House Price Crash Discussion Thread

WTF?_2

Thali wrote: »

Who in their right mind would sell a property, realising a loss of 30%? Surely now one who is still able to pay back the mortgage ... and we might have a 3 or 4% interest rate again by now. If the key factors do not change - economy still goes relatively strong, low unemployment, etc., I am wondering, how long prices are going to be as low.

A lot of people might even have saved up the new required minimum deposit of 20% and are ready to go on the ladder - surly, if competition breaks out, as there are so few houses available, prices need to be picking up soon-ish again?

Guess what I'm saying is: GB must be or become a very undesirable, unattractive and doomed place to be for this to happen and as long as people coming to Peterbrough (picking an packing) and to London, Canary Wharf (well, also picking and packing), it don't really see prices down for very much longer (as I said earlier, it's 2012 now)

Thali

PS: sorry, this is actually a bit confusing

Some points:

1. Many people will not have an option whether or not to sell. Principally BTL owners but also those who borrowed so much through MEW that they face looming negative equity and large repayments. They'll be looking to sell as their finances approach critical.

Those sales will set 'market values' and builders will have to take this into account on new builds.

2. Ever been through a recession? If you had you'd understand why people would be reluctant to borrow maybe 100k+ for a house even if prices had dropped significantly from the peak. Banks will also be reluctant to loan to anyone but the best risks.

3. Houses have risen by 30% or more in the last few years with absolutely nothing to support these price rises other than easy availability of credit and market sentiment to encourage people to take that credit. The easy credit is all but gone and sentiment is draining rapidly, reversing in fact. With these two supports taken away, what makes you think prices will hold up at anything like current levels?

Thali

Hey !!!!!!,

you'll think I'm slow but ... I don't get it :rolleyes:

10% of all mortgages are BTL, so let's say, BTL has a market share of 10% - so this 10% will dictate where the market is heading? That's a bold statement

Never been through a recession ... well, sort of, but not in the UK. I know that people are very careful with their money during that period, but is owning an affordable house not a basic need? And sorry, could you please clarify if you think we will have a recession or is the recession already in full swing?

I don't think prices will hold up but I still don't understand why prices should not be at the same/ similare leven in 5 years time. Of course, if we'd assume we'll have a recession and they won't be any jobs anymore ... than you're certainly right and prices might be 50% down by 2015.

To give it another spin ... if the exchange rate stays this way - do you think we'll get the €€€ here sooner that anyone thought?

Thali

m00m00

house prices are set at the margins

say there are identical 10 houses in a fictional street, and one of them is owned by a BTL'er, the rest by OOs. The BTLer needs to sell in a hurry as he's been a numpty and actually listened to Inside track, so he prices it aggresively to sell. When it sells, it will then set the market price for the rest of the properties on the street, any further sales will be compared against this previous sale.

WTF?_2

Thali wrote: »

Hey !!!!!!,

you'll think I'm slow but ... I don't get it :rolleyes:

10% of all mortgages are BTL, so let's say, BTL has a market share of 10% - so this 10% will dictate where the market is heading? That's a bold statement

Never been through a recession ... well, sort of, but not in the UK. I know that people are very careful with their money during that period, but is owning an affordable house not a basic need? And sorry, could you please clarify if you think we will have a recession or is the recession already in full swing?

I don't think prices will hold up but I still don't understand why prices should not be at the same/ similare leven in 5 years time. Of course, if we'd assume we'll have a recession and they won't be any jobs anymore ... than you're certainly right and prices might be 50% down by 2015.

To give it another spin ... if the exchange rate stays this way - do you think we'll get the €€€ here sooner that anyone thought?

Thali

BTL will lead the price falls. Many people jumped on the bandwagon too late after prices had reached the point where rental income didn't cover mortgage payments. They relied on ever-rising prices to make the investment pay off. Also, in many cases they remortgaged another property to get their deposit so effectively they are running very high loans in relationship to the total value of their assets. Not good.

As BTLs come onto the market they'll depress property values generally. Doesn't matter that they only sold at that price because they had to sell, that's what the new base price for that type of property in that area will be until someone attains a higher one - or more likely, sells for even less as the next forced sale comes.

Have you ever thought about how much money being paid for a typical house actually is? In a country where ever more people are in perma-debt, hundreds of thousands of pounds is a massive amount of cash. Why do houses cost that much today but not say, eight years ago. Have wages gone up by similar amounts? I don't think so, prices are higher because people are willing and able to borrow such large amounts of money.

Will they be able to continue this level of borrowing? Seems not.
Will they want to in the middle of a recession? Probably not.

Where does that leave prices then?

Thali

Does this work in a downhill market only because - how did prices ever go up? It's all about supply and demand, that much is true but I'd love the get a house at a repossession or bargain price but what are my "real" chances?

Ok, for me to summarize (as a slow person), everything depends on the fact if we a) have a recession b) how serious and long it's going to be - right? So, the reality is, we should all talk about recession not about HPI as this is just a side effect ....

Do we have a recession?

WTF?_2

Thali wrote: »

Does this work in a downhill market only because - how did prices ever go up? It's all about supply and demand, that much is true but I'd love the get a house at a repossession or bargain price but what are my "real" chances?

Ok, for me to summarize (as a slow person), everything depends on the fact if we a) have a recession b) how serious and long it's going to be - right? So, the reality is, we should all talk about recession not about HPI as this is just a side effect ....

Do we have a recession?

We've had good economic times over the last 6-7 years because the credit taps were turned on full.

When people and businesses can borrow money like there's no tomorrow, it's hardly surprising that things go well. Until the time comes when the credit dries up.

m00m00

Thali wrote: »

Does this work in a downhill market only because - how did prices ever go up? It's all about supply and demand, that much is true but I'd love the get a house at a repossession or bargain price but what are my "real" chances?

Ok, for me to summarize (as a slow person), everything depends on the fact if we a) have a recession b) how serious and long it's going to be - right? So, the reality is, we should all talk about recession not about HPI as this is just a side effect ....

Do we have a recession?

prices go up by local 'kite flyers' pricing aggressively and buyers in an upwards market being prepared to pay the prices

Thali

Thanks !!!!!!!

Is there nothing to "neutralise" the BTL influence? And are the BTL's not a very attractive booty for some people who'll have ready cash?

Last time, prices in London fell more than prices elsewhere ... I still can't understand that, was the reason because prices here were more inflated than elsewhere? It seems to me, that the demand is/ was much higher here. But of course, this might all change now.

So, what does the future bring: if BTL's are "responsible" for the crash - will there be restrictions?

maryotuam

The way I see it is, that a large number of consumers have already spent a great chunk of their future income already by going into debt. So for 10-15 years they will have no disposable income to buy anything but the basics. Much of their income will be interest on past loans.

It will be hard on them because many will have got used to overspending as "normal". The economy depended on their spending to grow.Therefore there will not be another boom for a long time to come. And just as they will be depressed having to make do with less and listening to their children go into hysterics because they have to get used to a strange new word called NO, the whole economy will be depressed too.

WTF?_2

maryotuam wrote: »

The way I see it is, that a large number of consumers have already spent a great chunk of their future income already by going into debt. So for 10-15 years they will have no disposable income to buy anything but the basics. Much of their income will be interest on past loans.

It will be hard on them because many will have got used to overspending as "normal". The economy depended on their spending to grow.Therefore there will not be another boom for a long time to come. And just as they will be depressed having to make do with less and listening to their children go into hysterics because they have to get used to a strange new word called NO, the whole economy will be depressed too.

You make a very good point - borrowing represents spending future income so unless you are borrowing to invest in something that's going to generate more of an income for you in the future, it's not a great idea.

Borrowing to buy an overpriced asset (ie. housing in the last few years) or to spend on being an ueber-consumer is just about the worst thing you can do for your future prospects. Better to wait and save the money. You'll end up paying less for the item (no interest to pay on credit, possibly interest earned while you save) and when you get something 'free and clear' with your own money you will enjoy it a lot more. Also, spending your own money makes you think harder about the worth of what you are buying.

Anyone who is stretched to their limit to maintain their current lifestyle and is borrowing to do so is in for one massive shock to their system as they start having to pay it all back (with interest of course) and the basic cost of living rises.