How low will property go?

Generali

michaels wrote: »

If property prices fall would you were moving, would you choose to spend less of your income on a similar property or the same proportion on a better property? Seems to me that unless people overall decide that property is poor value adn that they would sooner spend their money elsewhere and accpet worse accomodation in return then affordability is unlikely to change.

The last property slow down did not last long enough for 'forced sellers' to emerge in large enough numbers to exert strong downward pressure on prices, volumes simply dried up, not sure I can see anything different happening now.

A possible difference is Brexit.

If, as I hypothesise, London property is used by foreigners as a safe store of wealth then there may be a bunch of owners that would look to sell if London property is no longer a safe store of wealth. By definition, if the overbidder sells then the price must be lower.

I'm not saying that this will happen but it is certainly a risk. In my potential scenario people wouldn't be forced sellers merely trying to get out before price falls hit them in the hip pocket too hard.

cells

Generali wrote: »

A possible difference is Brexit.

If, as I hypothesise, London property is used by foreigners as a safe store of wealth then there may be a bunch of owners that would look to sell if London property is no longer a safe store of wealth. By definition, if the overbidder sells then the price must be lower.

I'm not saying that this will happen but it is certainly a risk. In my potential scenario people wouldn't be forced sellers merely trying to get out before price falls hit them in the hip pocket too hard.

surely that only works for a small number of households.
The fear of a 15% fall in prices causes a number of them to sell and once the 15% fall appears how many want to sell?

Transaction costs are also far higher now than yesteryear. If they sell not only will they pay 1-2% plus solicitors for the sell side but if they ever want to get back in to London property its going to be 14.14% stamp duty on a £10m house

AG47

If the overseas investors continue to pull out because of tax fears then property could go much lower

Generali

cells wrote: »

surely that only works for a small number of households.
The fear of a 15% fall in prices causes a number of them to sell and once the 15% fall appears how many want to sell?

Transaction costs are also far higher now than yesteryear. If they sell not only will they pay 1-2% plus solicitors for the sell side but if they ever want to get back in to London property its going to be 14.14% stamp duty on a £10m house

As I say, it's tough to say exactly why these investors are in London housing so it's tough to say what they motivation for holding or selling could be.

It's perfectly possible that they own a UK/London property as a just-in-case bolthole in which case the value is probably immaterial. If it is as a store of value and the asset is no longer performing that function then people will want to sell. I would suggest that a fear of an x% fall is less likely than fear of a fall of an unspecified amount.

If things get really bad for the pound I guess that brings in fears of capital controls being imposed and the investment not being able to be cashed in at all.

We'll see soon enough. If prices are going to start falling as a result of the vote then I think it'll happen sooner rather than later. The next risk point becomes the point of the UK actually exiting the EU.

N1AK

Generali wrote: »

As I say, it's tough to say exactly why these investors are in London housing so it's tough to say what they motivation for holding or selling could be.

I think you summarised this part of the equation very nicely. One thing I would add is you have to consider the change in demand from new buyers of this type. If you're a Russian Oligarch who wants a bolt hole you might be more likely to consider New York, Paris, Singapore if you feel recent events make the UK a riskier proposition.

I have my doubts that the external ultra-wealthy's demand will have a huge impact on pricing outside a niche group of postcodes though. If we're to see 10%+ falls in London, and any fall elsewhere, it will be because of either:

• economic issues leading people to be unable to spend
• concern about potential economic issues and the risk to house prices

I know that I personally just made the decision to rent in London rather than buy there having recently moved there for work. I don't know what will happen with the property market but my view is that if I'm staying out of the market due to concerns about pricing then plenty of other people will be, and a common result of that is price falls.

chucknorris

AG47 wrote: »

If the overseas investors continue to pull out because of tax fears then property could go much lower

Just as well that you sold your property portfolio at the top of the market, do you not miss the rental income? Where did you invest the equity?

bobbymotors

There are over 60m of us here in the UK,with lots more wanting to join us.

We are an island and they cant make the UK any bigger.

Pressure on house prices will always be upwards whilst the above applies.

Yes there will be downturns, but I cannot recall ANY 10 year period where houses were worth less at the end than at the beginning,even allowing for general inflation

And I am quite old...

HPC'ers think that if they wish for something badly enough it will happen.

Dream on....

cells

bobbymotors wrote: »

There are over 60m of us here in the UK,with lots more wanting to join us.

We are an island and they cant make the UK any bigger.

Pressure on house prices will always be upwards whilst the above applies.

Yes there will be downturns, but I cannot recall ANY 10 year period where houses were worth less at the end than at the beginning,even allowing for general inflation

And I am quite old...

HPC'ers think that if they wish for something badly enough it will happen.

Dream on....

The following regions are all cheaper v wages. That is to say wages have gone up more than prices over the last 10 years. Wages up 24.25% according to google search and house prices according to Land registry

-18% in NI
-2% in the North East
+6% in Wales
+7% in the North West
+9% in the Y&H
+13% in the West Midlands
+17% in the East Midlands
+19% in Scotland
+24% in the South West

so your view and advice is wrong for 9 of the 12 regions of the uk at least looking at today v 10 years ago

michaels

cells wrote: »

The following regions are all cheaper v wages. That is to say wages have gone up more than prices over the last 10 years. Wages up 24.25% according to google search and house prices according to Land registry

-18% in NI
-2% in the North East
+6% in Wales
+7% in the North West
+9% in the Y&H
+13% in the West Midlands
+17% in the East Midlands
+19% in Scotland
+24% in the South West

so your view and advice is wrong for 9 of the 12 regions of the uk at least looking at today v 10 years ago

I thought he said inflation not wages?

cells

michaels wrote: »

I thought he said inflation not wages?

http://www.tradingeconomics.com/united-kingdom/inflation-cpi

Trying to read the 10 year average on the line graph looks to be ~2.2% annual which would be about 24-25% or almost the same as wages growth. Therefore you can subsitute CPI for Wage growth in my post above.

If anyone is more inclined to find the actual figure of inflation over the 10 years (rather than trying to average a line graph) please post it

Remember we did enter a period of high inflation post crash as the pound fell from $2.1 to todays value