House Price Crash Discussion Thread

Nenen

Not sure if this is the right place to ask this question but, as it is in the context of house prices I'm going for it!
At the foot of this article on house prices in the Telegraph:
http://www.telegraph.co.uk/property/main.jhtml?xml=/property/2008/01/04/nosplit/pcrash105.xml#form

there is a comments board and I was interested to read this comment:

"Great article Edmund! At last house prices fall! We have rented for the last 4 years (after selling up with a nice profit in 2003) and can't wait to buy a home at a realistic price again like 3.5 times our salary and not x 7! Maybe it was worth waiting after all. My next prediction is that in 2011 when all other EU countries allow Eastern Europeans to work there a lot of immigrants will leave the UK and leave many properties empty...
Posted by Stefanie S. on January 4, 2008 7:34 PM"

As the reason many people give for house prices continuing to go up is the increasing demand for housing due to the large influx of economic migrants, does anyone know if it is true that currently (as the comment implies) the UK is one of the few (or possibly only) country that allows Eastern Europeans to live/work here whereas all other European countries will not allow Eastern Europeans in to work until 2011?

If so, out of interest (and not racism) why did UK allow this immediately when others didn't? I always assumed that within the EU anyone could work anywhere they choose and that for some strange reason Eastern Europeans chose UK above France etc rather than this was the only country that would allow them to live and work here at the moment.

Does anyone else (other than the Telegraph respondant) think that there will be a large outflux of economic migrants in 2011 and, if so, will this effect house prices? Please polish your crystal balls to give me an informed guess! :beer:

Jonbvn

Nenen,

I was about to post the same link. I respect the views of Edmund Conway, who is the economics editor of the telegraph.

neverdespairgirl

pickledpink wrote: »

Nothing wrong with living in rented accommododation? Well there is when you're so desperate to buy like you are!!

Why do you think I'm or we're desparate to buy? We aren't. We could have bought over the last fwe years easily, and could still do so now, as sadly, owing to OH's inheritance, we have a £400k deposit and good incomes.

pickledpink wrote: »

You've already said how you're saving like mad to get on the property ladder!

Nor are we saving like mad to get on the property ladder. We are saving, because our rent is so much lower than our mortgage, it makes perfect financial sense, and because living below our means and saving for a rainy day is a sensible, prudent thing to do..

pickledpink wrote: »

And you've admitted (albeit unwittingly) how fruitful owning property is, by telling us that your parents' made £2.1 million in little over just one decade by owning their own property!!

Owning property has been fruitful, not is fruitful. Past prices are not necessarily a guide to future performance.

pickledpink wrote: »

I find it strange that coming from a wealthy family; and with your boyfriend inheriting several properties from his deceased parents' (not to mention the fact you're both barristers who should be raking it in - if you're good at what you do of course!) that you're having to rent - and very modestly too!

We aren't having to rent, we are choosing to rent, because financially it makes perfect sense. We are happy doing so. We rent a 3 bedroom place in central London, very close to our work, and as there are 3 of us (me, OH, our 2 year old son) it's a great property for us.

pickledpink wrote: »

Oh Please!!!!! Stop talking bull!

Why are you being rude to me?

m00m00

Nenen wrote: »

Not sure if this is the right place to ask this question but, as it is in the context of house prices I'm going for it!
At the foot of this article on house prices in the Telegraph:
http://www.telegraph.co.uk/property/main.jhtml?xml=/property/2008/01/04/nosplit/pcrash105.xml#form

there is a comments board and I was interested to read this comment:

"Great article Edmund! At last house prices fall! We have rented for the last 4 years (after selling up with a nice profit in 2003) and can't wait to buy a home at a realistic price again like 3.5 times our salary and not x 7! Maybe it was worth waiting after all. My next prediction is that in 2011 when all other EU countries allow Eastern Europeans to work there a lot of immigrants will leave the UK and leave many properties empty...
Posted by Stefanie S. on January 4, 2008 7:34 PM"

As the reason many people give for house prices continuing to go up is the increasing demand for housing due to the large influx of economic migrants, does anyone know if it is true that currently (as the comment implies) the UK is one of the few (or possibly only) country that allows Eastern Europeans to live/work here whereas all other European countries will not allow Eastern Europeans in to work until 2011?

If so, out of interest (and not racism) why did UK allow this immediately when others didn't? I always assumed that within the EU anyone could work anywhere they choose and that for some strange reason Eastern Europeans chose UK above France etc rather than this was the only country that would allow them to live and work here at the moment.

Does anyone else (other than the Telegraph respondant) think that there will be a large outflux of economic migrants in 2011 and, if so, will this effect house prices? Please polish your crystal balls to give me an informed guess! :beer:

it doesn't even need an outflux to puncture the bulls bubble dreams

a slow down, or halt to further immigration would have the same effect, as rising prices need rising demand.

Generali

m00m00 wrote: »

a slow down, or halt to further immigration would have the same effect, as rising prices need rising demand.

It's not necessarily true to say that rising population = rising demand. If you can't afford to buy a property (or anything else for that matter) at a price at which someone will sell then you are not part of demand at that point.

Of course if a million very low paid people turn up in the UK they will have to live somewhere and the chances are that they'll sleep in dormitary like conditions for a while as that is cheap and gives them a chance to get on their feet. That will increase demand for HMOs and thus the demand from investors in HMOs. Poor immigrants tend to use housing very efficiently. Rich ones of course use it just as profligately as the rest of us.

KITCHEN1_2

Consider this. If the Uk goes into a slowdown and if this is accompanied by falling interest rates then the yield on falling housing prices is going to look more and more attractive to investors who are capitalised to increase their exposure to property. This also implies they can service their debt ,but if they cannot they are rather silly to be investing in this type of asset anyway.
I do believe a survey suggested the majority of investors were looking at BTL has long term pension style investments. If so their rational is likely to remain intact.Even a modest correction accompanied by falling rates is going to give them a positive yield and one in excess of the returns available on 'risk free' money.
The point I am making is investment funds have to flow somewhere and when most asset groups start to tank property will be a good deal more sticky and attractive than some people think.
Just a shame the govt backed off having these in pensions ,it made sense if they could have regulated it properly.

PasturesNew

pickledpink wrote: »

It's quite transparent how all the 'have-nots' are the ones who are predicting a massive crash! Sour and grape spring to mind!

Rubbish. Those who say that property will fall usually substantiate their claim with facts/figures/links. Being able to provide a referenced, critical analysis of market trends, along with their considered opinion is not the exclusive domain of the have nots. It is the domain of intelligent people who are open-minded.

I say house prices are falling, not everywhere, not every type of house. Yet. I am a have not and also a have. I have the cash to buy the sort of house I want outright, for cash, virtually anywhere I would choose to live in the country. On the other side of the token I don't have a job. But for getting a property I am a have.

Those who say the opposite tend to name-call, shout and leave no link/evidence of their source for their decision.

pickledpink wrote: »

And I say it once again: PROPERTY ALWAYS RISES IN THE LONG RUN!!

And the "house prices are falling" gang will agree with you.
Wholeheartedly.
Every man, woman, child, dog and whatever else ...

We are all in agreement with your statement. 100% fact.

However:
"property always rises": false
"in the long run": how long?

You must admit by your own posting that it always rises in the long run, not the short run. So you are saying prices will fall. We rest our case.

Generali

KITCHEN1 wrote: »

Consider this. If the Uk goes into a slowdown and if this is accompanied by falling interest rates then the yield on falling housing prices is going to look more and more attractive to investors who are capitalised to increase their exposure to property. This also implies they can service their debt ,but if they cannot they are rather silly to be investing in this type of asset anyway.
I do believe a survey suggested the majority of investors were looking at BTL has long term pension style investments. If so their rational is likely to remain intact.Even a modest correction accompanied by falling rates is going to give them a positive yield and one in excess of the returns available on 'risk free' money.
The point I am making is investment funds have to flow somewhere and when most asset groups start to tank property will be a good deal more sticky and attractive than some people think.
Just a shame the govt backed off having these in pensions ,it made sense if they could have regulated it properly.

What you say is unarguably correct but misses one important point about the BTL investment market which that it is almost all done on borrowed money. You need to be able to borrow to invest and lenders are tightening their lending conditions right now.

A survey of lenders for the Bank of England (link), "...found that the availability of mortgages to homebuyers during the three months to mid-December had already “reduced materially”, and that new home loans were expected to become still scarcer and more expensive in the present quarter."

Also, "The Bank’s survey results showed that 31.2 per cent more lenders said that the availability of mortgages had grown worse in the past quarter than said it had stayed the same or improved. That compared with a net 0.1 per cent in the third quarter survey reporting that mortgages were easier to obtain, marking a sharp tightening of conditions for secured borrowing. "

If you can't borrow you can't buy, in most cases at least.

IMO, this is the crucial point about where house prices go in the nearish future. I don't see the mortgage market going back to where it was in the Spring any time soon. I believe that will mean that forced sellers (of which there are always some) will have to take lower prices and unforced sellers will find their property very hard to shift at a price they're prepared to take.

Where it gets interesting is what happens to the broader economy? If people start getting laid off (as I suspect will happen) than the number of forced sellers will increase and the number of house sales at lower prices will feed though increasingly into Land Registry figures, oushing down the 'value' of the rest of the housing stock.

That's when the resolve of BTLers will be tested. Are they going to hang on to an asset that is rapidly falling in value for the cashflow or will they sell up in the hope of buying back in later at a better price? My guess is the latter but nobody really knows the answer. From an investment perspective it makes sense only if people think prices are going to fall a long way only due to the high costs of buying and selling. People don't always think about investments in a rational way though.

dolce_vita

From what I can gather, most newbie BTLers haven't got a pot to p1ss in and have relied on HPI to gain a foothold in the rental property market by equity release from their existing property(ies).

when prices are no longer going up they are exposed for what they are
i.e. chancers

The idea that these people will jump in and buy up properties is simply ludicrous because they will not have the money available to do so.

The people that will be able to are cash-rich, non debt junkies with their own money.
In other words, it's the same as it has ever been.

Do not make the mistake of confusing debt with wealth.

KITCHEN1_2

General,
good points and as you imply much of what will shape the property market remains at this time uncertain, particularly employment.

I have not proposed the market will return to what people have known recently. I have suggested that a buyers market may have stickier than some doom and gloom merchants think given other conditions ensue. I stand by that possibility and look forward to a return to sustainable conditions and volumes.

Dolca,
If your post was a reply to mine then please reread. The very people you mention, the flippers /speccies are the very cannon fodder that gave people like me the chance to build low risk positions in property all the way from the early 70's onwards. If I were younger I'd do it again when the forced sellers hit the auctions en masse. Buying other people's investment problems is where the risk get's attractive. This is distinct from the broad market which as I have said will possibly be stickier than some people think.
People will sell virtually anything before they sell their property at lower prices which is why most corrections are made up of stagnation rather than crashes which tend to be the province of overleaveraged speecies. This is why prop is for example much stickier than equities.

If and it's a big IF we get stuck into a Japanese style stagnation with domestic rates long term low then prop is going to outperform over the long term and it will do it first and foremost through yields ,not capital appreciation. I never bought a property looking for cap app although I've sold a lot when it was offered by the flippers/speccies.