Lunatic London Property market starting to turn?

Windofchange

Koldweather1 wrote: »

Yep, the government didn't allow the crash to unfold like it probably should have done, and my gut tells me any attempt at a crash will be stopped again, if only because there are still ALOT of people who have mortgages from the last big bubble in the mid/late 90s and 00s, and most of those will be natural tory voters I'd expect.

No party will want to be the one to let it pop on their watch, and too many people have massive mortgages that NEED low interest rates and NEED some form of HPI. I suspect the political need to keep them happy (and there must be a large number still, yet alone another new 1-3 million since the last relfation in 12-13). Any party that lets the system crash like a few want on here will NEVER get into power again and will basically eek out an exsistance like the Liberals after the 1920s.

I think they will have to increase rates, but very slowly, as someone said in the other thread, so much of the British wealth is locked into property, its not a boil that is easily lanced.

BTW, I DO think prices need to come down, my gut is the best people can hope for is a steady but prolonged drift down, maybe 1-2% a year for 5-7 years...though London is certainly primed to pop, but that is almost its own micro-climate.

I can agree to a point. It would be political suicide for anyone to let house prices collapse, and I most certainly think that any government will do all they can to prevent that. The interesting thing will be can they though? Things are wobbling with interest rates as they are. It is the way capitalism works - boom and bust. Interest rates don't need to climb much to put some into a great deal of trouble.

I'm still of the opinion that this thing will fall fast in the near future, but I can certainly see the argument for a gradual drawn out downshift as those priced out buy in and support the madness that bit longer.

I think we're in for an interesting back end of this year and 2018.

GreatApe

Windofchange wrote: »

I can agree to a point. It would be political suicide for anyone to let house prices collapse, and I most certainly think that any government will do all they can to prevent that. The interesting thing will be can they though? Things are wobbling with interest rates as they are. It is the way capitalism works - boom and bust. Interest rates don't need to climb much to put some into a great deal of trouble.

I'm still of the opinion that this thing will fall fast in the near future, but I can certainly see the argument for a gradual drawn out downshift as those priced out buy in and support the madness that bit longer.

I think we're in for an interesting back end of this year and 2018.

I will admit some time around 2001 I thought prices were overvalued simply on the basis that if everyone was saying prices were going to boom and completely discounting of any risk of any price falls then things were near a top. And prices had already boomed for ~7 years so they looked expensive vs the near past. The fact that I hadn't the money to buy into the market probably also plated a part in that view

I was of course stupid and wrong and unaware that I was stupid and wrong. I was also poor but unaware I was poor.

This is the problem with bears, they are stupid wrong and poor but unaware they are stupid wrong and poor. Worse that that they think they are smart correct and not that badly off (probably because they know people in a worse situation)


The simple truth of the matter is that homes are a game of musical chairs, if a bear wants a nice big home in a nice area he needs to out compete 90% of the population. No crash is going to take the purchasing power of a single man working a below median full wage job with below typical family help/inheritances to above the purchasing power of a couple working on full time median wages with help and inheritances. So the single HPCer will always have to settle with the smaller less desirable property. But a stupid website and their 'friends' on said site wont let go of the confirmation bias so they wont settle they will wait for two decades for the crash that will come and cause a 10% nominal fall, that wont be enough for them so they will wait another two decades by which time they are pensioners anyway and its over.

GreatApe

Windofchange wrote: »

The economy tried of course to return to historical norms back in 2008, but wasn't allowed to. They've got nothing obvious to throw at it this time around, but I'm sure they'll find something. Wonder how rampant inflation will run before they put rates up? London is an absolute car crash. Inflated to ludicrous levels by as you rightly say easy credit, lax lending and greed.

It will of course be all so obvious in ten years time when there is / should there be a crash. Ah yes, we saw that coming everyone will be saying. Government assistance to buy half a flat, emergency interest rates for the best part of a decade, record levels of unsecured debt, 24 year olds 'buying' half million pound one bed flats, brand new BMW's all round - a country up to its eyeballs in debt. It'll be blamed of course on Brexit or Trump starting a war or pretty much anything other than the systematic !!!! ups of successive governments.

You simply have no grasp of the level of wealth in this country.

I dont blame you, its not easy to understand unless you are at the top

I am not at the top but maybe upper middle and I can see vast sums of wealth around me.

The 'problem' is the better off do not generally discuss these things and the poor dont stop going on about it. So you would imagine its all !!!! out there but it really isn't

Recessions will come and go but the UK will remain a rich country with lots of opportunity

Sapphire

Thrugelmir wrote: »

Slavery even.

Yes, and in no small way practised among Africans (for example) themselves – a tradition that I believe still continues in parts of Africa today.

(I say that as someone whose ancestors did not practise slavery, but whose country was occupied by extremely harsh foreign powers itself, without its citizens having anything to do with occupying other countries, etc.)

Sapphire

Thrugelmir wrote: »

A number of factors seem to be coming together at the same time. Possibly we are simply returning to the historic norms. After 3 decades of exuberance. With the availability of easy credit. Everyone appears to have lost sight of the fundamentals and the fact that nothing is ever for free.

Yes – though not everyone has lost sight of the fact that nothing is ever for free. I know plenty of people who don't have a 'must-have' mentality, though admittedly they are pretty bright, with many interests that are not related to the acquisition of baubles they don't need (that isn't to say they refuse to have nice – to them – things, but they just acquire them according to their means, without getting into debt).

However, you only need to look at the absolute glut of advertising (tantamount to brainwashing) for 'must-have' expensive luxuries, most of it aimed at the apparently impoverished and 'needy' youth. That struck me the other day when travelling by train and Tube in central London, but I believe such propaganda is also all over the Internet (I use an ad blocker myself, so manage to avoid much of it).

AG47

Windofchange wrote: »

Interestingly quite a lot of negative sentiment in the newspapers today:

"UK house prices - is a crash coming?" City AM

http://www.cityam.com/267658/uk-house-prices-crash-coming-these-economists-thinks-so


"House prices on the brink of massive collapse" - The Metro

http://metro.co.uk/2017/07/02/house-prices-are-on-the-brink-of-massive-collapse-6749532/

Britain on the edge of worst house price collapse since 1990's" The Sun

https://www.thesun.co.uk/news/3928898/britain-on-edge-of-worst-house-price-collapse-since-1990s-as-experts-warn-property-value-could-plunge-by-40/

Whether you agree or not, it is hard to escape the fact that sentiment is a huge driver with property. It has been a one way bet, a quick ride to a fortune, can't lose with BTL mate. I wonder how quickly things will reverse should thoughts such as these permeate the mindsets of the masses?

The national association of estate agents reports that three quarters of homes sold for below asking price in May:

http://www.cityam.com/267399/more-than-three-quarters-homes-selling-less-than-asking

Yes, I know it is a tactic to put something up for more than you can get so you can offer a reduction, but in a booming housing market these places were getting brought for asking price or above.

Add to this the already widely published dropping like a stone prices in prime London and I think we are building quite a bearish picture. Inflation going up and away, living standards dropping, protesters on the street, emergency interest rates, record unsecured debt, help to buy, help to buy ISA's, family mortgages, Shared ownership.

All the signs are there that this is unravelling and unravelling fast.

London stilll falling year on year

Windofchange

AG47 wrote: »

London stilll falling year on year

I'm watching the Battersea power plant / nine elms area just up the road from me, and I think this will stand testament to the London madness in coming years. Flats aren't selling, 10's of thousands of units coming online still and they haven't sold the existing ones. Luxury apartments in free fall all over London. It'll have a ripple effect. Are you going to buy a 'needs modernisation' 2 bed in Peckham if you can afford a discounted new build in Chelsea?

chucknorris

Windofchange wrote: »

I can agree to a point. It would be political suicide for anyone to let house prices collapse, and I most certainly think that any government will do all they can to prevent that. The interesting thing will be can they though? Things are wobbling with interest rates as they are. It is the way capitalism works - boom and bust. Interest rates don't need to climb much to put some into a great deal of trouble.

I'm still of the opinion that this thing will fall fast in the near future, but I can certainly see the argument for a gradual drawn out downshift as those priced out buy in and support the madness that bit longer.

I think we're in for an interesting back end of this year and 2018.

It isn't just about house prices though, the economy is probably heading for tougher times, no one knows how Brexit is going to turn out. I think interest rates are going to have to be tweaked upwards soon due to inflation, but I really can't see interest rates being over 2.5% within the next 4 years, and it will also happen in small increments too.

IMO an increase to a 2.5% base rate is is not going to cause an increase to existing variable mortgage rates, there is already a healthy differential for mortgage lenders between the base rate/savings rates and variable mortgage rates. It will probably see the end of hugely discounted initial offers to mortgages (i.e. products heavily discounted for the first 2 years etc.), but that will not be a huge factor either.

But what could hit house prices is a bad Brexit (for the UK), leading to a recession. But a lot of people still don't seem to have learned yet, that it isn't easy for most of the population to buy a house during a recession, it just doesn't work that way.

GreatApe

Windofchange wrote: »

I'm watching the Battersea power plant / nine elms area just up the road from me, and I think this will stand testament to the London madness in coming years. Flats aren't selling, 10's of thousands of units coming online still and they haven't sold the existing ones. Luxury apartments in free fall all over London. It'll have a ripple effect. Are you going to buy a 'needs modernisation' 2 bed in Peckham if you can afford a discounted new build in Chelsea?

It is a new build development, whatever it sells for is its price.

Anyway a quick rightmove search shows the asking prices for 1 bedroom flats at £15,000 per sqm in battery power station development and £7.5k for the nearby council stock. For larger 3 bedroom flats the asking prices are closer to £10k/sqm for the development and £6k/sqm for the nearby council stock.

Is that what you call in free fall? £10-15k per square meter??

Crashy_Time

Koldweather1 wrote: »

Yep, the government didn't allow the crash to unfold like it probably should have done, and my gut tells me any attempt at a crash will be stopped again, if only because there are still ALOT of people who have mortgages from the last big bubble in the mid/late 90s and 00s, and most of those will be natural tory voters I'd expect.

No party will want to be the one to let it pop on their watch, and too many people have massive mortgages that NEED low interest rates and NEED some form of HPI. I suspect the political need to keep them happy (and there must be a large number still, yet alone another new 1-3 million since the last relfation in 12-13). Any party that lets the system crash like a few want on here will NEVER get into power again and will basically eek out an exsistance like the Liberals after the 1920s.

I think they will have to increase rates, but very slowly, as someone said in the other thread, so much of the British wealth is locked into property, its not a boil that is easily lanced.

BTW, I DO think prices need to come down, my gut is the best people can hope for is a steady but prolonged drift down, maybe 1-2% a year for 5-7 years...though London is certainly primed to pop, but that is almost its own micro-climate.

The property market won`t "drift down" IMO that is not how it has historically functioned, when sentiment turns it will be carnage IMO, you can`t get out of a bubble like this without pain, nothing really holding it up now.