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to wonder when reality will hit house prices?

(54 Posts)
TalkinPeace2 Mon 29-Aug-11 13:41:50

Rightmove chart of house asking prices :
August 2011 average is £231,543
Land registry chart of what houses actually sell for :
August 2011 average is £163,049

£68,494 less

so there are THOUSANDS of homes sitting on the market with unrealistic asking prices that buyers cannot get a mortgage for
and then politicians tell us to build loads more houses - that people still cannot afford.

Estate agents are LYING to people who want to move about what property is really worth.
When will we all stop kidding ourselves?

WhereYouLeftIt Mon 29-Aug-11 14:07:51

These are not necessarily comparable figures, because they are (presumably) averages. The 'average prices achieved' may be lower than the 'average price asked' because the houses sold may be mostly small houses, and therefore not representative of all the houses that are for sale.

But to address your point - I've been waiting for a house price crash for about a decade. It still hasn't come. I don't know why. Well that's a lie, I sort of do - vested interests. Nobody can afford to go into negative equity so they don't sell and stay put instead. Lenders want to be repaid what they lent.

treas Mon 29-Aug-11 14:42:41

Recently have put in an offer for a house which we thought the house was actually worth. Offer was rejected. The house has been for sale for coming up a year and still the seller thinks he'll get the asking price the estate agents suggested.

defrocked Mon 29-Aug-11 14:53:14

a house is worth what someone is willing to pay for it regardless of estate agents. If you cant sell, I would suggest you are asking too much

bubblesincoffee Mon 29-Aug-11 14:54:53

You are right, but it's not actually about what a house is worth, it's about what someone is prepared to pay for it.

Houses may sit on the market for unreasonable lengths of time because of a high asking price, but sometimes people can't afford to sell at much lower than that, or they simply don't want to. They would prefer to stay put and wait and see. Seems like a reasonable choice to make to me.

mousesma Mon 29-Aug-11 14:56:39

I think the problem is people can't afford to sell at the prices people are willing to buy at unless they want to go into negative equity. I think prices may stay static until we're out of the recession but no-one but the most desperate are going to sell for less then they bought for. The house price crash is IMO never going to happen.

CustardCake Mon 29-Aug-11 15:03:16

Message withdrawn at poster's request.

ragged Mon 29-Aug-11 15:03:59

yanbu. I personally think houses have been overpriced for about 10 yrs too smile. There is a sweet period home in our town centre just put up for sale (with a London estate agent; we live far from London). It's 5-6 bedrms and has a big chunk of land (3/4 acre); it also backs onto a pub, is on a busy narrow town centre road, and adjoins the 6th form college (so not quiet or peaceful in an otherwise sleepy town in a rural area of many large homes with large chunks of land). It's Grade II listed (so all the drawbacks of that).

Might sound great, but at 550k outragiously overpriced around here. There is little to compare it to, but I'm guessing the true market worth is 350-450k.

TalkinPeace2 Mon 29-Aug-11 15:13:40

House prices are not controlled by what somebody is willing to pay

but by what multiple of the buyers income a bank is willing to lend
and the banks make so much of their profit on the arrangement fees, owning the estate agents, owning the surveyor firms etc etc
and know that people moving and remortgaging makes them more of all of the above,
they do not care that they are creating a ponzi scheme of rising house prices.

if borrowing multiple controls were brought back in then house prices would fall to what people could borrow
the house would not change
nor would people's salaries

but the commission taken by the financial services industry WOULD drop

edam Mon 29-Aug-11 15:14:36

Housing is clearly far too expensive - not just for buyers, but rents are going up at ridiculous rates as well now far fewer people can afford to buy. The relationship between wages and house prices is horribly out of kilter. But custard is correct - lots of people are not selling because they don't want to/can't afford the drop in price. Fewer houses available should, in theory, push up prices - only the number of available buyers at those prices has dropped dramatically. We are at an impasse. The economists reckon wages will be, at best, static for the foreseeable, while the cost of living is galloping away. Heaven knows what will happen.

dh and I are lucky, we have plenty of equity (bought our first place 21 years ago) so if we did need to move we could take the hit - as long as there was a property to buy that was sensibly priced. (Not so lucky overall, as back when we first bought we got stung on an endowment.)

TalkinPeace2 Mon 29-Aug-11 15:22:49

I bought a house in September 1987 with DH.
It cost us £30,000 - three times his salary.
We sold it in July 1989 for £48,000
It sold again in September 2000 for £52,000
In May 2003 for £85,000
Four doors up sold for £128,000 in September 2006

since then NONE of the houses in the terrace have sold.
The house is unchanged - I drove past it a year ago.
Earnings in that part of the country have COLLAPSED in the last 10 years.
So all that can have changed is the income multiples.

Eurostar Mon 29-Aug-11 15:37:51

Exactly Talkinpeace 2. Houseprices were allowed to run away in this country, as in many, because of credit (mortgages) easily obtained. The more credit that could be got, the more prices rose. It's very sad that the UK, with its history of solid banking, did not stand firm against this but rather embraced the loose lending more than most.

Other countries have experienced crashes now but it has caused misery so its not something to be desired either. There's lots of things stopping the crash in the UK, among them the loosening of repossession due to arrears criteria, lowest interest rates ever, benefit support for mortgage interest, housing benefit/local housing allowance paying over market prices so those who have BTLs can keep them when they should not really be viable (and low tax conditions too on BTL profit) - the list goes on.

The vast majority suffer with these high rental and high mortgages. Everytime I see a thread on here from someone struggling with money, it always seems to be the mortgage/rent that eats up far more than the 1/3 income that was once expected.

House prices could drop if there was "jingle mail" like some parts of the States where, if you walk away, you do not have to own the debt for ever. However, then UK banks would go under because their mortgages are assets on their balance sheets and reselling abandoned places at what people could actually afford would mean that the banks would have to massively mark down their assets.

I have no idea what will happen but think the current situation will create every growing resentment and social unrest between those who own and those who are stuck in insecure AST rental contracts. If the banks are to be saved by not having to mark down their assets, then at least people should be able to rent with proper secure contracts so someone settled in area, with children especially, should not be at risk of having to move at 2 months notice.

nocake Mon 29-Aug-11 15:40:07

There are a bunch of reasons why the housing market hasn't crashed. Most of them have already been mentioned but the one that hasn't is the affordability of mortgages. The very low interest rates mean that people with negative equity have been able to keep paying their mortgages so repossessions have been kept to a minimum and there's been nothing to spark the housing market into life.

High house prices don't help anyone, except developers. I would love to see them crash as we'd then be able to afford to sell our current house (for less than we paid for it) and buy somewhere bigger.

mumblesale Mon 29-Aug-11 16:12:17

If my mortgage advisor is right, correct me if I'm wrong (and I would love to be wrong) mortgage companies always apply the salary multiple however much deposit you have.

We have 35% deposit for the sort of house we want to buy and could increase that to 50% by next year, but even then we could only borrow 5 times my salary which will never be enough on top to get any where near what we need.

I can understand the banks being more careful, but as an existing customer, with 5 years history with the lender, a near perfect credit and bank score and over 35% deposit, why won't they even maintain the amount of the portable mortgage they gave me 5 years ago interest only with zero deposit.

And they won't even take a guarantor.

Not very relevant to the thread I'm sure but it feels good to vent.

TalkinPeace2 Mon 29-Aug-11 16:16:01

tis true

I - like Edam - have a couple of endowments which will mature soon for less than a third of the sales paperwork value (I still have the originals) and only 2/3 of the value of the mortgage they were designed to cover.
my mortgage spreadseets going back to the late 1980's show the rate I actually paid rising to 11% at one stage and normally being around 5-7%
My main mortgage currently is a tracker on 1.05%
so DH and I are putting away an extra £1000 a month to make up the shortfall in the endowment which is DIRECTLY linked to the low interest rates.

If rates rose then LOTS AND LOTS AND LOTS of houses would be handed back
I have friends still paying off their negative equity from 1993.
THe banks balances sheets would ALL be toxic if rates rose and multiples dropped
but their staff get paid for closing the deal, not making it work in the long term.

TalkinPeace2 Mon 29-Aug-11 16:20:44

"interest only" - how will you repay the capital?
"5 times" - borrowing controls were at 3 times maximum until the late 1980's
If base rates rise to the historic average of 4% how will you cope with your mortgage repayment increasing 8 fold?
If you are looking to pay £500 a month today, interest only, you could need to find £4000 a month for the interest and £2000 a month for the capital.
Do you have that?
Now you can see why the banks are (finally) being wary.

CocktailMumma Mon 29-Aug-11 16:29:53

We have been looking to re buy again (sold our home 7 years ago to move abroad).

Since moving back to the UK we have lived in several different areas and 3 of them we seriously house looked to rebuy. Its quite shocking to see that some of same houses we looked at in 2007/8 are still on the market - as when we first looked. Few have dropped their asking price at all! The houses we looked at in 2009 are still up for sale at pretty much the same prices and we have been looking where we currently live for about a year - several of those still remain on the market too.

Having been a home owner I fully appreciate that you want at least what you paid for your house if not more (especially if you improved it) but when I see the same houses up for the same price I am quite shocked. The newly renovated splurge in the house description is no longer relevant now we are several years on. The brand new bathroom/kitchen/conservatory is no longer "Brand new".hmm

It must be awful for the people selling - forced to stick it out but in limbo. Who is going to put in a new kitchen or add a conservatory/loft conversion etc etc when they are on the market???

As a potential buyer I do sometimes get a bit frustrated but thankfully have a good few years yet before we will HAVE to buy as DH gets a house with his job. I refuse to buy houses for some of the prices - especially those still at the same price as 4 years ago!! At the end of the day any house is only worth what anyone is prepared to pay for it and looking about there are alot of houses people are not buying either through choice or because someone is not lending the money - it cant go on like this for ever surely?? We will eventually meet a complete stalemate if we do.

tyler80 Mon 29-Aug-11 16:30:05

Something's got to give eventually.

We started looking at houses in January, just completed in the last couple of weeks. Of the 30 or so houses we viewed the only one that has sold is the one we bought.

TalkinPeace2 Mon 29-Aug-11 16:38:35

People have to stop thinking of their home as an investment.
I bought this house in 1996 for £63,000. A couple of years back I put a MASSIVE extension on it at a cost of over £120,000
Houses along the road smaller than mine is now have recently sold for £240,000
but as my mortgage is £100,000 and falling I do not expect to "recoup" the money I spent on what was really grand scale maintenance.
Not planning to move till DS leaves school anyway. That was why we did the extension.

InMyPrime Mon 29-Aug-11 16:39:24

The problem is that only very few people need to sell because of the low interest rates that are available to anyone who has 40%+ equity in their home. Getting sellers to accept reality when they don't need to will take a long time. In previous house price crashes, inflation wiped out the losses and the high interest rates to combat the inflation forced sellers' hands. Now, there's no such pressure so I think we'll just see a slow leak rather than a big bang like previous crashes.

We managed to get our house for 10% less than peak value when buying last year but the seller was still stubborn. It was a classic forced sale - divorce, moving abroad - and a tricky property as it is a house in the countryside that needed a bit of work. It had been on the market for a year with one offer falling through already. Yet STILL, it was like getting blood out of a stone to get our 10% off. Sellers, even desperate ones, are just not willing to take a hit on the sale price and with low interest rates protecting them they don't really need to. The only thing that forced our seller to eventually accept our offer was the unamicable divorce and impatient ex-wife wanting shot of the situation. For the average seller who is just moving house or downgrading / upgrading, there's no incentive to accept offers.

TalkinPeace2 Mon 29-Aug-11 16:40:32

read and snigger

CocktailMumma Mon 29-Aug-11 16:55:40

OMG!! The 2nd link they have dropped some! But over 700 days on the market shock

I hope none of those with the 50% drop turned down a reasonable off a few weeks after they originally put it on the market!! If they did I bet they must be kicking themselves now!

Wish I could find a house that had dropped 50% from when I first viewed it! I could by 2 it would be like BOGOF grin

MrGin Mon 29-Aug-11 17:15:04

Reality will hit the housing market the day after interest rates go up.

TalkinPeace2 Mon 29-Aug-11 18:15:39

which is exactly why the rate has been at a level that is crippling savers for so long

LydiaWickham Mon 29-Aug-11 18:27:50

Yep, if interest rates go up, reality will kick in to the housing market. However, it'll also screw the rest of the economy as most people prioritise the mortgage over everything, so the high street will take a serious kicking.

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