can someone please explain what 50% fall would mean

adr0ck

Certain properties (either 4 bed houses or 3 bed bungalows) round my way are now going for £195,000 up from £170,000 in 2003/4.

Which equals a 15% increase in 3/4 years (seems to be about right for most properties round here)

Most of you guys on here are saying that theres going to be a 50% fall

does that mean properties round here(from the above example) will fall to less than £100,000?

JohnInDebt

Prices may drop significantly if someone needs to sell up urgently (i.e. can no longer afford the repayments) but they would probably be few and far between and quickly snapped up by property developers waiting in the wings.

However I do believe prices will drop, but not by a huge amount in a short space of time.

abaxas

adr0ck wrote: »

Certain properties (either 4 bed houses or 3 bed bungalows) round my way are now going for £195,000 up from £170,000 in 2003/4.

Which equals a 15% increase in 3/4 years (seems to be about right for most properties round here)

Most of you guys on here are saying that theres going to be a 50% fall

does that mean properties round here(from the above example) will fall to less than £100,000?

Nothing falls at the same rate, as nothing rises at the same rate (as you said above).

If the last 'crash' was anything to go by, the top and bottom end get the hammering while the middle loses ground. The reason for this that people tend to return to more 'tradition values'. IE bling dies while a 3 bed semi has value to most people.

The other thing to remember is transactions. In the last 'crash' some properties lost all value. This was not shown in the %age drop as there was no transaction.

Final point is inflation. Over time any correction/crash would usually be fixed by wage inflation howerer there is only one case of prolonged deflation. If we go japanese, who knows what will happen. But start praying we dont get that :eek:

adr0ck

i just can't believe that prices will fall to less than £100,000 for a 4 bed house

though saying that thats probably what prices were in 2000/2001

dannyboycey

Ar0ck, £100k for a 4 bed house may seem low now but only a few years ago it was seen as really high. It's all relative and house prices are almost arbitrary, in that they are only worth what people are prepared to pay for them at any one time.

Generali

Sellers that have a choice, won't sell. Forced sellers (e.g. the reposessed) have no choice.

The latter are the ones that cause prices to fall.

What will be interesting is what BTL owners do. Not the mad ones with huge LTVs but the sensible ones with small or no mortgages. Do they sell rather than lose more in the future or do the hang on to the interest stream?

abaxas

dannyboycey wrote: »

Ar0ck, £100k for a 4 bed house may seem low now but only a few years ago it was seen as really high. It's all relative and house prices are almost arbitrary, in that they are only worth what people are prepared to pay for them at any one time.

Agreed, but property is bought with debt. The ability to obtain this debt (mortgage) defines the sale price but doesn't effect the valuation.

A buyer's perception of value is based on this 'affordability'. In a crash/correction situation the buyer defines the price and eventually this becomes the valuation.

silvercar

Generali wrote:

What will be interesting is what BTL owners do.

They buy like crazy.

If they were prepared to buy at £150,000 why would they not buy at £100,000? Rents won't suffer as much as prices. Yields improve by the lower house prices and the increase in demand.

Guy_Montag

silvercar wrote: »

They buy like crazy.

If they were prepared to buy at £150,000 why would they not buy at £100,000? Rents won't suffer as much as prices. Yields improve by the lower house prices and the increase in demand.

Where do you get the money for this? If you've been releasing equity from your portfolio to expand it during the good times, there's a fair chance you'll be getting into negative equity if prices drop by a third (as in the example above).

Generali

silvercar wrote: »

They buy like crazy.

If they were prepared to buy at £150,000 why would they not buy at £100,000? Rents won't suffer as much as prices. Yields improve by the lower house prices and the increase in demand.

That depends on 2 things:

1. LLs being able to secure funding to buy more BTL places;
2. LLs being prepared to 'catch a falling knife' (that is buy a place knowing that they will suffer a capital loss almost immediately).

If lenders won't lend and LLs aren't prepared to do #2 (and it takes a lot of bottle, if you can find a lender that will support you) then what will provide support to prices as they fall? HPs have to fall a very long way until yields become attactive to people using borrowed money.

Running_Horse

"can someone please explain what 50% fall would mean"

A 50% fall would mean the price would halve. Hope this helps.