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

chucknorris

CLAPTON wrote: »

everyone knows that house price have reduced in the past so I would conclude that everyone knows that prices can reduce


I don't expect much reduction any time soon however, except in maybe small areas of London

I don't know where this theory about house prices always going up in value comes from? They fell in the early 70's, late 80's and of course in late noughties, it isn't as if there is no historical data to prove otherwise. I haven't seen anyone on here professing it, apart from saying in the very long run they will (nominally) increase, which is of course true.

CLAPTON

Crashy_Time wrote: »

MEW drove the economy for long enough? When the housing Ponzi broke, so did the economy?

I don't recognise that as the cause of the financial meltdown

Jack_Johnson_the_acorn

chucknorris wrote: »

I don't know where this theory about house prices always going up in value comes from? They fell in the early 70's, late 80's and of course in late noughties, it isn't as if there is no historical data to prove otherwise. I haven't seen anyone on here professing it, apart from saying in the very long run they will (nominally) increase, which is of course true.

That's because nobody has stated such a theory.... Only crashy. We had price drops 5years ago, surely crashy can remember this???

Oh well, I bought in 2011, prices have only risen YOY since then, Yippee.... Prices can only go up :rotfl:

hpc_troll

chucknorris wrote: »

Last house we bought was in 2008, we bought it for £243k and spent about £17k on it, so just under £265 incl. all the fees etc.


Our rental profit is currently over £12k a year, the total rental profit since purchase is about £65k the current value is about £360k. Total current rental profit and capital gain is therefore about £160k.

Fair enough and it is obviously great for you that you have done well - and it looks like you are on a path to securing your financial future, which is after all what everybody wants for themselves.

However, we are not the sole masters of our future. Nobody wants to lose their job and nobody wants a marriage to fail and nobody wants their house price to fall - but all these things do happen.

One of the main reasons that I post on hpc is to get the argument out there that house price inflation significantly in excess of wage inflation is not sustainable and even when it sustains it benefits some people at the expense of others.

The relevance of that to this debate is that that pattern of events since 2008 is suggestive of the fact that at least in some markets we are bumping along at the top of what can be afforded with earnings given the prevailing lending practices and interest rate environment.

Further, it seems perfectly reasonable to assume that decades of pretty rampant house price inflation has understandably given people good cause to believe that house prices will always march up significantly in advance of earnings.

The problem comes when people over-stretch themselves in a fragile economy in order to 'not miss the boat'.

It is all fine provided something accommodates their optimism about prices (wage growth, mortgage providers innovating and producing something ludicrous like a self-certified interest only mortgage at 85% loan to value, for example).

However, if it turns out that this time that accommodation will not come to the fore quickly enough, they may find that they have paid slightly over the odds.

Hence it seems appropriate at this time to consider whether or not we have reached a tipping point where a gap exists between current asking prices and what current buyers can afford to pay and whether the need to close that gap all along transaction chains is going to lead to a softening of prices.

hpc_troll

CLAPTON wrote: »

you click on 'QUOTE' at the bottom of his post




then write what you want


and then click on 'submit reply' at the bottom of your post

Thank you. Yes I did all that, and by the time I got to this 'Submit reply' business that you so kindly mention, the post that I believed I was replying to was no longer in thread! Though there is a rotating Martin Lewis slightly to the right of where I am typing which is fairly distracting. In truth, anything could have happened.

Crashy_Time wrote: »

Post got deleted after you replied, taken back to the workshop maybe for a polishing?

Can you delete your entire posts over here? If so, tremendous, I have posted my fair share of complete tosh over the years and over at the other place even if you delete the content of the post, a sour blank record of your error remains. I personally suspect that a lot of those 'duplicate posts' claims are people covering moments of madness.

chucknorris

hpc_troll wrote: »

Fair enough and it is obviously great for you that you have done well - and it looks like you are on a path to securing your financial future, which is after all what everybody wants for themselves.

However, we are not the sole masters of our future. Nobody wants to lose their job and nobody wants a marriage to fail and nobody wants their house price to fall - but all these things do happen.

One of the main reasons that I post on hpc is to get the argument out there that house price inflation significantly in excess of wage inflation is not sustainable and even when it sustains it benefits some people at the expense of others.

The relevance of that to this debate is that that pattern of events since 2008 is suggestive of the fact that at least in some markets we are bumping along at the top of what can be afforded with earnings given the prevailing lending practices and interest rate environment.

Further, it seems perfectly reasonable to assume that decades of pretty rampant house price inflation has understandably given people good cause to believe that house prices will always march up significantly in advance of earnings.

The problem comes when people over-stretch themselves in a fragile economy in order to 'not miss the boat'.

It is all fine provided something accommodates their optimism about prices (wage growth, mortgage providers innovating and producing something ludicrous like a self-certified interest only mortgage at 85% loan to value, for example).

However, if it turns out that this time that accommodation will not come to the fore quickly enough, they may find that they have paid slightly over the odds.

Hence it seems appropriate at this time to consider whether or not we have reached a tipping point where a gap exists between current asking prices and what current buyers can afford to pay and whether the need to close that gap all along transaction chains is going to lead to a softening of prices.

I tend to agree with you about property not really increasing that much more in real terms, fortunately I bought most of mine in the early 90's so these days I am merely looking for consolidation and balancing my portfolio. I don't anticipate any real (only nominal) capital gain, so I won't be buying any more property, my money is currently going into shares (in SS NISA, non NISA and SIPP) and DB pension, although I can't buy any more pension in the teachers' pension scheme after next year as I have reached the max allowed, which is probably going to prompt my early retirement.

Crashy_Time

CLAPTON wrote: »

everyone knows that house price have reduced in the past so I would conclude that everyone knows that prices can reduce


I don't expect much reduction any time soon however, except in maybe small areas of London

They don`t know it like someone who experienced it though? I know guys fought each other in trenches 100 years ago, I am interested in it, I have read about it, but I will never know what it felt like to actually be there. If you turned 16 in 2000 and are 30 now you have only known rampant HPI, with a blip where the PTB stepped in to make everything better again, HTB makes perfect sense! They can never walk in the shoes of someone in London in the late 80`s, balls deep in mortgage debt watching it all unwind?

HAMISH_MCTAVISH

hpc_troll wrote: »

it seems appropriate at this time to consider whether or not we have reached a tipping point where a gap exists between current asking prices and what current buyers can afford to pay and whether the need to close that gap all along transaction chains is going to lead to a softening of prices.

And if you're willing to have that debate based on objective facts and reasoned argument I think you'll find many on here are delighted to do so.... Despite your somewhat entertaining username.;)

Let's start with a few facts.....

The CML reports that the average FTB in May 2014:

- had a deposit of 16%

- took on a mortgage for 3.43 times income

- are spending 11.7% of income on interest payments

- are spending 19.5% of income on capital and interest repayments combined.

So in your opinion, which of these measures leads you to believe that buying a house is unaffordable?

Jack_Johnson_the_acorn

Crashy_Time wrote: »

They don`t know it like someone who experienced it though? I know guys fought each other in trenches 100 years ago, I am interested in it, I have read about it, but I will never know what it felt like to actually be there. If you turned 16 in 2000 and are 30 now you have only known rampant HPI, with a blip where the PTB stepped in to make everything better again, HTB makes perfect sense! They can never walk in the shoes of someone in London in the late 80`s, balls deep in mortgage debt watching it all unwind?

I certainly considered the possibility of negative equity during my purchase. But so long as you can afford the repayments it's hardly a massive problem. Unless you desperately need to move due to an emergency.

chucknorris

Jack_Johnson_the_acorn wrote: »

I certainly considered the possibility of negative equity during my purchase. But so long as you can afford the repayments it's hardly a massive problem. Unless you desperately need to move due to an emergency.

I never really considered temporary negative equity to be an issue for me, as selling up before my 60's was never on my agenda. I am now 56 and I just can't see a better home for my money than property, so I may well hold onto my properties into my 70's now.