To hope there is a house price crash this year

[blondieblonde]

I really hope there is, so we can buy somewhere. What are the chances?

The latest report suggested no interest rate increases until 2017 at earliest.

No, I don't hope for a crash but we have sold London properties in the last 18 months. I'm hoping the market might stagnate for 5-6 years rather than correct painfully and swiftly which will cause untold misery. I never have hard economic facts to quote on these matters but my gut is generally good. I have made seven figures in property since 1981 and usually sniffed a crash or boom. I placed a bet for an overall Tory majority on 5th or 6th May. Got 7/1 and put £100 on.

I would hope that interest rate rises will be gentle. If they aren't the economy will go into free fall. The situation is actually very worrying.

Interest rates may rise, but it will be a long time before they are anywhere near the 5% they were at in the mid noughties. 0.25 % won't make that much difference, on top of this, there is a fair chance that banks wouldn't pass on the rates so quickly this time, due to the fact that many FTB rates are well about the base.

Also the continual predictions of interest rate rises ignore the really low inflation near deflation levels.

Don't forget that in London, as well as the population bring at a record high and still rising, the rate of household formation has increased as there are more divorcees and single people.
It took us four years to find a suitable house to buy even though we had the money (Victorian terrace, nothing special) - there is a huge shortage of property in "normal-middle-class-family-house" London and that won't change if lots of BTLers or oligarchs sell up.
Estate agents round here say property availability is driven by the three Ds - death, divorce and parents downsizing so they can help their children buy. Two of which create more demand.

Whether or not there's a crash, interest rates will go up at some point soon. Why? There is no inflation.

I do think the upside of the new government reforms will be to reduce competition from landlords, encourage heavily leveraged landlords to reduce their portfolios if they are not held in LL companies and also to stop people holding onto their old homes when they trade up.

All of these things should make it easier for FTB to enter the market.

Im a FTB and even if interest rates where 7% the interest would still be less than my old rent. On top of that I currently have a 12 year mortgage and am paying it off super fast so if rates do rise then I can extend the term, or if i have a family in the future and want more income i can extend the term. The interest on my mortgage is almost nothing in comparison to the capital repayments i make each month with interest rates so low at the moment it was worth all the years saving a good deposit and finding a property that was good but needed renovation/work (1.99% for a FTB with 20% deposit...)

Why when low house prices usually mean recession?

Read an article earlier suggesting that the US have been premature in raising rates and may have to bring them back down again.

Prices in the UK will never drop back to levels more aligned to wages, until people are sure they have somewhere else safe to put their money.
Gordon Brown ruined pensions with his stupid, short-sighted, envious, idiocy. The stock market here hasn't provided stable returns over a long period of time.

If you can afford to buy a house that you can carry on living in even if prices fall, then most people will choose that every time.

You are so wrong to wish for a crash, OP.

Those who are the most vulnerable will suffer the most, and it won't just be homeowners. People working unskilled jobs who can be sacked easily because the employer knows they will be able to replace them in 6 months if business picks up again, can't pay the mortgage, repossessed. Young families running out of space who cannot afford to sell and move up the ladder. Renters who suddenly find the house is sold from under them by the bank because the landlord has had it repossessed, maybe they will be on benefits, disabled. All suddenly homeless and in turmoil because of a house price crash.
Pensioners living in big houses with the mortgage paid off and a pension larger than the average salary coming in, they won't suffer, they won't bat an eyelid. Except to maybe take a lump of money out of an stock market fund and hand it over to their children so they can buy while prices are low..

Be careful what you wish for.

Interest rates will only rise when we start to have inflation. I believe that the new living wage will cause a squeeze on companies in the uk. It is possible the living wage will cause companies to go under and cause unemployment or inflation. Lots of people losing their jobs means lots of reposessions or distressed sellers flooding the market.

I am glad the government is making new buy to lets harder and squeezing landlords who need large mortgages out the market. I hope the proprty bubble deflates like a slow puncture rather than an explosion.

Not a chance, prices rising ridiculously round here and houses sold within days.

I do hope for that, any real estate in UK is not affordable for my family, I even seriously though about moving out and purchasing something like phuket9.com/properties/lagoon-townhouse-46 at exotic country ( my husband and I we both work remotely ). The prices are still crazy here.

There are houses going for £50k and under where I live Laura, Certainly affordable (your link though is to a rental for 35k per mth ?)

I met someone yesterday ho had had a job promotion from the Midlands to Oxford - she could hardly believe the rent she now has to pay (Oxford, Cambridge, London, Surrey etc are booming at present for house prices and jobs). I do think waiting until after the April stamp duty changes take effect may be wise although I doubt demand out here will change in zone 5. Every single local building that could be built on is being built on. Even a local pub that was flattened last year I see now has a sign on - 25 new flats coming which is right by about 4 other similar schemes which all seem to sell out before they are even advertised. These will be flats up to about £400k in outer London near the tube. My son is looking hence my interest.

Whereas take yourself off to where my parents and I were from - NE and it's very very different.

I read today that Switzerland, Zug is asking people to pay their tax as late as possible as if the state holds the money it has to pay the banks to hold it as they have negative interest rates. We are really in unchartered territory at present.

Still buy a house for £65k where I live.

Where do you live? Is it a house in let vsble condition? What's the employment rate and average wage?

Oliversmumsarmy

No. We don't go out. We have zero spare cash at the end of each month. No luxuries etc. We can't even afford to save. All of our friends have either been given huge deposits by parents, or parents have allowed them to stay rent /bill free with them whilst they save £20k (easily done if you have no bills/rent etc)

I just personally think it's insane that a young couple, with two kids, both working can only borrow £100k LESS than what they need to buy a house. I don't mean a nice house. I mean a crappy house. The only thing I could buy round here is a 1 bed flat, needing renovation, in a very very rough area.

Might as well keep on renting.

When my parents bought, yes they stretched themselves, but still, it was 3 times their salary. Now it's more like 7 and it's completely unattainable for most without parental support. If you don't have that, you're screwed.

Although when we first bought interest rates were 12% on a repayment mortgage and today they are nearer 3%.

The media will report a drop of 1%-2% as a crash. I think that there will be a slow down and slight drop in house prices but you are unlikely to see house prices being massively reduced.

Even if house price crash does happen, it won't happen uniformly in every area of the country, so depending on where you are, you may not benefit from it anyway.

Also if house prices crash, people will be less likely to sell, which means that you may not be able to find what you want anyway. It's a double-edged sword.

I just personally think it's insane that a young couple, with two kids, both working can only borrow £100k LESS than what they need to buy a house.

I think your making the same error that many people make. This problem won't be solved by allowing people to borrow more / take on more debt. That's whats caused them to sky rocket.

What we need is cheaper prices. All this government intervention just allows people to borrow more and props up prices.

The only thing I could buy round here is a 1 bed flat, needing renovation, in a very very rough area. Might as well keep on renting.

Which is exactly my earlier point. There aren't many people who can't afford to buy. There are lots of people who can't afford to buy anywhere as nice as they can rent.

As a few posters on here (me included) have said, some people do buy that crappy flat in the crappy area. Then more people do. Then the crappy area becomes a less crappy area with nice shops.
Suddenly, the people who said 5 years ago that they would rather rent than live in that crappy area are whinging that their friends have got a flat that has doubled in value and are able to move on.

Currently, all my friends who are now in a house, started off in a crappy flat in a crappy area. All of them. We put up with the jokes about the area and the reluctance to come over to ours for dinner.
Those making the jokes are either still renting or in their first (small) flat.

But I still get told I was 'lucky' that my first flat was in Balham, because they couldn't to buy there now.
Well yes, but when I bought there, it was a shithole and the flat had been on the market for months with no interest.

if house prices crash, people will be less likely to sell
those with high LTV mortgages may be forced to sell if they are unable to service the mortgage

for some mortgages a low interest rate is contingent on the LTV ratio, that ratio will change if house values drop

^As a few posters on here (me included) have said, some people do buy that crappy flat in the crappy area. Then more people do. Then the crappy area becomes a less crappy area with nice shops.
Suddenly, the people who said 5 years ago that they would rather rent than live in that crappy area are whinging that their friends have got a flat that has doubled in value and are able to move on.^

This is an absolutely classic 'pre-crash' mindset.

Older posters, who were around in the late 80s, will remember the widely accepted perception, casually illustrated here, that 'prices can only go up'. People used to rattle it off unquestioningly, and then when the crash finally came, almost overnight it suddenly looked bonkers.

Fig
I bought my flat to get a toe hold in the market, not to speculate.
But look on the Property & DIY boards at the threads on Walthamstow, Layton, Catford. Areas that even 5, let alone 10 years ago would have been considered 'rough and crappy' by the vast majority of people. They are now places where people are happy to get a toe hold rather than rent, even if it means forgoing a local Starbucks, or a tube station.
But after a while, there is a critical mass of people with mild aspirations, and the amenities appear, and it is no longer referred to as a 'crappy or rough' area, where people would rather rent elsewhere than buy in.

I've been moderately lucky to have lived in a few places like this, not because I'm some gentification guru, but because owning a bit more space has been a higher priority to me than having a flashy postcode with coffee shops a-plenty. But I've never lived anywhere more than a few years before the coffee shops start to appear, because the property-owning-classes are a lemming-like bunch.
I just think it can sometimes be shortsighted to turn down the option of buying that crappy one bed in favour of continued renting of a nicer one bed in a nicer area

Figment, I don't know where you live but the poster you quote is bang on the money wrt London. Really down-at-heel areas here do become extremely gentrified (in a very short time) as people are forced out of more established areas. Those "new" areas experience eye-watering price rises which are unlikely to fall to the pre-gentrification levels even in a crash (or at least they didn't in the 2008 crash, too young to have bought in the early 1990s so harder to say).