House Price Crash Discussion Thread

mystic_trev

[FONT=Verdana, arial, helvetica, sans-serif]Whether it’s banks tightening lending, newspaper headlines proclaiming a slump, estate agents saying business is dead, boards staying up for longer, or conveyance-ing lawyers twiddling their thumbs with nothing to do - the anecdotal evidence does not look good for housing.[/FONT]
[FONT=Verdana, arial, helvetica, sans-serif]It’s amazing. In a bull market, every bit of news seems to point to higher prices. Then the market turns and horrendous stories seem to come of nowhere. Horrendous story follows horrendous story. That’s what’s happening now. [/FONT]
[FONT=Verdana, arial, helvetica, sans-serif]In the summer, estate agents reported a definite slow down, but no one was concerned. Summer’s a quiet time of year, after all. We needed a period of consolidation. We had some interest rate rises. Then we got the August credit crisis. Then we got the run on Northern Rock (NRK). Barratt (BDEV) reported falling sales. Then yesterday, out of the blue, petrol was poured onto the bear’s fire as Paragon (PAG), the UK’s third-largest buy-to-let mortgage lender, warned it may have to close to new business due to funding problems. [/FONT]
[FONT=Verdana, arial, helvetica, sans-serif]There is more of the proverbial standing by to hit the fan, just you watch. [/FONT]

http://www.moneyweek.com/file/38235/why-nows-the-best-time-of-year-to-buy-canadian-miners.html

SteveSilva

Many people especially those with vested interests have beating the same old drum....


"WE HAVE BEEN HERE BEFORE THEY'VE BEEN SAYING PRICES ARE GOING TO CRASH FOR YEARS, BUT IT HASN'T"

Which in actual fact they are correct, however before there was no real criteria for a crash, now things are different.

1) Rates are high, and even if they do reduce (which won't be easy due to inflation) lending criteria has become more stringent meaning people would find it alot harder to get a mortgage therefore less demand.

2) The market had previously been largely fuelled by the BTL section, however with low rental yields and the problems with NR, BB, and Paragon that is not an attractive option as it was before, infact many BTL'ers especially those who only bought recently maybe better of selling as their cheap mortgage deals come to an end.
However with ten years of triple figure gains, I do not see a ten or even twenty percent drop in prices constitute as a crash, merely a correction.

mrs_deadline

london_fox wrote: »

We are buying to stay there for a while. obviously we are hoping to get some money back on any developments we make to the place but overall we have bought it as a home.

I think you're right to try and understand the risks but as it's impossible to rule out the possibility of a recession, all you can do is judge whether you're adequately cushioned against the possible consequences.

So consider whether the place you've found is somewhere you could happily stay put in for 5-10 years (or even a bit longer if you need to get a return on home improvements), and has it got enough growing room for your anticipated needs, and are you putting down a decent deposit or, at the very least, buckling down to a repayment mortgage?

See !!!!!!'s post #21 in this thread for the negative equity scenarios you might want to weigh up.

SteveSilva

london_fox wrote: »

Hi all

I am new to this board so sorry if there is a thread on this somewhere else.

One of the guys I work with is banding about the word 'receission' today after speaking to a friend of his who works in banking. I am currently buying a house (in London) and I am now a little bit worried that I will end up with a lot of negative equity as a result.

I am hoping that prices in London will not be too badly affected as demand is still very high.

Thoughts??

Demand maybe reasonably high because many people agreed a mortgage before the head of the credit crunch dragon emerged, and these usually last about 4-6 months, however people looking for a new mortgage will find it alot harder.
Also London property has increased in value as a result of many city workers in recent years looking for a place to invest their massive bonuses, however now with talk of job cuts there will be no bonuses for many this year and would the ones with capital want to invest in property with the current crisis engulfing the economy?

London Fox play this game to your advantage, why not make a lower offer for the property you want to buy, Try 15% below asking price especially if the vendors have had the property for a long time. Many people with a little or no mortgage who have seen the value of their property double won't have a problem with taking 30k or so less. Even people who have only bought recently may want to sell their properties before the prices really fall. No harm trying!

JBeau

london_fox........bearing in mind that nobody in their right mind would have thought that this recent boom would have lasted as long as it has, you really cannot assume that your intentions of staying for up to 5 yrs will make everything ok.
During the last big property decline 90/92 it was not only many years of falling prices but many years before prices regained what was lost.
You are not safe by buying in London, there is no text book for this stuff, do not delude yourself into thinking all will be ok and go your way......if you can...wait - now is the worst time to buy.
Based on personal experience of the last correction with a London property.
Good luck.

codger

london_fox: London is safe only in those sectors where buyers are immune to credit crunches. Numerically, there aren't many of them. And comparatively, there aren't that many £multi-million properties anyway.

Whilst I'm not sure there'll be an actual "crash", I am sure there'll be a "correction", one factor of which has been alluded to by SteveSilva, i.e., a market which changes from being led by sellers to being led by buyers.

Notionally, you should be looking to discount any property asking price by 15%. That way, you're at least doing something to protect yourself by legislating in advance for a fall in purchase value.

I use the term "notionally" though because conditional upon this approach are availability, and sentiment. If there's only one property you actually like, because availability of that kind of property is restricted, then sentiment comes into play: you want it; you need it; you have to buy it.

But then:

Unless you can absolutely guarantee that this will be a home you will occupy for at least the next five years -- and the way the employment market is nowadays, not many can say they're insulated from redundancy or, worse, the failure of their employer's business -- then any "must have" purchase ought to be made in knowledge of the fact that a fall in the value of your purchase is more likely than an increase.

Whether to buy or to rent remains a decision that's anything but black-and-white: no two prospective purchasers are ever in the same situation, and so no single prescription for action can realistically apply.

ivegotabig1

The FTSE is down 700 points in three weeks !!!! now what does that tell you ! :eek:

simon_w_3

Thanks for your replies. This week I have had several staff and several principles approach me for jobs or to buy their Estate Agencies as they want out. I run a well established and succesful estate agency we are doing very well, but we saw all the key indicators change in April and took action then. Our fall through rate is one of the lowest in the UK I suspect at 10%. Many agents are telling me truthfully that 30% and even 50% of their business is falling through !
We have re-trained all our staff in the right tactics to adopt in the changed market.
Honesty has and always is the best course- you are failing in your duty to the client if you do not tell them what is happening!
Agents generally have not worked in these conditions and are struggling, this has helped me to increase market share significantly.
We are still selling well and doing deals- but only where we have 'educated' the buyers and sellers as to what is really happening and where they have heard the facts and accepted the evidence.

m00m00

if everyone in the industry was more like you Simon W I think this board would be considerably quieter.

pamaris

Simon, you have a great approach. I am sure that you will be able to ride out any storm. People really do appreciate being told how it is. I would go with an honest agent over a brown nosing schmoozer.