Property crash, just maybe it really is different this time

[HousePriceMania]

Ok, I'm going to call it, we are clearly at an inflection point.

Prices have peak due to CV19 and the QE/low IR scam and we will now see falls, the market is build on a mania, one particular demographic moving out of London and a dodgy tax cut.

The question now for me is how big the falls will be over the coming years and that will be down to the actions of the bankers.

 

[HousePriceMania]

4 minutes ago, spygirl said:

You missed -flat prices fall 7.9%. In a single month!

Flats are the domain of IO BTLer in London and HTBers.

 

I thought I put a line round that, good point though and worth bringing that to peoples attention. 

That is annually BTW, not monthly !!!

 

Edited September 9, 2021 by HousePriceMania

[Ghostly]

4 hours ago, HousePriceMania said:

Ok, I'm going to call it, we are clearly at an inflection point.

Prices have peak due to CV19 and the QE/low IR scam and we will now see falls, the market is build on a mania, one particular demographic moving out of London and a dodgy tax cut.

The question now for me is how big the falls will be over the coming years and that will be down to the actions of the bankers.

 

I think more printy, printy will happen to keep the party going - even though that is clearly insane.

[Boon]

TBH there are way to many vested interests now. You can see the newsflows, its all one way: housing is great, you cannot lose.

Take this link:

https://www.thesun.co.uk/money/16084057/our-home-was-more-than-we-could-afford/

A pretty dumb decision on every single level. 

Yet in todays society these people will be congratulated, like they should be patted on the back for managing to buy something beyond their means.

[Bobthebuilder]

5 hours ago, HousePriceMania said:

Ok, I'm going to call it, we are clearly at an inflection point.

Prices have peak due to CV19 and the QE/low IR scam and we will now see falls, the market is build on a mania, one particular demographic moving out of London and a dodgy tax cut.

The question now for me is how big the falls will be over the coming years and that will be down to the actions of the bankers.

 

I nearly posted the same yesterday, but, thought better of it.

I do believe we have hit the top in the south / southwest.

[spygirl]

37 minutes ago, Boon said:

TBH there are way to many vested interests now. You can see the newsflows, its all one way: housing is great, you cannot lose.

Take this link:

https://www.thesun.co.uk/money/16084057/our-home-was-more-than-we-could-afford/

A pretty dumb decision on every single level. 

Yet in todays society these people will be congratulated, like they should be patted on the back for managing to buy something beyond their means.

Oh get the full lot in - 

 

FIRST time buyers Marjan Jalanaji and Eshan Taghizadeh bought a house nearly £250,000 over their budget thanks to a government scheme.

But with London property prices much higher than the rest of the UK and the fact they needed to find a flat suitable for wheelchair user Marjan, the couple turned to using the government's Help to Buy loan scheme.

An accident 16 years ago left Marjan with a damaged spinal cord and unable to walk anymore. 

They knew that a new-build flat would be more accessible - and that's why they initially looked at the scheme.

It sees the government lend you up to 20% - or 40% in London - of the value of your property, and you only have to put down a 5% deposit too.

Taking out a Help to Buy loan gave them an extra £239,000 to play with and made it easier to save up for a deposit - and they were able to find a home that has changed both of their lives.

They ended up buying a £559,000 home - which is £249,000 more than what they were originally told they could afford.

 

Iranian academic and his crippled partner buy a ~560k flat in London. On the 5th floor ....

Hes 42. Tehyve managed to save .... 48k. Only the other 520k to pay back.

This has to be NW.

Who else would give someone who may or may not have the right to remain in the UK, ~500k mortgage.

 

 

 

 

 

[spygirl]

The couple saved up an impressive £48,000 for a deposit over four years even though they were paying a pricey £1,480 a month in rent for their previous home.

Marjan and Eshan are both software engineers on a salary of £45,000 a year and £33,000 a year respectively.

 

Current Nationwide Standard and Base Mortgage Rates

As of 15 April 2020, our SMR is 3.59%. Our BMR is currently 2.10%.

 

At the SMR rate, they face paying more than their rent in interest alone.

 

[spygirl]

The other extra bedroom is for guests - but if we get into financial difficulty in future, we could always rent it out.

 

 

If??????????????????????

[spygirl]

The flat was £599,000 and we put down £48,000 - roughly an 8% deposit - for it.

We took out a mortgage of £312,000 over 33 years at a fixed rate of five years.

Plus, we decided to take out a Help to Buy equity loan of £239,000.

Our mortgage repayments per month are £1,000, but service charge is roughly £350 a month on top of that.

It’s still less than the one bed flat we were renting in Collingdale before we decided to buy a house though - that cost us £1,480 a month.

42 + 33 = 75.

No, youve took out a mortgage for 560k. 

When the HTB period ends, you start paying interest, so your payments will double to 2k/m.

 

[Hancock]

1 hour ago, Boon said:

TBH there are way to many vested interests now. You can see the newsflows, its all one way: housing is great, you cannot lose.

Take this link:

https://www.thesun.co.uk/money/16084057/our-home-was-more-than-we-could-afford/

A pretty dumb decision on every single level. 

Yet in todays society these people will be congratulated, like they should be patted on the back for managing to buy something beyond their means.

Someone somewhere will be getting sued when these people get evicted.

There are regulations against such practices.

[eek]

£33k for a software developer in London is stupidly low.

As is £45k I was getting that 13 years ago in Sunderland. 

Edited September 9, 2021 by eek

[Bilbo]

How about this magical money tree.

Using equity release to buy a more expensive property. 

"Using Equity Release to purchase a property (with calculator)" https://www.moneyrelease.co.uk/Equity-Release-To-Purchase-Property/

 

[spygirl]

22 minutes ago, eek said:

£33k for a software developer in London is stupidly low.

As is £45k I was getting that 13 years ago in Sunderland. 

46k is low for *ANY* job in London. Esp one with a 560k mortgage.

I can only think theres something funny about their residence/qualifications.

 

 

 

 

[spygirl]

29 minutes ago, Hancock said:

Someone somewhere will be getting sued when these people get evicted.

There are regulations against such practices.

NW mortgage calcualator  -

Your results

We might be able to lend you up to:

£359,200

Borrowing £359,200 over 33 years means your monthly payment might be:

£1,257 - £1,602

Based on the information you've given us, we wouldn't be able to offer you the amount you asked for. We might be able to offer you more with a Helping Hand mortgage. See below for more information.

[nirvana]

1 hour ago, spygirl said:

Iranian academic and his crippled partner buy a ~560k flat in London. On the 5th floor ....

Hes 42. Tehyve managed to save .... 48k. Only the other 520k to pay back

holy shit wot da fuk r they smoking? wots his job for fuks sake? NFT developer lol

soz just read academic, says it all, doesn't do maths obvs 

Edited September 9, 2021 by nirvana

[Boon]

They are probably trapped there now. If they wanted to leave, could they do so without having their life savings wiped out? Then where do they go? 

Here is something for sale in the same development which might be a bit better as it has a bigger outside space. That's been on the market 4 months. These things are easy to sell with the HTB but without it are tough to shift.

Pricing for these things tends to be very bad value, just a little bit more gets you a freehold house. The service charge of £350 is pricy now - in 5 years time it could easily be close to £500.

So selling today, even £550k seems very optimistic. But they paid £590k so even if they got that, after fees their deposit is gone.

They are pretty much screwed if interest rates have to rise. In one sense the mortgage would still be in the fixed term but they would face a bad choice of selling into a market with other people facing difficulty, or knowing that when the mortgage is up for renewal rates will be sharply higher than what they were paying before. Back in the old GFC (for me anyway) the difference between the teaser rate and the SVR was c.50%, I couldn't remortgage due to valuation.

I think there are loads of people in the same position buying in London with a prop, maxing it out on the assumption prices will rise or interest rates stay low forever.

It seems mad to me that no-one in the media calls this out for the shit that it is, but if the shit hits the fan no doubt these people will be asking for a taxpayer bailout, claiming they were mis-sold and nobody told them.

[HousePriceMania]

1 hour ago, spygirl said:

The flat was £599,000 and we put down £48,000 - roughly an 8% deposit - for it.

We took out a mortgage of £312,000 over 33 years at a fixed rate of five years.

Plus, we decided to take out a Help to Buy equity loan of £239,000.

Our mortgage repayments per month are £1,000, but service charge is roughly £350 a month on top of that.

It’s still less than the one bed flat we were renting in Collingdale before we decided to buy a house though - that cost us £1,480 a month.

42 + 33 = 75.

No, youve took out a mortgage for 560k. 

When the HTB period ends, you start paying interest, so your payments will double to 2k/m.

 

Do they mean Colindale ?  Couldn't find any place in the uk called Collingdale !!!

Anyway, if only they'd waited...

 

£1200 ( down from £1350 ) for a 2 bed

https://www.rightmove.co.uk/properties/109723769#/?channel=RES_LET

 

£1150 for a 2 bed

https://www.rightmove.co.uk/properties/108834584#/?channel=RES_LET

 

£1053 for a 1 bed end of terrace house

https://www.rightmove.co.uk/properties/112872356#/?channel=RES_LET

1050 1 bed flat

https://www.rightmove.co.uk/properties/111370370#/?channel=RES_LET

 

Shoulda haggled

[HousePriceMania]

52 minutes ago, Boon said:

They are probably trapped there now. 

 

Just looking on RM at those places depressed me.  The housing bubble is a terrible horrible think.  £600K to live in that shit

[Bobthebuilder]

33 minutes ago, HousePriceMania said:

Just looking on RM at those places depressed me.  The housing bubble is a terrible horrible think.  £600K to live in that shit

£600K would buy me the dream retirement home in my favourite rural are. Too much money in my book but, £600K for a flat in Colindale? you're taking the piss, surely.

[Hancock]

Here is a pleasant article-

Why house prices could fall this autumn

Buyer demand is cooling fast as stamp duty savings recede

Rocketing prices and an extreme supply crunch mean that, for most buyers, the property market is an unpleasant place to be.

For Jennifer Brown*, a 79-year-old pensioner, the situation is stark. Mrs Brown wanted to downsize from the four-bedroom house she has lived in for 22 years in a village in Suffolk. When the stamp duty holiday was extended in March, she decided to make the jump.

She benefited from the buying frenzy: after previously failing to sell the property for £350,000 a few years ago, she got an offer four days after listing it in March, for £390,000. She sold up and moved out.

But now she has been caught out by the supply shortage and soaring prices, which are particularly hitting the type of property she wants. “I sold a four-bedroom house and it isn’t even going to meet the cost of an ordinary bungalow,” said Mrs Brown. In April, she had a £435,000 offer accepted on a three-bed home, but the owners are also downsizers and will not sell until they have somewhere to move to. Five months on, Mrs Brown is still in limbo. “I am beginning to panic.”

 

But there are signs the market could turn. The stamp duty savings will disappear at the end of this month, and so will the furlough scheme. Buyer demand is high, but has declined rapidly since its peak. Will there be an autumn property market reckoning?

Demand is cooling

Lucian Cook, of Savills estate agents, said: “I think the next 18 months will be a period of normalisation; some of the urgency has come out of the market.”

Since the spring, when the possibility of getting the maximum stamp duty savings had gone, demand has cooled fast. Savills analysis of data from analytics firm TwentyCi showed that agreed sales in August were 9pc above the 2017 to 2019 average. This was a drop of 44 percentage points since April, and the lowest level since June 2020.

Disappearing savings

Transaction levels in September could be 10pc to 20pc above normal levels, said Neal Hudson, of BuiltPlace, an analyst. Buyers are rushing to take advantage of the last of the stamp duty holiday savings before September 30; from October 1, the incentive will end altogether.

After the stamp duty nil-rate band was tapered from £500,000 to £250,000 at the start of July, the benefits shifted from the south of England to the North and Midlands, where lower home values meant buyers benefited from a higher saving in proportion to house price.

Analysis by Hamptons estate agents showed that in areas such as Worcester, Rugby and York, savings on stamp duty were equivalent to 0.7pc of local house prices. It is these places that could encounter the biggest change when the tax break ends, but agents are bullish.

Martin Robinson, of Hunters estate agents in York, said: “Back in June, everyone was calling me about the deadline and I was terrified that everyone would pull out of their sales if they missed it. This time I’ve not had anyone panicking about stamp duty. They’re so pleased to get a property, they won’t let it go.”

The supply crunch could ease

The stamp duty holiday contributed to the acute lack of supply because it incentivised investors and second home owners. “They are net 'takers-away', as they do not sell anything when they buy, and that has contributed to the supply crunch,” said Mr Hudson.

New instructions in August were 17pc lower than normal levels, according to TwentyCi. “That general lack of stock is likely to underpin pricing to the end of the year, irrespective of stamp duty,” added Mr Cook.

Supply could be boosted in a chain reaction from economic circumstances. The closing of the furlough scheme poses a risk, but any spike in unemployment is more likely to hit the rental market than the sale market, said Mr Hudson. “Unless there is a large number of repossessions off the back of it, the direct impact on transactions will be fairly limited.”

Mortgage repossessions could spike as the backlog of claims that were not processed during the moratorium, which ended in April, hits the market. But rates were already at record lows before the pandemic, said Mr Hudson. Any rise would therefore be small on a historical scale.

Andrew Wishart, of data consultancy Capital Economics, added that a temporary rise in unemployment after the end of the furlough scheme would be mitigated by the fact that job vacancies are at a record high.

A rise in homes for sale could come from investors selling up. “We could start to see a lot more activity from landlords getting tenants out,” said Mr Hudson. “There would then a flurry of activity from buy-to-let landlords selling off, after the frustration of 18 months of not being able to access their properties.”

High prices would be a further temptation to sell up. “That could lead to high levels of supply [in particular areas and types of property], and that is a potential risk to prices.”

Could demand hit a cliff?

Wealthy upsizers are still the driving force of the market. While agreed sales of homes priced £1m and above in August were still 52pc above the 2017-2019 average, sales of homes worth under £200,000 were down 11pc.

Moves at the higher end of the market are closely tied to the race for space after lockdown. “Whether the change will be structural or if it was a one off shift, that is where the great uncertainty lies,” said Mr Hudson.

Wales recorded the fastest house price rises of any country in the UK. Data from the Office for National Statistics found values in June were up 16.7pc, against national growth of 13.2pc. Carol Peett, of West Wales Property Finders, a buying agency, said the primary driver of the market has been people returning to Wales now that they can work remotely.

Agents have reported that many buyers brought forward moves because of lockdown. “If all we have done is brought forward moves from the next five years, then there will be fewer moves in the next five years,” said Mr Hudson.

Mr Cook argued, however, that many people had also put moves on hold after the Brexit referendum, when the market was sluggish due to uncertainty. “Demand is also coming from four or five years of delayed transactions,” he added.

The market’s continued momentum and house price growth is heavily dependent on low interest rates. Capital Economics found the ratio of house price to earnings is at its highest level since 2007, but this does not matter as much as in previous years, because the record low Base Rate means borrowing is incredibly cheap. A person buying an average-priced home only needs 36.3pc of an average income to service an 80pc mortgage. Back in 2007, the share was 61.4pc.

But this will change. Rising house prices mean that Capital Economics has forecast the share will rise to 37.9pc by the end of 2021. This would be the highest level since 2016.

If the Base Rate rose, there could be an affordability crunch. If it hit 1pc, by the end of 2022 a person would need 40.7pc of their income to service an 80pc mortgage. And it it rose to 2pc, by the end of 2023 a person would need 47.7pc of their income, the highest share since 2008.

[Hancock]

13 minutes ago, Bobthebuilder said:

£600K would buy me the dream retirement home in my favourite rural are. Too much money in my book but, £600K for a flat in Colindale? you're taking the piss, surely.

Yes with 600k i could buy a £150,000 house somewhere sunny, use 100k for my kids schooling, then 250k to live off for the next 15 years.

Or i could buy a shit flat in London.

[Wight Flight]

36 minutes ago, Hancock said:

Yes with 600k i could buy a £150,000 house somewhere sunny, use 100k for my kids schooling, then 250k to live off for the next 15 years.

Or i could buy a shit flat in London.

If you don't need that missing £100k, would you mind bunging it my way?

[macca]

10 hours ago, spygirl said:

When the Fed andor ECB rise - and they will, as inflation is getting out of control, then the BoE does.

Germany’s long-simmering anger with the European Central Bank is again coming to the boil. It is hard to justify perennial bond purchases and negative rates when German inflation is near 4pc and rising, the highest since the Reunification boom in the early 1990s.

Political realities are forcing the ECB’s ultra-dovish governing council to prepare for bond tapering sooner than it wants – and sooner than it should, if you are a New Keynesian – in order to head off a bust-up with Europe’s anchor power.

It will have to start pulling away the shield that has protected the high-debt Club Med states from market forces for almost seven years, and that has conveniently covered their entire borrowing requirements under the cloak of “monetary policy”. The first treacherous step could happen as soon as Thursday.

It is this monetary tightening in conjunction with parallel moves by the US Federal Reservethat poses the chief risk to overheated global asset markets, not the Delta variant.

German irritation should not be underestimated. The German Centre for European Economic Research (ZEW) this week published an extraordinary paper, more or less alleging that ECB governors from the high-debt states are exploiting quantitative easing in order to bail out their own insolvent governments, and doing so in violation of EU treaty law.

It says the southern governors are acting as de facto proxies for their finance ministers in a monetary union that has fallen captive to “fiscal dominance”. It suggests that the ECB is continuing to purchase bonds at this juncture “because otherwise some euro states could run into acute financing problems”.

I would qualify this. Some governors vote with the doves even though they are not from high-debt states. They do so because they know that the euro will blow apart if the South is left to its fate. But the effect is the same: an easy money majority under Christine Lagarde is ramming through an inflationary policy against the express protest of German-led hawks in the North.
 

Eurozone inflation hits 3pc

Line chart with 8 lines.

% change in inflation vs the same month a year ago

View as data table, Eurozone inflation hits 3pc

The chart has 1 X axis displaying categories. 

The chart has 1 Y axis displaying Inflation, % change year on year. Range: -1 to 4.

January 2015July 2017January 2020July 2015January 2016July 2016January 2017January 2018July 2018January 2019July 2019July 2020January 2021July 2021-101234SOURCE: Eurostat

Eurozone inflation hits 3pc

% change in inflation vs the same month a year ago

Inflation, % change year on year

End of interactive chart.

The ZEW’s caustic view is broadly shared by the German Council of Economic Experts (Five Wise Men) and most of the Ordoliberal establishment. Former Bundesbank chief Axel Weber said at a recent forum in Frankfurt that the ECB had lost the plot on inflation and would soon be forced to take “active measures” to contain the fall-out, including rate rises. That would hit complacent markets like a thunderbolt.

It is above all the view of Friedrich Merz, the designated “finance superminister” of the next government if the Christian Democrats keep power in this month’s election.

Mr Merz said the ECB had reached “the limits of its mandate” and was playing down evidence of surging prices in everything from the daily shopping basket, to rent, home prices, and filling up the petrol tank.

Inflation is particularly corrosive in Germany, not because of Weimar mythology but because just half the population owns property or equities. The other half rents for life and mostly keeps savings in bank deposit accounts. This half is being pauperised. Furthermore, negative rates are destroying the business model of the small cooperative and savings banks that provide 90pc of credit for the Mittelstandfamily firms, the backbone of the German socio-economic system.

Grumbling in Germany has long been a fixture of the eurozone. Nothing much ever happens. There was barely a hiccup after the German constitutional court ruled last year that the ECB was acting ultra vires and subverting the fiscal sovereignty of national parliaments.

Nor did anything happen when a group of elder statesmen warned that uncontrolled debasement is destroying the foundations of the German social market economy, and risks setting off a “social explosion”.

What is different this time is that inflation can be felt everywhere – gefühlte Inflation – and parts of the German economy are patently overheating. One can argue that the picture is more akin to stagflation as rising prices collide with slowing growth (due to supply bottlenecks) but this merely takes us back to the conflicts of the 1970s: Club Med central banks let stagflation run; the Bundesbank fought it.

 

[sancho panza]

6 hours ago, Bobthebuilder said:

I nearly posted the same yesterday, but, thought better of it.

I do believe we have hit the top in the south / southwest.

 

volume looks to be a real issue,at best I'd have thought these registration tallies will double.

 

Edited September 9, 2021 by sancho panza

[spygirl]

12 hours ago, Boon said:

They are probably trapped there now. If they wanted to leave, could they do so without having their life savings wiped out? Then where do they go? 

Here is something for sale in the same development which might be a bit better as it has a bigger outside space. That's been on the market 4 months. These things are easy to sell with the HTB but without it are tough to shift.

Pricing for these things tends to be very bad value, just a little bit more gets you a freehold house. The service charge of £350 is pricy now - in 5 years time it could easily be close to £500.

So selling today, even £550k seems very optimistic. But they paid £590k so even if they got that, after fees their deposit is gone.

They are pretty much screwed if interest rates have to rise. In one sense the mortgage would still be in the fixed term but they would face a bad choice of selling into a market with other people facing difficulty, or knowing that when the mortgage is up for renewal rates will be sharply higher than what they were paying before. Back in the old GFC (for me anyway) the difference between the teaser rate and the SVR was c.50%, I couldn't remortgage due to valuation.

I think there are loads of people in the same position buying in London with a prop, maxing it out on the assumption prices will rise or interest rates stay low forever.

It seems mad to me that no-one in the media calls this out for the shit that it is, but if the shit hits the fan no doubt these people will be asking for a taxpayer bailout, claiming they were mis-sold and nobody told them.

If you could fix the mortgage for the full term a la US/ Maes then they would be a no brainer - price pending.

However, by only having relatively short fixed mortgages - 5 used to be seen as a very long fix - the chances of the IR changing between the start and end of  fix is pretty high, esp in times of ZIRP.

Imagine fixing at 1.5% for 5 years then coming off when SVR is 6%+. Massive problem.