A big house price correction appears to have started.

andybenw

macaque wrote: »

Like many people, I would have preferred a correction years ago but thats not the way things go. We have seen a lot of false dawns over the years but it is difficult to see how the current slide can be stopped.

The problem with a slide today is that no one knows how far it will go or what damage it will do in the process. Prices were allowed to go too far into lala land.


http://www.whatmortgage.co.uk/news/property-price-reductions-grow/

Unfortunately stagnation is all you are going to get. The crash has already taken place. I hope you have been saving your pennies over those long years you have been paying rent, as at some point unless you wish to continue to do so for the rest of your life then you are going to have to bite the bullet and get on the ladder/snake.

StevieJ

RenovationMan wrote: »

One does wonder how long the same people can have the same arguments for. Still, it passes the precious time we have before we enjoy the quiet of the grave.

A cheery thought

nollag2006

My favourite HPC bit still has to be the 2003 clip, still on HPC.com, showing a couple of the illustrious founding fathers of that website on London Tonight proudly boasting how they had STR’d in 2002 and were going on a round the world trip planning to return to London in 2005 “when house prices had fallen back to a reasonable level”. Even at the bottom of the crash in early 2009, I don’t think London house prices fell back to the 2004 level.

Lovely to see them lose their shirt on that bet.

paulmapp8306

nollag2006 wrote: »

Shame you missed the opportunity to buy when we had that 20% fall from peak in early 2009.
Never mind – there’s bound to be another crash in about 12 – 15 years. That’s typical cycle of the house price market

:rotfl:

Prices where Im looking are lower now than after that 20% fall - and still falling.

paulmapp8306

wotsthat wrote: »

If you can't get a mortgage you can't buy a house whatever the price.

Depends how much of a mortgage.

I earn £40k - and the most I can get a mortgage for is £138k. That means assuming a 15% deposit (which is still hard to save for) is a max property price i can look at is ££158k

£40k wage is a fair bit above national average - so its safe to say that as the average person cant afford current prices, with present mortgage restrictions even if they CAN get that mortgage.



The current average wage (worked out from http://career-advice.monster.co.uk/salary-benefits/pay-salary-advice/uk-average-salary-graphs/article.aspx) is £27583.

Current mortgages are maxing out at around 3.5 times you wage, so £96540. Add even 20% for a deposit, and your talking £115k. That is where the average house in the UK should be priced, in order for the average wage earner to be able to afford it - and thats with a 20% deposit as Ive said.

The only way prices can realistically be above that - is with greater lending. 5x wages used to be possible a few years back - and even 6 times. That is one reason why prices got so high. currently most lenders wont go above 3.5x - hence why prices are still falling (slowly). If lending went back to that level - then the average wage earner could possibly get a £138k mortgage, and then the 20% deposit makes the average price around £165k.

f course if there are two wage earners you could get more - but even if both are "average" earners that still only gives a max mortgage of £193 - plus your 20% deposit = £230k.

BUT - and its a big but - how many households currently have two earners, both earning at least the national average wage? Thats the problem right now. Lower wages and few jobs aroud, means less households have the income required - and lenders cutting back to 3.5x wages from 5x - and THATS why houses are unaffordable, even at todays prices.

Conrad

macaque wrote: »

We have seen a lot of false dawns over the years but it is difficult to see how the current slide can be stopped.

You have just exhibited classic confirmation bias. It is very likely to be a false dawn but as ever with this psychological traite, people will keep expecting 'thier bir prophecised event' to be just around the corner, just keep postponing ad - infenitum.

You will right now be filtering out evidence of the comming propserity and at the same time taking notice of factros that appear to support your view.

My prediction in Discussion Time, is that we will see a clear new era of prosperity emmerging by summer next year. And yes the evidence is there if you WANT to see it.

Conrad

PS - one downside risk for landlords is that the new rules which will mean HB being paid to tenants will prove to be costly for some landlords and make finding a tenant perhaps harder (unless the tenants, unable to fund a willing landlord, instead get a job).

paulmapp8306

Oh - i will add, i didnt say prices WILL fall that low, or indeed fall any lower than they currently are. TNH I m expecting prices to remain roughly where they are for the next couple of years, and then to start rising SLOWLY.

Ultimately it will depend on two things.

1. The economy. Unless householders are in jobs, paying at least the national average, and feel safe in those jobs there not going to get/try to get those mortgages.

2. Lenders. unless they start offering 5x and 6x wages again, then the average joe wont be able to borrow the amounts required to but a house, regardless of 5%, 10% or 15% deposits. Of course if they can find 20%+ they may be able to afford something.

wotsthat

paulmapp8306 wrote: »

Depends how much of a mortgage.

I earn £40k - and the most I can get a mortgage for is £138k. That means assuming a 15% deposit (which is still hard to save for) is a max property price i can look at is ££158k

£40k wage is a fair bit above national average - so its safe to say that as the average person cant afford current prices, with present mortgage restrictions even if they CAN get that mortgage.

My comment was made in response to a poster who appeared to be implying that because mortgages were difficult to come by that prices would somehow reduce to levels at which people could get mortgages.

Looking at your example a BTL can buy this place for 25% down and get a sub 4% fixed rate mortgage. On a repayment basis that's around £600/ month for 25 years. Not sure what the rental returns would be on this but I'd bet that even though the average single person can't get a mortgage there will be someone who can and can then rent it to the average single person. i.e. there's potentially still a market without prices having to come down.

That house is probably in reach of a couple on average wages too.

Single people on average wages have probably always struggled to buy the average house - I don't think this is anything new or that prices have ever reduced to accommodate them.

nollag2006

paulmapp8306 wrote: »

Prices where Im looking are lower now than after that 20% fall - and still falling.

Really - where's that ?

Tripoli?