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  • FIRST POST
    • Skag
    • By Skag 7th Oct 17, 2:22 PM
    • 196Posts
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    Skag
    Housing market move given Brexit and interest rise
    • #1
    • 7th Oct 17, 2:22 PM
    Housing market move given Brexit and interest rise 7th Oct 17 at 2:22 PM
    I was wondering what you think will be the housing market move in the next 6-12 months given the uncertainty with Brexit and the coming interest rates rise(s).
    I would assume that since cost of borrowing will rise, and also BTL is becoming less affordable and efficient, will the (high geared) BTL owners start selling and prices will start to fall?
    Consequently will it be a good market for those who are looking to buy but couldn't afford so far? Though this will cost a bit more given the interest rates hike.

    Do you agree with the above?
    I live in London and have observed the last weeks that new properties are coming in the market for lower prices that used to say half a year or one year ago.
    Last edited by Skag; 07-10-2017 at 2:26 PM.
Page 3
    • caronoel
    • By caronoel 11th Oct 17, 4:03 PM
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    caronoel
    I am not claiming to be able to accurately predict the housing market, just that there is a massive bubble and that when it pops there will be a mess. Most people are awake to this now, the audience were even saying on QT that HTB isn`t the answer! The word just needs to filter through to the debate forum and then more or less the whole country will be clued in...
    Originally posted by Crashy Time
    This eminent wisdom comes from a 50-something man who lives alone in a bedsit in Edinburgh, having sold up in the late 90s – just before a 20 year property bull run.

    He missed the buying opportunity of a lifetime in 2008-09 and seems to be just a little bitter.

    Take his economic predictions with a pinch of salt.
    • ukcarper
    • By ukcarper 11th Oct 17, 5:21 PM
    • 11,658 Posts
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    ukcarper
    Yes, it's truly hilarious innit... that an entire generation and more have been priced out of possibly ever owning their own home, unless they're able and prepared to commit unprecedented proportions of their income for possibly they're entire working life to service a mortgage... and the real kicker is it's our government and central bank that have enabled it.
    Originally posted by Tiners
    I don't find it hilarious that prices have increased so much in certain areas, but I don't think an entire generation have been priced out, as in many parts of the country prices have not increased dramatically and in the areas where they have some people can still. But blaming the government and making rash predictions helps no one.
    • caronoel
    • By caronoel 11th Oct 17, 8:45 PM
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    caronoel
    I don't find it hilarious that prices have increased so much in certain areas, but I don't think an entire generation have been priced out, as in many parts of the country prices have not increased dramatically and in the areas where they have some people can still. But blaming the government and making rash predictions helps no one.
    Originally posted by ukcarper
    No one finds it hilarious, but why spoil a good rant with the truth?
    • chucknorris
    • By chucknorris 12th Oct 17, 7:58 AM
    • 9,205 Posts
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    chucknorris
    You definitely won't get a ''better debate'' there... it's populated by a small but very vociferous clique of vested interests, property investors, recent buyers etc... who all hold the general opinion that never ending, policy driven, rampant house price inflation is great and has no drawbacks what so ever.
    Originally posted by Tiners
    We have a vested interest, because we invested quite a bit in property, although we have already sold a couple of properties and I'll sell most of mine in the next 4-6 years (market permitting). But I don't hold the opinion that significant HPI has had no drawbacks, of course it has. I think that it is awful that young people today have to take on so much debt (property and student loans).
    Chuck Norris can kill two stones with one bird
    The only time Chuck Norris was wrong was when he thought he had made a mistake
    Chuck Norris puts the "laughter" in "manslaughter".
    After running injuries I now also hike, cycle and swim, less impact on my joints.

    For the avoidance of doubt Chuck Norris is an actor and an ex martial artist (not me)
    • GreatApe
    • By GreatApe 12th Oct 17, 7:57 PM
    • 1,458 Posts
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    GreatApe
    There is one very simple fact the crash cheerleaders are missing.
    Why the hell would landlords sell after a crash ???

    If prices fell 50% that would mean a property with a rental return of 5% today would have a rental return of 10% post crash. Which landlord is stupid enough to sell a 10% rental return property and put that into a 1% return savings account?

    The crash wishers have it completely wrong. If prices doubled a hell of a lot of landlords would sell out and bank the profit. If prices half then few landlords would sell and many more would buy investment properties becoming landlords in the process.
    • chucknorris
    • By chucknorris 12th Oct 17, 8:55 PM
    • 9,205 Posts
    • 13,824 Thanks
    chucknorris
    There is one very simple fact the crash cheerleaders are missing.
    Why the hell would landlords sell after a crash ???

    If prices fell 50% that would mean a property with a rental return of 5% today would have a rental return of 10% post crash. Which landlord is stupid enough to sell a 10% rental return property and put that into a 1% return savings account?

    The crash wishers have it completely wrong. If prices doubled a hell of a lot of landlords would sell out and bank the profit. If prices half then few landlords would sell and many more would buy investment properties becoming landlords in the process.
    Originally posted by GreatApe
    Exactly! Last year I decided to sell my properties as tenants gave me notice,and I sold the first property when this happened (my wife also sold a property too), but when tenants gave me notice on a second property, I thought 'hang on a minute, this is a particularly profitable property' so I'll hang on to it a while. So given that I made the decision to sell, then changed my mind because property is the most profitable asset for me to hold. Do the 'crash cheerleaders' seriously think that I would sell if prices fell? Please 'crash cheerleaders' I'd really love to hear why you think this, so please explain your reasoning, I can't wait to hear.

    You are correct about that 1% GreatApe, we are looking to upsize our home and we currently have about £1.3m sitting in savings accounts earning about 1% (1.17% in my case in a Sainsburys bank savings account), I feel like I'm being mugged.
    Last edited by chucknorris; 12-10-2017 at 8:59 PM.
    Chuck Norris can kill two stones with one bird
    The only time Chuck Norris was wrong was when he thought he had made a mistake
    Chuck Norris puts the "laughter" in "manslaughter".
    After running injuries I now also hike, cycle and swim, less impact on my joints.

    For the avoidance of doubt Chuck Norris is an actor and an ex martial artist (not me)
    • LdnFtB
    • By LdnFtB 13th Oct 17, 3:23 AM
    • 62 Posts
    • 64 Thanks
    LdnFtB
    There is one very simple fact the crash cheerleaders are missing.
    Why the hell would landlords sell after a crash ???

    If prices fell 50% that would mean a property with a rental return of 5% today would have a rental return of 10% post crash. Which landlord is stupid enough to sell a 10% rental return property and put that into a 1% return savings account?

    The crash wishers have it completely wrong. If prices doubled a hell of a lot of landlords would sell out and bank the profit. If prices half then few landlords would sell and many more would buy investment properties becoming landlords in the process.
    Originally posted by GreatApe
    If I can take a punt at understanding the reasoning (using some stats from a CML publication The Profile of UK Private Landlords, I think that the hope that the crashists have is that these sellers are forced sellers and not voluntary (the TL;DR is negative equity begets bankruptcy begets reposession):
    1) Over half of landlords own a single property. Increases/falls in prices won't affect them. Most landlords have no borrowing, so price falls/increases and interest rates won't affect them either.
    2) Less than 10% of landlords own more than five properties.
    3) However, this small proportion of landlords accounts for 40% of the market.
    4) Many portfolio landlords have arrived at their position by withdrawing equity from existing properties to fund deposits for further properties. As such their position is more dependent upon finance than the average landlord.
    5) Falling values place these portfolios in negative equity, leaving the owners unable to remortgage and stuck on SVR's. Simultaneously, removal of tax relief increases the tax bill. So a double whammy of increased costs. Finally, older properties require energy efficiency upgrades otherwise they can't be let.
    6) These costs may be passed on to tenants in the form of increased rents, but they're competing against over half the market who isn't bearing these increased costs.
    7) As such, rents can't be raised to cover increased costs.
    8) As a result, portfolio landlords need to subsidise their business as if they can't then either their lender or HMRC is going to go wanting.
    9) If they are unable to service their debts or pay their taxes, neither of these entities take very kindly to commercial ventures being in arrears and can force a disposal of assets in order to settle bills.

    Now, the situation with finance was even more acute in 2008 and the sector has only grown since then so I'm not sure if the above will really play out, but I think that's a fairly accurate summation of the thought process.
    • westernpromise
    • By westernpromise 13th Oct 17, 9:30 AM
    • 3,037 Posts
    • 3,691 Thanks
    westernpromise
    You definitely won't get a ''better debate'' there... it's populated by a small but very vociferous clique of vested interests, property investors, recent buyers etc... who all hold the general opinion that never ending, policy driven, rampant house price inflation is great and has no drawbacks what so ever.
    Originally posted by Tiners
    Give an example of one such poster.
    The Lottery, with its weekly pay-out of enormous prizes, was the one public event to which the proles paid serious attention. It was probable that there were some millions of proles for whom the Lottery was the principal if not the only reason for remaining alive.
    • NineDeuce
    • By NineDeuce 13th Oct 17, 9:50 AM
    • 273 Posts
    • 214 Thanks
    NineDeuce
    Decreasing house prices is not a good thing as negative equity can have serious implications on families. What is needed is a stagnation in increase and allow wages to catch up.
    • westernpromise
    • By westernpromise 13th Oct 17, 10:00 AM
    • 3,037 Posts
    • 3,691 Thanks
    westernpromise
    Incidentally, mortgage rates are pretty close to long term averages. The problem with listening to crash troll millennials on places like HPC is that they think the world began the day they were born and therefore they imagine "normal" interest rates to be those they can vaguely remember from the early 90s.

    The fact is that the UK base rate has only been above 10% in 20 of the last 300 years and all of them were between 1970 and 1995. They weren't normal, they were the aberration. The genuine long term base rate is just under 4% IIRC and hence a "normal" mortgage rate can be considered something around 5%. Most lenders' SVR is about 4% so we are indeed not very far off that. Certainly, to have rates 1% or so away from the long term average is a lot closer to a 'normal' rate than rates at the 15% that millennial crash trolls would like to return so they can buy a cheap house.

    It is probably more useful to think about what we mean by normal in the current climate. We have had a base rate of 0.5% or lower for nearly nine years now. Even the rumoured November rise, if it happens, will only take us back to 0.5%. So someone who bought nine years ago could fix today for 10 more years and would thus ensure that at least 19 of the standard 25 years of the term are at current comparatively low mortgage rates.

    Now I don't know about anyone else but if I can lock in pretty much 80% of a mortgage term at rates of 2-point-whatever per cent, it's the rate applicable over those years that I consider 'normal'. I seriously question the mental balance of anyone who suggests that any higher level to which they may rise for 20% of the term should be labelled 'normal'. The 2-point-whatever per cent is the new normal. And of course this only has to persist for another 6 years for me to able to lock in the whole 25 years at low rates, by doing a 10-year fix at year 15.

    Finally, a point often not understood by crashtrolls is that low interest rates have an important embedded advantage: you pay down principal very fast. If you put down a 10% deposit on a £100k property and borrow the other £90k at 3%, then after 5 years, you will have paid off about 15% of the loan. This means that the price could fall to £75k and you would still be able to sell up and move on without negative equity. In return for taking on that risk you get to participate in any upward price movement as well.

    There is a lot more to house buying economics than timing the market so you can buy cheaper. It is because Crashy has failed to understand any of the above that he is a single man in his 50s renting a bedsit and advising other people not to buy because prices may briefly fall.
    The Lottery, with its weekly pay-out of enormous prizes, was the one public event to which the proles paid serious attention. It was probable that there were some millions of proles for whom the Lottery was the principal if not the only reason for remaining alive.
    • GreatApe
    • By GreatApe 13th Oct 17, 11:21 AM
    • 1,458 Posts
    • 1,324 Thanks
    GreatApe
    If I can take a punt at understanding the reasoning (using some stats from a CML publication The Profile of UK Private Landlords, I think that the hope that the crashists have is that these sellers are forced sellers and not voluntary (the TL;DR is negative equity begets bankruptcy begets reposession):
    1) Over half of landlords own a single property. Increases/falls in prices won't affect them. Most landlords have no borrowing, so price falls/increases and interest rates won't affect them either.
    2) Less than 10% of landlords own more than five properties.
    3) However, this small proportion of landlords accounts for 40% of the market.
    4) Many portfolio landlords have arrived at their position by withdrawing equity from existing properties to fund deposits for further properties. As such their position is more dependent upon finance than the average landlord.
    5) Falling values place these portfolios in negative equity, leaving the owners unable to remortgage and stuck on SVR's. Simultaneously, removal of tax relief increases the tax bill. So a double whammy of increased costs. Finally, older properties require energy efficiency upgrades otherwise they can't be let.
    6) These costs may be passed on to tenants in the form of increased rents, but they're competing against over half the market who isn't bearing these increased costs.
    7) As such, rents can't be raised to cover increased costs.
    8) As a result, portfolio landlords need to subsidise their business as if they can't then either their lender or HMRC is going to go wanting.
    9) If they are unable to service their debts or pay their taxes, neither of these entities take very kindly to commercial ventures being in arrears and can force a disposal of assets in order to settle bills.

    Now, the situation with finance was even more acute in 2008 and the sector has only grown since then so I'm not sure if the above will really play out, but I think that's a fairly accurate summation of the thought process.
    Originally posted by LdnFtB

    Yes I agree they think that a huge number of mortgaged Landlords will all hit the wall around the same time causing mass selling to crash prices. However like you say we already had the recession of 2008-2010 and what were the results? Well mortgage lending for Landlords crashed hard there were very few mortgage landlord buyers.

    The result was that the largest groups of landlords, those who inherit and cash buyers just bought more property. Through 2008-2010 the rental stock expanded by about 750,000 properties NET not gross.

    When house prices crash landlords buy property. And a huge number of new landlords are minted as those who inherit their parents properties decide its not a good time to sell so they rent them out and become landlords. This is what happened in 2008-2010 a massive number of people who normally would have sold inherited property decided not to bother.

    As I say, if house prices doubled I would sell all my rental properties. If house prices half I would sell none of them
    • GreatApe
    • By GreatApe 13th Oct 17, 11:24 AM
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    GreatApe
    Decreasing house prices is not a good thing as negative equity can have serious implications on families. What is needed is a stagnation in increase and allow wages to catch up.
    Originally posted by NineDeuce

    House prices have done just that in Scotland / Wales / Norther-Ireland / NE-England / NW-England / Yorkshire&Humber and a lot of the E&W Midlands too. Those areas are now very affordable so much so that a repayment mortgage on a 3 bedroom starter terrace is close to or lower than social rents
    • LdnFtB
    • By LdnFtB 13th Oct 17, 12:07 PM
    • 62 Posts
    • 64 Thanks
    LdnFtB
    Decreasing house prices is not a good thing as negative equity can have serious implications on families. What is needed is a stagnation in increase and allow wages to catch up.
    Originally posted by NineDeuce
    Most households with repayment mortgages can stomach decreasing prices though. As long as the decrease is less than the capital repayment portion of the mortgage then their equity in a property will actually increase. 1-2% nominal falls shouldn't put anyone into negative equity.
    • Crashy Time
    • By Crashy Time 14th Oct 17, 8:52 AM
    • 5,001 Posts
    • 2,156 Thanks
    Crashy Time
    House prices have done just that in Scotland / Wales / Norther-Ireland / NE-England / NW-England / Yorkshire&Humber and a lot of the E&W Midlands too. Those areas are now very affordable so much so that a repayment mortgage on a 3 bedroom starter terrace is close to or lower than social rents
    Originally posted by GreatApe

    http://www.mortgagesolutions.co.uk/news/2017/10/12/housing-bubble-alert-issued-mortgage-adviser-19-uk-towns-cities/
    • chappers
    • By chappers 14th Oct 17, 1:42 PM
    • 2,654 Posts
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    chappers
    You are correct about that 1% GreatApe, we are looking to upsize our home and we currently have about £1.3m sitting in savings accounts earning about 1% (1.17% in my case in a Sainsburys bank savings account), I feel like I'm being mugged.
    Originally posted by chucknorris
    you are. inflation is currently sitting just below 3% so your savings are actually being eroded.
    • caronoel
    • By caronoel 14th Oct 17, 9:14 PM
    • 759 Posts
    • 966 Thanks
    caronoel
    Yet more wisdom from HPC's answer to Warren Buffet

    This eminent wisdom comes from a 50-something man who lives alone in a bedsit in Edinburgh, having sold up in the late 90s – just before a 20 year property bull run.

    He missed the buying opportunity of a lifetime in 2008-09 and seems to be just a little bitter.
    • chappers
    • By chappers 15th Oct 17, 2:57 AM
    • 2,654 Posts
    • 1,501 Thanks
    chappers
    equity is just vanity, unless you are trying to release it.
    when times are hard all people care about is can they keep hold of their houses, any price correction is irrelevant, yes it stagnates the market and might put people into negative equity, but what really matters is can people afford their mortgage, and at the last correction yes employment levels were high and interest rates low so people managed.
    The 80/90s crash was different there was a hike in interest rates to try to hold the value of the pound against the deutsch mark to keep us competitive in Europe ahead of entry into the ERM and this in addition to high unemployment meant that the bubble burst.
    But the overall trend has been upwards.
    I know of people who just surrendered their keys in those days, who now own several houses outright or with minimal mortgages.
    The market will recover and provided you are sensible with your gearing, you should be OK
    • Crashy Time
    • By Crashy Time 15th Oct 17, 7:16 PM
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    • 2,156 Thanks
    Crashy Time
    equity is just vanity, unless you are trying to release it.
    when times are hard all people care about is can they keep hold of their houses, any price correction is irrelevant, yes it stagnates the market and might put people into negative equity, but what really matters is can people afford their mortgage, and at the last correction yes employment levels were high and interest rates low so people managed.
    The 80/90s crash was different there was a hike in interest rates to try to hold the value of the pound against the deutsch mark to keep us competitive in Europe ahead of entry into the ERM and this in addition to high unemployment meant that the bubble burst.
    But the overall trend has been upwards.
    I know of people who just surrendered their keys in those days, who now own several houses outright or with minimal mortgages.
    The market will recover and provided you are sensible with your gearing, you should be OK
    Originally posted by chappers

    Nah, the debt burden on average people is miles different to what it was back then, small interest rate changes will affect things big time. The Tories are doing their best to hand the next election to JC, and he will quickly get us into troubled waters with international markets IMO.
    • brit1234
    • By brit1234 15th Oct 17, 7:28 PM
    • 5,168 Posts
    • 11,946 Thanks
    brit1234
    I agree prices are to high in some areas, but I don't agree that it is entirely down to government intervention to prop up housing market otherwise property would have boomed everywhere. Most of the measure taken were to protect economy not prop up housing market. What is need is more property in areas where it is needed the most or somehow to spread demand more evenly around the country.
    Originally posted by ukcarper
    It's not totally down to govenment intervention but makes a large part of it. You have the whole foriegn investors issue which was focussed on certain areas of the country and not others, however in the areas where they invested heavily it caused ripples outwards,

    Govenment policy destroyed savings too which lead to lots of money being taken out and put into property instead. There are massive consequences when you attack free markets and result in asset bubbles such as housing.
    Scams - Shared Equity, Shared Ownership, Newbuy, Firstbuy and Help to Buy.

    Save our Savers
    • ukcarper
    • By ukcarper 15th Oct 17, 7:29 PM
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    ukcarper
    Nah, the debt burden on average people is miles different to what it was back then, small interest rate changes will affect things big time. The Tories are doing their best to hand the next election to JC, and he will quickly get us into troubled waters with international markets IMO.
    Originally posted by Crashy Time
    What makes you say that since 2007 affordability criteria has been tightened so people are less likely to default.
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