50% house price crash does not = more affordable homes

chucknorris

RealElement47 wrote: »

When property goes down do do rents, they are correlated.

When property crashes, rents fall because LLS are desperate to get out of the markwt

When property prices dropped in the early 90's correction, I bought 2 houses and 2 flats, when they dropped in the 2008 correction I bought another house. Do you somehow think Landlords prefer to buy when property is expensive, rather than cheap?

Admittedly I probably would not buy anymore property, no matter how cheap it becomes, but that is because I have had enough of dealing with people like you now, no matter how profitable that it is.

westernpromise

RealElement47 wrote: »

When property goes down do do rents, they are correlated.

When property crashes, rents fall because LLS are desperate to get out of the markwt

Exactly wrong once again. When houses prices fall rents go up. This is because people are prepared to pay up to avoid owning a capital loss. If your £100k house that you let at £5k a year is falling in value by £10k a year, you just jack the rent up to £15k a year. What are the renties going to do, buy a house to avoid paying the rent? In a falling market? Riiiiiiiiiiiight.

The BoE used to publish stats on this. They compared renters versus owners' ability to pay for housing. The graphs were pretty much identical especially in the early 90s.

If there were to be a housing crash, first thing that happens is your rent will go through the roof. Next you lose your job as a parallel consequence of whatever caused the crash. Net, your ability to buy will worsen, not improve, because even if you don't lose your job deposit requirements go up and salary multiples down.

If you want to know who'll own property after a crash - look at who owned it before.

RealElement47

chucknorris wrote: »

When property prices dropped in the early 90's correction, I bought 2 houses and 2 flats, when they dropped in the 2008 correction I bought another house. Do you somehow think Landlords prefer to buy when property is expensive, rather than cheap?

it is.

The tiny drop in 2008 was nothing compared with the 1990s.

The next drop will be more similar to the 1990s than the little blip down of 08. I remember when some properties were being sold for £20K in the 1990s.

chucknorris

RealElement47 wrote: »

The tiny drop in 2008 was nothing compared with the 1990s.

The next drop will be more similar to the 1990s than the little blip down of 08. I remember when some properties were being sold for £20K in the 1990s.

I bought 4 flats ( incl. 2 in 1999) and two houses in the 90's, although it was a larger correction than 2008, it wasn't that much larger. London prices dropped just over 30% in the 2008 correction (at least mine did), I don't think the 90's correction exceeded 40%.

buglawton

A falling market is caused by mortgage lenders cutting approvals on new lending. A falling market then discourages lenders from approving all but the most gold plated borrowers. All in all nothing becomes more affordable and most people will stay put.

Cornucopia

The proposition has some in-built issues:-

In the basic premise of a "crash", the effects on the market will depend on the nature of the crash and its cause(s). You can't make sweeping assertions that a crash will not benefit anyone without understanding why that could be. (And also what "benefit" means in this context).

For a basic FTB, clearly if their first home costs 50% less (say) then that means for them: 50% less deposit to find and 50% less to pay back. In the long term, that asset will be worth less, but that may well not be the most important consideration for them.

But what about interest rates - are they going up, down, or staying the same in this scenario? What about housing demand? If the demand remains high and prices have collapsed in spite of high demand, then there will simply be a rush to buy at the temporary new low price and prices will rise again.

In fact, I would say that as long as supply is restricted, there will be demand-led upward pressure on prices for the foreseeable future. There may be temporary adjustments, and indeed some adjustments will result in further reduction in supply, which can stablise falling prices from the supply-side.

It's not a great situation, and really only government is in a position to do anything about it, by resolving the supply-side issues.

lisyloo

RealElement47 wrote: »

When property goes down do do rents, they are correlated.

When property crashes, rents fall because LLS are desperate to get out of the markwt

Just been to buck house and got me thinking.
In London visitor numbers will be up due to gbp dropping against other currencies.
The apartment and air b&b sales will be booming, so I think property will be most resilient in the capital and that includes rents.

GreatApe

lisyloo wrote: »

Just been to buck house and got me thinking.
In London visitor numbers will be up due to gbp dropping against other currencies.
The apartment and air b&b sales will be booming, so I think property will be most resilient in the capital and that includes rents.

This is not new this is a 20 plus year trend

One of the reasons London has grown and will continue to grow more than rUK is the tourist economy. Tourism has and will continue to boom as former very poor countries become richer and richer. 3 billion Indians and Chinese many who would like to visit London if only they had the money and soon they will, none of who want to visit Stoke on Trent

Look at China. Chinese wages have doubled on the decade and the currency legged to the dollar has gained a lot
So much so that Chinese household shave 4x the income (in sterling) that they had in 2007

London is 4x cheaper for them than it was in 2007!! That's a huge difference

But still they are poorer than us
China is now around $11k / capita, USA $63k, UK$37k
However in a about 20 years time they will be roughly UK levels
London tourism is going to boom when an additional 3 billion people can actually afford a foreign holiday and London is a too destination

Air BnB should be embraced London mayor should scrap the 90 days limit or whatever it is and allow it to grow exponentially as traditional hotels will struggle to expand so fast. They would just increase room prices to ration supply which is bad because it means a cap to tourist number


London should plan for tourist numbers to grow from 20 million towards 100 million a year by 2050
The government should ensure the infrastructure for this is in place (mostly hotels and rooms) and Airbnb should play a part in this. This additional 80 million tourists could boost London by some £80 billion a year. Creating directly and indirectly upto 2 million additional full time equivalent jobs mostly in the capital and the SE

GreatApe

Rich2808 wrote: »

Price of food, gas, TVs, cars and electricity falls by 50 per cent - means they are mote affordable?

But apparently not houses!

But what you and most people don't understand is that wealth typically transacts with wealth not with income. So one house is worth one house

Let me try ask you in another way that might help

Let's say house prices crash 90%
How many buyers could benefit from this crash?
~1 million homes are sold each year so 1 million households can benefit...actually no because about two thirds of buyers in a given year are also sellers. So only about 0.3 million households can benefit from this crash out of 30 million households in the UK

So a crash even if it helps can only help 1% of households out
The other 99% homes are no more or no less affordable if houses cost 50% less or 50% more than they do

GreatApe

westernpromise wrote: »

Why would there be a crash in rents? If buying just became less desirable. what are all the would-be buyers going to have to do instead?

Rents will fall towards zero (above maintenance and repair) over time

We are in a period where the world has a true shortage of homes.
10 billion humans will need 5 billion good quality homes
There are some 3 billion okay homes in the world
Another 2 billion need to be built over the next 40 years
By far the world's biggest infrastructure projects is building homes

The current build rate is about 500 million a decade so we are on track.
This is the biggest amazing factor of free markets. Hosting the poor at a rate unheard of

Anyway at some stage we will have enough homes but we won't stop building new homes
So existing second hand homes will sell at a discount a big discount Vs new homes
This is already the case in some countries eg like Turkey which has a very high build rate (about 800,000 units a year Vs 200,000 a year in the UK) a new house might cost X while a second hand one which may only be 20 years old costs about 0.6x so 40% off

This will be true in a lot of the EU soon as their populations fall

If Germany shrinks from 82 million to 75 million over 30 years and they build an additional 6 million net homes. She will end up with something approaching 48 million homes for 75 million people. That's a huge oversupply. Homes would be relative to incomes and wealth, very affordable! Excluding children that's just 1.25 adults per property. Or rather 4 out of 5 German homes will only have one adult living in them probably just alone by themselves

The UK and London won't face this problem
We could allow continued immigration and avoid this date for a long time