'50% drops'

Cannon_Fodder

I think it most unfair to disparage people's comments on here, because they may have difficulty with Maths.

It might not be a high profile disability, but its painful for those concerned, nevertheless.

http://www.telegraph.co.uk/earth/main.jhtml?xml=/earth/2008/06/07/scidyscalc107.xml

WTF?_2

Max_Headroom wrote: »

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 "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.

It's not just the 'prices going down sentiment' now. It's the "I could lose my income at any time" sentiment that's going to do the damage now.

And then of course, the actual job losses are going to start kicking in in earnest. That means lots of people will suddenly find themselves unable to service the whopping debts that they have accrued for the privilege of owning their own home.

Interest rates are sure to be slashed soon - maybe even today. But it's way too late for house prices.

Max_Headroom_3

I think most people would regard 50% drops (the subject title) as property halving in price. That's how I understand it.

kennyboy66_2

Heyman wrote: »

Surely an 100% fall = free flats?

Its an extreme view and in fairness can really only happen if the flats come with a hefty communal repair bill. So although you could pick up a flat for next to nothing, you have a repair liability.
Looking at some flats they don't look as well built as some concrete 60's monstrosities.

Once squatters & druggies get in, would you live there even for free?

You will find that some developers (Urban Splash) took whole blocks of flats from councils for nominal sums but had to completly renovate & refurb them.

Max_Headroom_3

!!!!!!? wrote: »

It's not just the 'prices going down sentiment' now. It's the "I could lose my income at any time" sentiment that's going to do the damage now.

I think it's both.

And then of course, the actual job losses are going to start kicking in in earnest. That means lots of people will suddenly find themselves unable to service the whopping debts that they have accrued for the privilege of owning their own home.

Very true, And those forced sales will set the level for the street to some degree. As soon as a semi in a road of identical houses sells for £100K (say) then no one will want to pay more.

Interest rates are sure to be slashed soon - maybe even today. But it's way too late for house prices.

I don't understand all this furore for dropping interest rates, does anyone really think the banks will pass this on to lenders?

Heyman_2

brit, thanks for your summing up of most of the current issues with the market.

I think the best point you make is about remortgaging. Any current BTL'er on a Fixed rate is going to have a nasty surprise when they find they can't get a new deal, and if anything that's what will cause repos etc.

However, how will this translate into long-term falling rents? Surely a decrease in rented property through repossesions, and an increase in the demand for rented property as a result of the housing market crash will result in sustained or higher rents? It's a simplistic assumption, but I can't get away from it as I've seen nothing yet to convince me otherwise.

Getting back on topic - when do you think we'll see a 50% drop in the overall market, rather than just overpriced city centre pap and repos?

Dithering_Dad

brit1234 wrote: »

It is highly likely we will have 50% falls (which in reality brings it down to normal levels). 50% falls are increasingly happenening in the Northen Cities such as Manchester and this crash has barely got started.

As you put so much time and effort into your post, I just haven't the heart to poke holes in it. I just thought though that I'd mention that there are holes just so any newbies who have just stumbled into the forum didn't spend all their deposit money thinking they will be able to pick up a 4 bed detached in Didsbury for £40k. :rolleyes:

kennyboy66_2

Dithering_Dad wrote: »

It makes as much sense as most of the clap trap spouted by the hard-core HPC brigade.

I mentioned a possibility of a 150% fall (where the flat owner pays you £50k to take it off their hands) and one of the regulars was 'nodding' sagely and saying that it would probably happen.

Madness.

I could point to councils who pay a housing corporation to take blocks of flats off their hands.
They do however take responsibilty for putting right years of poor maintenance.

Heyman_2

Max_Headroom wrote: »

I don't understand all this furore for dropping interest rates, does anyone really think the banks will pass this on to lenders?

No they won't, not on Fixed Rate products or perhaps even their SVRs (they'll likely just adjust their own + rate to swallow up the BofE decrease).

However, if you're on a BofE Tracker like me then you do stand to gain from interest rate drops

I know that Generali was talking about this on another thread though, and was saying that the banks could actually weasle their way out of this commitment if they wanted to Would entirely defeat the point of a Tracker for me though, if the bank suddenly decided not to pass on a BofE decrease in rates! :mad:

Max_Headroom_3

Heyman wrote: »

brit, thanks for your summing up of most of the current issues with the market.

I think the best point you make is about remortgaging. Any current BTL'er on a Fixed rate is going to have a nasty surprise when they find they can't get a new deal, and if anything that's what will cause repos etc.

However, how will this translate into long-term falling rents? Surely a decrease in rented property through repossesions, and an increase in the demand for rented property as a result of the housing market crash will result in sustained or higher rents? It's a simplistic assumption, but I can't get away from it as I've seen nothing yet to convince me otherwise.

You can only rent a property for what renters can afford. They only have so much money. As there is less money in the system, so rents will have to follow. Money can't be created out of thin air (well it can, but only for a bit, hence the mess we're in now!)

Also, for every rental that gets repossessed, it has to come back as housing, either to rent again, or to a buyer (who is either a FTB vacating a rental property or moving out of parents and so not renting and leaving another rental free, or is vacating an owned house which will have to be bought again by a FTB or someone moving on). So the numbers don't really change when a rental is repossessed.

Add to that the amopunt of people renting property they can't/won't sell in addition to all the dinner party dabblers who have to rent at any cost because cheaper to subsidise low rent than get none, and there is a lot of renting competition out there.