'50% drops'

Max_Headroom_3

Heyman wrote: »

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

I didn't say that they would. Those that don't sell will have zero effect on the market either way, effectively they're not in the market (the market is sellers and buyers).

Heyman_2

macaque wrote: »

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.

No - the high-paid jobs are going because the banks shot themselves in the foot by exposing themselves to the American sub-prime market. The rest of the private sector is feeling the knock-on effects of that. It isn't a concerted and planned effort to solve the asset bubble!

Hey look, it's another article about the booming rental market (albeit in America) - here.

And at the risk of sounding like HIHM, my friend put his flat on the rental market a couple of weeks ago as he's off travelling. Had his first viewing the next day, and the couple concerned took it straight away.

Heyman_2

Max_Headroom wrote: »

I didn't say that they would. Those that don't sell will have zero effect on the market either way, effectively they're not in the market (the market is sellers and buyers).

Maybe I misunderstood you - you said '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'. So how will we lose them if they're not selling up?

We may be at cross-purposes here....I agree with your latest post, anyway.

Heyman_2

kennyboy66 wrote: »

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.

Surely an 100% fall = free flats?

Max_Headroom_3

Heyman wrote: »

Maybe I misunderstood you - you said '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'. So how will we lose them if they're not selling up?

We may be at cross-purposes here....I agree with your latest post, anyway.

Ah yes, my mistake I didn't make that very clear.

I should have said you lose huge swathes of the BTL amateurs buying properties which (in large part) fuelled the last boom'.

As you rightly say, many who have already bought will sit tight (some whether they want to or not as they won't be able to afford to sell) but they won't affect the market as buyers (which is of course what drives it).

Apologies for confusion.

penguine

Heyman wrote: »

Surely an 100% fall = free flats?

Or just flats which won't sell at all, at any price.

Heyman_2

Max_Headroom wrote: »

Ah yes, my mistake I didn't make that very clear.

I should have said you lose huge swathes of the BTL amateurs buying properties which (in large part) fuelled the last boom'.

As you rightly say, many who have already bought will sit tight (some whether they want to or not as they won't be able to afford to sell) but they won't affect the market as buyers (which is of course what drives it).

Apologies for confusion.

Oh ok, yeah it makes sense now! No probs

Dithering_Dad

Heyman wrote: »

Surely an 100% fall = free flats?

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.

Max_Headroom_3

Heyman wrote: »

Surely an 100% fall = free flats?

Yes, and with huge oversupply it could happen.

Ironically I was of the opinion it couldn't, but as someone pointed out, if a huge city centre block is 3/4 empty and for sale or for rent but without buyers, then what value do you put on them?

I think in reality there will be a bottom value, whereby people will buy just because they're so cheap, but it theoretically could happen that they just become worthless.

Bear in mind they will have a mainenance charge applied, which will be high as the building is only recouping it from 1/4 of the properties, and the maintenance is likely to be shoddy as there simply is not enough money to fund it so these places could end up very delapidaded.

Just to put a real context on this, in the last crash (early '90s) I had half an idea of buying some places to rent, but was on a very low wage so couldn't really get the money together plus I wasn't convinced prices would go back up (see what I mean about sentiment, how wrong was I!?) I looked at a converted villa that was about 12 flats. They were all let out by owners who couldn't sell, the place was a tip because no one was paying maintenance, and a one bed flat was on the market for £11,000!! And I walked away because the place felt like a slum and prices were dropping (actually they weren't by then, but I believed they were).

Just to add, thinking about this I seem to recall the estate agent suggesting an offer of about £9K would get it. Imagine that! There were others for sale at £13-15K too, with 20:20 hindsight I should have bought them all, but then I couldn't have got the funding, a bit like now of course...

brit1234

Heyman wrote: »

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

Hi, I'm one of the few on this board who think over 50% falls are very likely, my reason why:

1, The banks have been burnt and still getting burnt as they have lent to much money. They use to fund homes via deposits but recently they have turned to investment vehicles instead by selling off their mortgages to 3rd parties allowing more access to funds. This caused the credit crunch and sub prime incidnts and that area of funding is well dead. That leavesthem reliant on savings which they can lend £10 for every £1 of savings. This pretty much restricts mortgage lending to 3.5 times salary and a deposit. That in turns means about a 50% fall in prices on what the banks will sensibly lend.

2, House prices have gone up at an unsustainable high rate. Traditionally the only way an asset can go up above inflation is to add value to it. These properties were going well above inflation and the cause was irresponsible and unregulated lending. Some people were saying it was a shortage of property causing the huge price rises but I say it was over lending. To prove this look at the market today, there are over 15 sellers to very 1 buyer, the socalled demand hasn't died away but the lending criteria has. Quite simply we have a huge property bubble based on loose lending which has now ended and is taking banks down by the day.

3, At present average prices have fallen about 13-14% belowthis time last year. On present trends it will be a 20% fall by Christmas. There are no signs of recovery in the market and infact with us going into recession and widespread banking collapse it is highly likely the housing market will fall further. House price crashes normally ast about 4 years, we are in the first 6 months and we have the biggest falls on record. With unemployment and debt rising the trend is clearly down.

4, Buy to Let and self cert (British sub prime). Apart from the major increase in lending over the last decade the other big difference is buy to let and self cert mortgages. Pretty much all the buy to let lenders have stopped lending, gone bust, been taken over, or hiked up rates and lending restriction. Many of these people have large portfolios so as it get more expensive to fund especially around remortgaging time. Margins are being cut short, rents are falling (ARLA) voids increasing as unemployment rises. Many are highly geared investing capital gains from recent house price inflation as deposits for new properties. So as prices have already fallen 14% it makes it very exspensive to remortgage with the lower LTV required. It is my belief that all the properties flooding auctions from their reposesions will allow the big drops which other sellers can't bare. Just look t the Wilson family(see other thread), they are increasingly in trouble as prices fall and are now looking to sell some properties. If they go bust thats 800 odd properties extra up for sale in a depressed area. Then you have all the people who have lied about the saliries, there has been a big clamp down. How are they going to remortgage?

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.

60-70% are also possible due to a over correction. Remeber it takes time for sentiment to change so when we do reach bottom people make not recognise and the market will fall below purely on sentiment.