Property crash, just maybe it really is different this time

[Hancock]

10 hours ago, AWW said:

The thing is, will you still be alive when the market reaches the edge of the cliff?

Herein lies the problem.

Its about 20 years since we should have had a house price correction as 97-02 saw epic HPI ... SDLT holiday is ending soon and it doesn't seem to be making one iota of difference.

Boris/Sunak levelled things up in the last year or so by sending house prices to the moon in the parts of England that didn't get the full on HPI caused by Help to Buy and all the other scams Gidiot came up with in 2013.

Sad thing is the recent HPI is seen as being a success, or at worst something that is happening worldwide so nowt to do with the Tories.

[Noallegiance]

Anecdote:

Overheard at boys football tonight - bloke is struggling to find somewhere to rent. Other bloke trying to help:

"My boss owns a hundred flats in the SE. I'll see if he's got anything."

This condition where it's easier to own multiple dwellings than it is to have one to live in is way more damaging than many realise.

[UmBongo]

16 hours ago, Noallegiance said:

"My boss owns a hundred flats in the SE. I'll see if he's got anything."

I fail to see the appeal of owning any more than half a dozen properties. A landlord's focus is going to be diluted with so many of them. And then there's the astronomical debt to pay for them if applicable. 

[JoeDavola]

On 03/08/2021 at 16:16, Herby said:

Can't believe banks are offering 120% mortgages again.. 

https://www.scottishwidows.co.uk/bank/existingcustomers/producttransfer/interest_rates.html

"EXISTING CUSTOMERS - MORTGAGES

Professional and Flexible Mortgage Interest Rates

Rates available up to 120% Loan to Value"

🤦

It's because so many houses on sale are not only really expensive but also falling to bits. So it's 30 years of debt for a renovation project. Cheap credit to fund renovations bolted on to the mortgage is the next logical step. I won't be at all surprised if a 130% mortgage comes along.

Edited August 5, 2021 by JoeDavola

[Herby]

42 minutes ago, JoeDavola said:

It's because so many houses on sale are not only really expensive but also falling to bits. So it's 30 years of debt for a renovation project. Cheap credit to fund renovations bolted on to the mortgage is the next logical step. I won't be at all surprised if a 130% mortgage comes along.

Hmmm. I'm sure last time this happened was 2007. 

[spygirl]

On 03/08/2021 at 16:16, Herby said:

Can't believe banks are offering 120% mortgages again.. 

https://www.scottishwidows.co.uk/bank/existingcustomers/producttransfer/interest_rates.html

"EXISTING CUSTOMERS - MORTGAGES

Professional and Flexible Mortgage Interest Rates

Rates available up to 120% Loan to Value"

🤦

Youd need to look at how many they are selling.

My guess is that tour chances of getting one is low.

And its to existing customers, which does not look like SW have good underwriting.

AFAICT its just a means of extending   existing IO mortgages reaching tghe end of their terms.

 

[Castlevania]

1 hour ago, spygirl said:

Youd need to look at how many they are selling.

My guess is that tour chances of getting one is low.

And its to existing customers, which does not look like SW have good underwriting.

AFAICT its just a means of extending   existing IO mortgages reaching tghe end of their terms.

 

They are a niche lender. They only really lend to professionals and contractors who earn a decent rate. They won’t lend to the majority of people.

[spygirl]

On 19/12/2020 at 10:11, spygirl said:

One thing I try to do is to put things into longish term perspective.

As far as the UK n housing, IIRC the majority of Brits still rented in the 60s.

From the 60s to 70s mortgages were not really a mass market product.

Its only a combination of the financial deregulation in the early 80s and the bulk of baby boomers (mid age boomer was born in mid 1950s) hitting 30, prime house buying age.

The whole 'cant loose with property' is a daft mindset, prevalent in the UK, which doesnt put the demographic change into perspective.

A lot of baby boomers went bust in the late 80s to early 90s slowdown, so its not that theyve not seen it before.

The assumption that banks are going to lend like they did in ~85-89 or 2002-2008ish is wrong. You can see it in the post 2008 mortgage lending stats.

One, unlike the 89-96 slowdown , which saw borrowers go bust, the 2008-today slowdown has seen the borrowers 'saved' but the banks go under.

Huge amounts of lending capacity has been destroyed and is not coming back. Most boomers houses are not going to sell at anywhere close to what they think its 'worth'

 

Two, the finsec used to create its down demand - the mass expansion othe finsec ~82 -> 2009ish, saw 100k of employees, all well paid, some with access to cheaper products.

The biggest winner for this job bonanza was the south - I dont men The City, which is whole sale trade, I mean the large number of retail banks and the support services around housing sales/mortgages - lawyers, treasury management, debt, life insurers  selling endowments etc etc.

Theres barely a fraction of the people still employed compare to ~85-2007.

The jobs have been automated, regulated away.

You want a mortgage today?

You go to a bank with ~20% deposit and verified income with a good track record and get a repayment mortgages.

Theres no vat array of scammers offering liar loans, allowing people without a pot to piss in a mortgage, which pushes up housing costs.

There's no magic repayment like an endowment  mortgage, which was the cause of the 80s boom - the repayment method was a made up WP return, so allowed people to borrow 2x the amount they could afford.

The liar loans and IO mortgage were the cause of the 2002-2010 bubble.

These have gone for resi customers.

Theres a massive adjustment for UK housing esp. in the South where the mass well paying jobs have gone and the high LTE multiples are a no go.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

On 19/12/2020 at 10:45, Frank Hovis said:

 

A very good overview with which I agree.

Essentially house prices have been on a barely-interrupted ever-upwards trajectory because of the low initial level of home ownership and the momentum given by freely available debt.

The fall off on this graph shows that those jumping aboard the property ownership train is now on a declining trajectory after more than doubling in sixty years.  In 1950 30% owned their own home with a massive 50% private renting; in 2005 that was 70% owned versus 16%. 

Or to put it another way of those not in social housing 62% were renting and therefore potential buyers in 1950 but only 19% were renting in 2005.  The number of potential first time buyers has inevitably declined massively as ownership has gone the other way.

The desire to own is probably stronger than ever owing to the intense propaganda but personal finances, especially salary to house price ratios, means that the mortgage computer keeps saying "no".

That owner occupier line will keep falling and tax changes will do for BTL demand.  I expect social renting to go up as a lot of unsellable new builds from the massive town edge estates now going up are sold at a discount to Housing Associations; I have already heard of this happening in a limited way.

Even without higher interest rates overall house prices are going to start steadily coming down in real terms IMO although the rush out of the cities will make that a very patchy picture.  Big falls in London whilst coast and country properties keep climbing.

I'm not actually that convinced that high interest rates will have a big impact at first as so many people have either fully or mostly paid off their mortgages through this prolonged low interest rate era.  They will however serve to undercut the market by reducing the number of new entrants onto the "property ladder" and this will feed through until those peak homes - four beds with substantial gardens in desirable locations - find themselves adrift without any potential  buyers.

When will this happen?  It's already happening *.  It just isn't that obvious yet because of the vast flight of housing equity from the cities giving coast and country a big boost.

 

* Here is where it is happening.  You're not seeing it because you're not looking there as these are not aspirational towns in Cornwall and so will mostly be first time buyers.  Obviously law of small numbers can apply but there is a clear pattern to this and that's down.

These are all percentage falls year on year.

Lanivet 17%

Tregantle 4%

St Blazey 6%

Callington 2%

Camelford 16%

Redruth 1%

St Columb Minor 5%

Lanner 10%

Dobwalls 3%

St Erth 16%

 

https://www.cornwalllive.com/news/cornwall-news/areas-cornwall-house-prices-going-4796145

Look at the chart -

It's not that UK properdee market hasn't recovered from 2008, it hasn't recovered from 1988.

Now let's assume that HMRC is really going to turn the screws on io  btl- it's coming.

Or if IRs go up modestly, then the whole io  btl fuckwitted leverage models implodes.

You also need to adjust for London/SE where the bulk of house buying from 2002idh esp since 2008 has happened.

 

[Frank Hovis]

Yes good point; the extent of a market isn't simply price it is price times volume.

The tweet isn't loading for me so here's the chart.  I didn't realise that there was a second step down after 2008.

[spygirl]

2 minutes ago, Frank Hovis said:

Yes good point; the extent of a market isn't simply price it is price times volume.

The tweet isn't loading for me so here's the chart.  I didn't realise that there was a second step down after 2008.

UK sales fell off a cliff in 2008.

Compare to 1993ish - the other properdee nadir - which, in hindsite looks positively booming.

More so, when you consider the likes of io btl was a hefty lump of purchases since 2002ish.

Again, io btl needs actively killing. HMRC needs to be beating up the banks on io btl loans lzck of tax paid.

Ditto BoE needs to be raising capital required on all io mortgages, get them off the banks balance sheet.

 

[Wight Flight]

16 minutes ago, spygirl said:

UK sales fell off a cliff in 2008.

Compare to 1993ish - the other properdee nadir - which, in hindsite looks positively booming.

More so, when you consider the likes of io btl was a hefty lump of purchases since 2002ish.

Again, io btl needs actively killing. HMRC needs to be beating up the banks on io btl loans lzck of tax paid.

Ditto BoE needs to be raising capital required on all io mortgages, get them off the banks balance sheet.

 

If you kill off BTL, where do the renters live?

[Frank Hovis]

3 minutes ago, Wight Flight said:

If you kill off BTL, where do the renters live?

In the homes that they can now afford to buy.

[Wight Flight]

1 minute ago, Frank Hovis said:

In the homes that they can now afford to buy.

I disagree. Unless you are suggesting a property crash >50%

The homes will be bought by those 30 year olds that have been living in their parent's bedrooms.

 

[spygirl]

9 minutes ago, Wight Flight said:

If you kill off BTL, where do the renters live?

IO BTL has been scrapped.Its baked in with S24

It should never have started,in 2002ish,  UK prs needs rolling back 20 years.

In terms of renting, they need to crack on with migrant reform, removing access to benefits and cranking up the hurdle wage to remain in the UK.

IOBTL view with flood of low paid/benefit migrants from tge early 2000s. Same coin; different sides.

 

[Frank Hovis]

Just now, Wight Flight said:

I disagree. Unless you are suggesting a property crash >50%

The homes will be bought by those 30 year olds that have been living in their parent's bedrooms.

 

I know people renting in their forties and fifties on decent salaries but unable to buy the houses they rent owing to earnings multiples.

To take one example on household income of I guess £80k, renting a £400k house.

If that house dropped by a quarter then they would be just about be able to buy it and would switch from renting to owners with a mortgage.  Though probably not in that identical home.

Not everyone is a winner with this but somebody who has been unable to move out even into a rented flat by 30 is unlikely to have the earning power to buy unless there is an enormous nominal crash which appears unlikely.

 

[Wight Flight]

3 minutes ago, Frank Hovis said:

Not everyone is a winner with this but somebody who has been unable to move out even into a rented flat by 30 is unlikely to have the earning power to buy unless there is an enormous nominal crash which appears unlikely.

Unless they have been earning a good wedge and banking nearly all of it.

There are a lot of people like that, just waiting for an opportunity.

[Frank Hovis]

5 minutes ago, Wight Flight said:

Unless they have been earning a good wedge and banking nearly all of it.

There are a lot of people like that, just waiting for an opportunity.

 

Maybe so; but I doubt there are "a lot".  A few maybe.

I was like that but I didn't get the impression that many others were doing it; most people with whom I worked had their money in cash deposits, so eroding annually with inflation, and regarded £20k as a decent amount of life savings.

If you're not investing but simply sitting in cash then your savings are going down and the more you have the more you lose each year; with equities (my choice but there is of course the potential of market crashes) they go up each year, the income on them goes up each year and they usually outstrip HPI if you reinvest the dividends.  My very rough estimate is that I have made twice to three times as much from investments as I did from earnings.

Or you can be clever on the crypto currencies, in and out, profit taking, and make money fast that way. Or play the gold / silver ratio.

Something, anything, but cash deposits.

People who earn a reasonable salary and make their savings in cash deposits usually IME have as a peak of aspiration having sufficient for a deposit.  I don't know anyone else who simply bought a house.

[Castlevania]

42 minutes ago, Frank Hovis said:

Not everyone is a winner with this but somebody who has been unable to move out even into a rented flat by 30 is unlikely to have the earning power to buy unless there is an enormous nominal crash which appears unlikely.

 

My cousin who’s a junior doctor lived with his parents until he was 31. They didn’t charge him rent and so he saved most of his salary. Had well over a hundred grand saved up when he moved out and bought a 5 bed house.

[Shamone]

3 minutes ago, Castlevania said:

over a hundred grand saved up when he moved out and bought a 5 bed house.

I wish I’d clapped for him now.

[reformed nice guy]

1 hour ago, spygirl said:

IO BTL has been scrapped.Its baked in with S24

It should never have started,in 2002ish,  UK prs needs rolling back 20 years.

In terms of renting, they need to crack on with migrant reform, removing access to benefits and cranking up the hurdle wage to remain in the UK.

IOBTL view with flood of low paid/benefit migrants from tge early 2000s. Same coin; different sides.

 

https://www.ethnicity-facts-figures.service.gov.uk/uk-population-by-ethnicity/national-and-regional-populations/population-of-england-and-wales/latest

The population of the UK in 2001 was 59m and 88.6% were natives, so 52.27m people

The 2011 population was 63.3m and 80.5% were white British, so 50.96m people

If it wasnt for immigration then houses prices would be lower, our CO2 emmissions lower, hospitals not as busy, wages higher, schools quieter and millions of other benefits

[spygirl]

4 minutes ago, reformed nice guy said:

https://www.ethnicity-facts-figures.service.gov.uk/uk-population-by-ethnicity/national-and-regional-populations/population-of-england-and-wales/latest

The population of the UK in 2001 was 59m and 88.6% were natives, so 52.27m people

The 2011 population was 63.3m and 80.5% were white British, so 50.96m people

If it wasnt for immigration then houses prices would be lower, our CO2 emmissions lower, hospitals not as busy, wages higher, schools quieter and millions of other benefits

The last 20 years have seen a hammering of GDP per capita. And increase in fixed costs.

Cretinous economics.

 

[reformed nice guy]

22 minutes ago, spygirl said:

The last 20 years have seen a hammering of GDP per capita. And increase in fixed costs.

Cretinous economics.

 

And those GDP per capita calculations are probably using a significantly underestimated population, making the real numbers much much worse

[spygirl]

From TOS  - 

 

Oh dear.

Theyve broke London ...

Bear in mind the bulk of post 2008 HPI was in London.

London been falling for ~ 5 years.

Covid, end of floods of EUers flooding in. Bust.

 

 

[sancho panza]

3 hours ago, spygirl said:

From TOS  - 

 

Oh dear.

Theyve broke London ...

Bear in mind the bulk of post 2008 HPI was in London.

London been falling for ~ 5 years.

Covid, end of floods of EUers flooding in. Bust.

 

 

Link bewtween price and volume is clear in londinium

[HousePriceMania]

1 hour ago, sancho panza said:

Link bewtween price and volume is clear in londinium

The only fix for that is a crash.