Property crash, just maybe it really is different this time

[Shamone]

16 minutes ago, JoeDavola said:

Sounds like a plan - I know you and your wife are choosing to work less so need a house that enables you to live like that.

A recent discussion here saw many folks ideal house being a modest 2 bed detached bungalow; the only problem being they’re hard to come by.

And yes new builds are generally shit.

Yes 2 bed bungalow would be grand.

[Don Coglione]

28 minutes ago, Shamone said:

Yes 2 bed bungalow would be grand.

This is what is wanted by so many, but the "market" does not offer.

Bent doesn't begin to describe it.

[Frank Hovis]

23 minutes ago, Knickerless Turgid said:

This is what is wanted by so many, but the "market" does not offer.

Bent doesn't begin to describe it.

It's not a bent market it's a very clear market.

Detached bungalows are the lowest density housing so if you work up a scheme comprising solely or mainly those then you are going to be making less profit than with two storey houses, semis, terraces or flats and will therefore be able to offer less for the land than somebody planning a high density build.

Unless planning rules change such that s106 contributions are significantly reduced when building detached bungalows so allowing competitive bids for the site then bungalows will continue to not be built.

[Don Coglione]

3 minutes ago, Frank Hovis said:

It's not a bent market it's a very clear market.

Detached bungalows are the lowest density housing so if you work up a scheme comprising solely or mainly those then you are going to be making less profit than with two storey houses, semis, terraces or flats and will therefore be able to offer less for the land than somebody planning a high density build.

Unless planning rules change such that s106 contributions are significantly reduced when building detached bungalows so allowing competitive bids for the site then bungalows will continue to not be built.

I agree 100% with your post.

Bent in the sense that the big builders sidle up to politicians of all flavours and stitch up all the development land, hence we end up with a nation of rabbit-hutches. Lots of bungalows were constructed in the 1970s, before the builders got cute.

[Option5]

1 minute ago, Knickerless Turgid said:

I agree 100% with your post.

Bent in the sense that the big builders sidle up to politicians of all flavours and stitch up all the development land, hence we end up with a nation of rabbit-hutches. Lots of bungalows were constructed in the 1970s, before the builders got cute.

I lived in a Dormer bungalow in Norfolk, only 4 of the bungalows on the estate were dormer the other 50 or so were single storey. Developers started buying them to demolish and build 4 bed detached on the same footprint as planning allows that. The council eventually figured out how to stop them by decreeing that the replacement building couldn't be any higher than the original. The prices being offered for the bungalows collapsed but the prices offered for the 4 dormers stayed high.

[sleepwello'nights]

19 hours ago, Chewing Grass said:

Within the next 10 years that will be common place and they will be chasing very few buyers.

The Pension most people who don't think, think they will get is the bottom row.

A £100,000 pot buys you just over £2500 a year above state pension at ~65 (if you don't have the 25%).

Big houses may be nice but they have big bills even if new eventually.

Feel free to multiply...

Fucking ridiculous isn't it. Take any number divide it into £100k and to calculate the number of years you have to live to get your capital back. You've got to get into your 90's before recouping your initial outlay, let alone any income the annuity may generate.

A few will make it and then the care home fees will dispose of it quickly. 

[Frank Hovis]

10 minutes ago, Option5 said:

I lived in a Dormer bungalow in Norfolk, only 4 of the bungalows on the estate were dormer the other 50 or so were single storey. Developers started buying them to demolish and build 4 bed detached on the same footprint as planning allows that. The council eventually figured out how to stop them by decreeing that the replacement building couldn't be any higher than the original. The prices being offered for the bungalows collapsed but the prices offered for the 4 dormers stayed high.

With the baby boomers ageing and downsizing the supply of bungalows for sale will be well below the demand for them and I can see them going to a big premium per square foot compared to two storey houses (nb - I am not saying "soar"!).

The major appeals for pensioners are that they are all on one level, that they are easy to maintain (no scaffolding required for exterior painting for example), cheaper to heat without another storey and with loft insulation in place, usually in nice quiet areas with other pensioners for neighbours, and come with a low council tax band.   

Unlike houses very few bungalows come into the private ownership market via RtB as there is an exemption to RtB for housing suitable for older people so no supply from that and nobody is building them.

My observation over the past year is that their prices have risen no faster than those of a two storey house but that they sell much more quickly; which is very suggestive of higher demand. 

 

[Frank Hovis]

3 minutes ago, sleepwello'nights said:

Fucking ridiculous isn't it. Take any number divide it into £100k and to calculate the number of years you have to live to get your capital back. You've got to get into your 90's before recouping your initial outlay, let alone any income the annuity may generate.

A few will make it and then the care home fees will dispose of it quickly. 

Yep.

Nobody with the ability to use a calculator and a basic knowledge of investment returns would go anywhere those annuities.

I think that the average retiree would be genuinely better off taking it out in cash and putting it under the mattress given how long they can expect to live in good health.

[BoSon]

They have been building loads of two bed bungalow retirement properties, just that the bungalow is above another bungalow in the form of an apartment block with a lift.

Traditional bungalows are more suited to the younger oldies still able to maintain the garden or have a dog they are still able to walk that needs the garden for a toilet when not out being exercised.

[Wight Flight]

50 minutes ago, Frank Hovis said:

Yep.

Nobody with the ability to use a calculator and a basic knowledge of investment returns would go anywhere those annuities.

I think that the average retiree would be genuinely better off taking it out in cash and putting it under the mattress given how long they can expect to live in good health.

It goes to show that a hobby business that you can do in retirement, and that will bring in an easy £20k per annum, is worth the same as half a million in your pension pot.

[Frank Hovis]

9 minutes ago, Wight Flight said:

It goes to show that a hobby business that you can do in retirement, and that will bring in an easy £20k per annum, is worth the same as half a million in your pension pot.

 

Yes if you are the sort of person who sees no further than an annuity - which is sadly a great many of the wider public though probably nobody on this forum.

If however you put that into a SIPP and invest it in major share indices then you could well pull 4% out per year whilst the capital grows at a similar inflation-beating 4%; so increasing your income each year.

The result is to match the annuity in terms of income without giving away your capital; rather it will continue to increase.

If people weren't prepared to swap their capital for an annuity on the terrible terms offered then they would increase as would the the required return upon the bonds backing them.  Corporate interest rates would start rising without anything the central banks could do to stop them.  

 

 

• The average stock market return for 10 years is 9.2%, according to Goldman Sachs data for the past 140 years.
• The S&P 500 has done slightly better than that, with an average annual return of 13.6%.

https://www.businessinsider.com/personal-finance/average-stock-market-return?op=1&r=US&IR=T

[spygirl]

20 hours ago, Chewing Grass said:

Within the next 10 years that will be common place and they will be chasing very few buyers.

The Pension most people who don't think, think they will get is the bottom row.

A £100,000 pot buys you just over £2500 a year above state pension at ~65 (if you don't have the 25%).

Big houses may be nice but they have big bills even if new eventually.

Feel free to multiply...

75 single life, no guarantee.

You need to live to 90, 5 years beyond average life expectancy, to break even.

Better off putting it in bonds/fixed income and drawing down.

Those numbers are beyond shite.

I'd add that's Zrp n QE for you.

I'm ok with ukgov doing QE. However they need to halve full public sector pensions.

[Wight Flight]

20 minutes ago, Frank Hovis said:

 

Yes if you are the sort of person who sees no further than an annuity - which is sadly a great many of the wider public though probably nobody on this forum.

If however you put that into a SIPP and invest it in major share indices then you could well pull 4% out per year whilst the capital grows at a similar inflation-beating 4%; so increasing your income each year.

The result is to match the annuity in terms of income without giving away your capital; rather it will continue to increase.

If people weren't prepared to swap their capital for an annuity on the terrible terms offered then they would increase as would the the required return upon the bonds backing them.  Corporate interest rates would start rising without anything the central banks could do to stop them.  

 

 

• The average stock market return for 10 years is 9.2%, according to Goldman Sachs data for the past 140 years.
• The S&P 500 has done slightly better than that, with an average annual return of 13.6%.

https://www.businessinsider.com/personal-finance/average-stock-market-return?op=1&r=US&IR=T

I have plans to do both.

Retirement wouldn't really suit me.

[Frank Hovis]

31 minutes ago, Wight Flight said:

I have plans to do both.

Retirement wouldn't really suit me.

I don't know that it suits me but I'm not conceding yet!

[sancho panza]

9 hours ago, spygirl said:

75 single life, no guarantee.

You need to live to 90, 5 years beyond average life expectancy, to break even.

Better off putting it in bonds/fixed income and drawing down.

Those numbers are beyond shite.

I'd add that's Zrp n QE for you.

I'm ok with ukgov doing QE. However they need to halve full public sector pensions.

79 for males and 82 for females in terms of UK life expectancy.

So actually situation is worse.

[sancho panza]

Jsut happened to flip on  london postcode and very much the opposite to leicester happenign there.Flats selling at reduced prices

Edited December 29, 2020 by sancho panza

[sancho panza]

I do wonder if the smart money is selling central London here......W2 is the poster child for the price/volume graph of the decade.

Edited December 29, 2020 by sancho panza

[spygirl]

Does seem to confirm that London prices have been falling for 5-6 years.

The problem in a market like the UK has had for 10-15 years is that is not so much the houses that sell, its the houses that dont sell and are removed, waiting for 'better prices'

Imagine the bloodbath is the London graph ends up like the Scabby/Norther one - same nominal prices as 2004ish.

Imagine if London prices fall to the same sort of LTE seem in the mid 90s. I remember looking at nice 3brd houses that would have been ~3 times my salary back in 95.

 

 

 

[Democorruptcy]

Move along please, there's nothing to see here, it's just a lot of inflation...

http://danielamerman.com/va/HomeWealthOne.html

 

 

 

[BurntBread]

1 hour ago, Democorruptcy said:

Move along please, there's nothing to see here, it's just a lot of inflation...

http://danielamerman.com/va/HomeWealthOne.html

 

 

 

I'd want to dig a bit deeper into that before dismissing housing problems with "real house prices have stayed roughly the same".

First, even on that graph, real house prices have gone up about 30% since 2011.

Second, the US is a big market, and most of the bubblyness has been concentrated on the coasts. A lot of the central states have been pretty flat, price-wise, as there is little income growth and plenty of land. I'd want to see local ratios of median house prices to median salaries, then average that statistic across the US (or split it out by region).

Lastly, "inflation adjusted" is a can of worms. Is it adjusted for wage inflation, or for some measure of cost of goods? If wage inflation, is that median or mean wage inflation? If cost of goods, does that include houses, and if so, at what proportion? Different people see different levels of inflation, and even one person sees different types of inflation.

My guess is that in the "fly-over" states, people have seen flat incomes (measured by cost-of-basic-goods inflation), but also flat house prices, so it's not hard to afford a place to live. In San Francisco, I'd guess mean wages have skyrocketed, median wages have increased a fair bit too, but house prices have eclipsed both, and there's a lot of rich people living on sofas. There'll be a nasty split by generation, too.

[Democorruptcy]

1 hour ago, BurntBread said:

I'd want to dig a bit deeper into that before dismissing housing problems with "real house prices have stayed roughly the same".

First, even on that graph, real house prices have gone up about 30% since 2011.

Second, the US is a big market, and most of the bubblyness has been concentrated on the coasts. A lot of the central states have been pretty flat, price-wise, as there is little income growth and plenty of land. I'd want to see local ratios of median house prices to median salaries, then average that statistic across the US (or split it out by region).

Lastly, "inflation adjusted" is a can of worms. Is it adjusted for wage inflation, or for some measure of cost of goods? If wage inflation, is that median or mean wage inflation? If cost of goods, does that include houses, and if so, at what proportion? Different people see different levels of inflation, and even one person sees different types of inflation.

My guess is that in the "fly-over" states, people have seen flat incomes (measured by cost-of-basic-goods inflation), but also flat house prices, so it's not hard to afford a place to live. In San Francisco, I'd guess mean wages have skyrocketed, median wages have increased a fair bit too, but house prices have eclipsed both, and there's a lot of rich people living on sofas. There'll be a nasty split by generation, too.

"Inflation adjusted" certainly is a can of worms if you have been waiting for a nominal crash.

I still think a lot of HPI is the move from what was largely one income to joint income at higher lending multiples. The extra lending tripled prices.

[spygirl]

3 hours ago, BurntBread said:

I'd want to dig a bit deeper into that before dismissing housing problems with "real house prices have stayed roughly the same".

First, even on that graph, real house prices have gone up about 30% since 2011.

Second, the US is a big market, and most of the bubblyness has been concentrated on the coasts. A lot of the central states have been pretty flat, price-wise, as there is little income growth and plenty of land. I'd want to see local ratios of median house prices to median salaries, then average that statistic across the US (or split it out by region).

Lastly, "inflation adjusted" is a can of worms. Is it adjusted for wage inflation, or for some measure of cost of goods? If wage inflation, is that median or mean wage inflation? If cost of goods, does that include houses, and if so, at what proportion? Different people see different levels of inflation, and even one person sees different types of inflation.

My guess is that in the "fly-over" states, people have seen flat incomes (measured by cost-of-basic-goods inflation), but also flat house prices, so it's not hard to afford a place to live. In San Francisco, I'd guess mean wages have skyrocketed, median wages have increased a fair bit too, but house prices have eclipsed both, and there's a lot of rich people living on sofas. There'll be a nasty split by generation, too.

Wage inflation tends to run slightly ahead of price inflation.

Or did, before China and Browns TC idiocy.

Housing is an wage hedge. Thats all.

 

 

[Democorruptcy]

Plenty of cash buyers:

Quote

 

Britain has saved like never before this year, with official figures finding as much as £148billion was put away between October 2019 and October 2020, including £54.6billion in three months between April and June during the lockdown, the returns on those savings have never been lower.

Given that savers had already suffered from a decade of low returns following the 2008 financial crisis, the last thing they would have hoped for in December 2020 was to be staring at interest rates of as little as 0.01 per cent, which is what is being paid by all of the UK's major high street banks.

But the coronavirus pandemic led to a pair of Bank of England base rate cuts in mid-March which took it to an all-time low of just 0.1 per cent, while a cheap central bank funding scheme has dished out £67.2billion since April that banks no longer have to find from savers.

https://www.thisismoney.co.uk/money/saving/article-9079265/Savings-rates-rebound-time-low-2021.html

 

 

[spygirl]

On 29/12/2020 at 12:21, Wight Flight said:

It goes to show that a hobby business that you can do in retirement, and that will bring in an easy £20k per annum, is worth the same as half a million in your pension pot.

A hobby business is one where you end up putting money in it.

Im planning on doing a small business from my early 60s.

Im planning on ~2 days/week, aiming at for ~1500/2k/month income.

And for the same reasons - top up my income, most of which I expect to go to  my kids.

But also to stop me going nuts.

 

 

 

[spygirl]

52 minutes ago, Democorruptcy said:

Plenty of cash buyers:

 

Plenty of future inflation priming the pipes.