wealthy homeowners are slashing hundreds of thousands of pounds off their asking prices to sell properties...."

If it's the Torygraph, 'wealthy homeowners' would be code for 'our readership'. 

Same for the Graun but they'll usually throw in a few 'Isn't it awwful' puff pieces on supposedly 'starving' fat single mums to ease their guilt.

They're all part of the same club. They can see what's happening in other high net immigrant, rentier based, neoliberal Anglophone economies and fear that UK housing is heading in the same direction.

Edited February 20, 2023 by tank

[spygirl]

On 15/02/2023 at 08:48, spygirl said:

This came up as a topic the other day.

Quick google.

https://scarborough.objective.co.uk/portal/planning/lpr_2020/sasr?pointId=s15815194766893

These numbers are waaaay out of date (2010 census)

Home Ownership (Tenure)

5.34 Scarborough has a high percentage of 'owned: owned outright' properties (39% Census 2011) that is comparable to the county average and above the overall average for England. The main reason for this is likely linked to the age profile of the area which has a high proportion of 60 plus residents; either persons who have lived and worked in the area (and paid off their mortgage) or those who have decided to retire to the coast and purchase a property outright. There is also a number of second homes in the area which may contribute further to this trend. A further 27% own a property with a mortgage.

5.35 The private rented sector now accounts for around 19.5% of all households. The largest concentrations are within the inner urban areas of Scarborough, where around 45-50% of the stock is privately rented, the majority of which is either flats or Houses in Multiple Occupation (HMOs). The other form of rented (social from a Registered Provider) accounts for over 10% with a further 13% unoccupied at the time of the last Census. The Borough Council has specifically tried to address vacant and unoccupied properties and successfully reduced the number of vacant properties in recent years.

5.36 Overall, based on survey evidence and as a proportion of those properties occupied, the tenure profile of Scarborough Borough shows that 66% of dwellings are owner-occupied, 20% are private rented (including tied accommodation), 12% are rented from a social housing provider and 0.6% are intermediate tenure dwellings. The trend appears to have been fairly constant with the only significant increase since the previous census (2001) being owned with a mortgage.

 

A lot of empty houses.

~40% of houses are OO with no mortgage, Basicially OAPs. They aint going to be buying houses, reverse soon.

Bar the flop hosues/doleys, most low paid people in Scabby bougth hosues -they were cheap.

Thats reversed, with 20% of houses holds privately rented i..e. BTL.

This will have grow massively over the last 10y - Id not be suprised if its doubled.

These are either EUers or locals whove been milked for rent.

Only 30% of households were playing the housign equity game in 2010.

Thats probably halved now.

The number of people in active inthe housing market is tiny.

Again,. mortgages are fat becoming a small minority.

 

 

 

 

 

Had a look a that Charlie property blog.

He has a post from an ooold Ea -

https://bestagent.co.uk/john-durrant-advice-for-estate-agents-property-market-downturn/

Some doesnt and reasonable comments- most of which Ive made.

Makes a reference to the Barber boom, so must be v old. barber predated what I term mass market mortgages.

Basically. higher IR and cost have knocked about 1/3 of the mortgage people can get.

Then he touches on a topic Ive kept banging about in relation to my local market.

With household budgets up £400 a month (energy and food) there will be less money available to fund mortgages. At 3.5% over 25 years, that £400 a month would have funded £80,000 and over 35 years that would have been £98,000. If they choose to eat and heat, they’ll have up to £100,000 less than they would have had available to make their purchase! Many will compromise in the and eat a diet of handouts from parents and turn their heat down to 19 degrees. Many more will choose not to move away from parents I the first place. A property market without FTBs is not viable.

IF/WHEN the tipping point is reached, expect lenders to become nervous too. They’ll be looking at affordability and even if buyers decide to go on a no-food diet and freeze to death it’s unlikely that the lenders will accommodate their wishes to buy a home at current price levels. Demand is only effective when there is money available. If interest rates increase, then affordability will fall further. Lenders are likely to become a problem – although the rate of mortgage lending hasn’t been high of recent so they might be slow to respond.

But he doesnt quite join up the dots. And this is where all Ea, old and young, and house sellers are not fully grasping.

The monster that was IO BTL *REMOVED* ~50% of FTB from the market for ~20y.

The money that would have gone into housing equity, building up assets and allowing 2nd 3rd etc moves since 2002, has been sucked away by IO mortgages, going back to the banks, with LL skimming off ~100/m.

Majority  of BTLer will be exiting the market, selling  for a *LOT* less than they bought it for.

A 'property ladder' a phrase I hate, is nothing more than housing equity built up as a person pays down the mortgage.

At the best of time, its not really that fast - ~5%/y of debt paid off, over 20y. Normally its barely enough to keep up with the SVR on the debt i.e. the 'property ladder' is only 1 or 2 steps.

With people on IO mortgages, and others in private rentals, its just not been present at all. Dead.

[MrXxxx]

10 hours ago, Axeman123 said:

Here is an interesting (if slightly schizophrenic) Telegraph article:

Headline: Wealthy homeowners forced to dramatically cut asking prices

Already we are wrong-footed, "wealthy" is that intended as praise or damning? Normally those are the two kinds of wealthy in newspaper land, but which are these? How can they even be wealthy in an article about selling houses, and with buyers setting the price too. Its all very confusing.

"Wealthy homeowners are slashing hundreds of thousands of pounds off their asking prices to sell properties as the downturn hits the top of the housing market. Six in 10 homeowners selling property worth £1m or more in January were forced to cut their asking prices before they could find a buyer, according to analysis by Hamptons estate agents...."

Fairly standard stuff, a few examples of high end seller cutting their asking follow. Then:

"...Just as buying power dwindles, the number of homeowners under pressure to sell quickly is climbing. Mr Waight said: 'There is a big issue in the buy-to-let sector, particularly among accidental landlords, as landlords get hit by higher mortgage rate.'. Buy-to-let investors coming to the end of fixed rate deals must remortgage at rates that are double what they are used to. David Hill, of Marsh & Parsons estate agents, said: 'Some people are definitely struggling. High mortgage rates mean their profits have diminished rapidly.' Jean Jameson, of Foxtons estate agents, said: 'A few more landlords are coming in to pick up the distressed landlord stock. They know that because they are buying from a distressed seller they can knock off 10pc or 20pc.' But there are also distressed sales across the market. Mr Jameson added: 'It’s absolutely across all of our divisions. Maybe not all of them have to sell today, but there are homeowners who can’t afford the mortgage rates, and the cost of living crisis means people are really stretched across everything.'..."

Now I have no idea if we are still talking top of the market, or more broadly. Still nice to hear about landlords lubing up for 20% off

source: https://uk.finance.yahoo.com/news/wealthy-homeowners-forced-dramatically-cut-171823505.html

20% off is still only 2020/21 prices though...meh!

[MrXxxx]

9 hours ago, Bobthebuilder said:

The Victorians did everything 200%, they didn't fuck about.

Empire...

Isambard Kingdom Brunel...

...where did it all go wrong?

[eek]

16 minutes ago, spygirl said:

Majority  of BTLer will be exiting the market, selling  for a *LOT* less than they bought it for.

The flaw in your argument is why would the greediest generation ever sell at a loss? It requires repossessions and banks willing to sell at any price before that occurs. I suspect that is at least 1 year away.

[MrXxxx]

10 minutes ago, eek said:

It requires repossessions and banks willing to sell at any price before that occurs.

..and I think this is where it is going to be 'different this time'...the Banks/lenders were bailed out the last time by the government [tax payers actually], and this is where they [banks] have to start paying for their 'free lunch' via debt/payment flexibility and lack of foreclosure/distressed sales.

[eek]

2 minutes ago, MrXxxx said:

..and I think this is where it is going to be 'different this time'...the Banks/lenders were bailed out the last time by the government [tax payers actually], and this is where they [banks] have to start paying for their 'free lunch' via debt/payment flexibility and lack of foreclosure/distressed sales.

My point was one about timing - we need the following steps to occur before the market reacts

1) banks to repossession property

2) banks fail to sell property at market prices and start accepting low offers

3) the advertised low prices do not trigger bidding wars

Basically we need the housing market to return to the fear stage of 1992 onwards and the market took 2+ years to get to that point.

[MrXxxx]

2 minutes ago, eek said:

My point was one about timing - we need the following steps to occur before the market reacts

1) banks to repossession property

2) banks fail to sell property at market prices and start accepting low offers

3) the advertised low prices do not trigger bidding wars

Basically we need the housing market to return to the fear stage of 1992 onwards and the market took 2+ years to get to that point.

...and this time I think the banks will be reluctant/will be 'encouraged' by government not to do 1, hence why 2 & 3 will not follow. This said, I hope I am wrong, and if so I hope it happens rapidly rather than being drawn out over 4-5 years; I think the latter is likely due to the recent BoE stats [below] where the impact of high 2023/24 inflation rates and high 2024/25 unemployment rates will affect property prices ~2025/26:

[spygirl]

28 minutes ago, eek said:

The flaw in your argument is why would the greediest generation ever sell at a loss? It requires repossessions and banks willing to sell at any price before that occurs. I suspect that is at least 1 year away.

Commercial loans.

Mr n Mrs hitting 66.

Voids, higher IR, mis repayment, cant remortgage.

Whoosh - pay the mortgage back. Now.

 

 

[spygirl]

19 minutes ago, MrXxxx said:

..and I think this is where it is going to be 'different this time'...the Banks/lenders were bailed out the last time by the government [tax payers actually], and this is where they [banks] have to start paying for their 'free lunch' via debt/payment flexibility and lack of foreclosure/distressed sales.

One of the obscure ways QT works is it blows away banks capital.

I.e. banks have to work harder n pay more money.

 

 

[Boon]

Interestingly we are starting to have stuff like this:

https://forums.moneysavingexpert.com/discussion/6426480/advise-my-situation-property-sell-with-loss-or-keep-paying-mortage-with-loss

Looks like a lost cause really - looking at a big loss. Let's say loss is £300 a month is even before tax or EA commission, and it must be a fully managed if he is abroad, no way to avoid these.

Depending on tax could be running £700-1000 a month and that's even on the cheap mortgage deal, and assumes nothing goes wrong.

Yet I don't think any of the comments will reflect this. There always seems to be an implicit belief that if you wait for the market to recover, it will because it always has done. But bankrolling £50k of losses to wait for the face saving moment to get the selling price equal to the buying price is still a loss.

Maybe as a collective sentiment will turn slowly, then quickly. 

[HousePriceMania]

On 11/02/2023 at 16:37, MrXxxx said:

Do you think his forecast for the market bottom i.e. 2yrs from now/2024 is accurate?

Little point forecasting anything, the property owning banker establishment are capable of anything.

Maybe they want/need a 50% crash.

Maybe they want/need the £ to be bog roll.

It's one or the other though, that's the only thing I am sure of.

[MrXxxx]

1 hour ago, Boon said:

Interestingly we are starting to have stuff like this:

https://forums.moneysavingexpert.com/discussion/6426480/advise-my-situation-property-sell-with-loss-or-keep-paying-mortage-with-loss

Looks like a lost cause really - looking at a big loss. Let's say loss is £300 a month is even before tax or EA commission, and it must be a fully managed if he is abroad, no way to avoid these.

Depending on tax could be running £700-1000 a month and that's even on the cheap mortgage deal, and assumes nothing goes wrong.

Yet I don't think any of the comments will reflect this. There always seems to be an implicit belief that if you wait for the market to recover, it will because it always has done. But bankrolling £50k of losses to wait for the face saving moment to get the selling price equal to the buying price is still a loss.

Maybe as a collective sentiment will turn slowly, then quickly. 

...it's also interesting that not one of the comments questioned whether continuing employment with the same company was a good idea...that potential  £50k loss equates to ~£63k pre-tax, divide this by say five years overseas, and the new post needs to be paying ~£13k more per annum than staying put in the UK with the same company OR finding a post with another.

I think what this article does demonstrate [that people often forget] is that renting rather than home ownership offers you career/work flexibility.

Edited February 20, 2023 by MrXxxx

[Rare Bear]

1 hour ago, MrXxxx said:

Empire...

Isambard Kingdom Brunel...

...where did it all go wrong?

Empire

[Axeman123]

@MrXxxx The wildcard is BTL and "accidental" landlords.

In previous crashes nearly all property was owner occupied, and hence liquidating meant losing both accomodation and face with the neighbours etc. These people innevitably had to be pried out of the property with a crowbar, and only then when it became impossible for them to service the loan.

This time around in contrast we have huge numbers of people that can liquidate without surface disruption to their life. This group are also very attached to paper valuations etc. They may well dump as soon as the tide turns against them, which is already happening. What the effect of this on timescales will be is unknowable of course. There is the possibility of a stock-market crash style liquidation panic IMO.

[Guest]

On 19/02/2023 at 08:05, JoeDavola said:

Yes apartment living imo only makes sense for most folk if they are are living near the beach in a sunny climate and live mostly outdoors. But if you have the means for a house nobody’s going to opt for a flat.

I suspect if my folks do move it’ll be to one of the newbuild developments in outer Belfast like this; they’re not to my taste but with most older houses in such bad nick I can see why modern appeals to some:

https://www.propertypal.com/4-millmount-quarry-view-dundonald-belfast/795623

This is similar to the adult generations in my family: the retired grandparents are living in the 3+ bedroom houses with 1500+ sq ft of floor space and multiple bathrooms while the parents+kids are making do in 2 beds with 800 sq ft and 1 bathroom.

Them as has the money calls the tunes.

Edited February 20, 2023 by Guest

[JoeDavola]

9 minutes ago, Darude said:

This is similar to the adult generations in my family: the retired grandparents are living in the 3+ bedroom houses with 1500+ sq ft of floor space and multiple bathrooms while the parents+kids are making do in 2 beds with 800 sq ft and 1 bathroom.

Them as has the money calls the tunes.

Yes based on several comments over the past month my parents seem to be trying to normalize the idea that at almost 40 and with almost 20 years of 'professional' life behind me and almost a quarter mill banked that it's really quite unreasonable for me to expect anything other than a modest 2 bed flat, or at best a small semi in an area that wouldn't be posh enough for them to ever consider living in.

Whereas they, on a single very modest wage that peaked at about £30K have ended up in a house with over 3 times the square footage of the kind of flat they think I should be settling for, and are looking for something even better.

Edited February 20, 2023 by JoeDavola

[MrXxxx]

29 minutes ago, Axeman123 said:

@MrXxxx The wildcard is BTL and "accidental" landlords.

In previous crashes nearly all property was owner occupied, and hence liquidating meant losing both accomodation and face with the neighbours etc. These people innevitably had to be pried out of the property with a crowbar, and only then when it became impossible for them to service the loan.

This time around in contrast we have huge numbers of people that can liquidate without surface disruption to their life. This group are also very attached to paper valuations etc. They may well dump as soon as the tide turns against them, which is already happening. What the effect of this on timescales will be is unknowable of course. There is the possibility of a stock-market crash style liquidation panic IMO.

True, but only a fifth of UK property is BTL [https://www.theguardian.com/uk-news/2023/jan/05/number-households-renting-more-than-doubled-2001-census-england-wales],

and of these only 41 % own outright [https://www.money.co.uk/mortgages/buy-to-let-mortgages/statistics], this suggests that 59% have mortgages outright or against assets [another property], and so are likely to want to 'hold out' rather than 'fold' early.

[Axeman123]

5 minutes ago, MrXxxx said:

True, but only a fifth of UK property is BTL [https://www.theguardian.com/uk-news/2023/jan/05/number-households-renting-more-than-doubled-2001-census-england-wales],

and of these only 41 % own outright [https://www.money.co.uk/mortgages/buy-to-let-mortgages/statistics], this suggests that 59% have mortgages outright or against assets [another property], and so are likely to want to 'hold out' rather than 'fold' early.

Thanks for the stats.

My counterpoint would be that ~8% of property is owned outright BTL, from your figures. Perhaps those will also tend to have a lot of paper equity, just as a guess, and perhaps more likely to be driven by fear/greed to hold onto this. What % of housing stock normally turns over in a year, and what effect would a significant fraction of the 8% potentially have on supply/demand?

I have no idea tbh, we are in uncharted territory.

[HousePriceMania]

16 minutes ago, MrXxxx said:

True, but only a fifth of UK property is BTL [https://www.theguardian.com/uk-news/2023/jan/05/number-households-renting-more-than-doubled-2001-census-england-wales],

and of these only 41 % own outright [https://www.money.co.uk/mortgages/buy-to-let-mortgages/statistics], this suggests that 59% have mortgages outright or against assets [another property], and so are likely to want to 'hold out' rather than 'fold' early.

Is that 1/5th the 1/5 propping up the bottom of the pyramid ?

[Bear Hug]

27 minutes ago, JoeDavola said:

Yes based on several comments over the past month my parents seem to be trying to normalize the idea that at almost 40 and with almost 20 years of 'professional' life behind me and almost a quarter mill banked that it's really quite unreasonable for me to expect anything other than a modest 2 bed flat, or at best a small semi in an area that wouldn't be posh enough for them to ever consider living in.

Whereas they, on a single very modest wage that peaked at about £30K have ended up in a house with over 3 times the square footage of the kind of flat they think I should be settling for, and are looking for something even better.

My mother has just returned from holidays in Australia and has declared that they can only fly business class at their age, anything less would be too uncomfortable. Of course she forgot to mention that if it wasn't for civil service pension of her husband, she wouldn't afford to fly to australia, never mind business class or not. 

[Stuey]

Prices still going up.

https://www.bbc.co.uk/news/business-64703234

Buy the plateau - or miss out for another decade. 

[HousePriceMania]

2 hours ago, Bear Hug said:

My mother has just returned from holidays in Australia and has declared that they can only fly business class at their age, anything less would be too uncomfortable. Of course she forgot to mention that if it wasn't for civil service pension of her husband, she wouldn't afford to fly to australia, never mind business class or not. 

I have a relative who's just done that too  ( no joke ).

Are you cousin Billy ?

Also met a pensioner skiing who's spent weeks in the Alps learning to ski, c**t should be down the allotment growing spuds to survive. 

 

 

 

[JoeDavola]

3 hours ago, Bear Hug said:

My mother has just returned from holidays in Australia and has declared that they can only fly business class at their age, anything less would be too uncomfortable. Of course she forgot to mention that if it wasn't for civil service pension of her husband, she wouldn't afford to fly to australia, never mind business class or not. 

Well to be fair my folks aren't that wealthy - but we do have a relative like that. Her husband worked himself into an early grave (at her encouragement for more more more status/money), and for over a decade now she's been travelling the world on their civil service pensions and bragging about it on Facebook. Posing with boomer mates the world round, the holiday homes with private pools, the fancy restraunts etc. She's the sort of person would have loved social media when she was younger and now she's all over it in her 80's bragging.

Probably good for the global economy I imagine there's quite a few industries held up by this kind of boomer.

Edited February 20, 2023 by JoeDavola