Prices to fall as "irrational" rally ends

Harry_Powell

Generali wrote: »

For me the biggest downside risk to house prices has to be pension provision in the UK. If pensions don't come through as advertised (basically inevitable) then people will most likely be forced to turn to their other assets to support them.

For most people, the only significant asset they have other than a pension is their home.

Some people have homes they can't downsize from as they're already modest properties, others will be no better off downsizing after fees. These will just have to stay put and live off their state pensions and whatever is left in their personal pension. A large number of people have no personal pension whatsoever, so any falls in the stockmarket are immaterial. Other's retiring now will have have FS scheme pensions that are unaffected by the crash (in as much as the company backing the scheme may have a shortfall, but it doesn't impact the pensioner).

I can't see the pensions issue being a risk to the housing market, whatsoever, never mind the 'biggest' risk.

Generali

Thrugelmir wrote: »

Where are the banks going to raise the capital to lend from? The major lenders are contracting their overall loan books due to the lack of competetively priced wholesale funding and low retail deposits held. And this is before higher capital requirements are imposed on them.

It's a good question. QE seems to be the plan that the Government has.

Other than that, I guess increasing incomes and corporate profits leading to higher deposits into the banking system. That's not exactly a short term fix!

IveSeenTheLight

Harry_Powell wrote: »

I can't see the pensions issue being a risk to the housing market, whatsoever, never mind the 'biggest' risk.

I didn't read that housing market would be at risk because of pensions but that people are more likely to invest in property instead of pensions as it is viewed as a safer investment.

Harry_Powell

IveSeenTheLight wrote: »

I didn't read that housing market would be at risk because of pensions but that people are more likely to invest in property instead of pensions as it is viewed as a safer investment.

If people invest money in housing rather than pensions, then that would be an 'upside' risk, not a 'downside' one, surely because the influx of money would boost house prices?

IveSeenTheLight

Harry_Powell wrote: »

If people invest money in housing rather than pensions, then that would be an 'upside' risk, not a 'downside' one, surely because the influx of money would boost house prices?

I understand risk is what you would lose, reward is what you would gain

Generali

To make myself clear regarding pensions and house prices in the medium term I see the following happening.

1. Government and private companies are unable to make good on pension and (possibly) healhcare promises as massive liabilities are either unfunded (public sector) or only partially funded (private sector).

2. Individuals ultimately will need to raise cash in retirement if the income stream they hoped for isn't there. The obvious way to do that is to sell the house and buy something smaller or in a cheaper neighbourhood.

3. That process is likely (IMO) to be a long lasting and continual drag on the UK housing market and probably the economy as a whole.

Harry_Powell

Generali wrote: »

To make myself clear regarding pensions and house prices in the medium term I see the following happening.

1. Government and private companies are unable to make good on pension and (possibly) healhcare promises as massive liabilities are either unfunded (public sector) or only partially funded (private sector).

2. Individuals ultimately will need to raise cash in retirement if the income stream they hoped for isn't there. The obvious way to do that is to sell the house and buy something smaller or in a cheaper neighbourhood.

3. That process is likely (IMO) to be a long lasting and continual drag on the UK housing market and probably the economy as a whole.

Thanks for clearing that up, generali.

What sort of time frame do you have on this theory? As I posted above, current pensioners are safe with their personal pension annuities and state pensions, people coming up to retirement in the next 5 to 10 years are much more likely to have had the benefit of final salary pensions during their working life, and while their companies may have a deficit in the pension fund, this will not affect the individual employees. People who have longer than the 5 to 10 years to retirement should see their pension pots recover as the stockmarket recovers (many will have made significant strides towards recovery already now that the FTSE100 is around the 5000 mark).

That's if people have a pension at all. Many will be simply receiving the state pension which again will not be impacted by stockmarket movements. I just don't see a sudden rush to the market of "Silver Sellers" forced out of their houses due to the drop in pension income.

LeeSouthEast

My cat comment was designed to be humorous not analysed to death

Harry_Powell

Everything is over analysed in this forum and weighed against whether it will have a positive or negative impact on the price of houses.

I'm amazed anyone on here can get out of bed in the morning. By the time we've analysed the options ahead of us (shower before breakfast or after, slippers on or not, get out of left or right side of bed, readybrek or weekabix, navy trousers or black, raincoat or summer jacket, etc or etc) the day is over and it's time for bed!

StevieJ

Generali wrote: »

To make myself clear regarding pensions and house prices in the medium term I see the following happening.

1. Government and private companies are unable to make good on pension and (possibly) healhcare promises as massive liabilities are either unfunded (public sector) or only partially funded (private sector).

2. Individuals ultimately will need to raise cash in retirement if the income stream they hoped for isn't there. The obvious way to do that is to sell the house and buy something smaller or in a cheaper neighbourhood.

3. That process is likely (IMO) to be a long lasting and continual drag on the UK housing market and probably the economy as a whole.

But should provide support at the FTB level ironically, as pensioners trade down and FTB try to buy.