Property crash, just maybe it really is different this time

[sancho panza]

5 hours ago, Rare Bear said:

A view from the Telegraph

yowza----you need to flesh that out for the readership there RB

Edited May 30, 2023 by sancho panza

[Axeman123]

US focussed, but still applies here too:

 

[AWW]

On 27/05/2023 at 19:06, Lightscribe said:

Boomers don’t move or downsize, there lies the rub. They just rattle around in big houses and complain.

This describes most of my neighbours. They all live in Edwardian and Victorian semis that are starting to need a lot of expensive maintenance. The one that we rent, the back of the house is sliding down the hill faster than the front. Fuck knows how expensive that is to sort out - I suppose it's tens of thousands, but it's not my problem. The old folk are all complaining about how expensive this sort of work is, how much these old houses cost to heat with their sash windows and high ceilings, and how they can't afford it. They blame everything from Putin to the Tory government to profiteering. Yet, there's an obvious solution that is staring them in the face, but they're all too emotionally attached to their houses to take it.

[AWW]

On 30/05/2023 at 13:26, Rare Bear said:

Actually the inflation target should be zero as inflation is a wealth tax. So the UK interest rate needs to be high enough to maintain zero inflation. Getting the inflation rate to zero may need high rates but maintaining it probably won't. After all, sterling would be one of the few stable currencies in the world.

Other countries rates would become much less relevant.

I agree, but unfortunately, we can't do this while money is issued as debt, because there wouldn't be enough money to pay back the principal and the interest. Fiat needs to die before inflation can be zero.

[xyz]

I'm in the middle of buying a house, is it a total disastrous time to buy now?

Large victorian bay fronted terrace, three beds, two bathrooms for 260k. Decent-ish NW town with trains to Manchester in 30 mins. Small mortgage <100k and 5 year fix on 4.1% allowing 20% overpayment a year without penalty.

I've been looking at houses for 3+ years and this is the best for the price I've found so far anywhere by quite a distance. To be honest there are very few decent houses coming up and the population here is increasingly rapidly (mostly enrichment unfortunately). Might be looking to move in 5 years, although the mortgage should hopefully be paid off by then.

I can see house prices falling a lot, but then I can also see inflation being left to run rampant once we're in recession caused by rising interest rates and they start to panic.

[Frank Hovis]

36 minutes ago, xyz said:

I'm in the middle of buying a house, is it a total disastrous time to buy now?

Large victorian bay fronted terrace, three beds, two bathrooms for 260k. Decent-ish NW town with trains to Manchester in 30 mins. Small mortgage <100k and 5 year fix on 4.1% allowing 20% overpayment a year without penalty.

I've been looking at houses for 3+ years and this is the best for the price I've found so far anywhere by quite a distance. To be honest there are very few decent houses coming up and the population here is increasingly rapidly (mostly enrichment unfortunately). Might be looking to move in 5 years, although the mortgage should hopefully be paid off by then.

I can see house prices falling a lot, but then I can also see inflation being left to run rampant once we're in recession caused by rising interest rates and they start to panic.

 

As you're in a position to buy somewhere you want to live and have it fully paid off in five years then personally I would be jumping straight in.

The amount of spare cash you will have every month after those five years when you are paying nether rent nor mortgage will be massive, and five years isn't long to wait.

Even if house prices do start to fall, well it took eight years before they stopped falling in London (1988 - 96) at the last proper crash, at a time when the government wasn't doing silly things to prop them up.  How long do you wish to wait?

 

[xyz]

16 minutes ago, Frank Hovis said:

 

As you're in a position to buy somewhere you want to live and have it fully paid off in five years then personally I would be jumping straight in.

The amount of spare cash you will have every month after those five years when you are paying nether rent nor mortgage will be massive, and five years isn't long to wait.

Even if house prices do start to fall, well it took eight years before they stopped falling in London (1988 - 96) at the last proper crash, at a time when the government wasn't doing silly things to prop them up.  How long do you wish to wait?

 

Well if it does take that long to fall and I want to move in 5 years then it could be possibly the worst timing ever 

I can see the Tories pulling out all the stops to prevent massive falls before the election, an HPC is probably one of the worst things for the government losing votes. Of course they might not be able to stop it, so could get some falls and a load of inflation or possibly they have no choice but to let it crash completely.

Shouldn't have to worry about all this bullshit when buying a house really, but we've had 20 years of incompetence so it's really trying to second guess how stupid the government is going to be. Twats.

[onlyme]

1 hour ago, xyz said:

I'm in the middle of buying a house, is it a total disastrous time to buy now?

Large victorian bay fronted terrace, three beds, two bathrooms for 260k. Decent-ish NW town with trains to Manchester in 30 mins. Small mortgage <100k and 5 year fix on 4.1% allowing 20% overpayment a year without penalty.

I've been looking at houses for 3+ years and this is the best for the price I've found so far anywhere by quite a distance. To be honest there are very few decent houses coming up and the population here is increasingly rapidly (mostly enrichment unfortunately). Might be looking to move in 5 years, although the mortgage should hopefully be paid off by then.

I can see house prices falling a lot, but then I can also see inflation being left to run rampant once we're in recession caused by rising interest rates and they start to panic.

Lot of Northern areas seemed to have been in stasis price-wise since 2008, some uptick over covid maybe but nowhere near as bad as the south where prices just romped away again from around 2013.  The North has already lost the vast number of well paid jobs that lead to decades of overall decline,  so that is a one off factor that has already passed and been factored in. If the house and area desireable and decently priced may not be worth putting off. Wouldn't be saying this for any area of the South.

 

 

Edited May 31, 2023 by onlyme

[Long time lurking]

[Frank Hovis]

27 minutes ago, xyz said:

Well if it does take that long to fall and I want to move in 5 years then it could be possibly the worst timing ever 

I can see the Tories pulling out all the stops to prevent massive falls before the election, an HPC is probably one of the worst things for the government losing votes. Of course they might not be able to stop it, so could get some falls and a load of inflation or possibly they have no choice but to let it crash completely.

Shouldn't have to worry about all this bullshit when buying a house really, but we've had 20 years of incompetence so it's really trying to second guess how stupid the government is going to be. Twats.

 

Even if they do fall then so will the next one you want to buy.

I appreciate that it's a difficult decision to make the jump into property ownership but once you've bought, and especially once you've paid off the mortgage, it doesn't really matter what house prices then do.

Mine was up something like 70% the last time I looked on Zoopla, but it isn't like I can actually spend any of that increase unless I go back to renting which I don't want to do.

[Long time lurking]

 

Running out of greater fools 

[xyz]

43 minutes ago, Frank Hovis said:

 

Even if they do fall then so will the next one you want to buy.

I appreciate that it's a difficult decision to make the jump into property ownership but once you've bought, and especially once you've paid off the mortgage, it doesn't really matter what house prices then do.

Mine was up something like 70% the last time I looked on Zoopla, but it isn't like I can actually spend any of that increase unless I go back to renting which I don't want to do.

Yes that makes perfect sense, however we might be looking to leave (flee) the country in 5 or so years, so timing is pretty important to us. 

Renting it out seems to have become a massive pain in the nonce with all the new government legislation, so is probably not an option while waiting for prices to recover. 

I suppose if it falls 50k over 5 years it's not a big deal as that would be less than renting a similar place anyway. Also 5 years is a big chuck of your life at my age so not living in a crappy place during that time is worth a lot in itself. 100k down would sting a bit though. 

[Frank Hovis]

4 minutes ago, xyz said:

Yes that makes perfect sense, however we might be looking to leave (flee) the country in 5 or so years, so timing is pretty important to us. 

Renting it out seems to have become a massive pain in the nonce with all the new government legislation, so is probably not an option while waiting for prices to recover. 

I suppose if it falls 50k over 5 years it's not a big deal as that would be less than renting a similar place anyway. Also 5 years is a big chuck of your life at my age so not living in a crappy place during that time is worth a lot in itself. 100k down would sting a bit though. 

 

Famous last words but I think there a snowball's chance in hell that a decent 3 bed bought for £260k will be down to £160k in ten years.

I've outlined this theory previously but for me there are two parts to a house's valuation:

1) Its underlying utility value as a place to live - you need a bedroom, a bathroo, kitchen, lounge

This would be maybe 20x the annual rental of anywhere in the area that can provide that utility.

2) Its desirability premium - precise location, garden, garage / drive, land, view, extra rooms that aren't actually necessary but nice to have.

 

I would say that my house value is made up of about 60% utility 40% desirability.  If times become really rough that 40% could just vanish but that 60% is a baseline price IMO.

Your proposed house I would guess from the price is more like 80% utility 20% desirability so if things became really bad you might be £50k down or probably break even over five years with rent saved.

Something like the £15m place in Kent that @spunko posted on the individual house thread this week is going to be something like 5% utility 95% desirability.

If there is a big crash that one will be hit very hard indeed.

[Formerly]

2 hours ago, Frank Hovis said:

 

As you're in a position to buy somewhere you want to live and have it fully paid off in five years then personally I would be jumping straight in.

The amount of spare cash you will have every month after those five years when you are paying nether rent nor mortgage will be massive, and five years isn't long to wait.

Even if house prices do start to fall, well it took eight years before they stopped falling in London (1988 - 96) at the last proper crash, at a time when the government wasn't doing silly things to prop them up.  How long do you wish to wait?

 

You could argue we're now 15 years into government props for house prices. Those props have pretty much all been removed over the last couple of years, so there are interesting times ahead.

[Wight Flight]

8 minutes ago, Frank Hovis said:

 

Famous last words but I think there a snowball's chance in hell that a decent 3 bed bought for £260k will be down to £160k in ten years.

I've outlined this theory previously but for me there are two parts to a house's valuation:

1) Its underlying utility value as a place to live - you need a bedroom, a bathroo, kitchen, lounge

This would be maybe 20x the annual rental of anywhere in the area that can provide that utility.

2) Its desirability premium - precise location, garden, garage / drive, land, view, extra rooms that aren't actually necessary but nice to have.

 

I would say that my house value is made up of about 60% utility 40% desirability.  If times become really rough that 40% could just vanish but that 60% is a baseline price IMO.

Your proposed house I would guess from the price is more like 80% utility 20% desirability so if things became really bad you might be £50k down or probably break even over five years with rent saved.

Something like the £15m place in Kent that @spunko posted on the individual house thread this week is going to be something like 5% utility 95% desirability.

If there is a big crash that one will be hit very hard indeed.

At it's most basic level house prices are set by the LHA x interest rates.

They will never drop below that.

[onlyme]

45 minutes ago, xyz said:

Yes that makes perfect sense, however we might be looking to leave (flee) the country in 5 or so years, so timing is pretty important to us. 

Renting it out seems to have become a massive pain in the nonce with all the new government legislation, so is probably not an option while waiting for prices to recover. 

I suppose if it falls 50k over 5 years it's not a big deal as that would be less than renting a similar place anyway. Also 5 years is a big chuck of your life at my age so not living in a crappy place during that time is worth a lot in itself. 100k down would sting a bit though. 

One thing to factor in is if you did get to see a 100K fall in all likelihood anything you would want to buy aborad (unless a wreck in the middle of nowhere) would also see significant falls.

This chap sums up the current situation pretty well - falls proper by late summer / autumn.

https://twitter.com/i/broadcasts/1YqJDongQweGV

In another post he also postde this graph, no way the likes of NW can keep their mortage rates where they are unless somthing very odd  behind the scenes is going on.

Edited May 31, 2023 by onlyme

[Frank Hovis]

7 minutes ago, Wight Flight said:

At it's most basic level house prices are set by the LHA x interest rates.

They will never drop below that.

 

Absolutely.

Hence my proposing that those houses with the highest premium over the average in their area will be the ones to fall the furthest.

A big standard three bed on an unfashionable estate might fall 20%, I've suggested that mine might fall 40%, but the Omaze type "dream" houses might be dropping 60 - 80% in the event of a big crash.

Hopefully anyway, as I'd like to buy similar.

This isn't my saying a crash is on the way, though certainly in coastal Cornwall prices are dropping and Rightmove is posting a lot of reductions.

[Wight Flight]

2 minutes ago, Frank Hovis said:

 

Absolutely.

Hence my proposing that those houses with the highest premium over the average in their area will be the ones to fall the furthest.

A big standard three bed on an unfashionable estate might fall 20%, I've suggested that mine might fall 40%, but the Omaze type "dream" houses might be dropping 60 - 80% in the event of a big crash.

Hopefully anyway, as I'd like to buy similar.

This isn't my saying a crash is on the way, though certainly in coastal Cornwall prices are dropping and Rightmove is posting a lot of reductions.

I agree on that. The basic rental market seems to be LHA + 20%.

There is the 'better than that' market that is happy to pay £200-400 above that.

Once you get beyond £500 over the number of potential applicants thins very rapidly indeed.

[onlyme]

I posted this guy's twitter link earlier, just been listening to live stream, impressed.

Rental market - asking prices up but achieved actually falling. Expects 35% fall across the board in pricing peak to trough broadly.

 

 

[Wight Flight]

30 minutes ago, onlyme said:

Rental market - asking prices up but achieved actually falling.

I don't know the area he is in, but that isn't what i am seeing apart from the really kite flying stuff.

[Phil]

30 minutes ago, onlyme said:

I posted this guy's twitter link earlier, just been listening to live stream, impressed.

Rental market - asking prices up but achieved actually falling. Expects 35% fall across the board in pricing peak to trough broadly.

 

 

Just changed abode, rental to rental (s21) . Scum lord wanted £1050. Agreed on £950. Thought I’d share.

[Wight Flight]

2 minutes ago, Phil said:

Just changed abode, rental to rental (s21) . Scum lord wanted £1050. Agreed on £950. Thought I’d share.

Do you know how many others were after the place?

[onlyme]

2 minutes ago, Wight Flight said:

I don't know the area he is in, but that isn't what i am seeing apart from the really kite flying stuff.

I think London. He was working off achieved rentals stats, didn;t see the graph he put up as was listening rather than watching, small anecdote on top of contact with property that never failed to let very easily - very significant pushback, viewings and only one offer of rental 10% below asking.

 

 

[Phil]

24 minutes ago, Wight Flight said:

Do you know how many others were after the place?

Tbf, no. It’s near what is considered a good school, near the town centre, and was recommended by the agent who oked the previous place we never missed payment on. Looking at being on our toes come September anyway. I assume it’s above LHA , I may be assuming wrongly. 

[Wight Flight]

1 minute ago, Phil said:

Tbf, no. It’s near what is considered a good school, near the town centre, and was recommended by the agent who oked the previous place we never missed payment on. Looking at being on our toes come September anyway. I assume it’s above LHA , I may be assuming wrongly. 

Sounds like you did very well.

Fair play for having the balls to bid low.