What has to happen for house prices to come down where I live?

penguine

I haven't been on this forum for the past few years. Although I firmly believe house prices in this country are ridiculously, unrealistically high, I got bored of the subject and moved on to other things. Instead of buying a house, we decided to rent one.

I have been watching house prices in my area pretty closely, off and on, for the past 5+ years. It's a 1930s London suburb, not too trendy but with good primary schools and public transport connections. And prices are definitely not coming down, not at the moment anyway. There was a big dip during the credit crunch in 2008, and houses were selling well below asking price until late 2009 at least. But since then they have rebounded and if anything are higher than the peak of the market in 2007. Most houses that go on the market sell very quickly and from individual properties I've been watching on Rightmove, at very close to their asking price.

Obviously things are different in other parts of the country, but I'm starting to wonder what it would take for house prices to really fall where I live. Another credit crunch would definitely do it, but what other possible scenarios could deflate this bubble in the next few years?

joe_blotts

As you say Housing bubbles don't pop, they deflate slowly, and it often takes years. Japans housing market has been deflating for 20 years and are now down 80% since their highs 2 decades ago. I don't think house prices in the UK will ever truly 'crash' but they may drift lower to sideways for many many years. Another banking crisis might speed up the process though and we may just get one courtesy of the EU. A massive round of global QE though could cause prices of everything to rise, including houses. Who knows? wait and see.

Thrugelmir

penguine wrote: »

Obviously things are different in other parts of the country, but I'm starting to wonder what it would take for house prices to really fall where I live. Another credit crunch would definitely do it, but what other possible scenarios could deflate this bubble in the next few years?

The area going out of fashion. Failing schools perhaps?

Turnbull2000

They won't. And the bubble passed five years ago. Current prices are a reflection of established market conditions i.e. rapid population growth, very little house building, investors setting price floors, double income norm, long term low rates etc.

HAMISH_MCTAVISH

yertiz wrote: »

This maybe?

Why do you keep spamming moneyweek subscription links?

moneyinmypocket

In order for house prices to go back to what they where in late 90s you would need a time machine

Sorry to burst anyone's bubble but house prices have withstood v though economic times and still going strong. If you can afford a house get one if you can't rent and accept things as they are

moneyinmypocket

House prices will start booming again

paddyrg

As you can tell, nobody knows what will happen, but there are a lot of people who will state as fact that what they want to happen will happen - even if it's the exact opposite of the post above or below it, and mutually exclusive!

Nobody knows, so many factors involved... if they did know, they'd be multi-millionaires on their yachts and not on this forum.

ruggedtoast

penguine wrote: »

There was a big dip during the credit crunch in 2008, and houses were selling well below asking price until late 2009 at least. But since then they have rebounded and if anything are higher than the peak of the market in 2007.

I never really noticed the big dip, certainly not in the SE and London.

I remember a slight dip in real world observation and a lot of noise about stats going down. I thought it would only have been a matter of time before asking prices actually dropped to mirror the Haliwide reports but they never really did.

I was pretty sure that prices would fall to the point where I could afford something but I was completely wrong. In the end it all worked out for the best and we were very lucky with the place we eventually bought, but that was dumb luck and circumstance rather than cleverly guessing the market.

I dont know what it would take for prices to really fall, people to stop wanting them I suppose.

penguine

Thanks for all the replies.

I'm not expecting prices to fall back to 1990s levels, but I would feel like a mug paying more for a property this year than we would have paid in 2008 ... given that the UK's supposed to be in the biggest recession since the 1930s, and it doesn't look like an economic recovery is around the corner either.

I'm mostly curious about what particular economic circumstances would exert a downward pressure on house prices in this country.

GeorgeHowell

There's only two things that drive house prices -- supply and demand. Prices will fall if supply increases or demand decreases or both. Supply is not likely to increase substantially soon because the recession is bound to make house builders wary of overcooking it. Demand is buoyed by low interest rates = lower mortgage payments. The biggest single thing that could happen to supress demand would be mortgage rates going up by 2 or 3 percent. People tend to buy the most expensive house they can afford -- ie afford the payments. If they can afford less they will offer less and if buyers want to shift their property they'll have to come down in price. There would be a delay factor due to the inertia of sellers going into denial and not being willing to sell for "less than it's worth", but over a few months prices would begin to drop.