'50% drops'

Max_Headroom_3

!!!!!!? wrote: »

50% drops are already a reality in some places:

http://www.ft.com/cms/s/0/1235fb4e-8f5f-11dd-946c-0000779fd18c.html?nclick_check=1

These are the very extremes though, and only because they were way over-priced even at 2007 levels of ridiculousness. I don't think you can fairly apply this to the mainstream trend, any more than pointing at that rogue stat that saw prices going up in one part of the country (apparently) can be fairly applied as a trend.

stevetodd

dopester wrote: »

Yes, with unemployment shooting up, firms going under nearly every day, adults moving back to their parents' (boomerangs), lenders on life-support all over, deflation setting in, and even the king and queen of BTL beginning to sell with quite some worry on their minds.

Boom boom dead for your rents.

Luxury! we used to dream of boom times like that back in the good old days of recession. In the last recession I had to sell my 500k house for sixpence and move into a hole in the ground with a taupaulin for a leaky roof. Unemployment? we had to get up half an hour before we went to bed and pay for the priviledge to go to work, you lot these days don't know what recession is

macaque_2

Heyman wrote: »

I disagree with you on both counts.

You first point just ignores 17 years worth of inflation and economic evolution. I could make the same example about a loaf of bread or a weekly shop. Hell - we could go back even further and say that no-one in 1960 would believe that a house such as the one you mentioned would go for 200K (more like 2K!).

Rents will be sustained whilst there are people willing to pay them and there are landlords (or ladies) who have big enough mortgages to service. Given the hysteria on here about nobody buying etc, I'd say the rental market is in for a bit of boom of its own.

It is no secret that the UK has been paying itself far too much for 10 years and that has also contributed to an asset bubble. In particular, the city and public wages have gone way beyond sustainable levels.

Unlike the 70s we are now competing in a globalised economy and our scope for inflating our way out of an asset bubble is much more constrained. We have to restore our competetiveness through a process of wage deflation. This is already happening. You don't need to give people pay cuts to reduce salaries, you just get rid of the highest paid jobs. Companies are doing that all over the country and the city is laying people off by the busload. The public sector are still doing well however they cannot avoid the consequences of a rapidly falling tax take.

In the case of rents, these are already falling rapdily. Rents are very senstive to wages. Falling salaries and rising unemployment are death to the rental business and landlords who don't move with the times will be unable to find tenants.

Max_Headroom_3

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

I'm not sure that's the case. The "success" of BTL of late has been almost solely based on capital gains, no one really got into it just to take the rent money.

With prices dropping (or perceived to be, whether they are at that point or not) you lose huge swathes of the BTL amateurs that fuelled the last boom, leaving the professional BTL landlords who are in the business of renting property for the income, rather than seeing tenents as a rather inconvenient way of funding their properties whilst they wait for them to soar.

And there simply are not enough real landlords to mop up massive house price falls. Sure, some will buy and they'll be pleased with what they have and go off and happily rent them, but the Dinner Party Dabbler won't be anywhere to be seen so there'll still be way more sellers than buyers even including wily landlords buying cheap.

Heyman_2

It all depends what qualifies a '50% drop' as a reality for you.

For some people it's new build city centre flats. For others it's houses they've found on Property Bee that have been 'reduced'.

For me - it would be seeing it down my road and in the surrounding area. I had my house valued recently for a remortgage by a RICS surveyor and it was 7% up on the price I paid at the end of 2006. So for me, there's some way to go yet - although I wouldn't say it DEFINITELY won't happen. Who knows what's going to happen? Who knows when the banks will start lending again?

Walletwatch

horseinhatman wrote: »

You make the point really, but all this 25% this, or 50% that is mainly a load of old balls because there is little to no decent stock on the market, and when a decent property does come on the market there is enough interest to get asking.

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

Hey, HIHM, great to have a genuine contribution from your end to what has been a good engrossing discussion so far.

How did your valedictory speech at the Trolls' farewell party go? (meant to be a good-humoured dig and nothing more)

Dithering_Dad

Walletwatch wrote: »

Hey, HIHM, great to have a genuine contribution from your end to what has been a good engrossing discussion so far.

How did your valedictory speech at the Trolls' farewell party go? (meant to be a good-humoured dig and nothing more)

Not wishing to start an argument, but isn't this trolling?

kennyboy66_2

That's by far the best article I have seen on the mechanics of mortgage fraud. Lets hope that amongst the people who will be made redundant by developers & surveyors there are a few "whistle blowers" who have gathered some evidence in the connivance in this by well know developers.

I am no doom merchant, but it would not surprise me if there are effectively 100% falls for a minority of flats in some areas. This stage will be 10 years after the flats were built.

This seems extreme, but it happened to some right-to-buy flats in the North West in the last property crash. They became so blighted & required such maintenance that councils ended up buying them back.

Heyman_2

Max_Headroom wrote: »

With prices dropping (or perceived to be, whether they are at that point or not) you lose huge swathes of the BTL amateurs that fuelled the last boom, leaving the professional BTL landlords who are in the business of renting property for the income, rather than seeing tenents as a rather inconvenient way of funding their properties whilst they wait for them to soar.

Who says that the 'Dinner Party Dabbler's as you call them, will sell up in their droves? What would be the point in them trying to sell now, in a failing market with no buyers?

Another link for you -
Confidence remains in the UK Buy to Let market

Max_Headroom_3

The hardest thing to predict is the power of sentiment. The last boom was created by the "houses going up" sentiment, the thought that, no matter how ridiculous the price, if you didn't buy at that price it would be more in a month. This of course was fuelled by banks hurling money at people to enable them to act upon this sentiment.

Once the prices falling sentiment takes hold (and I don't think it has yet, a lot of people, espically sellers as it suits them to, still choose to believe that this is just a "blip" and things will "get back to normal") then we enter the exact same relms in reverse, no matter what the price people will believe it will be cheaper next month if they just hold off a bit longer, and sellers will think that no matter how low the price, it will be lower next month.

Just as house price increase became a self fulfilling prophesy (the fact that people believed it and bought at ever higher prices "proved" it was true so they believed it more, so house price drops could become a self fulfilling prophesy. Thing is, on the way up it is eventually capped by the money running out (as it has with disasterous consiquences). There isn't the same brake on the way down.

Sentiment is a powerful driver in markets, both up and down (as the last boom has proved) and it's not "factual", you can't put numbers or analysis to it.