House price crash?

nonsensefactory

homer_j wrote: »

Where would all the people live if this was to happen?

I am not wanting to sound like I am protected in anyway because I am not- my property value will fall along with everybody elses.

I have taken precautionary steps to fix my mortgage for the next 5 years on the basis that I know that its the ability to repay the debt that counts.

If, or when as you may say, my equity subsides due to house prices falling then my line of thought would not be one of panic and lets sell. It would be to continue paying and to ride it out.

Property has never lost out over a 7 year period (and I know that there is always a first) but surely keeping your mortgage repayments affordable, protecting your income and life correctly will minimise the risk?

There will be a lot of people who will simply be pushed over the edge I am sure if what you say was to happen but I think if you were to think that people still needed a place to live and someone has to own that house so I think my job would be fairly safe. The argument comes down to one of my first posts on here which is that Demand outweighs supply and until that is resolved, I cannot see there being a crash - only a slow down (which is happening right now and will do probably when HIPS come in - and that in itself may make demand rise as supply will lessen due to people not moving).

Where will people live ? Those with a job will carry on paying the mortgage, some will rent rooms, move back to parents, some might buy (as I said in my post), those unable to buy will carry on renting (not all landlords have IO mortgages, some have large amounts of equity and won't need to sell) my point is that if there is a HPC then your business will suffer just as everyone elses will as LESS people will want to buy in a falling market, just as MORE people want to buy in a rising market : lower mortgages demand equates to less mortgages deals which is why you'd be affected just as a lower demand for cars will affect people in the car industry say.

A 5 year fixed rate sounds like a good idea as interest rates are going higher, and yes, house price inflation has been rampant over the last 7 years and have certainly not fallen, but are repayments for 4,000,000 or so FTB's and BTL landlords who bought in the last 3 years or so really affordable ? We're talking here about mortgages 5 or 6 times the average single income, incomes boosted by overtime, bonuses, both of which will dry up very fast in a downturn.

Demand both now and over the last few years is high for a number of reasons : more people living alone, immigration and BTL, but demand itself has been skewed by lax lending, low interest rates and a view by the public (around most developed nations) that housing is a one way bet.

Take away one of the factors causing the high demand (i.e. cheap credit) and prices will begin to drop, which is what's happening in the States at the moment.

sinking_2

homer_j wrote: »

whilst there is insufficient housing to meet demand - no. I think that it will level out or dip slightly but crash would be disasterous for the economy...

I am in a stable relationship and we are looking in the next 12 months to buy our first property together. my partner has excellent credit, whereas mine is dotted by a couple of ccj's from a past business failing. could you advise as to wether my partner could take out a mortgage and include me as income as right now we feel we will never get a mortgage due to my situation. We are both in steady employment and have a combined salary of 57k pa.

Thanks for taking the time to read this.

youngmoney_2

Guys and girls, seriously. There won't be a crash. Firstly, demand now is still absolutely massive (at least in london and the south east) as anybody trying to buy will currently tell you.

Secondly, most people now know that people who bought a load of property at the last crash are now mostly rich and retired. The nation has learnt from this and even if there WAS a brief crash, most people would a) hang on to their houses if they could or b) buy as much up as possible thereby creating a new flow of demand.

Obviously there are hundreds of economic factors asides from this that may be a negative but think about where you were 10 years ago. Then, everybody was saying the same "well it can't keep going up like this" and guess what, it did.

If you look at the precursors to the last crash, none of these feature today. Inflation and interest rates were both abysmal (even with the rises, they're still great now compared to mainland Europe), employment was absolutely huge, financial knowledge was limited at best and people were willing to take far fewer risks.

Whilst it is possible for a crash to happen, I don't believe the BofE or the government for that matter would allow it to happen.

In regards to the papers, I counted around 25 headlines of major newspapers saying the market was going to crash last year and surprise surprise, it didn't.

At the end of the day, whilst demand is high, prices WILL keep going up. If London stops being the financial capital of the world, if inflation gets really bad, if unemployment levels start to increase rapidly and if we stop getting foreign investors, THEN maybe we might have a little crash, but I agree with previous comments that there might be a little leveling out or mini dip at some point but I don't think even the top experts could predict when it will happen.

nonsensefactory

youngmoney wrote: »

Guys and girls, seriously. There won't be a crash. Firstly, demand now is still absolutely massive (at least in london and the south east) as anybody trying to buy will currently tell you.

Secondly, most people now know that people who bought a load of property at the last crash are now mostly rich and retired. The nation has learnt from this and even if there WAS a brief crash, most people would a) hang on to their houses if they could or b) buy as much up as possible thereby creating a new flow of demand.

Obviously there are hundreds of economic factors asides from this that may be a negative but think about where you were 10 years ago. Then, everybody was saying the same "well it can't keep going up like this" and guess what, it did.

If you look at the precursors to the last crash, none of these feature today. Inflation and interest rates were both abysmal (even with the rises, they're still great now compared to mainland Europe), employment was absolutely huge, financial knowledge was limited at best and people were willing to take far fewer risks.

Whilst it is possible for a crash to happen, I don't believe the BofE or the government for that matter would allow it to happen.

In regards to the papers, I counted around 25 headlines of major newspapers saying the market was going to crash last year and surprise surprise, it didn't.

At the end of the day, whilst demand is high, prices WILL keep going up. If London stops being the financial capital of the world, if inflation gets really bad, if unemployment levels start to increase rapidly and if we stop getting foreign investors, THEN maybe we might have a little crash, but I agree with previous comments that there might be a little leveling out or mini dip at some point but I don't think even the top experts could predict when it will happen.

Demand is only high because the banks are prepared to lend even higher amounts to people who can't really afford it - the market has stopped being logical and is being driven by fear (fear of missing out)
Houses are over-valued by any measure and this has fooled people into thinking they've become richer allowing them to release the equity in their homes and spend like there's no tommorrow. This eventually will stop, the economy will take a nose-dive and take house prices with it. Result : total panic and a house price crash. I'm staying well out of it and renting, saving and waiting for HP's to return to realistic levels

inflation is abysmal, it depends on what you're buying: Chinese DVD's then no, we have deflation, but for every commodity I can think of, we have very high inflation indeed.

If I had a mortgage of £130K (i.e. small 2 bed house price ?) on my salary of £25K (national average), I think I'd be fumbling around in the bottom drawer for the Webley

youngmoney_2

nonsensefactory wrote: »

Houses are over-valued by any measure and this has fooled people into thinking they've become richer allowing them to release the equity in their homes and spend like there's no tommorrow.

Houses are not overvalued. If people are willing to buy at that price, then that is the price they are worth. A house price is never the bricks and mortar of the house, it's simply the demand. On a very simple level, if there was only one person interested in my house 5 years ago and now there are 15, then logic dictates I should get a higher price for my property. Similarly, if demand was high for my property years ago but now nobody is interested, then I'd have to lower the asking price to get a sale.

For example, I know that Foxtons register around 1,000 NEW applicants every single week and I very much doubt they bring 1000 new properties onto the market each week.

I guess it's a measure of risk like Homer J was saying. Rent is money you'll never see again, whereas if you bought a house 2-3 years ago and sold now, you'd (probably) be in a better financial position.

However, nothing is ever for sure and I think in todays market, pretty much any decision you make puts you at a potential disadvantage.

Out of curiosity nonsensefactory, let's say that the market does continue to rise, have you made provisions to buy, or would you continue renting out?

Melissa177

Don't forget those 1000 new applicants each week at Foxtons are also applying to about 20+ other estate agencies!

I don't think the London market is going to dip anytime soon - although it might slow. There is just too much demand out there.

peter999

paulinuk wrote: »

sooner it crashes the better,its all stupid,what good does these crazy prices do1000s of people can never buy,i came off market sold 1bed flat for £28000 now its a horrendos £96000 mad,i was going to retire to krakow but its gone mad there as well.its a stupid world

What are prices like in Krakow ??

Do you have some property websites ??

peter999

Mr_helpful

Their will be a crash or correction at least because the lenders are not going to be lending 5X income if rates rise much more which means that almost overnight people wont be able to raise as much as they need and the only way for prices is down. Its not a big deal for those of us who have sense and save money here and their as after a couple of years of fall then one can buy at a good discount and increase my BTL portfolio.

mystic_trev

Yes - Of course there's going to be a correction, and it won't be pretty and this from someone with a substantial Investment in Property. Apart from rising IR's there's so much debt it can't be serviced.

http://www.creditaction.org.uk/debtstats.htm

"Total UK personal debt at the end of March 2007 stood at £1,318bn. The growth rate increased to 10.5% for the previous 12 months which equates to an increase of £116bn.

Total secured lending on homes at the end of March 2007 stood at £1,104bn. This has increased 11.5% in the last 12 months"

mystic_trev

youngmoney wrote: »

Secondly, most people now know that people who bought a load of property at the last crash are now mostly rich and retired. The nation has learnt from this and even if there WAS a brief crash, most people would a) hang on to their houses if they could or b) buy as much up as possible thereby creating a new flow of demand.

Total bo11ux. You obviously weren't around during the last crash! Many of my friends got badly burnt and some were made bankrupt. Most of them have never really recovered from the experience, and we're talking Central London Property!