Why don't people cheer the brilliant elements of No-Deal crash- Such as making property affordable?

leitmotif

MobileSaver wrote: »

That's why so many here say to be careful what you wish for; lower prices may sound like a good thing but the reality is far from it.

Lower prices equals greater overall affordability equals more renters buying their own home equals lower demand for rental property equals downward pressure on rents equals greater capacity (on the part of remaining renters) to save up for a deposit. It also means that both renters and buyers spend less of their total lifetime earnings on rent and/or buying, which leaves more disposable income, which is better for the economy.

Besides, problems with affordability have led to a generation renting and saving. Sure, there may be plenty of new entrants to the job market and some spendthrift types for whom a £16K deposit seems like a major stumbling block, but there's also a backlog of would-be buyers out there who already have £16K or more, but aren't purchasing for a number of reasons, including waiting to see what Brexit brings and considering moving abroad to get the same size house for half the price in a more developed country, or perhaps holding off because they recognise that nigh on 9x average annual gross salary for the average house is less sustainable than the multiple we had at the height of folly in 2007/8, and this time we won't have the safety net of interest rate cuts to save us.

MobileSaver

leitmotif wrote: »

more renters buying their own home equals lower demand for rental property

Are you sure about that?

All other things being equal there are no more homes being created; just more properties are owner occupier rather than tenanted occupier. So although there is one less renter looking for a property there is also one less property available to rent... QED the renter demand remains constant.

Following on from that (although I'm speculating here as I haven't seen any stats) it's possible that renter occupied properties as a whole have a higher occupancy rate than owner occupier properties. I.e. your typical owner occupier property has two adults living there whereas I'm speculating that rented properties might average out at say three adults (due to HMOs and flat shares etc.) In which case one couple in a rented property may now buy but the other one or more renters in that rented property still need to rent so in fact there may be greater demand for rentals...

I'm just thinking out loud here, does anyone have any official statistics on occupancy rates comparing owner occupier against rented?

leitmotif

MobileSaver wrote: »

although there is one less renter looking for a property there is also one less property available to rent... QED the renter demand remains constant.

That’s assuming a one-out, one-in model. I’m not convinced by it (and could argue it both ways, incidentally, so I’m partly conceding on this point), precisely because the affordability issue has led to an increased number of renters and pushed up rental prices. According to your simplified model, such an inflationary effect shouldn’t be an inflationary effect because for each person who continues to rent (through being priced out, through choice, etc.) there’s a house that goes unbought and is therefore potentially available for rent.

MobileSaver wrote: »

Following on from that (although I'm speculating here as I haven't seen any stats) it's possible that renter occupied properties as a whole have a higher occupancy rate than owner occupier properties. I.e. your typical owner occupier property has two adults living there whereas I'm speculating that rented properties might average out at say three adults (due to HMOs and flat shares etc.) In which case one couple in a rented property may now buy but the other one or more renters in that rented property still need to rent so in fact there may be greater demand for rentals...

That’s possible. I’ll tentatively counter with the example of a man in a single-occupant rental property pairing up with a woman in a single-occupant rental property, both quitting their rental properties to buy one property together. Perhaps there’d be an extra link in the chain there, i.e. they move into a single rental property together before buying a place, but the net effect would be two rental properties becoming free for one house purchased.

We also need to consider that lower purchase prices will make it more affordable for would-be BTL landlords to buy in cash. Let’s not forget that the legal changes geared towards making it more of a level playing field for non-BTL buyers only disadvantage landlords reliant on mortgage finance. A fall of 20% (I take this as an example because others were discussing it above) would make a paid-in-cash BTL affordable for many more and potentially result in greater availability of rental property/rooms.

MobileSaver wrote: »

I'm just thinking out loud here

Me too, I’m afraid.

The-Joker

It’s looking increasingly like whatever happens deal or no deal the pound will fall a lot and so will property

phillw

leitmotif wrote: »

I’ll tentatively counter with the example of a man in a single-occupant rental property pairing up with a woman in a single-occupant rental property, both quitting their rental properties to buy one property together. Perhaps there’d be an extra link in the chain there, i.e. they move into a single rental property together before buying a place, but the net effect would be two rental properties becoming free for one house purchased.

Or they were living with their parents, or sofa surfing, or living with many friends in a house share.

Which doesn't help the couple and their baby rent somewhere.

It's pretty much impossible to model it.

phillw

GreatApe wrote: »

Which housing market is more affordable?
One that continuously goes up or one that continuously goes down?

To be fair, people don't want houses to continuously go down. They want them to drop by 90% just long enough for them to buy one, then spring back the next day.

Cars lose value because they require so much maintenance and spare parts to keep going and it's easier to build a new car than a new house. So we won't see house and car value following the same model in the UK.

The timber houses in the US things are slightly different, they ended up bulldozing relatively new but un-maintained empty houses after the financial crash.

If someone is struggling to buy then detroit is still relatively cheap at the moment, maybe relocating would be a good move.

AG47

The-Joker wrote: »

It’s looking increasingly like whatever happens deal or no deal the pound will fall a lot and so will property

Anything is possible at this stage, the only thing that is certain is uncertainty :cool:

mwt_2

MobileSaver wrote: »

Because only a fool would believe that a property price crash would be in complete isolation to everything else that affects being able to buy a house.

A house price crash isn't the HPC nirvana if...

• you've just lost your job due to the economic downturn
• you can't get a mortgage because lenders have modified their lending criteria to reduce their risk
• existing owners choose to stay put and not sell until the downturn is over
• developers slow or stop building new houses until the downturn is over

+1 this. We purchased our house mid last year and are now knuckling down for the long haul, mortgage fixed for 5 years, topping up savings etc. If we hadn't moved there's no chance I'd have sold my previous property during a crash, I needed the equity to move.


It's foolish to think that a crash means all the properties on the market today suddenly become "affordable". The vast majority of them will come off the marketing because the owners can no longer afford their onward purchase or simply don't want to sell and lose out. Sure there will be people that MUST sell, normally repossesions and auctions, but those exist today and the prices are more likey defined by clearing some sort of debt rather than what the property is worth.

phillw

mwt wrote: »

Sure there will be people that MUST sell, normally repossesions and auctions, but those exist today and the prices are more likey defined by clearing some sort of debt rather than what the property is worth.

I think that lenders have learned that mass repossessions are not the most cost effective way of dealing with the issue. With interest rates so low and the possibility of getting SMI, then if we see the same level of repossessions as the 80's and 90's then the country has bigger problems that will affect everyone

Crashy_Time

mwt wrote: »

+1 this. We purchased our house mid last year and are now knuckling down for the long haul, mortgage fixed for 5 years, topping up savings etc. If we hadn't moved there's no chance I'd have sold my previous property during a crash, I needed the equity to move.


It's foolish to think that a crash means all the properties on the market today suddenly become "affordable". The vast majority of them will come off the marketing because the owners can no longer afford their onward purchase or simply don't want to sell and lose out. Sure there will be people that MUST sell, normally repossesions and auctions, but those exist today and the prices are more likey defined by clearing some sort of debt rather than what the property is worth.

The bit you are missing is that people have been able to leave property empty, or rent out without paying any or much tax up until now, changes to council tax and BTL tax make this harder to do. The end of FOM is going to see demand for housing plummet anyway IMO.