House Price Crash Discussion Thread

mystic_trev

Great article in todays Torygraph by Jeff Randall.

The UK housing market is past its peak and heading south. House prices went up by about 150pc in 10 years, wages by a small fraction of that. An idiot in a hurry could see that the maths didn't work, yet experts kept insisting that demand would force prices ever higher.

The demand was there, I agree. As an abstract concept, it still is. But in order to fulfil demand, consumers need the ability to pay. The average buyer didn't have £200,000 stuffed in a jam jar, so he borrowed as much as he could. Not any more. The credit crunch has kiboshed super-stretch mortgages.

This lifts the curtain on an important part of the Brown Boom deception, which was that rising house prices made us all richer. It seemed like free money; it wasn't. Unfortunately large numbers of headstrong consumers behaved as if it was, sucking out equity from their homes to finance consumption.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/19/ccjeff119.xml

simon_w_3

Sorry to spread the doom, but here at the sharp end, even after 25 years in the business it is exceptionally bad. No instructions, largely due to a resistance to pay for HIP's, buyers knowing that prices are falling - so why buy now? and at least a 25% DROP in actual prices for some property types - 2 bed flats especially as there is a huge over supply. If you are selling now, then be realistic on your expectation, if you are buying - there are some great deals out there. By the way, we have just had our first prospective purchaser ask to see a HIP - not bad considering we have hundreds of properties on our books, thousands of applicants, so HIP 'take-up' for buyers approx 0.001% well done the Govt- yet another own goal! Good news for me is that lots of estate agents are going out of business and so hopefully only the good ones will be left ( that should bring some feedback!) oh and Happy Christmas.

JBeau

Happy Christmas to you too. What would be your advice for two friends of mine with houses up for sale - since the spring/summer - yet to find a buyer who hasn't pulled out. Will there be any spring bounce in 2008?
Personally I think the party's over - but then I would say that as I am poised to buy at a sensible price level with a big deposit.
What impact do you think lower interest rates will have on the market? I remember that even though rates fell during the last crash - that in itself didn't apply the brakes.
Keep posting!! what area of the UK are you based?

WTF?_2

simon_w wrote: »

Sorry to spread the doom, but here at the sharp end, even after 25 years in the business it is exceptionally bad. No instructions, largely due to a resistance to pay for HIP's, buyers knowing that prices are falling - so why buy now? and at least a 25% DROP in actual prices for some property types - 2 bed flats especially as there is a huge over supply. If you are selling now, then be realistic on your expectation, if you are buying - there are some great deals out there. By the way, we have just had our first prospective purchaser ask to see a HIP - not bad considering we have hundreds of properties on our books, thousands of applicants, so HIP 'take-up' for buyers approx 0.001% well done the Govt- yet another own goal! Good news for me is that lots of estate agents are going out of business and so hopefully only the good ones will be left ( that should bring some feedback!) oh and Happy Christmas.

Thanks for an informative post but the notion that people aren't selling property worth hundreds of thousands of pounds because they'd have to spend a couple of hundred quid up front for a HIP is complete and utter rubbish.

Most sellers will have to pay thousands to the estate agent upon sale so the notion that a couple of hundred quid up front is enough to keep them from selling is patent twaddle and a flimsy excuse to cover the fact that current asking prices are simply too expensive for the market to bear any more and we have an army of fools who think that this situation is going to change in the spring (encouraged by the pronouncements of certain estate agents and other vested interests).

WTF?_2

yanex wrote: »

With house prices its all reletive, generally the price of houses will always go up and it generally happens in 5 year cycles, They go up up up, level off, somtimes drop a little then go up. Usually where you hit a point where they have levelled and may drop you simply stay put for 2-3 years until you see prices move upwards again.

People who lose their money are those who decide to move (or have to) whilst the trend is going down.

So in the current climate, I would stay put and wait. There is a strong likelyhood the Bank of england will be forced to drop interest rates a couple more times over the next 6 months to avoid the economy sliding in to recession, this should kick start prices slowly going up again....

Wow, now isn;t that deep for my first post on MSE....

MSE newbie.

Well done, you've discovered the solution to all economic problems everywhere. Simply keep lowering the interest rates and all will be well! :j

I wonder why no-one has discovered this obvious fix-all solution before

Here are a couple of minor points that you may have overlooked though:

(1) Interest rates are already extremely low
(2) Lowering interest rates to zero really helped Japan's economy out of recession, didn't it?
(3) House prices aren't the only factor in the economy, there's a small thing called inflation which might have to be considered when factoring economic conditions into account.
(4) The way our system works is boom/bust cycles. After the boom, there has to be the bust to bring things back to some sort of norm before the cycle kicks off again. Deferring the bust by keeping rates artificially low in the face of other factors is just about the dumbest thing you can do and has got us into the mess we are now facing.


Apart from those minor niggles, great first post.

free4440273

(5) Savings matter also to the health (balance) of the economy; artificial low rates discourage saving. Balance being the operative word here; thus far (for the last ten years) everything is skewed to irresponsible lending/borrowing. Cannot believe this* (well, actually I can).

*BoE voted 9-0 for Dec rate cut, mulled bigger move (!!!!!!!!)

dweeby

From the Telegraph (again!) but it's true, recently everybody wants everything and they want it yesterday. An economic downturn will help to bring society down to earth!

"there is a widespread sense of a sickening and lopsided glut of affluence. The giddy ascent of our economy, fuelled by soaring house prices, cheap credit and piratical speculation by the City's new golden boys, has looked like a hydrogen-filled Zeppelin for some time."

Read the full article here.

dunnomate

Looks like there will probably be another cut Jan 2005.

cheers

dunnomate

mr.broderick

dunnomate wrote: »

Looks like there will probably be another cut Jan 2005.

cheers

dunnomate

2005 am i missing something here?

cybermum

Hello,first post,so please be gentle
Yes,2005???
Anyhow,I just wanted to share.
We bought our first home in '96,newbuild,for £37,995.
Sold Jan '06 for £112,000.
We had a small loan attached to the mortgage but still came away with a reasonable amount.
We talked about ploughing that back into another property,but it didn't feel right.
Fast forward to now;We am in Italy and coming back in the early part of next year.
And so,I have followed this thread for a few days with interest.
We plan to rent when we return,for the forseeable future,whilst we see the results of the fallout.
We have 2 kids and my heart says go for house,roots down etc etc
My head on the other hand is holding firm and waiting with baited breath.
I do think the bubble has stretched itself to unreal proportions.
Prices have to come down .JMHO