To think the housing market is about to collapse

[sandrabedminster]

We seem to be getting almost daily story's about it on the edge, no surprise really given the ridiculous prices.

Now standard life have suspended their commercial property fund.

Is it about to go back to 2008 all again?

The surge in population might have had something to do with it.

call what people coming over here taking our jobs...and our benefits...and our houses?

Call the Tory Government to account will you - rather than making peoples concerns about negative equity and house prices an immigration issue

I think it's silly to say London will collapse and the rest will follow. London has been way over inflated compared to most of the country.

My area (East Anglia) has gone up by nowhere near as much as London and also has significant developments going on in terms of trains and such. It's also becoming a more common area for people to live if they work in London because connections are still relatively quick. I cannot see any big drops around here at all, because if there are two of you, you can still afford to live here. Unlike London where no one my age can buy even with someone else without parental help.

London is likely to suffer more, and people who did Help To Buy 5% deposits are the ones I worry for. I'm really glad we steered clear of that now.

I'm in Scotland; where I am, house prices have just about recovered to their 2008 prices. It depends on which type of house you're looking at. In Aberdeen, the drop in oil prices has wiped out the local economy and the housing market has crashed. I know people who want to get out before they lose their jobs, but can't sell their house.

Lower house prices mean we enjoy a great standard of living, but it also means we are very reluctant to leave because we would be in a much smaller house (& probably more stretched schools/healthcare/services). But we may have to go in the next couple of years as DH lost his job a year ago and my job is in a precarious situation.

Lower house prices mean we enjoy a great standard of living

Exactly. I don't think people realise it's no privilege living in London and the surrounding areas. It's a fucking ball-ache if I'm honest. You pay a fortune for very little. My friends and family in Scotland and NI enjoy a far better standard of living than anyone I know in London although they make far less money.

Where I am house prices have genuinely doubled in three years.
So 1 bed flat has gone from 125/150 is now 250-300
A 2/3 bed semi 250-300 so now 500 to 600

They are also building on greenbelt.
You need to go a long way out now for anything cheaper.

How can a renter trying to save for a deposit or even qualify for a mortgage on that sort of increase?

As another poster says selfishly I'd like that bubble to burst. But I see the bigger picture would fuck things up for a lot of orhers

There are loads of overseas buyers who use London property as an investment as it pays better than the stock markets .

This creates a lot of buildings standing empty.

This should be stopped.

Housing should be for those wishing to live and work on the area.

Empty properties add nothing the the economy -

Yes, that's exactly what I said :)

Or let's try it again:

A surge in population contributed to a rise in house prices: the more pressured this surge was, the sharper the increase was (London/south east)
Meanwhile, wages didn't increase with the cost of living.

In our area, you are looking at 500k for a 3 bedroom house - normally requiring updating. It's ridiculous. Ours is heading for 600k and we bought it 10 years ago for 250k. I would love to sell up and move back to Wales, but wife is a local.

There are loads of overseas buyers who use London property as an investment as it pays better than the stock markets . This creates a lot of buildings standing empty

Leaving them empty serves a purpose, it means that investors can sell more quickly as soon as they get any kind of advance nod that the market is falling and its time to park the money elsewhere

I think we're a couple of years away from a collapse. Depends on the outcome of the EU negotiations.

I think we will have economic stagnation - if things don't proceed at some pace overseas investment in the economy will dry up. This may or may not force layoffs particularly in manufacturing. Generally I think there will be a huge slow down in growth.

There will be a general downturn in consumer confidence. I think people will spend less and save more in case it's needed later. That is a recessionary influence.

R&D
I could easily see a situation where overseas/EU grants are no longer forthcoming as the term of the funding will become an issue if Article 50 is initiated. Specialists in these areas will jump ship if vacancies arise elsewhere and we will see a brain drain so it will become self fulfilling as time goes on.

Chinese investors in flats will go elsewhere if they have any sense. So there might be a drop in prices for oversupplied 1/2 bed flats in London/Manchester/Birmingham. Not exactly going to set the housing market on fire though.

Round my way (Zone 2 SE London) I am seeing more properties reduced in price and staying on the market for longer.

We have been tentatively looking to buy for ages - we're in a large two-bed flat but would like a larger flat or small house - but will probably hold off as we're both foreigners and feeling a bit uneasy about chucking £600k into a property just now.

Population increase is not the only factor pumping up the bubble
Availability of credit is a big one, interest only loans and cash out refinancing for buy to let landlords.
Foreign investors, help to buy schemes which are really help to Jack up prices schemes

Why is negative equity worse than people being stuck renting? If someone buys a property they are taking a risk that prices could go up or down and presumably most people buy a property to live in, not to tell all their friends how they have become accidental millionaires? Surely it's worse to price out a whole generation of young people and leave them to the whim of rotten landlords, in overpriced and unsafe properties than for some people to suffer from negative equity? I am sure there are more renters now than people potentially in negative equity. Politicians should be aiming their policies at renters as they are the future, having been priced out with prices being so barmy.

Seriously? It has been explained to you. You sound bitter, and not that economically/financially literate.

If you rent, you can hand in your notice and move somewhere else. To a bigger property, to a different area in the same city, to a cheaper property, to a whole new area of the country. You are highly mobile.

If you are in negative equity (house worth £180k mortgage £220k), you cannot sell and move (e.g. to a different part of the country) unless you have the additional cash to make up the shortfall.

Hence people rent out their houses and become 'accidental landlords' to avoid crystallising the loss, and the stock of housing coming online decreases. As has already been explained to you, that is why rents have generally tended to fall as house prices fall.

You are a fool to wish for a house price crash, people like you won’t benefit. The rich with cash in the bank to spend will prosper and the poor will get poorer.

Personally I hope for a house price stabilisation AND a prosperous economy – it would be no bad thing if the market slowed and prices held steady for 15 years and the economy boomed and people’s wages caught up. That is pie in the sky thanks to the idiotic Brexit decision and imminent recession though.

I am sure there are more renters now than people potentially in negative equity

This is a really good point actually - but unfortunately the demographic who vote for the conservatives is skewed towards home owners. The conservatives really don’t give a shit about the working poor living in shitty accommodation since they don’t vote for them anyway

Why is negative equity worse than people being stuck renting?

If you work in London or a major urban centre, if you are an EU national or need to be mobile for work then it's a huge problem.

Frankly if you are in a home that's adequate for your needs and you are employed it makes little difference to your world until you need to remortgage. I think life gets pretty tricky then.

Frankly if you are in a home that's adequate for your needs and you are employed it makes little difference to your world until you need to remortgage. I think life gets pretty tricky then.

Yup so you end up staying on the SVR (which is like 4% at the mo, as compared to being able to fix at 1.5% ish) and paying way more than people whoaren;t in negative equity in the long term.

I do think that there will be far less people in negative equity this time round than in 2008, given the stupid 100% and even 110% mortgages are a thing of the past.

Being stuck renting is so frustrating. We had to rent (in shit, cold, damp flats) for many years while we saved up enough for our deposit. It's the thought of all the money you pay your LL which you think could be a mortgage repayment towards your own home.

But, we did save for a long time and it wasn't easy. If we had to sell our house in negative equity we would have none of that money we saved and also would have to repay on the mortgage what couldn't be recouped on the house sale.

I don't know which is worse (renting vs negative equity), but it would certainly not be a happy time for us if we ended up with less than what we spent so long saving for.

We just bought our first house in February. However, we are not planning to move so hopefully whatever happens will be OK.

Renting gives you flexibility but not paying off capital.

Owning gives you the financial advantage of paying off capital but little flexibility (it's expensive to move).

Negative equity means you can't move but also aren't paying off much capital (once you come to remortgage) because of the high interest rates of being a risky borrower.

That's why it's seen as a worst of both worlds scenario I think.

www.moneyadviceservice.org.uk/en/articles/negative-equity-what-it-means-and-what-you-can-do-about-it

We're a long way [thankfully] from negative equity but we would be financially fucked if we were stuck with whatever our current mortgage provider's standard rate was if it were significantly higher than our current long term deal.

Mortgages are also calculated on a loan to value ratio. So if my home is valued at £500k and I only need to borrow 70% of that, I will get a lot more options and lower interest rates offered to me as I represent less risk to the bank. If the market drops and I have to sell, they'll get their money back and I will have to take the hit. There's no shared risk in home equity with the banks.
If the arse falls out of the market and my home is suddenly valued at £350k, then my LTV ratio is much higher and the banks will only offer more expensive deals and shorter periods.

I think that given the current housing shortages a crash is not imminent unless the outcome of Brexit is a total withdrawal from the EU / EEA. Developers can simply sit tight and stop developing for a bit as they did in 2008 onwards. By creating an artificial shortage they can maintain prices and not make a loss on the cost of the land. Existing commercial property is much more vulnerable if businesses close/ relocate or no longer need to expand.

Q: What is your advice to people who are wondering about taking out a loan or mortgage?

We are advising people to be prudent, governor Carney smiles.

If you are taking out a mortgage, at some stage, during the life of that mortgage, conditions will be difficult.

So you want to be sure, as a household or an individual, that you can repay that mortgage - you don’t want to lose your house or flat.

But this is classic central bank advice, he adds. We’d tell you to be prudent if we were in the 10th year of a boom.

I'm about to exchange on a studio in London and am in a complete panic. It's all I can afford right now and I overbid on it as the market was
over-heated at the time. I'd already been having doubts that it was too small etc but now with these doom and gloom predictions I'm thinking about pulling out.

Part of me is hoping that prices will stablise or dip slightly so I can finally afford a 1 bed - am I being unrealistic? If I do bail I risk being priced out of the market if prices continue to rise.