Can housing ever actually drop?

dude7691

Old_Lifer said:

House prices  do fall from time to time,  though many of those involved in selling houses may still be saying 'now is a good time to buy' shortly before the fall begins to commence.     I have, I suppose experienced three falls over the last four decades, the worst fall being in the order of 20-25%. It takes a few years for prices to recover after a fall.

Many younger people have no experience of falling prices and rising interest rates and think rising prices and low interest rates will go on uninterrupted for ever.

Yep, usually it's when everyone is on board that things turn south. 20-25% is very significant especially with the amount of leverage people are taking now, hence why I don't think the government could possibly allow it to happen as they know votes depend on it. 

Absolutely! I am all too aware of those possibilities. I think it's more a case of older people are contented just as much. The way things are currently though the market has been engineered in such a way asset prices can be inflated forever without pushing inflation up, as long as the BoE and gov work in sync which they appear to be doing spectacularly well. I know nothing is ever too big to fail, but in my eyes it's pretty damn close. You'd think being in my position I'd be nitpicking reasons for it to fall, but I can't ignore the facts  

dude7691

jimjames said:

Just to reiterate that prices can fall and fall fast especially after a boom. The situation referred to above with the abolition of MIRAS was one. My wife bought a place for £60k in 1989, 5 years later the price had dropped to £30k or so. We finally sold in 1998 for £40k. This was in Southern England. House is now worth £200k

Yep, volatility was insane back in the day I've read up on it quite a bit. Nowadays volatility does seem extremely low comparative to the 80's, 90's and even the 00's. It's just a case of at the moment the economy is (perceived) supposedly incapable of coping with a drop of any measure, or even stagnation. It just makes you wonder when the government runs out of tools to push it higher. There's no limit to the amount of money that can be printed I suppose, which is just why it feels very difficult to justify falling prices at the moment. 

Apodemus

Since you are an OU student, would it be an option for you to buy a student flat in a decent university town this summer, live in it and rent a room (or two!) to other students?  That would give you the additional student social contact that you are missing at the moment, bring forward your purchase and give you future rental options if you were to move for work after you graduate.   With 18 months when students have been effectively out of the rental market, now might be a good time to scope out prices in university towns (but remember location is key with student accommodation).

MX5huggy

“I live in Pembrokeshire, Wales, so there are zero job prospects here except retail jobs which are dead end.”

I think you should do your dissertation on the economy of Pembrokeshire, while there’s not a huge range of economic activity there is only 125000 people including children and retirees. There’s much more than retail, tourism, agriculture, construction, public services, energy, health services. There are certain benefits, to being here. I recommend you set up a Walrus spotting tour operation, you could not do that anywhere else in the UK. 

Set your horizons further than Swansea, then come back and buy a slice of gods county I paid less than £0.5m for 2 houses sent in 3 acres (no sea view). 

 

dude7691

Apodemus said:

Since you are an OU student, would it be an option for you to buy a student flat in a decent university town this summer, live in it and rent a room (or two!) to other students?  That would give you the additional student social contact that you are missing at the moment, bring forward your purchase and give you future rental options if you were to move for work after you graduate.   With 18 months when students have been effectively out of the rental market, now might be a good time to scope out prices in university towns (but remember location is key with student accommodation).

Hi There

This is a great suggestion, but my problem is getting a mortgage via my current sources of income would be impossible as they're from student grants which aren't counted, and my self employment is naturally going to be at a disadvantage versus an employed position. I have a friend who bought a 2 bed house in Swansea for £130k, and gets £450 just to rent out a room whilst she lives there (it would go for £650 a month if she let it out without her in it). It's definitely dire for the rental market at the moment with yields dropping all over the place, so there's a possibility that may turn around eventually, but regardless it could still be a good investment if you can do it through rent a room especially, so thank you for that idea!

dude7691

MX5huggy said:

“I live in Pembrokeshire, Wales, so there are zero job prospects here except retail jobs which are dead end.”

I think you should do your dissertation on the economy of Pembrokeshire, while there’s not a huge range of economic activity there is only 125000 people including children and retirees. There’s much more than retail, tourism, agriculture, construction, public services, energy, health services. There are certain benefits, to being here. I recommend you set up a Walrus spotting tour operation, you could not do that anywhere else in the UK. 

Set your horizons further than Swansea, then come back and buy a slice of gods county I paid less than £0.5m for 2 houses sent in 3 acres (no sea view). 

 

Hi

I appreciate of course I was generalising. I was referring basically to the probabilities of obtaining such a job in this area I'm currently in. Haha yes I have heard about the walrus ) I don't mean to pass off Pembs as a bad area to live in. It's very beautiful and there's loads to do as a tourist or a retiree, it's just my experience of it has been that it's very restrictive. 

I'd love to set my horizons further, but I've pretty much written off anywhere in England at the moment. If Wales is bad then England is another level! Renting of course is an option, but again the cost of living is so high that I find it hard to believe I'd be better off going there and getting a slightly better paid job but paying the difference away in higher rents. 

I wouldn't mind coming back here to retire, though Pembs is one of the reasons I've never had much desire to travel, I already have experience of living in a very picturesque place!

A_Lert

I believe that as long as most British voters live in owner-occupied homes, we won't see a significant fall in house prices.

coyrls

dude7691 said:

Dh6 said:

You need to remember to live your life!

The decade you’re now in will most probably be the best of your life, LIVE IT!

hence why I'm saving so aggressively to try and change my circumstances so I can have a more balanced life that's actually enjoyable

It looks to me like you're trying to lock in your circumstances, rather than change them.  As others have suggested, your best investment now would be in yourself and your future career.  Try to be more flexible and don't tie yourself down with an early house purchase.  It seem crazy to me that you would move abroad for a cheaper house but tie yourself to your current location for your job search.  There is nothing wrong with renting when you are young, why the obsession with buying a house?

Voyager2002

dude7691 said:

I'd love to set my horizons further, but I've pretty much written off anywhere in England at the moment. If Wales is bad then England is another level! Renting of course is an option, but again the cost of living is so high that I find it hard to believe I'd be better off going there and getting a slightly better paid job but paying the difference away in higher rents.

You seem to be forgetting that a graduate job in parts of England (or Cardiff or similar places) would be the first rung of a ladder. Even if you had to pay two-thirds of your income in rent for a few years it would be worthwhile if you ended up able to command a salary sufficient to buy a nice house near to your workplace. Or a highly-skilled professional able to live and work somewhere like Spain (where a nice place to live can cost as little as £50K).

dunroving

dude7691 said:

Hi all,

As the title may or may not indicate, I'm starting to question everything I thought I knew about housing. A bit of background first. I'm currently 21 and living at home in a tiny annexe (worth £40k or so) paying a low amount of rent, but obviously I don't want to stay here forever. Also, the annexe is needed for another person after I move out so I feel very pressured to do so. I live in Pembrokeshire, Wales, so there are zero job prospects here except retail jobs which are dead end. Am currently studying an economics degree, due to graduate in 2024. I want to buy a house in Swansea, a 2 bed terraced house would be fine and currently goes for around £100k for a reasonable one. I've currently saved just over £43k towards a deposit, but have an income comprising only of student grants and online work that I do (I file self employed tax returns) and get about £14k a year in total (combining these). I'm on track to save roughly £85k by 2024. I've already got a LISA, and the max I'll realistically be able to borrow is around £60k, as I'll probably end up on min wage for a period after a graduate. I've literally been a hermit for 3 years (since 18) only leaving the house for work (when I was working away from home), sold my car, cut off all my friends and stopped all spending except absolute essentials and have lived this way for 3 years, can't cut my outgoings any more than I have. I spent a total of £35 on discretionary spending last year It may be paranoia but I'm so frustrated with the way things are right now that I'm just trying to stack the odds in my favour so I can at least say I tried. My options to increase my income are limited, as I have to devote a huge portion of my time to my degree and online work sucks the rest. 

Anyway, onto my main question. I don't know if I'm starting to go insane but I'm starting to believe it is impossible for housing not to skyrocket with no falls for the coming few decades. The government is clearly hellbent on pumping house prices at 10% a year no matter what, and the BOE although supposedly independent is blatantly subsidising manipulation of the housing market with zero interest rates (negative ones probably coming soon if houses drop more than a fraction of a percent). Even if house prices crashed, they'd just drop interest rates to stop it immediately I suspect, or Rishi would come up with some other dull scheme that fails to address the supply issue. All this would make that £100k house worth £146k in 4 years time. How worried should I be about this? Are we really now in a scenario where it will be impossible for me to move out (barre renting, which I would try to avoid doing at all costs except at a very low price). It's getting to the point where it's killing my motivation to save and I just want to put the money in risky investments for a lottery ticket at being able to keep up with artificially inflated house prices. Can someone please tell me I'm not being an idiot playing it safe and not putting money I need in 4 years into eternally rising stocks I am aware crashes and bear markets happen, but we've never had a bull market subsidised on QE and extreme money printing designed purely to inflate assets, so maybe the "rulebook" has changed to allow it to never go down for more than a month or two, being generous. 

Are there any instruments to hedge against house price rises that can be reasonably accessed in the UK? (except buying property of course). Would love to see something like this so I could "lock in" my deposit at current prices and just have my capital appreciate and depreciate at the same rate as housing does, rather than the pathetic interest rate I get currently (1.02% with Al Rayan). 

What countries have more reasonable house price - income ratios, that are also safe? I've been thinking about moving abroad, and there's lots of areas in the US that have reasonable ratios and look mildly affordable. If the pound gains strength over the coming years (if the fed continues to abolish their own free market ) then there's a chance a weak dollar could make it a viable option if the pound outperforms more than the inevitable real estate rise that would bring over there. I don't want to move abroad, and it's a last resort, but I don't want to let a fraudulent government/central bank kill my efforts. 

Just adding this on for new readers as a reply gave me an idea. Once you've secured a mortgage, does your income decreasing have to be declared to the bank? Theoretically I could get a summer job for 4-6 months whilst I'm off from study, get the mortgage, then leave that job to resume focusing on my degree, and pay the mortgage out of the income I currently have (that won't change for the foreseeable). 

Sorry if this post came off as a bit rant-esque, just sick of plundering all my resources into one goal that has moved away further than I could ever have anticipated. 

Thanks  

Another TLDR from me, too. Just a suggestion: Break long posts into smaller paragraphs.

To answer the headline question, "Yes, of course". Late 1990s. Mid 2000s.

I've also lived in the US and there, too, the answer is, "Yes, definitely". I have purchased two houses in the US. Neither went up in value, over a 3-year and 6-year period, respectively, so taking inflation into account, that's a decrease in value. Out of interest, I have followed the two houses on Zoopla, and neither house has appreciated in value - over a period of over 20 years!

But trying to time, or predict, house prices is a fool's errand for most people. Look at a house as a place to live, not an investment.