'50% drops'

Heyman_2

It's been discussed to a degree on some other unrelated threads, so I thought I'd create one especially for this divisive statement!
Personally, I don't think it's beyond the realms of possibility, and it would be very dangerous to dismiss the idea out of hand.
Ignore the statistics for a minute and just focus on a local area example.

No-one who has bought within at least the last 5 years is going to consider accepting an offer for 50% of the 2007 value of their house. I'd suggest that they'd be financially unable to do it. But this will not apply to properties where the mortgage has been paid off in full or no longer applies, such as pensioners selling up, inherited properties and repos.

There was a thread here a couple of weeks ago regarding someone trying to stop their elderly neighbour selling at 'below market price' because it would affect the whole street - this is an absolutely correct assumption. We all know that when surveyors go round to value properties, they take recent sale prices into consideration.

All it would take is for one or two similar properties in an area to go for around half of the 2007 value, and there you would have your 50% drop.

Does anyone think this scenario is out of the question?

Heyman_2

True.

I guess you also can't rule out the influence of Estate Agents, who whilst dying on their !!!!!! at the moment, will still want to get a property sold for the maximum amount possible so that they get the biggest cut they can.

By the way, thanks for posting on my thread, your mere presence has probably guaranteed me at least 3 pages of abusive responses

ManAtHome

I think EAs will be encouraging price cuts - dunno what percentage they charge these days but would have thought they'd be keen to get any sales asap rather than possibly en extra couple of hundred quid if they hold out for a few months.

Anyway, that's how it panned out in the early 90s.

zappahey

Heyman wrote: »

True.

I guess you also can't rule out the influence of Estate Agents, who whilst dying on their !!!!!! at the moment, will still want to get a property sold for the maximum amount possible so that they get the biggest cut they can.

I rather suspect that estate agents' main interest is getting something sold at all. In these times, maximising the income is going to take second place to ensuring that there is an income in the first place.

Alan_M_2

horseinhatman wrote: »

Forget the buyers and the lack of mortgage, the only people selling will be those who for whatever reason have no other option.

Actually this is the most sensible thing you've posted......

However the reverse is also true, those buying now either have been living a time capsule somewhere or have no choice....

Therefore the market grinds to a halt and everyone batons down the hatches....

The credit problems and mortgage issues are compounding the problem and visa versa, it's a vicious circle....but then, it's not a surprise really is it...what is a surprise is how big it's become and the whole scale panic that's set in on a global level.

macaque_2

People can comfort themselves fairy tales or they can face reality.

Over the past few months house pricing has been taken out of the hands of home sellers. Although people are free to advertise at whatever price they like, the actual selling price is being rapidly driven down by the lender's lack of appetite for risk. Some of this process is happening by stealth. The lenders are relying on the buyers to bid the price down, then they send in the valuer to knock another 10% off. Finally they reserve their best offers for 60% loans. In other words, they are already factoring in price falls of upto 60%.

Banks are pushing lending ratios back down to 3 to 3.5 times income. The other factor relates to what is happening to incomes. Truck loads of highly paid city jobs are going to vanish. Elsewhere in the economy, unemployment is rising rapidly. These factors are driving down average incomes rapidly. Its a double whammy.

There will still be a few stubborn souls who will go on advertising their properties at 2003 prices (forget 2007) but that is just window dressing for estate agents.

Like it or not home owners have missed the boat.

Will prices fall by by 50%? Unlikely. More like 60 or 70%.

Heyman_2

60 or 70%? Time to play devil's advocate!

OK, I'll assume you're talking about AVERAGE prices from their 2007 peak.

So, taking a 200K house at 2007 price as an example, you're saying that we can expect to see that house drop to 60K. Really? On what timescale? An 100K flat down to 30K?

BTLs would go through the roof! I know I'd get in on it I could buy a flat for less than 1x my annual income

GDB2222

Alan_M wrote: »

However the reverse is also true, those buying now either have been living a time capsule somewhere or have no choice....

Therefore the market grinds to a halt

Not quite. If forced sales exceed forced buyers, prices have to tumble to entice more non-forced buyers. Of course, that => more forced sellers, and so on. It's not endless, because there will be buyers around once prices get lower, but any non-forced buyers are going to want very low prices.

dopester

I noticed a house in my hit-list areas start the year at £320,000, to £275,000 a few months later, and has just changed again, going to auction with a guide price of £160,000

Maybe it will get that or beat it at auction. Yet it is an ugly-ish 3-bed semi at £160,000. The unemployment and pay-cuts storm coming, and the recession and deflation mix makes it seem very expensive at £160K to me.

johnycoldears

Heyman wrote: »

60 or 70%? Time to play devil's advocate!

OK, I'll assume you're talking about AVERAGE prices from their 2007 peak.

So, taking a 200K house at 2007 price as an example, you're saying that we can expect to see that house drop to 60K. Really? On what timescale? An 100K flat down to 30K?

BTLs would go through the roof! I know I'd get in on it I could buy a flat for less than 1x my annual income

If the banking crisis gets any worse you'd need that 1x annual income in cash. In order for property prices to have dropped 60 - 70% lending will virtually have to have ceased.

Come to think of it if a complete credit freeze does occur houses could end up costing less than food - did you see that house (more of a shack really) on the news last week that sold in America for $1.75 ?

macaque_2

Heyman wrote: »

60 or 70%? Time to play devil's advocate!

OK, I'll assume you're talking about AVERAGE prices from their 2007 peak.

So, taking a 200K house at 2007 price as an example, you're saying that we can expect to see that house drop to 60K. Really? On what timescale? An 100K flat down to 30K?

BTLs would go through the roof! I know I'd get in on it I could buy a flat for less than 1x my annual income

You assess reality from where you stand. If someone had told you in 1990 that a 2 up 2 down in a dull midland town would fetch £200k in 2007, you would have called for an ambulance.

BTLs would only go through the roof if rents stay at current levels. I don't see how current rents can be sustained.