How can house price's fall so much??

brit1234

pickles110564 wrote: »

They are even more stupid than the people who think we will have over a 50% crash.

Pickles you might have not noticed but didn't Halifax or Nationwide put up its mortgage interest rates by 0.5% yesterday (thats the equivalent to 2 BOE increases). The more that people pay on mortgage costs the less they can pay on a property. Thus there are fewer and fewer people who can pay the prices that sellers want and hence prices have to come down to sell.

On that basis 50% falls don't sound that ludicrous with banks interest rates rising so fast especially when there is an ever growing surplus of property for sale.

wisbech_lad

Both HK and Japan saw house price declines of over 50%, so it can happen...

jamescredmond

brit1234 wrote: »

Pickles you might have not noticed but didn't Halifax or Nationwide put up its mortgage interest rates by 0.5% yesterday (thats the equivalent to 2 BOE increases). The more that people pay on mortgage costs the less they can pay on a property. Thus there are fewer and fewer people who can pay the prices that sellers want and hence prices have to come down to sell.

On that basis 50% falls don't sound that ludicrous with banks interest rates rising so fast especially when there is an ever growing surplus of property for sale.

I have to concede that a 50% fall is a slim possibility.

but to reach that figure the economy would have hit a 'perfect storm', i.e. being tipped from recession into slump.

an economic contraction of this magnitude would be painful and long-drawn out, with all the attendant misery (mass unemployment, food shortages, social dislocation, etc.).

only then will you get your 50% drop.

improbable, IMO, but still possible.

bdon

Hairy wrote: »

I cant help but notice that there seems to be loads of scaremongering on this site. People saying house prices will drop by over 50% in some cases.

I may be wrong here, but how is that possible. Let me explain.

If you owned a house worth £300k and all you could get for it was £150k you simply wouldnt sell. So how the heck are house prices going to drop that much? People simply wont sell. Even if prices drop by 25% I doubt many people would sell, they would stay put, surely?? I am by no means an expert, but isnt this common sense??

The two factors to build in to any percentages you see are time and inflation; eg with a 5% drop per year on the price of a house coupled with 4.6% inflation (ahem!) it takes only three years to have dropped by 25% in real terms - nominally of course it will only have fallen 5% pa.

Y £ %fall £ RPI £ Total%
1 100 -5.00% 95 -4.60% 90.63 9.37%
2 90.63 -5.00% 86.1 -4.60% 82.14 17.86%
3 82.14 -5.00% 78.03 -4.60% 74.44 25.56%

(mathematicians/economists please correct the above if wrong)

If inflation takes off then then a house valued at £100 today, while it still may have a value of £100, be worth considerably less as the cost of all other items have gone up.

magicdogsbrain

I live in a not so good area in a smallish house and would like to 'upgrade' in 5 or 6 years. I hope I can catch the tail end of this before it sorts itself out.

Do you folks think that house prices will compress so that expensive houses fall very fast and FTB houses dont fall as fast - or will it be a uniform % of the current value decrease?

Also, do you think area will compress - e.g. Very posh area will fall faster than a not so posh area a few miles away?

I think yes and yes.

I wish they did fall 50% but I just dont see the fundamentals at all. About 20% is my worst (or best) case.

Remember this is not a UK driven economic phenomenon - it was caused by the housing bubble in the US - and the realization of the investment vehicle that was packaged as good debt when actually it was mixed. Then the banks stopped lending to each other because they didn’t know how exposed to this bad debt the other bank was.

Anyway – nobody on this board really knows whats going to happen – unless your name is Mervin or Ben (and even then it’s a guesstimate).

dannyboycey

Hairy wrote: »

NOT the same thing. if your house goes up, you dont owe that extra equity to the bank.

Patronising T**T

Are you that simple that you have to resort to name-calling. You posted a comment on, wait for it.... 'a *public forum*', and because not eveyone shares the same blinkered, uninformed view as you, you get all shirty.

By the way, I know several people who's homes lost more than 50% during the last crash, in which there was nowhere near the scale of debt we have now.

sarah_elton

jazzyjustlaw wrote: »

Sorry but Im someone who "just wont buy unless house prices fall by 50%" so where does that leave us?

Renting?

Jonbvn

Hairy wrote: »

I am in the process of buying another property, I am renting out my present one, and I completed on the sale of another for full asking price last week. Things will get bad I agree, but I doubt it will get nearly as bad as everyone is saying. Most of the over-reaction is caused by the media, as well as a few people on boards like this.

From this post it is evident that the OP was looking for confirmation that he had done the right thing financially by purchasing another house. When everyone jumped in and told him some truths he didn't want to listen and just spat his dummy.

When the mirage that is his BTL empire is revealed for what it really is, we will see him back on the DFW board pleading for assistance within a few months.:rotfl:

skap7309

Hairy wrote: »

and I completed on the sale of another for full asking price last week.

No you didnt you fool, you just cannot work out why no one wants to view your overpriced (up to 50%) house........

WTF?_2

magicdogsbrain wrote: »

I live in a not so good area in a smallish house and would like to 'upgrade' in 5 or 6 years. I hope I can catch the tail end of this before it sorts itself out.

Do you folks think that house prices will compress so that expensive houses fall very fast and FTB houses dont fall as fast - or will it be a uniform % of the current value decrease?

Also, do you think area will compress - e.g. Very posh area will fall faster than a not so posh area a few miles away?

I think yes and yes.

I wish they did fall 50% but I just dont see the fundamentals at all. About 20% is my worst (or best) case.

Remember this is not a UK driven economic phenomenon - it was caused by the housing bubble in the US - and the realization of the investment vehicle that was packaged as good debt when actually it was mixed. Then the banks stopped lending to each other because they didn’t know how exposed to this bad debt the other bank was.

Anyway – nobody on this board really knows whats going to happen – unless your name is Mervin or Ben (and even then it’s a guesstimate).

Generally what happens is that as prices fall, the steps of the housing ladder get closer together.

ie. The more expensive house falls more than the cheaper house, so 'trading up' requires less money. That's assuming you have equity in your current house, if not then you will find it extremely difficult to sell and get a mortgage for the new place.

However, 'good' houses should hold their value the best. In the boom any old tat would sell for high prices and quite often the cheap, rubbish properties saw spectacular increases as they were perceived as 'good investments'.

So basically, don't expect to be able to sell a nasty flat in a bad area and trade up to a nice 3-bed semi in a good area.