'We've reached a tipping point' Signs of house price weakness

System

It took a GFC and a royally borked mortgage market to bring about the last 20% drop.

I don't think an increase in selling activity due to a new peak price is going to give you what you need. You need a lot of distressed sellers to get some big drops and I just can't see they will come from.

The increase in supply we see now will soon dry up if people don't get what they want.

System

ukcarper wrote: »

Why are you all so reluctant to give a figure, what do you call sensible come on give us a figure.

You can work it out.

saguk lives in Lewisham.

I thnk it's painfully obvious that saguk doesn't earn a lot, lets be generous and say 20k.

Cheapest property in Lewisham is 160k for a studio.
http://www.rightmove.co.uk/property-for-sale/property-45346138.html

Assuming he bungs down 10% and gets a mortgage 3.5 times income, he'll need *mental arithmetic* about a 50% crash I reckon.

Good luck with that.

saguk1234

I would like prices in London to drop back to last years prices. I would be very happy.

Actually I am better paid than probably most of you on MSE.

£160 for a studio flat. You probably think that's a great price. You HPI nutters need to say no to the pipe!

And no, I do not live in that part of London.

wotsthat

lukeh23 wrote: »

20% drop would do me.

there we go....

Why didn't you buy after the last 20% drop?

Philuk

ukcarper wrote: »

Why are you all so reluctant to give a figure, what do you call sensible come on give us a figure.

The long term ratio Debt/Income is about 3.5 for the UK but structurally higher in London at 4.5. If I take my area, Islington (London), the average salary being 55k, the appropriate price level would be for the average property 4.5 * 55 + 20% deposit (4.5 x 55)/0.80=309k. Assuming the average flat for a single person should be a one bedroom flat, this is the price I would buy this type of property for, the price were at 350k 18 months ago but are now close to 500k.

For a young family, 2 adults would earn 110K. on the same calculation basis, the 3 bedrooms flat they would need for their kid(s) would be fairly valued at 619k. This would barely get you a 2 bedrooms at the moment (up from 450-500k 18 months ago).

Price have increased by 45-50% in this area over the last 12-14 month, or at least some transactions have been completed at this level.

ukcarper

saguk1234 wrote: »

I would like prices in London to drop back to last years prices. I would be very happy.

Actually I am better paid than probably most of you on MSE.

£160 for a studio flat. You probably think that's a great price. You HPI nutters need to say no to the pipe!

And no, I do not live in that part of London.

I wouldn't be entirely surprised if London prices did fall back to somewhere near last years prices but I wouldn't bank on it.

Philuk

Joeskeppi wrote: »

It took a GFC and a royally borked mortgage market to bring about the last 20% drop.

I don't think an increase in selling activity due to a new peak price is going to give you what you need. You need a lot of distressed sellers to get some big drops and I just can't see they will come from.

The increase in supply we see now will soon dry up if people don't get what they want.

49% of all mortgages in London are interest only, it is unclear how the market would react to the inevitable interest rate hike for later this year/early next year. People are over levered with debt income ratios close very far from the sustainable 3.5-4.5 bracket. If floating rates were to double from 2.2% to 4.5% which is still cheap, many household would have to sell.

ukcarper

Philuk wrote: »

49% of all mortgages in London are interest only, it is unclear how the market would react to the inevitable interest rate hike for later this year/early next year. People are over levered with debt income ratios close very far from the sustainable 3.5-4.5 bracket. If floating rates were to double from 2.2% to 4.5% which is still cheap, many household would have to sell.

Have you any figures to show how many people have a mortgage of over 4.5x income.

Rota

lukeh23 wrote: »

20% drop would do me.

there we go....

So London has gone up around 20% (give or take) in the last year. Why didn't you buy 12 months ago?

System

Philuk wrote: »

49% of all mortgages in London are interest only, it is unclear how the market would react to the inevitable interest rate hike for later this year/early next year. People are over levered with debt income ratios close very far from the sustainable 3.5-4.5 bracket. If floating rates were to double from 2.2% to 4.5% which is still cheap, many household would have to sell.

Your figures up there somewhere (assuming I'm not making a massive mistake somewhere) suggest you need a 50% crash before you would buy in, do you think that's likely? I wouldn't bat an eyelid at 20% (in London), but 50%... can't see it.

Not considered just leaving London?

My brother wanted to buy another house in London at the start of the year (edit, it was June, brainlapse), I told him he was mental.