Why do you think the housing market has slowed - referendum?

sheff6107

ElsieMonkey wrote: »

I agree, but it is stagnating. It's like people don't want to act or commit, particularly regarding putting their properties up for sale. Wondering why? People talk about the referendum having an impact but I don't understand why or how this would stop people making decisions about whether they want to move or not??? I mean, whatever the outcome, nothing much is going to happen overnight to house prices is it...or is it???!

Our estate agent told us they often get enquiries from people who have been looking for months or even years. If you're that slow to move, you'd probably wait another couple of months just to see what happens. House buying is a little bit like the stock market and uncertainty makes investors jittery and risk averse.

westernpromise

If you look at what property prices do over time in real terms, the trend for the last 60 years has been up, with intermittent peaks and troughs. Sometimes the underlying reason for these is obvious both at the time and in retrospect, such as the removal of multiple MIRAS in 1988, the doubling of interest rates in 1989-1990, the credit crunch of 2008, and the 3% stamp duty hike this year.

Sometimes it is obvious only in retrospect. Thus we had a property crash in the 70s, in that we had years when general inflation was 27% but house price inflation was only 10%, which is a net decline. Most people didn’t notice that till after the event, and nowadays the oil shocks of the early part of that decade are recognised as a major contributing factor whose full effects could not easily be foreseen.

Likewise, when we had the early 1990s slump, that was prolonged by of all things German reunification. Germany borrowed to pay for it, so if you can hold D-Mark state debt at 10% you’re going to want more than that for sterling state debt. They put their rates up to borrow what they needed and that kept ours high too.

The fall of the Berlin wall was an example of a widely-predicted event (I first read a prediction of it in Hackett’s The Third World War in the mid-1970s) whose actual timing was wholly unpredicted and unpredictable. Even when it happened, I don’t remember anyone in 1989 predicting it would contribute to a UK house price slump lasting until 1996 - but it did. We shared the cost of German reunification, basically.

Brexit could be similar in that everyone knows there's a vote happening. But nobody knows what the result will be nor what the results of any given result will be. China will have a recession at some point (or own up to one) - ditto.

There’ll be another slump and spike at some point, and like everyone else I don’t know when. Nobody has better information or a competitive advantage over anyone else when it comes to guessing when the next peak or trough will be. Previous shocks have been partly foreseeable, so in 1989 we had the inflation / interest rate shock; but partly unforeseeable, so in 1989 we also had the German thing on top. It was the combination of these factors that produced the seven-year slump. If it had been inflation-driven only it would have lasted less than half as long.

A house is the biggest purchase there is with very high entry and exit costs and not a lot of liquidity in the market most of the time whether you are trying to get in or get out. One's approach to it needs to be correspondingly thoughtful. The bitter loonies on websites like housepricecrash.co.uk, who’ve treated it as a short-term speculative punt and screwed it and their lives up, are all the warning you need that betting on house prices when you aren't smart enough to be humble brings you only misery.

You are generally better off buying whatever you can afford, locking in cheap mortgage rates, making it a home, getting on with paying it off - which today you can do at rates unprecedented in living memory - and treating it as a place to live for the next 10 years.