House price crash

[kabbes]

Interesting to look back at this thread, actually. Despite all the reasons people were giving between April and October 2010 for why a big house price crash was coming, the truth was that 12 month rolling house price inflation was positive from April 2010 to Jan 2011, dipped negative (trough of -2%) until Apr 2012 and has remained positive ever since.

UK House Price Index - Office for National Statistics

It wouldn’t surprise me if we didn’t go through a similar year of inflation around zero or even slightly negative but the reasons I gave back then for why I wouldn’t expect a big crash still hold up today. People are not being forced to sell and will generally stay put rather than face up to a loss, and we still have too little housing (with nonexistent tenancy rights making renting unattractive), which means demand push is too strong to see a big crash.

 

[Teaboy]

Plus the house builders are reducing output yet again.

 

[Dogsauce]

Depends where you are. Seems to have been rising in Leeds (my place, which I’m selling, is nearly worth what it was in 2008 again) but dipping in London where I guess demand will be hit by the loss of some high paid jobs and a reluctance of overseas investors to purchase with brexit uncertainty going on (although if the pound tanks it’ll be a lot cheaper for overseas buyers and could fuel some demand).

The banana skin I’ve put on my own path was borrowing a load of cash from the gf’s dad to help get our new place as a bridging loan until my place is in a fit state to sell. Main problem being the loan was in euros and I’m already a couple of grand south due to the pound dipping. A property crash and pound crash wouldn’t be very helpful right now...

 

[kabbes]

London is worth massively more than its 2008 prices now though. It could go through quite a dip and still be worth a lot more than 2008.

 

[Yossarian]

There must be quite a few people delaying buying a house until after Brexit - might be enough of them to keep house prices the same or even push them up a little after March 29 passes without bread riots and planes plummeting from the sky.

 

[mauvais]

I think there's a lot of people who don't want to commit because of the risk - 'what if prices crash' rather than an expectation that they will. Anecdotally I see people being cautious or delaying, but prices have only plateaued, not dropped, as a result.

 

[TruXta]

Surely the London dip is mainly down to the significant fall in prices at the top of the market.

 

[SpookyFrank]

There must be quite a few people delaying buying a house until after Brexit - might be enough of them to keep house prices the same or even push them up a little after March 29 passes without bread riots and planes plummeting from the sky.

There's nothing new coming on the market round here atm, which is annoying as we were hoping our friend was gonna buy a house that we could live in.

 

[spitfire]

Personal experience would suggest prices have dropped significantly in East London. We went from 800k (over priced) to 625 and couldn't shift the flat. We gave up about 4 months ago.

Multiple agents I have spoken to have been blaming Brexit for lack of interest and people holding off buying/selling if they can. Stuff is shifting up to 600k as there is the govt. scheme to help first time buyers and family homes are shifting as people's families grow and they have to move. In between that is stagnant. I don't know much about high end stuff.

Anecdote not evidence but it is what I have experienced.

As Kabbes says though, we bought in 2006 so there would have to be an absolute national catastrophe of epic proportions if the flat ever went below our original buying price. Hope I'm not tempting fate here...

We have a roof over our head and are very lucky to have one. It could be so much worse.

 

[Idaho]

I think there's a lot of people who don't want to commit because of the risk - 'what if prices crash' rather than an expectation that they will.

That's a fairly poor rationale/approach when it comes to housing. The more reasonable decision making process would be to decide whether they want to live in a particular place for 10 years + and then to work out what the monthly cost of a 5 year mortgage would be, weighed against the rent they currently pay. The realisable value of the property is fairly irrelevant.

 

[Bahnhof Strasse]

That's a fairly poor rationale/approach when it comes to housing. The more reasonable decision making process would be to decide whether they want to live in a particular place for 10 years + and then to work out what the monthly cost of a 5 year mortgage would be, weighed against the rent they currently pay. The realisable value of the property is fairly irrelevant.

We're looking to buy, but will give it 6 months, nothing to do with price fluctuations, they are all relative, but will be nice to know we still have an income once the great avocado drought kicks in.

 

[mauvais]

That's a fairly poor rationale/approach when it comes to housing. The more reasonable decision making process would be to decide whether they want to live in a particular place for 10 years + and then to work out what the monthly cost of a 5 year mortgage would be, weighed against the rent they currently pay. The realisable value of the property is fairly irrelevant.

Well, that's why we went ahead and bought a house last year, because ultimately the primary risks are (a) being unable to move again, and if things got really bad (b) being unable to remortgage to an equivalent deal on expiry because of a big drop in value. A distant second to that is paying over the odds over your lifetime.

But noone likes to lose out, and if you don't need to move and you think you might pay say £50k more now than you would in a few months (I think this unlikely), then you can see the attraction in waiting.

 

[kabbes]

Actuaries are taught from lesson 1 to always think of assets in terms of the liability they are there to protect against. The concept of “matching” refers to having an asset that goes up when your liability goes up (and vice versa, inevitably). The closer the match, the better the protection. If I have to pay £1000 plus inflation in 10 years then I can match that by buying £1000 nominal of index-linked gilts of 10 year term now. Maybe that only costs me £950, maybe it costs me £1050 — either way, I know I’m covered when it comes time to pay out that £1000 with inflation.

Non-investment assets can be an even better match to liabilities. If I have an insurance liability that may pay anything from £0 to £10000 next year, I could try to match that with an investment. Alternatively, I could buy a reinsurance that will pay out anything above £1000. That reinsurance asset perfectly matches my insurance liability.

Because of this mindset I’ve been trained into, I’ve always viewed “needing somewhere to live” as my liability, to be matched by the “owning a house” asset. The actual costs of these items are irrelevant to the fact that the house asset perfectly matches the need-to-live liability. If the cost of living somewhere goes up, the value of having somewhere to live goes up in sync. If the value of having somewhere to live goes down, who cares? It’s juat matching the liability I have, which is also going down.

 

[Idaho]

I think the fear of a big drop is more acute in London as house prices are such much more inflated by foreign speculators and well paid city jobs - both under threat from brexit.

 

[Idaho]

Because of this mindset I’ve been trained into, I’ve always viewed “needing somewhere to live” as my liability, to be matched by the “owning a house” asset. The actual costs of these items are irrelevant to the fact that the house asset perfectly matches the need-to-live liability. If the cost of living somewhere goes up, the value of having somewhere to live goes up in sync. If the value of having somewhere to live goes down, who cares? It’s juat matching the liability I have, which is also going down.

It's a good way of looking at it.

When we moved, a few years ago, we increased our mortgage to about £700. Ms Idaho didn't like this idea, but my reasoning was that whatever misfortune we suffered, we would always need a place for us all to live, and renting even a crappy small place would easily cost us the same.

 

[Bahnhof Strasse]

It's a good way of looking at it.

When we moved, a few years ago, we increased our mortgage to about £700. Ms Idaho didn't like this idea, but my reasoning was that whatever misfortune we suffered, we would always need a place for us all to live, and renting even a crappy small place would easily cost us the same.

kabbes always has the option of getting Europa Oil to recommence drilling so he can move in to a bender on the edge of site

 

[Gromit]

Yeah people worry about prices going up and down but it only really matters when you enter or exit the housing market.

If your house goes up so does everyone else’s so if you move you are no better off. In fact worse off when you subtract solicitor and estate agent fees.

 

[spitfire]

Yeah people worry about prices going up and down but it only really matters when you enter or exit the housing market.

If your house goes up so does everyone else’s so if you move you are no better off. In fact worse off when you subtract solicitor and estate agent fees.

Not strictly accurate, we were going to use some of the profit to clear our (massive) personal debts. So it matters on a personal financial level.

(I can hear the tiny violins from here.)

 

[Gromit]

Not strictly accurate, we were going to use some of the profit to clear our (massive) personal debts. So it matters on a personal financial level.

(I can hear the tiny violins from here.)

By downsizing or moving to a less desirable (therefore cheaper area) I presume rather than moving like for like?

 

[spitfire]

Kinda, we could get a house with a garden slightly further out (Wanstead/Walthamstow) for the price of our flat in Bethnal Green. We would still have a mortgage though for about half the value of the new place.

I do sort of agree with your general point but just wanted to show it's not quite as black and white as that IMO.

 

[Dogsauce]

Yeah people worry about prices going up and down but it only really matters when you enter or exit the housing market.

If your house goes up so does everyone else’s so if you move you are no better off. In fact worse off when you subtract solicitor and estate agent fees.

Or when your partner fucks off with someone else and you have to buy them out of half the equity, which is what happened to me a decade ago at the previous peak of the market. It’s still not quite back to what it was worth then!

 

[Gromit]

Or when your partner fucks off with someone else and you have to buy them out of half the equity, which is what happened to me a decade ago at the previous peak of the market. It’s still not quite back to what it was worth then!

I was trying to forget about that.

I sold then had to buy with less equity because she’d taken some (not half) but everything else had gone up loads. Made me wish I’d never agreed to buy a house with her. Set me back ten years financially.

I’d have been mortgage free 3 years ago if I’d just kept my flat. Instead I’m now mortgaged all the way up to retirement now (although moving to London has much to do with that I’ll confess).

 

[Riklet]

What could realistically happen to house prices outside of London this year then?

I'm fairly sure London will go down significantly (fingers crossed) as it is the most exposed to Brexit etc but just wondering about elsewhere. One of the main factors which has kept the market here in the South West is people moving out of London with big monnies.

 

[Gromit]

What could realistically happen to house prices outside of London this year then?

I'm fairly sure London will go down significantly (fingers crossed) as it is the most exposed to Brexit etc but just wondering about elsewhere. One of the main factors which has kept the market here in the South West is people moving out of London with big monnies.

Historically London drops are deeper than outside drops but recover faster and stronger.

 

[Idaho]

What could realistically happen to house prices outside of London this year then?

I'm fairly sure London will go down significantly (fingers crossed) as it is the most exposed to Brexit etc but just wondering about elsewhere. One of the main factors which has kept the market here in the South West is people moving out of London with big monnies.

I don't think that's a main factor in the south west. Net migration is a factor, but its more of a compelling narrative than dominant force. Local economic growth and demographics + housing stock shortage are the biggies.

 

[ska invita]

jesus.... London.... fuck me

 

[seeformiles]

In the meantime, the exodus from London is inflating prices up north as people discover the profits from their London shoebox enables them to outbid anyone local up here. If this is levelling up then it’s a load of bollocks.

 

[beesonthewhatnow]

jesus.... London.... fuck me

London is fundamentally broken.

 

[Saul Goodman]

London is fundamentally broken.

Unfortunately, its also breaking the rest of the country.
London should be cut away, towed out to sea and scuttled, for the good of the country.

 

[Yossarian]