House Prices - Bound To Nosedive

Discussion in 'Taylor's Tittle-Tattle - General Banter' started by Clive_ofthe_Kremlin, May 10, 2020.

  1. Clive_ofthe_Kremlin

    Clive_ofthe_Kremlin Squad Player

    Aren't they? I saw something saying the number of transactions is down 99% or something.

    What good news! Hopefully they'll continue on their downward trend and people will be able to afford to buy them once more. Get the average price down to what it used to be - around 2.5 to 3 times the average wages - so around £65-£75k.

    Having more accessible house prices will mean less people will have to private rent, meaning less demand and good downward pressure on the rents too. Also those "release your equity" companies who advertise on afternoon TV will be completely screwed. It's win win win!
     
  2. Moose

    Moose First Team Captain

    Unfortunately, it’s more likely that cheaper housing will simply be bought up by Robbie Fowler or a Jacob Rees Mogg private equity mob, thus subjecting even more people to a lifetime’s renting. It needs a fall of reasonable proportions and new legislation against buy to let to reverse the decline in home ownership.

    But I think this is also a bit premature. The UK housing market has become one of the vehicles of choice for investors to sink their excess wealth in. With many stocks less attractive and the future looking turbulent it may continue to look like a safe bet.

    So without something pretty revolutionary, maybe not so much change.
     
  3. UEA_Hornet

    UEA_Hornet First Team Captain

    There’s no reason to think greedy sellers or desperate buyers will have gone anywhere. Transactions have been curtailed by the government regulations and the inability of surveyors to get out to do mortgage valuations rather than a fall in confidence. While the rest of the economy will take ages to recover I suspect for all the reasons Moose suggests and more, house prices will drop sharply (maybe 20%) but gain back the lost ground within a couple of years.
     
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  4. a19tgg

    a19tgg Reservist

    That’s just because everything has ground to a halt it’s nothing to do with actual supply and demand. There are arguments to say there may even be a short term boost once things fire up again, as people stuck in their homes for months look to move. I think that’s slightly fanciful in reality. But you have to remember the average British home owner looking to sell won’t just decide to knock a few hundred grand of their asking price, certainly not if nobody else in their street or area does, or in the area looking to buy. All that actually tends to happen in a situation like this is people stubbornly stick to their original asking prices, the market slows, demand builds up and prices eventually shoot up later on. Couple that with the a slow in construction and lack of new builds and it ultimately means it will just likely mean a short term slowing of the market with an eventual spike higher again. You’ve always got the three Ds, Death, Divorce and displacement that will mean some transactions happen in any market, but for all the other non essential transactions you’ll find the vast majority of the great British homeowners won’t be in any hurry to slash the price of their house.
     
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  5. Clive_ofthe_Kremlin

    Clive_ofthe_Kremlin Squad Player

    What about the massive rise in unemployment, the stock market losses and the coming slump?

    Won't that affect demand?
     
  6. a19tgg

    a19tgg Reservist

    Yes unemployment is likely to have an impact, but people are still always reluctant to slash the price of their home if they don’t have. There are other dynamics at play as well. Lenders dislike new builds as they’re difficult to value, particularly flats. On it around the lockdown most lenders slashed their LTV on new builds to 60% or less because they became impossible to value. If this continues then it pretty much wipes all first time buyers out of the equation as most of them won’t have a 40% deposit. Then a couple of things will probably happen, as moose says they’ll be bought up cheaply by people with the cash to do so, further decreasing supply and pushing more people into rent. The builders will also stop building them because people won’t be able to get mortgages to buy them. If people don’t reduce their prices further up the chain they just wait it out until demand reaches a point that pushes prices up eventually, but in the meantime you just get greater inequality at the bottom anyway.

    The issue of unemployment is all relative to the lenders anyway. If unemployment shoots up and prices fall lenders criteria becomes far stricter and they insist on much bigger deposits, so it’s all relative to first time buyers. Even if prices fall their ability to get a mortgage to buy these properties is directly related to the state of the economy.
     
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  7. Plus all those twenty-somethings can save for a deposit now they can't go out for skinny latte moccachinis and avocado on toast that the Daily Express and ZZTop would have as the reason they can't get a mortgage.
     
  8. lowerrous

    lowerrous Squad Player

    The UK may be looking a bit less of "a safe bet" for foreign investors at the moment though, for instance by it being hit harder from coronavirus than many other countries and Brexit still looming on the horizon. Demand from abroad should also decline from a general reduction in international travel, a global recession and a general decline in other asset values (e.g. people will have lost wealth from declines in stock values, and foreign buyers from countries such as Russia and Saudi Arabia will have lost wealth from the decline in oil prices). This will affect purchase prices, but also rental prices for instance as a knock-on affect from increased vacancies in student accommodation and holiday rentals from lack of foreign students and tourists.

    How much prices will fall by remains to be seen, though it's incredibly unlikely in what is still a more globalised world than the 70s that they will fall to Clive's wishful prediction of 2.5 to 3x average local wages. Also. going back to Clive's original post, even if prices fall they still may not necessarily be more affordable to local people if those people have falling wages and increasing unemployment. Falling asset values will most favour those who have weathered the storm without losing too much of their own wealth relatively speaking, and are thus in a better position to buy the dip whenever that appears to have been reached.
     
  9. a19tgg

    a19tgg Reservist

    Yes in Clive’s scenario mortgages effectively become extinct, no lender is going to lend against an asset depreciating so much in value, not without probably something like a 50% deposit. The people with cash will then be left to buy up as and when they feel they’ve reached a suitable value to do so. As you say it would likely have a positive impact on rents though, these would likely adjust downwards accordingly. But the state of the economy is directly linked to people’s ability to borrow the money they need to to buy the houses in the first place.
     
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  10. hornmeister

    hornmeister Administrator Staff Member

    Consequently it could be bad news. Think of the people who have mortgages they will no longer be able to service? Those kicked out of their expensive homes trying to buy up cheaper stuff with what they have left.
    Those who no longer have jobs or those that have vastly reduced income. The strain on the benefits system will mean more people claiming, less being able to be paid out to individuals and less people employed to be able to fund it through taxation.

    House prices really only affect those trying to get on the ladder as a first step as those with stuff to sell will rise/fall accordingly and those buying as investments can charge rents to cover as per market forces. Any crash won't positively affect the amount of stock available, if anything the economy shut down may well even reduce the amount of building taking place. Less people moving and less people employed in the satellite businesses. Any downturn in the economy affects people closer to the line more, people who've paid off their mortgages or may have a spare bit of cash will be the winners.

    It's not a time to be jumping around with glee driven by jealousy. It's time to assist in getting the country back on it's feet by helping wherever possible and following the instructions designed to mitigate the issue.
     
  11. Happy bunny

    Happy bunny Cheered up a bit

    It's much to be regretted that in the UK we use housing as an investment tool, and only something really really dramatic will change that. Dramatic as the coronavirus is, I don't think it's dramatic enough, for the reasons so well explained above by a19 and others.

    What we need is an excess of housing supply and I don't see that happening any time soon. We need more factory-built housing and changes in land-use legislation.

    P.S. If anyone wants to swap their house for a couple of skinny lattes, I'm in as soon as I can get to Costa.
     
  12. hornmeister

    hornmeister Administrator Staff Member

    Completely agree apart from the coffee offer. High St. Coffee is junk.
     
  13. Happy bunny

    Happy bunny Cheered up a bit

    All round to Meister's then! As soon as Boris lets us.
     
  14. hornmeister

    hornmeister Administrator Staff Member

    You can sit the other side of the moat at meister manor as it's more than 2 m wide and watch me drink a freshly ground and prepared espresso if you so wish.
     
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  15. Squibba

    Squibba Predictor Choker 14/15

    Have a couple of estate agent friends and funnily enough they're selling more than ever!

    I'm guessing lot of time at home has made people see;

    a) Their homes aren't fit to be stuck in. They want a garden etc.

    b) Life slowed down for once and they plucked up the courage to move.

    c) Spent so much time with family that people want to move out!:D
     
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  16. HappyHornet24

    HappyHornet24 Crapster Staff Member

    1. Agree with all the counter points to Clive’s OP
    2. Fewer
     
  17. The Voice of Reason

    The Voice of Reason First Team Captain

    Gardens could definitely be a big factor IMO.

    My son had his garden revamped last summer as it was not child friendly being a very mature garden with no lawn loads of mature shrubs and bushes plus a fish pond.

    Now he has a decent sized lawn, no pond and only a few plants, and he was so pleased he had it revamped last year as he has two young boys who would have been cooped up in the house all through the recent LOCK DOWN. However because they had had the garden made child friendly they were able to spend most of lock down out in the garden and enjoy the wonderful weather we had.

    Therefore I can understand why many people who did not have outside space are now actively trying to get a property with a garden. As many of them have possibly spent the whole lock down probably being driven mad trying to entertain small children in a confined indoor space.
     
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  18. Moose

    Moose First Team Captain

    A surplus in housing supply could be created by making it much tougher to buy to let or have second homes. There are plenty enough houses in the Country, just lots of people want more than one.

    Even so, it surprises me sometimes how slow we are to build on disused sites.
     
  19. ForzaWatford

    ForzaWatford Squad Player

    I've been lucky enough that I've been able to save in the lockdown, and me and my GF have enough for a deposit now. It is so depressing looking at what you can get in north london for our budget though...
     
  20. Diamond

    Diamond Squad Player

    I spent most of lockdown and furlough in the garden, it kept me and the wife sane. One of the main points of buying this place was garden size, thank god we did.

    Will there be a price slump? Most definitely. How the h*ll are my own kids supposed to get on the ladder? Prices are due a "reset" soon anyway. I think the drop will be much higher than people think. Personally I'd be quite happy with that.
     
  21. nornironhorn

    nornironhorn Administrator Staff Member

    Another one hoping for a drop in prices.

    My girlfriend and I have been saving up for a deposit but I've been on 80% wages during lockdown and she is a sub-teacher so also just getting 80% and then nothing in July and August.

    We'll need a healthier deposit than usual due to her being a sub teacher I'd imagine as primary teaching is incredibly competitive in NI so no guarantee of a permanent post for years
     
  22. a19tgg

    a19tgg Reservist

    Stamp duty changes today will help. I put mine on the market early March, obviously died a death and then have had a steady stream of viewings since Agents opened back up again, but no offers as of yet.

    This stamp duty change will make mine roughly £15k cheaper, which should help massively as well as providing a boost to anyone on the chain.

    As the changes were instant there will no doubt be some mega pissed people who completed yesterday though!

    Re moose’s point above, the removal of stamp duty up to £500k will apply to second homes and BRL purchases as well, although they’ll still have to pay the 3% second property tax. In many cases the 3% will be almost as cheap as the stamp duty they would’ve also paid, so unfortunately this is probably going to boost the BTL market as well.
     
  23. ForzaWatford

    ForzaWatford Squad Player

    Will it save that much, or will house prices just go up by another £15k?
     
  24. a19tgg

    a19tgg Reservist

    It depends but I wouldn’t have thought so much in the current climate, at least not in my area.

    When I decided to put mine up it was at the peak of the market (feb) I was told I’d probably have five viewings on the first Saturday and an offer about £20k below asking. Then Covid hit and it’s been a trickle of half hearted viewings.

    I wouldn’t have thought sellers would be putting prices up, just maybe accepting offers not quite as low, at the very worst (for buyers).
     
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  25. lowerrous

    lowerrous Squad Player

    If everyone is wanting to sell-up and move to somewhere bigger with a garden etc., then who are all the people buying up the smaller properties they're wanting to move out of?
     
  26. Keighley

    Keighley Squad Player

    People getting onto the property ladder?
     
  27. lowerrous

    lowerrous Squad Player

    With loads of people being furloughed or own temporarily reduced wages, and banks likelier to ask for lower LTVs, then surely the number of people able to do this will start dropping soon.
     
  28. Keighley

    Keighley Squad Player

    Maybe, but see #19.

    If the papers are to be believed there are also people who want to move the family home out of London but who also want to retain a pied-a-terre.
     
    Last edited: Jul 8, 2020
    The Voice of Reason likes this.
  29. a19tgg

    a19tgg Reservist

    From the beeb:

    57A28EDE-C862-4618-B407-8B11E4BD15F0.png
     
  30. leighton buzzard horn

    leighton buzzard horn Squad Player

    I’m in total agreement with this. I’m not an estate agent but I am in that industry and have a good insight of how the market is performing on a weekly basis. It’s been very strong since restrictions were lifted, so today’s news boosts an already positive market. I can’t help but feel this was an ace card that would have been better off being held back until it was truly needed.
     
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  31. hornmeister

    hornmeister Administrator Staff Member

    Agreed. Supply is strangled to artificially keep prices high. Any stamp duty savings will just be lumped on purchase price when demand outstrips supply. Whilst I'm fundamentally against Stamp duty on 1st homes, I do feel it;s a revenue stream that the government could do with at the moment.
     
  32. ForzaWatford

    ForzaWatford Squad Player

    When you say offer 20k below asking, is that the norm? If my budget is around £405 should I be looking at houses at £425? Im clueless about these things.
     
  33. a19tgg

    a19tgg Reservist

    I would say definitely look a bit above your budget, look at how long a house has been listed for. If a house has been on the market for 6 months and the price hasn’t changed then you’ve got every chance an offer £15/£20k or evening more below asking price would be accepted, if it’s only just gone on less so, but still no harm in making an offer.

    If you look closely at the listing it will say when it was listed and also when it was last reduced, if indeed it has been. A house that has been listed for a while and has been reduced once or twice would very likely entertain a lower offer.

    With mine they basically priced it like people do with second hand cars. They listed it at £25k above a round number with a view to getting the round number. So quite often the price you see a house listed at isn’t necessarily the price the seller expects to get.

    But really unless a house has just gone on the market and has loads of interest and you really really want it, never offer full asking price on anything.
     
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  34. ForzaWatford

    ForzaWatford Squad Player

    Cheers mate, that's helpful!
     
  35. nornironhorn

    nornironhorn Administrator Staff Member

    Does a new-build work the same way? Or are they more a set price as you are buying off a developer as opposed to a person who lived in the house.
     

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