Experiences of the last housing market crash?

Pauper_Princess

Hi all,

Was just wondering if anyone could tell me anything about the housing market crash in the late 80s/early 90s? I was still at school then and living with my parents in a council house, so I know next to nothing about what happened to house values and how peoples' lives were affected.

On another site I was reading that some finance people are predicting falls of up to 30%... does this mean that a house valued today at say £150,000 would fall to about £100,000? Sorry if I'm being really thick

albacore1854

an hour from London

1 bed flats sub 30K, 3 bed semi detached 65K, 3 bed detached 80K, 4 bed detached 95K.

15-17% interest rates, so a 100K mortgage was costing 15-17K a year to service without repayments.

albacore1854

That was around 1991.

roswell

I was at school at the time but we had just emigrated over from south africa, my parents were renting a property in borehamwood 2 bed terrace, the jist of it went as follows.

My parents were paying rent on the property that didnt cover the land lords mortgage, the land lord was living in a 1 bed flat with his family as they couldnt afford the mortgage on the house they were paying rent for the flat and part of the mortgage on the house (what the rent didnt cover) , our imediate neighbours sold up in 1996 and had to carry £20 000 worth of negative equity to there new property, they had bought at £90 000 and sold at £65 000.

roswell

We moved out of that property after 18 months as my dad couldnt find a job and we couldnt afford the rent.

Alan_M_2

You will get anecdotal evidence from individuals, these are very area specific and individual specific and should not be taken as the country as a whole. I Live in Surrey.

I bought a house in 1989 - a 2 bed terrace for £72,000 (which had been on the market for low £90K's). I'd put a £9,000 deposit down and organised a £63,000 mortgage over the next few years the house was improved with a new bathroom, kitchen and central heating.

A combination of things from the withdrawal of Miras (tax relief on mortgage payments) and rapidly increasing interest rates amongst other things lead to a stretch on finances.

People were finding it hard to keep up payments (including me) and houses were having to be sold, this creates a pyramid effect as more houses go on the market, prices tumble due to oversupply, it becomes a buyers market.

After only 3 years the value of my house had dropped to High £40K's to low £50's from the £72K I'd paid, and with the interest rates the mortgage had increased to more than my net income (on a 4 x multiple).

Unfortunately I didn't have any family able to help my out financially as they were in similar positions otherwise I would have done what I could to hold on to the house, but I had to let it go as I simply could no longer afford to keep it.

bobsa1

We bought in 1988 for £28,000, six months before the house had been bought by the people we bought from for £18,000. 1 Year after we bought it we sold for £38,000 and it stayed at around that price for about the next 9 years (we are in the north of england so didn't see massive price drops at the bottom of the market but did see complete stagnation and some price falls)

At the same time a house we were later to buy, was a new build sold for £98k (a lot of money then) we bought it six years later after it had been repossessed as people unable to keep up payments, for £72K.

In this area the top end of the market and new build suffered most. We were late to see the house boom and later seeing the fall than the south of the country but for many it still hurt!

Pauper_Princess

Wow, thanks for your responses guys - that was quick!

Alan M - your story sounds just so much like so many people today! Decent offer against the EA valuation, good deposit... yet the house falls so much in value :eek:

So even those of us who think we're being sensible today, can still be open to this kind of scenario...?

bobsa1 - aha! I too am in the north (near Leeds but without the benefit of the recent Leeds rises in values!!). Can I ask, what kind of prices were the cheapest houses going for at that time? Round here, now, a 2 bed terrace is upwards of £125,000!!

bobsa1

Your probably not far from me, we're near Beverley. The first house we bought was in Hull and it was a two up two down, no heating or double galzing, needing new kitchen etc.but in nice area. Cheapest you could get at the time was about £8k (I know that sounds mad) back to back terrace, horrible area, no bathroom etc.

Cheapest you would get our first house today would be £120k. You can still get houses in Hull for about £90k but in fairly bad state of repair/area.

House we bought as a repo at £72K in 1994/5 sold a month ago for £225K (wish we'd held onto it now)

read in the local property guide they are predicting 10-15% growth this year, in this area. Don't know if it will happen, but lots of demo of poorer areas of Hull going on and inward investment of over £200 million over next 2-5 years so may see further increases.

Pauper_Princess

I don't read the housing papers round here any more, it's too depressing. Before Christmas the 2 bed terraces were starting to creep up towards £130,000

Not sure where Beverley is, isn't it quite rural though? Probably more scope for growth there than in an old mining town full of Cash Converters and pound shops

lynzpower

rural areas are certainly not immune from drops in prices.

If a major crash occurs, moving to a rural area might put movers from cities off given
a) fuel costs and travel times
b) difficulty in achieving employment in rural areas

I believe that living in the countryside, is more expensive than living in towns and cities, public transport is practically nil in some areas, less choice, less bargains, and less work.