Coronavirus effect on property markets?

GDB2222

MobileSaver said:

Crashy_Time said:

MobileSaver said:

Why should people worry about having a "big mortgage debt" if COVID-19 takes hold in the UK?
What is your prediction then, 10% off by Christmas 2020?

It doesn`t have to take hold in the UK, if it upsets the Chinese and other economies enough to cause effects in the credit markets it has an immediate effect

So, again, what is your prediction on how this "pretty big economic impact ... on house prices" will affect us and when? 10%? 20%? 30% drop in house prices?

Can I try to help? First, if the epidemic gets stopped before many people are infected, the effect will be small.

So, as we don’t really know the answer to that question, let’s look at the opposite extreme, and assume virtually everyone gets infected. We know that the death rate for over eighties is 15%, 8% for people on their seventies, and 4% for people 60-70. So, average that as 8%. There are roughly 15m people in the 60+ age group, so we are looking at worst case 1.2m deaths.

Home ownership amongst that age group is much higher than the average at about 75%. So, we are looking at possibly 900,000 houses becoming vacant. Actually, less than that because many of those houses will not be single occupancy. So, say 500,000.

And then we need to add in the people under age 60. A lower mortality rate, lower home ownership, etc. 

What effect do you think 500,000 extra houses coming up for sale would have? To help you answer let me point out that the average UK transactions are 1.2m. But most of those are in chains, with one FTB at the bottom and a vacant property at the top. 

Perhaps  people won’t rush to sell their inherited properties. Nevertheless, in a worst case scenario, that number of properties would represent a significant overhang.

Crashy_Time

MobileSaver said:

Crashy_Time said:

MobileSaver said:

Why should people worry about having a "big mortgage debt" if COVID-19 takes hold in the UK?
What is your prediction then, 10% off by Christmas 2020?

It doesn`t have to take hold in the UK, if it upsets the Chinese and other economies enough to cause effects in the credit markets it has an immediate effect

So, again, what is your prediction on how this "pretty big economic impact ... on house prices" will affect us and when? 10%? 20%? 30% drop in house prices?

I doubt Warren Buffet could answer that, or would even want to, the main prediction is that there are going to be (are) supply chain and credit market effects that will obviously feed through to credit availability/appetite (if your factory shuts because of a Chinese slowdown buying an overpriced new-build will slip down the list of priorities) and that we are only at the beginning of this, although many commentators seem to think that the global economic damage from China is already done in that many companies will now realise that they can never again be so reliant on China for parts/labour, that alone changes the whole globalisation dynamic.The main prediction from HPC was always that it isn`t sustainable, and that a credit event, political change or "Black Swan" event could alter the dynamic that favours the property bubble, and we are seeing this at all sorts of levels now. Maybe you could answer these points instead of just shouting for price drop predictions (although the BOE seemed to think 30% could happen off the back of the "Bad Brexit" still to come)

gfplux

This article in the Guardian makes Grim if not frightening reading.
https://www.theguardian.com/world/2020/feb/23/world-is-approaching-coronavirus-tipping-point-experts-say

the phrase Tipping Point is..........

Sailtheworld

Crashy_Time said:

https://www.express.co.uk/news/world/1246178/Coronavirus-panic-Italy-outbreak-military-lockdown-quarantine-South-Korea-China-latest

Pretty big economic impact coming down the track from all this, definite impact on house prices IMO.

The bear story is always more compelling and usually wrong. Maybe we should revisit this at the end of the year (if we're spared) and see just how definite that impact on house prices turned out to be? 

Sailtheworld

GDB2222 said:

MobileSaver said:

Crashy_Time said:

MobileSaver said:

Why should people worry about having a "big mortgage debt" if COVID-19 takes hold in the UK?
What is your prediction then, 10% off by Christmas 2020?

It doesn`t have to take hold in the UK, if it upsets the Chinese and other economies enough to cause effects in the credit markets it has an immediate effect

So, again, what is your prediction on how this "pretty big economic impact ... on house prices" will affect us and when? 10%? 20%? 30% drop in house prices?

Can I try to help? First, if the epidemic gets stopped before many people are infected, the effect will be small.

So, as we don’t really know the answer to that question, let’s look at the opposite extreme, and assume virtually everyone gets infected. We know that the death rate for over eighties is 15%, 8% for people on their seventies, and 4% for people 60-70. So, average that as 8%. There are roughly 15m people in the 60+ age group, so we are looking at worst case 1.2m deaths.

Home ownership amongst that age group is much higher than the average at about 75%. So, we are looking at possibly 900,000 houses becoming vacant. Actually, less than that because many of those houses will not be single occupancy. So, say 500,000.

And then we need to add in the people under age 60. A lower mortality rate, lower home ownership, etc. 

What effect do you think 500,000 extra houses coming up for sale would have? To help you answer let me point out that the average UK transactions are 1.2m. But most of those are in chains, with one FTB at the bottom and a vacant property at the top. 

Perhaps  people won’t rush to sell their inherited properties. Nevertheless, in a worst case scenario, that number of properties would represent a significant overhang.

It's playing with maths again. If this, that and the other happens then perhaps half a million homes will become vacant. That would probably have an effect on house prices but if the credit markets close down as well nobody will be able to get a mortgage to buy them. We know that when prices fall non-distressed sellers shut up shop refusing to sell at lower than what they perceive as market value.

On HPC there would be much excitement (it's on!) which would be short lived. Complaints would soon start about deluded sellers and the only properties being available tiny bungalows that have red crosses painted on the doors.

On the other hand 1.2m might not drop dead in short order and 2020 house prices will be +/- 4% of where they started the year. 

mirko

This might be the most "MoneySavingExpert" forum thread of all time. Ticks all the boxes. Well done everyone.

Sailtheworld

Just a thought. 1.2m popping off might well lead to more houses coming to market - might also bring forward a few inheritances and we know where that money ends up.

GDB2222

Sailtheworld said:

GDB2222 said:

MobileSaver said:

Crashy_Time said:

MobileSaver said:

Why should people worry about having a "big mortgage debt" if COVID-19 takes hold in the UK?
What is your prediction then, 10% off by Christmas 2020?

It doesn`t have to take hold in the UK, if it upsets the Chinese and other economies enough to cause effects in the credit markets it has an immediate effect

So, again, what is your prediction on how this "pretty big economic impact ... on house prices" will affect us and when? 10%? 20%? 30% drop in house prices?

Can I try to help? First, if the epidemic gets stopped before many people are infected, the effect will be small.

So, as we don’t really know the answer to that question, let’s look at the opposite extreme, and assume virtually everyone gets infected. We know that the death rate for over eighties is 15%, 8% for people on their seventies, and 4% for people 60-70. So, average that as 8%. There are roughly 15m people in the 60+ age group, so we are looking at worst case 1.2m deaths.

Home ownership amongst that age group is much higher than the average at about 75%. So, we are looking at possibly 900,000 houses becoming vacant. Actually, less than that because many of those houses will not be single occupancy. So, say 500,000.

And then we need to add in the people under age 60. A lower mortality rate, lower home ownership, etc. 

What effect do you think 500,000 extra houses coming up for sale would have? To help you answer let me point out that the average UK transactions are 1.2m. But most of those are in chains, with one FTB at the bottom and a vacant property at the top. 

Perhaps  people won’t rush to sell their inherited properties. Nevertheless, in a worst case scenario, that number of properties would represent a significant overhang.

It's playing with maths again. If this, that and the other happens then perhaps half a million homes will become vacant. That would probably have an effect on house prices but if the credit markets close down as well nobody will be able to get a mortgage to buy them. We know that when prices fall non-distressed sellers shut up shop refusing to sell at lower than what they perceive as market value.

On HPC there would be much excitement (it's on!) which would be short lived. Complaints would soon start about deluded sellers and the only properties being available tiny bungalows that have red crosses painted on the doors.

On the other hand 1.2m might not drop dead in short order and 2020 house prices will be +/- 4% of where they started the year. 

It's wonderful! One user says "make a prediction", and then when I attempt to do so, you call it "playing with maths".

I actually agree with your prediction for 2020. The numbers of deaths will accelerate throughout 2020, and then there's time to get probate. After that, as you say, many people will, at least initially, refuse to sell. I'd expect to see a strong continuing effect in 2021, though. 

If there's a pandemic, my figure for the number of deaths amongst over-60s is based on current data for the disease. Bear in mind that, if there is a pandemic, the NHS will be unable to provide anywhere near enough ICU places, so the mortality rates will probably rise. 

Sailtheworld

GDB2222 said:

Sailtheworld said:

GDB2222 said:

MobileSaver said:

Crashy_Time said:

MobileSaver said:

Why should people worry about having a "big mortgage debt" if COVID-19 takes hold in the UK?
What is your prediction then, 10% off by Christmas 2020?

It doesn`t have to take hold in the UK, if it upsets the Chinese and other economies enough to cause effects in the credit markets it has an immediate effect

So, again, what is your prediction on how this "pretty big economic impact ... on house prices" will affect us and when? 10%? 20%? 30% drop in house prices?

Can I try to help? First, if the epidemic gets stopped before many people are infected, the effect will be small.

So, as we don’t really know the answer to that question, let’s look at the opposite extreme, and assume virtually everyone gets infected. We know that the death rate for over eighties is 15%, 8% for people on their seventies, and 4% for people 60-70. So, average that as 8%. There are roughly 15m people in the 60+ age group, so we are looking at worst case 1.2m deaths.

Home ownership amongst that age group is much higher than the average at about 75%. So, we are looking at possibly 900,000 houses becoming vacant. Actually, less than that because many of those houses will not be single occupancy. So, say 500,000.

And then we need to add in the people under age 60. A lower mortality rate, lower home ownership, etc. 

What effect do you think 500,000 extra houses coming up for sale would have? To help you answer let me point out that the average UK transactions are 1.2m. But most of those are in chains, with one FTB at the bottom and a vacant property at the top. 

Perhaps  people won’t rush to sell their inherited properties. Nevertheless, in a worst case scenario, that number of properties would represent a significant overhang.

It's playing with maths again. If this, that and the other happens then perhaps half a million homes will become vacant. That would probably have an effect on house prices but if the credit markets close down as well nobody will be able to get a mortgage to buy them. We know that when prices fall non-distressed sellers shut up shop refusing to sell at lower than what they perceive as market value.

On HPC there would be much excitement (it's on!) which would be short lived. Complaints would soon start about deluded sellers and the only properties being available tiny bungalows that have red crosses painted on the doors.

On the other hand 1.2m might not drop dead in short order and 2020 house prices will be +/- 4% of where they started the year. 

It's wonderful! One user says "make a prediction", and then when I attempt to do so, you call it "playing with maths".

I actually agree with your prediction for 2020. The numbers of deaths will accelerate throughout 2020, and then there's time to get probate. After that, as you say, many people will, at least initially, refuse to sell. I'd expect to see a strong continuing effect in 2021, though. 

If there's a pandemic, my figure for the number of deaths amongst over-60s is based on current data for the disease. Bear in mind that, if there is a pandemic, the NHS will be unable to provide anywhere near enough ICU places, so the mortality rates will probably rise. 

You've calculated a worse case - assume very high infection rates, assume the higher end of potential mortality rates and assume it'll be mainly oldies who get a visit from Mr. G. Reaper. That's why I called it playing with maths because it's a calculation - you haven't made a prediction.

As a worse case 1.2m deaths in the UK is the result of the calculation. It's very likely to under that - obviously a worse case is at the very edge of likelihood and it wouldn't be much of a worse case if there were more deaths than this. However, it still doesn't pass the sniff test. 1.2m deaths is 2.5x the World's annual death toll from flu. Also the floating petri dish known as the Diamond Princess cruise liner is still yielding data - even accounting for the 4 new cases it's looking increasing likely that even if Coronavirus was to spread unchecked in the general population infection rate and mortality rates are far lower than the worse case.

My guess (it's impossible to predict) would be that the worse case would be equivalent to a bad flu season (15,000). I'd actually be quite surprised if it got over 1,000. That would still have a big effect on the economy because it's self fulfilling - for example I've just cancelled a business trip to SE Asia. Not because I'm overly concerned about the risk but the last thing I need is to come back with a cold and get locked up for a fortnight. People are losing the plot.

I hope your cold's better by the way.

GDB2222

Thanks. I seem to be recovering manfully from my man flu.

You can't compare COV to ordinary flu.  COV is far more contagious and far more deadly. 

Your chances of catching COV right now are very small, but you really cannot be sure when you leave on a trip whether you'll be allowed back, so I entirely agree with your conclusion to cancel your trip. I agree that governments have lost the plot. They should be taking draconian measures now, but of course they'll leave it far too late.