What would cause negative HPI in London

mwpt

A lot of discussion around here takes the form of "London prices will never go down because...."

Now maybe that is correct but I don't feel I'm learning anything new hearing the same old supply/demand arguments.

I'd be interested if a few of you could don your bear hats and describe a scenario in which we see negative HPI in London.

My take on it is perhaps a credit event would cause drops. We know that the supply/demand issue exists and so that will exert upward pressure on the market. If HPI had tracked rent increases more closely, I'd say that was "normal" HPI but add in the decreased cost of credit and you have much higher inflation. So what would it take for mortgage rates to go up significantly making current prices completely unaffordable to new buyers? At 6% rates I estimate new buyers would want somewhere around 40% discounts. How much can market forces influence mortgage rates?

That's just one view. Any other scenarios?

chucknorris

London house prices have gone down enough in the past to know that they most likely will do so again, in fact it is almost guaranteed that they will. My guess is that will happen around the mid 20's, when the economic cycle may take another dip.

CLAPTON

mwpt wrote: »

A lot of discussion around here takes the form of "London prices will never go down because...."

Now maybe that is correct but I don't feel I'm learning anything new hearing the same old supply/demand arguments.

I'd be interested if a few of you could don your bear hats and describe a scenario in which we see negative HPI in London.

My take on it is perhaps a credit event would cause drops. We know that the supply/demand issue exists and so that will exert upward pressure on the market. If HPI had tracked rent increases more closely, I'd say that was "normal" HPI but add in the decreased cost of credit and you have much higher inflation. So what would it take for mortgage rates to go up significantly making current prices completely unaffordable to new buyers? At 6% rates I estimate new buyers would want somewhere around 40% discounts. How much can market forces influence mortgage rates?

That's just one view. Any other scenarios?

if house prices were unaffordable then they would fall

cells

London is more BTL % than any other region so stuff that makes BTL less attractive should impact London more

An example might be regulating BTL with the specific aim of shrinking the sector. For example if the banks were forced to use a rental cover of 150% at 8% (currently its typically 125% at 5%) that would shrink the sector as it would mean a BTLer would need to put down over 60% deposit in most cases.

Of course it's difficult for the government or regulators because if they do the above (or similar changes to shrink BTL) then the clearing price would fall and no one wants nominal falls

cells

Possible risks for London Property investments

Increased taxation
Negative mortgage regulation changes
Higher interest rates
Negative rental regulation changes
Negative GDP growth (recession)
Rapid sell off of council/HA stock
Falling population
Big increase in new builds

BobQ

Banning individuals from owning more than one residential property in London

A cap on the price of residential properties than could be let for profit (ie however they are financed)

chucknorris

BobQ wrote: »

Banning individuals from owning more than one residential property in London

A cap on the price of residential properties than could be let for profit (ie however they are financed)

There is as much chance of either of those things happening as the PM sticking his private parts into a dead animal.

CLAPTON

BobQ wrote: »

Banning individuals from owning more than one residential property in London

A cap on the price of residential properties than could be let for profit (ie however they are financed)

does that mean you are happy for large foreign companies to own any amount of residential property?


how would a cap work : presumably it would be set to several million to allow for prices in kensington and chelsea?

mwpt

Property prices in Singapore are down after the increased foreign buyer stamp duty, I believe.

Sapphire

I'd be interested if a few of you could don your bear hats and describe a scenario in which we see negative HPI in London.

A dirty bomb?

padington

You can't reply with one word but if I could ...

Corbyn