50% house price falls

dannyboycey

adr0ck wrote: »

please explain danny

HPI has grown at a much faster rate than wage inflation, leading to large disparity between them.

HPI has been double digit - wage inflation has been nowhere near that. People who have stretched themselves with credit over the last few years, be it mortgages, credit cards or loans have found that inflation has hit them really hard. Who's to blame? Lenders, for throwing cash at them so irresponsibly? Or the borrowers, for being greedy (or their niaivity in thinking they must get on the property ladder before it's too late)? This point can be argued, but I think it's a combination of both. Add this to Gordon Browns 'miracle economy' that he's built over the last 10 years and you have a financial timebomb of epic proportions waiting to happen.

Badger_Lady

Wages recently haven't even kept up with cost of living, leaving many people suffering an effective wage cut.

Before I left my last job, we were "rewarded" with an annual payrise of 2%. In the same year, my house price rose 7% (and mine was a stagnant area).

LostSocks

My Husband hasn't had a wage rise for the past 2 years, so house prices have risen for faster than we can afford.

WTF?_2

adr0ck wrote: »

whats this fascination with the average house price for FTB

FTB's are looking for 2-3 bedroom terrace or semi detached

in most parts of the country (except for the south west) you can buy these for around £150K (have a look on rightmove) (even in London you can buy these for £200K)

how is this unafordable for two people earning £20K each with a £10K deposit?

or in London 2 x £30K

Even if one assumes that you can get a 3-bed semi for 150k (doubtful in most parts of the country) then a couple on 20k each, with a 10k deposit saved would be looking at borrowing 3.5x JOINT salary.

Traditional 'sensible' lending multiples are 3.5x single, 2x joint. 3.5x joint would be really stretching it given that the chance of one of the couple losing their job is double that of a single person losing theirs. And what do you do when you want kids?

So even by your own rather suspect figures, houses are stupidly overpriced.

wibble68_2

adr0ck wrote: »

why does everyone go on about wages not keeping up with house prices?

havn't wages grown faster than house prices?

go back 30 - 40 years and you had one breadwinner in each family

now you have two

I don't think using double incomes to explain the housing boom is a good idea.

I would agree that having 2 breadwinners has fuelled the boom to some extent, but statistically the average house has been worth between 3 and 5 times the average wage for 50 years or more. It's only in the last 3 - 4 years that the ratio has moved higher (currently about 6 times earnings)

I don't see that double incomes have only taken off in the last 4 years.

Also, unless couples have good friends and family, when they have children their income may well be reduced.

HugoSP

dannyboycey wrote: »

Many of the figures you've spouted are observations on your part.....

Yes you are quite right. I've been investing in property now for over 20 years.

......and have no basis in fact.

...and your counter arguement to support this is?

I wouldn't mind had it not been for your ridiculous nuggets of advice to 'homeowners'.

.......and the point of actually typing this is?

hgllgh

RabbitMad wrote: »

If house prices loose 50% of their current value then I for one will be jumping back on the BTL bandwagon.

I've just sold my rental place for £174,000 while getting £625 pcm rent. If that was available for £87,000 then that's a great return on your investment (alternatively the rent would cover a repayment mortgage - subject to being able to get one of course)

It ain't going to happen without a major recession and near total economic melt down.

It did in Japan .... no recession ... no economic meltdown .... house prices down 60% ....

WTF?_2

hgllgh wrote: »

It did in Japan .... no recession ... no economic meltdown .... house prices down 60% ....

And it's happening in the USA right now (since last year, in fact). Massive house price crash across many areas which had previously experienced booms yet interest rates are lower than the UK, salaries are higher and the economy is doing well.

Soprano

A 50% drop seems high to me. But taking into account most people agree the market is 20% over-priced its not totally unrealistic.
For the first time in a very long time I do suspect things are going to get tougher.


I am making this statement on a combination of what I read, gut-feeling and Spider-sense.

codger

wibble68 wrote: »

I don't think using double incomes to explain the housing boom is a good idea.

No. It isn't. Because it isn't accurate.

What would be accurate would be a condemnation of all those banks and building societies which set out to make a fast buck (and succeeded) by luring in "self certifying" borrowers, each one of whom then acted like a stone thrown into a pond and sent out ripples in every community by buying that which they most likely could not afford at a price most likely beyond credible, sustainable, market value.

What would also be accurate would be a condemnation of all those banks and building societies which set out to make a fast buck (and succeeded) by ostensibly reducing mortgage interest rates in a baffling plethora of short-term deals whilst inventing ludicrously high "arrangement fees" and similar charges which are then tacked onto, and included within, the overall mortgage repayment.

What would also be accurate would be a condemnation of all those estate agents who saw how it was in their own best interests to talk up a house price boom (and if you don't believe that, check with the national association of estate agents on just how many new estate agency firms have set up in business in the past five years: it's well nigh two in every large town and sometimes, three.)

There's been money to had, and the money was from the punters. There's been money for Government to have -- the great Mr Prudent Brown's Treasury above all -- and, again, it's from the punters, either in Stamp Duty or Inheritance Tax.

At every turn and in every aspect of the UK property market the sharks have massed for an easy kill, and in every unsuspecting property buyer they've found exactly the victim they were after.

The banks and the building societies especially knew exactly what they were doing when it came to exploiting that most human of ambitions of all: the desire to own one's own home.

They knew what they were doing in driving the market up through cheap loans, through irresponsible loans, through indefensible loans, because it was profit all the way -- and hey, if the poor suckers who bought then discovered they couldn't afford to continue on in occupation, no problem: house repossession causes no pain to anyone other than the loser.

When we bought our first home (in 1972) we paid £4,600. For a beautiful three / four bedroomed semi detached overlooking a park. Even though we were both working, our building society would not lend more than 2.5 times our joint income. Arrangement fees were, however, unheard of: that money making device, designed solely to deceive, had yet to be dreamt up.

Today's house prices are so far out of kilter with the average incomes of average first time buyers that a "correction" is inevitable, i.e.: price falls, market stasis, negative equity, and an ever-rising number of repossessions.

You could say it's all the fault of the borrower, and I'd agree if -- if -- the marketplace of recent years had been as honest, and as moulded by integrity, as was the case back in the 1970s.

But it hasn't been.

Corrupt, greedy, irresponsible and deceitful, banks and building societies have by their own admission ceased to lend money but have instead "sold products".

And if people have gone out and bought the wrong product, then tough on them: they buy a kettle that doesn't work? So bin it. A car from a dodgy dealer that breaks down? Hard luck, sonny. They buy a house they can't afford? Well, more fool them: they lose it.

No wonder there were lines of people outside Northern Rock.

They weren't so much panicking as displaying an instinctive, intuitive reaction, kicking back at a so-called institution (oh really? It borrows money from another bank at 3% then lends that out at 5%? And that's supposed to be so brilliant, so difficult, a 'business model' that the chief executive earns £1.5 million a year as a result? Ye Gods, my old corner shop grocer knew more about fiscal risk, and economics in general, than anyone on Northern Rock's board of directors has ever shown -- thogh unlike Northern Rock, he would never have been bailed out with taxpayer's money by a dysfunctional Government that has happily overseen Britain's years of self-deluding prosperity) and a so-called Government and the promises of politicians who we all have every right to view as about as dependable as a warranty from Del Boy or Arthur Daley.

The housing boom was fuelled by personal need as well as by personal greed, but the greatest greed was, as ever, that of those who, like Northern Rock, saw in their borrowers a potential for ever greater corporate profit and ever greater individual reward.

And as ever, when the wheels come off, it's "institutions" like Northern Rock that are saved from "going to the wall" (Alastair Darling's phrase, not mine) -- never those who, one day soon or one day later, find their own walls won't be there for them to go to at all.