Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • mr auspicious
    • By mr auspicious 14th Sep 18, 9:17 AM
    • 34Posts
    • 4Thanks
    mr auspicious
    Brexit, Mark Carney and the housing market
    • #1
    • 14th Sep 18, 9:17 AM
    Brexit, Mark Carney and the housing market 14th Sep 18 at 9:17 AM
    I woke up this morning to reports of Mark Carney telling the cabinet about threats of a 35% drop in house prices and a big rise in interest rates if we end up with a no deal Brexit. Iím 2 to 3 weeks away from exchange so Iím fearing the worst with buyers further down the chain.

    What are everyoneís thoughts on this sorry situation?
Page 2
    • _CC_
    • By _CC_ 15th Sep 18, 8:53 AM
    • 317 Posts
    • 336 Thanks
    _CC_
    As mentioned, it wasn't a prediction like some headlines made out. It's what the bank uses for stress testing in the event of a major economic downturn. 1/3 drop in house prices, 4% rates and doubling of unemployment.

    Depends on the area, in some areas it could be 50k or lower.
    Originally posted by Crashy Time
    You can already buy 3 beds in "some areas" for around that.

    Care to be more specific? What are these houses that you think will be worth £50k currently being valued at?
    • Crashy Time
    • By Crashy Time 15th Sep 18, 7:23 PM
    • 6,519 Posts
    • 2,440 Thanks
    Crashy Time
    As you probably know, I am in the process of self building a modest 3 bedroom house.

    Leaving out land cost and planning cost, the actual construction cost is so far standing at £130K and will probably hit £150K by the time it is actually finished. That is just about £1000 per square metre, you really would struggle to build for less than that with todays material and labour costs.

    So even if building land was free and planning permission was free, if you are hoping for a 3 bedroom house to be built and sold for £50K then I can assure you not a single house will get built.
    Originally posted by ProDave

    There are plenty of houses already built.
    • Crashy Time
    • By Crashy Time 15th Sep 18, 7:28 PM
    • 6,519 Posts
    • 2,440 Thanks
    Crashy Time
    If you're paying £150k JUST on build costs for a 'modest' 3 bed property then someone is seriously taking you for a ride.
    Originally posted by Gwendo40

    Yep, admittedly the last time I was involved in house building was in the 1980`s, but a couple of good brickies can knock up the basic structure of a decent house very quickly, matter of days, but I do clearly remember helping out a couple of people who had tried self-build and got into a real pickle, close to divorce over it type stuff, so I hope this isn`t the first time he has tried it Worst possible market to be throwing money at property AND building it yourself IMO.
    • ed67812
    • By ed67812 15th Sep 18, 10:35 PM
    • 158 Posts
    • 57 Thanks
    ed67812
    Quote:
    Originally Posted by ed67812 View Post
    Despite what the Daily Fail reports...
    Why bring this irrelevant comment into the discussion? All the reports I have heard and read have been on the BBC!
    Because the BBC lead story had an excellent explanation of what stress testing meant and how the parameters are deliberately set beyond even the worse case scenarios. The articles in other more sensationalist parts of the media seemed to lack this and other key information, so my comment was hardly irrelevant.
    • gettingtheresometime
    • By gettingtheresometime 15th Sep 18, 10:38 PM
    • 4,007 Posts
    • 10,128 Thanks
    gettingtheresometime
    In another thread yesterday, someone poimted to some houses for sale in Wales. These were newbuilds, 3 bed terraces, looked pretty nice, going for £90k. That would have included land, bulding costs and profit for the builder.
    Originally posted by AnotherJoe
    Where the dickens was that?

    Would love to know as I'm in the house building game and our clients houses aren't going for that!
    Lloyds OD / Natwest OD / PO CC / Wescott / Argos Card cleared thanks to the 1 debt v 100 day challenge


    Next on the list - JD Williams
    • Computer Beginner
    • By Computer Beginner 15th Sep 18, 11:53 PM
    • 269 Posts
    • 127 Thanks
    Computer Beginner
    As you probably know, I am in the process of self building a modest 3 bedroom house.

    Leaving out land cost and planning cost, the actual construction cost is so far standing at £130K and will probably hit £150K by the time it is actually finished. That is just about £1000 per square metre, you really would struggle to build for less than that with todays material and labour costs.

    So even if building land was free and planning permission was free, if you are hoping for a 3 bedroom house to be built and sold for £50K then I can assure you not a single house will get built.
    Originally posted by ProDave
    Which is why rebuild costs for home buildings insurance, is often more than the market value of the property.

    Presumably, if a mid-terraced house (for example) is fire damaged and needs to be completely rebuilt, this needs to be done at a loss (relative to resale value) - because obviously the neighbours either side need the house rebuilding!
    • Computer Beginner
    • By Computer Beginner 15th Sep 18, 11:56 PM
    • 269 Posts
    • 127 Thanks
    Computer Beginner
    Where the dickens was that?

    Would love to know as I'm in the house building game and our clients houses aren't going for that!
    Originally posted by gettingtheresometime
    Google 'Persimmon snowline'
    • Crashy Time
    • By Crashy Time 16th Sep 18, 11:16 AM
    • 6,519 Posts
    • 2,440 Thanks
    Crashy Time
    Because the BBC lead story had an excellent explanation of what stress testing meant and how the parameters are deliberately set beyond even the worse case scenarios. The articles in other more sensationalist parts of the media seemed to lack this and other key information, so my comment was hardly irrelevant.
    Originally posted by ed67812

    So they "stress test" for interest rates at 4% when they were at 5% before the last meltdown, and they didn`t see it coming last time but are allegedly prepared for all outcomes this time because they are doing "stress tests"? Best to take everything that MC says with a pinch of salt IMO, these comments are just designed to undermine Brexit IMO, the banks are still vulnerable to global events, but the funny thing is that they banged on about house prices dropping before the vote and the majority still voted to leave The appetite among the public for decades worth of debt for basic shelter is definitely waning IMO.
    • AFF8879
    • By AFF8879 16th Sep 18, 12:14 PM
    • 370 Posts
    • 950 Thanks
    AFF8879
    So they "stress test" for interest rates at 4% when they were at 5% before the last meltdown, and they didn`t see it coming last time but are allegedly prepared for all outcomes this time because they are doing "stress tests"? Best to take everything that MC says with a pinch of salt IMO, these comments are just designed to undermine Brexit IMO, the banks are still vulnerable to global events, but the funny thing is that they banged on about house prices dropping before the vote and the majority still voted to leave The appetite among the public for decades worth of debt for basic shelter is definitely waning IMO.
    Originally posted by Crashy Time
    I thought they stress tested up to 7/8%, at least in the UK? In any event, far more important than borrower stress testing is the levels of capitalisation banks are now required to meet. If a recession hit to similar levels of 2008 the banks could withstand it many, many times over. The point being there would not even be a need to reduce rates into negative territory.
    • Crashy Time
    • By Crashy Time 16th Sep 18, 12:38 PM
    • 6,519 Posts
    • 2,440 Thanks
    Crashy Time
    I thought they stress tested up to 7/8%, at least in the UK? In any event, far more important than borrower stress testing is the levels of capitalisation banks are now required to meet. If a recession hit to similar levels of 2008 the banks could withstand it many, many times over. The point being there would not even be a need to reduce rates into negative territory.
    Originally posted by AFF8879

    2008 was a banking credit crunch/crisis, the last real recession that actually affected people badly was in the early 80`s, easy credit has seen to it that people don`t experience real austerity any more, IMO anyway. They can`t reduce rates any more either, and the massive QE experiment hasn`t produced the growth results many hoped it would, plus the US is now raising rates and we have countries like Turkey with rates at what 24% at one point recently? With all the shadow banking/derivatives etc. nonsense that goes on I would say a big banking crisis is even more likely than in 2008, and the more MC and co. bang on about "stress testing" etc. the more I think that they know there are problems waiting in the wings. Even ignoring China/Trump and other global problems Italy/Turkey/Brexit has the potential to cause massive upsets to credit markets. Really really not the time to have a bubble mortgage IMO.
    • Crashy Time
    • By Crashy Time 16th Sep 18, 12:40 PM
    • 6,519 Posts
    • 2,440 Thanks
    Crashy Time
    I thought they stress tested up to 7/8%, at least in the UK? In any event, far more important than borrower stress testing is the levels of capitalisation banks are now required to meet. If a recession hit to similar levels of 2008 the banks could withstand it many, many times over. The point being there would not even be a need to reduce rates into negative territory.
    Originally posted by AFF8879

    Sorry, just to add, the idea that the average person in London/SE with a recent mortgage could withstand rates anywhere near 7/8% isn`t even funny to me, it is scary!
    • datlex
    • By datlex 16th Sep 18, 1:51 PM
    • 1,767 Posts
    • 1,667 Thanks
    datlex
    I thought they stress tested up to 7/8%, at least in the UK? In any event, far more important than borrower stress testing is the levels of capitalisation banks are now required to meet. If a recession hit to similar levels of 2008 the banks could withstand it many, many times over. The point being there would not even be a need to reduce rates into negative territory.
    Originally posted by AFF8879
    When I took out my mortgage it was stress tested for 10% not 7/8%.
    • gazzabboi
    • By gazzabboi 16th Sep 18, 3:00 PM
    • 207 Posts
    • 91 Thanks
    gazzabboi
    Let’s say you buy a house for £200k now.

    A 35% crash would make the house £130k.

    Chance of that happening is slim.

    Interest rates would be more likely to drop before they put them up while in negative equity. The news is fake, ramainers doing their best to avoid brexit.
    Last edited by gazzabboi; 16-09-2018 at 3:03 PM.
    • StumpyPumpy
    • By StumpyPumpy 16th Sep 18, 5:24 PM
    • 1,292 Posts
    • 3,519 Thanks
    StumpyPumpy
    Letís say you buy a house for £200k now.
    A 35% crash would make the house £130k.
    Chance of that happening is slim.
    Interest rates would be more likely to drop before they put them up while in negative equity. The news is fake, ramainers doing their best to avoid brexit.
    Originally posted by gazzabboi
    According to the Land Registry, in Blackpool 223 flats sold in 2008 at an average price of £106,941. In 2009 163 sold at an average price of £85,611 a 19.95% drop in prices. It's a lot but isn't 35%, so you might be right.

    But wait...
    In 2010 the average of the 101 flats sold was £83,213 a 22.19% drop on 2008.
    In 2011 it was 141 @ £71,700: a 32.95% drop.
    2012, 138 @ £67,934: a 36.48% drop.
    So in 4 years it was more than Carney's prediction for a no-deal Brexit.

    But wait..
    In 2013 they went up again, hurrah! to 141 @ £68,128. Only a 36.29% loss.
    Then it went pear shaped again in 2014 when 192 sold at an average of £66,786 or a 37.57% drop on 2008 prices.
    2015 they fell further: 169 @ £65,423 a 38.82% but since then the prices have recovered year on year until last year (2017) when they were only 29.48% lower than in 2008 based on 185 sales at an average of £75,413

    The figures are all there on the Land Registry website for you to examine. So, tell me again about this "fake news" of which you speak. And perhaps a quantitative analysis of what you would define as slim. Not only is there precedent for the housing market to fall by such an amount it was only 10 years ago when it did. And there are home owners who are still feeling the pain of this now who will undoubtedly bear the brunt of further drops whether that be 39% or 35% or maybe, if they are lucky 10%.

    Do I think it will happen? I don't know, I am not an expert economist, unlike Mark Carney, but quite frankly I'd take his side when the alternative is someone who thinks it is clever to mimic Donald Trump's answer to anything he doesn't like the look of.

    SP
    Come on people, it's not difficult: lose means to be unable to find, loose means not being fixed in place. So if you have a hole in your pocket you might lose your loose change.
    • Computer Beginner
    • By Computer Beginner 16th Sep 18, 9:41 PM
    • 269 Posts
    • 127 Thanks
    Computer Beginner
    2008 was a banking credit crunch/crisis, the last real recession that actually affected people badly was in the early 80`s, easy credit has seen to it that people don`t experience real austerity any more, IMO anyway. They can`t reduce rates any more either, and the massive QE experiment hasn`t produced the growth results many hoped it would, plus the US is now raising rates and we have countries like Turkey with rates at what 24% at one point recently? With all the shadow banking/derivatives etc. nonsense that goes on I would say a big banking crisis is even more likely than in 2008, and the more MC and co. bang on about "stress testing" etc. the more I think that they know there are problems waiting in the wings. Even ignoring China/Trump and other global problems Italy/Turkey/Brexit has the potential to cause massive upsets to credit markets. Really really not the time to have a bubble mortgage IMO.
    Originally posted by Crashy Time
    I agree with most of your post.
    But I don't think it will be a BANKING crisis this time.
    Governments have a habit of always "fighting the last war" and so banks have been made much stronger. In fact some of the hassles the government has given them is making HSBC consider gradually moving back to Asia (where it originated).

    Ray Dalio said in his recent interview, that he thought the next crisis will have more of a social component to it. But I think he was talking more about the repercussions, rather than the triggers.

    I don't know what will trigger the next crash. Each crash is slightly different.
    • Computer Beginner
    • By Computer Beginner 16th Sep 18, 9:43 PM
    • 269 Posts
    • 127 Thanks
    Computer Beginner
    According to the Land Registry, in Blackpool 223 flats sold in 2008 at an average price of £106,941. In 2009 163 sold at an average price of £85,611 a 19.95% drop in prices. It's a lot but isn't 35%, so you might be right.

    But wait...
    In 2010 the average of the 101 flats sold was £83,213 a 22.19% drop on 2008.
    In 2011 it was 141 @ £71,700: a 32.95% drop.
    2012, 138 @ £67,934: a 36.48% drop.
    So in 4 years it was more than Carney's prediction for a no-deal Brexit.

    But wait..
    In 2013 they went up again, hurrah! to 141 @ £68,128. Only a 36.29% loss.
    Then it went pear shaped again in 2014 when 192 sold at an average of £66,786 or a 37.57% drop on 2008 prices.
    2015 they fell further: 169 @ £65,423 a 38.82% but since then the prices have recovered year on year until last year (2017) when they were only 29.48% lower than in 2008 based on 185 sales at an average of £75,413

    The figures are all there on the Land Registry website for you to examine. So, tell me again about this "fake news" of which you speak. And perhaps a quantitative analysis of what you would define as slim. Not only is there precedent for the housing market to fall by such an amount it was only 10 years ago when it did. And there are home owners who are still feeling the pain of this now who will undoubtedly bear the brunt of further drops whether that be 39% or 35% or maybe, if they are lucky 10%.

    Do I think it will happen? I don't know, I am not an expert economist, unlike Mark Carney, but quite frankly I'd take his side when the alternative is someone who thinks it is clever to mimic Donald Trump's answer to anything he doesn't like the look of.

    SP
    Originally posted by StumpyPumpy

    Be off with you Sir, with your facts and figures.
    We'll have none of your sort around here...
    • _CC_
    • By _CC_ 17th Sep 18, 8:41 AM
    • 317 Posts
    • 336 Thanks
    _CC_
    According to the Land Registry, in Blackpool 223 flats sold in 2008 at an average price of £106,941. In 2009 163 sold at an average price of £85,611 a 19.95% drop in prices. It's a lot but isn't 35%, so you might be right.

    But wait...
    In 2010 the average of the 101 flats sold was £83,213 a 22.19% drop on 2008.
    In 2011 it was 141 @ £71,700: a 32.95% drop.
    2012, 138 @ £67,934: a 36.48% drop.
    So in 4 years it was more than Carney's prediction for a no-deal Brexit.

    But wait..
    In 2013 they went up again, hurrah! to 141 @ £68,128. Only a 36.29% loss.
    Then it went pear shaped again in 2014 when 192 sold at an average of £66,786 or a 37.57% drop on 2008 prices.
    2015 they fell further: 169 @ £65,423 a 38.82% but since then the prices have recovered year on year until last year (2017) when they were only 29.48% lower than in 2008 based on 185 sales at an average of £75,413

    The figures are all there on the Land Registry website for you to examine. So, tell me again about this "fake news" of which you speak. And perhaps a quantitative analysis of what you would define as slim. Not only is there precedent for the housing market to fall by such an amount it was only 10 years ago when it did. And there are home owners who are still feeling the pain of this now who will undoubtedly bear the brunt of further drops whether that be 39% or 35% or maybe, if they are lucky 10%.

    Do I think it will happen? I don't know, I am not an expert economist, unlike Mark Carney, but quite frankly I'd take his side when the alternative is someone who thinks it is clever to mimic Donald Trump's answer to anything he doesn't like the look of.

    SP
    Originally posted by StumpyPumpy

    "Not only is there precedent for the housing market to fall by such an amount it was only 10 years ago when it did"


    No it didn't.


    See https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/jan2017



    Maybe it did in your specific example, but that makes up less than 0.1% of the residential housing sold in those years.
    • davidwood681
    • By davidwood681 17th Sep 18, 10:03 AM
    • 630 Posts
    • 1,858 Thanks
    davidwood681
    "Not only is there precedent for the housing market to fall by such an amount it was only 10 years ago when it did"


    No it didn't.


    See https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/jan2017



    Maybe it did in your specific example, but that makes up less than 0.1% of the residential housing sold in those years.
    Originally posted by _CC_
    Correct. Using Blackpool as an example is a bit specific.

    The only people who buy flats in Blackpool are landlords who fill them with benefit claimants and child abusers from all over the country.

    The town is in serious decline......but if you're going to claim benefits, why not claim them in a ''fun'' place like Blackpool
    • StumpyPumpy
    • By StumpyPumpy 17th Sep 18, 11:50 AM
    • 1,292 Posts
    • 3,519 Thanks
    StumpyPumpy
    Correct. Using Blackpool as an example is a bit specific.

    The only people who buy flats in Blackpool are landlords who fill them with benefit claimants and child abusers from all over the country.

    The town is in serious decline......but if you're going to claim benefits, why not claim them in a ''fun'' place like Blackpool
    Originally posted by davidwood681
    Well of course it is specific, it is what is known as "an example" all examples are specific: it is the nature of examples. It is an illustration of an area where something has happened which was discounted as not going to happen.

    Your reasoning is flawed as Blackpool is known as having a larger than average proportion of HMO's due to "landlords who fill them with benefit claimants" who don't buy flats - which is why I used them as an example - they buy houses, often guest houses to turn into HMO's. Pointless trying to turn a 1 bed flat into an HMO when you can pay twice the price and get a 10 bed guest house, isn't it?

    Do you discount everything that only hits poorer areas as too specific? Is it all ok because the multimillion pound properties in Surrey a similar decline?

    Here are some more figures for you for Blackpool in the years preceding the crash:
    2000 £38,143 111
    2001 £40,254 142 6%
    2002 £40,877 150 2%
    2003 £53,054 167 30%
    2004 £82,707 173 56%
    2005 £120,587 272 46%
    2006 £102,675 241 -15%
    2007 £92,729 239 -10%


    Do those look like figures of a town "in serious decline"? No. The crash caused the decline in prices not the other way around.

    Now, I can hear those cogs turning, your going to say "Ah ha! Blackpool was in terminal decline in 2006/2007 before the crash. Look, the average has gone down." Well, yes it did, but the reason for that was the massive 56% and 46% rise in 2004/2005 which has skewed the results because of a single building known as Admiral Point (look it up). The average price of a the 66 "new" flats that sold in Admiralty Point in 2004/2005 was £195,804 and there has been nothing like it since or before.

    So, you don't like facts. That is ok: who needs them when you are so entrenched in a position that all else bows before your superior ignorance. One day you might pull yourself out of the mindset of a 5 year old and realise that just because you don't want something to be true does not make it so.

    Tell you what: you find me a town in the UK with a similar sample size to Blackpool where prices went up by a similar margin before the crash and continued to go up afterwards with the same detail I have provided and I'll show you some figures from other places where they have fallen by similar amounts. FYI The total sample base you will be looking at between 2000 and 2017 will be in the region of 2300 similar properties.


    SP
    Come on people, it's not difficult: lose means to be unable to find, loose means not being fixed in place. So if you have a hole in your pocket you might lose your loose change.
    • _CC_
    • By _CC_ 17th Sep 18, 1:13 PM
    • 317 Posts
    • 336 Thanks
    _CC_
    Well of course it is specific, it is what is known as "an example" all examples are specific: it is the nature of examples. It is an illustration of an area where something has happened which was discounted as not going to happen.

    Your reasoning is flawed as Blackpool is known as having a larger than average proportion of HMO's due to...

    [mumbo jumbo]

    So, you don't like facts.


    [more mumbo jumbo]
    Originally posted by StumpyPumpy

    You were given the facts in the link I posted.



    It showed your assertion was wrong.


    Maybe one day the team at the BoE will solely use flats in Blackpool in their modelling instead of the UK housing stock as a whole and your insight will prove helpful.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

74Posts Today

2,136Users online

Martin's Twitter