To think that big house price falls finally on the way?

[qwertyflirty]

After years or price rises, in my area (edge of London), I'm finally seeing price falls of around 15% from peak.

Lots of evidence in recent months of house price falls starting and picking up in London/South East, and usually once they start here, price falls spread elsewhere.

House prices are down on average 17K since July 2017 in London. "The average price of a home for the capital as a whole was £471,986, down from a peak of £488,247 last July."

There is little the government can do to mitigate it this time round, as interest rates are already at record lows. All signs are currently pointing to the top of the market having been reached and prices about to crash.

Such as:

www.theguardian.com/business/2018/apr/18/london-house-prices-fall-average-uk

www.thisismoney.co.uk/money/mortgageshome/article-5733321/Beware-red-danger-signs-house-prices-Young-buyers-borrow-record-sums.html

www.theguardian.com/money/2018/may/12/house-prices-are-on-the-slide-where-will-they-go-now

www.independent.co.uk/news/business/news/house-prices-fall-housing-market-rics-survey-april-a8343561.html

www.propertyweek.com/finance/house-price-falls-continue-in-london-and-spread-to-south-west/5096455.article

www.theguardian.com/commentisfree/2018/may/10/celebrate-house-prices-falling-britain-property-values

www.homesandproperty.co.uk/property-news/london-house-price-reductions-at-record-high-as-86-per-cent-of-homes-sold-below-asking-price-a120031.html

So all that is happening is the prices were too high in the first place.

Saying that 86% of homes sell below the asking price. Again another blanket statement.

They could have all knocked £1 off to prove this statement correct

Yes, they could have knocked £1 off.

But as it happened, on average they knocked £27,000 off on average in London in the first 3 months of this year.

www.homesandproperty.co.uk/property-news/house-prices-in-london-gap-between-asking-and-sold-prices-across-the-capital-reaches-27k-a119521.html

Oops, too many 'on averages' there!

So actually more people would benefit from falling nominal as well as real prices than lose out from them.

If it was a very gradual and long fall of like 1% - 2% per year maybe.

If it was the kind of fall like you are wanting, disagree - see earlier comments about people being spooked by seeing their major asset falling and ceasing discretionary spending. Also probably leads to a reduction in the amount of debt you can borrow, which doesn't help affordability!

Of course there will be some winners, but overall I think large price falls will be harmful to a greater extent to the UK 'in general' than a long period of stable prices.

I'm sure cleverer people than me have modeled this to the Nth degree and there are probably a range of scenarios being considered by banks and economists at the moment. I'm not an economist or a forecaster.

@qwertyflirty as a numerical example of why declining house prices mean much tiger lending:

If you are now able to borrow £95k on a £100k house at 4% - your monthly repayments will be c.£500 on a 25 year term.

At the end of year 1 your loan remaining will be £92.8k.
End of Y2 £90.4k
End of Y3 £88.0k

If you have annual house price falls of 5%... your LTV starts at 95%. Then INCREASES to 98%, then 100%, then 103%. Hello neg equity.

So you can wave bye bye to 95% mortgages and can expect to see banks requiring much larger equity cushions before they will lend in a declining market.

And now I have got into black hole running various house price falls and interest rate rises based on my debt/equity! :-) Need to get back to my actual work.

Furano

Yes you would.

But is that a bad thing?

It was clear overly lax lending contributed to the problems.

I don't think going back to days of 100% mortgages would really help people onto the ladder - because house prices would just rise as a result.

I agree with you that large house price falls would probably spook the economy though.

But the alternative - high wage increases - don't seem to be anywhere nearby to save the day though.

It's all very well posting links which support your point of view, but if you are going to make statements you need to do it objectively. Google House price rises and you get a different picture:

This is money prices will rise 26% by 2018 but London will flatline in two years' time, top estate agent predicts

Homes and Property house price rises set to continue into 2018, despite London dip. UK house prices are going up, despite Brexit uncertainty and possible interest rate rises

The Express house prices to soar 25% over next four years

The Halifax prices in the three months to April 2018 were 2.2% higher than in the same three months a year earlier.

There won't be a crash because we can't have a nation of negative equity and people unable to pay their mortgages because interest rates have gone to double figures.

I agree with you that large house price falls would probably spook the economy though.

But the alternative - high wage increases - don't seem to be anywhere nearby to save the day though.

Or we could just have a general slow down in price increases so that they are more steady from year to year and possibly a slight decline. The recent year on year growth is unsustainable.

Personally, I think there could be a small fall or at least a slow down, particularly with Brexit and the steps the Government is finally taking to make being a buy to let landlord less financially beneficial. But I don't believe there will be a massive drop any time soon in London - I have so many friends in their mid-thirties who are desperate to buy (fortunately I escaped to another city a few years ago) and I think economy of the UK is so London-centric that there will be more demand than supply in London for the foreseeable future.

Me and DH are planning on staying in our current home until we get old and need a bungalow so we'll be fine I guess.

LifeBeginsAtGin

I couldn't get any of your links to work?

Could you repost with working links please as I would love to see these articles?

Thanks.

Your second headline: "prices will rise 26% by 2018" suggests it is a very old article!

We are already in 2018...

"There won't be a crash because we can't have a nation of negative equity and people unable to pay their mortgages because interest rates have gone to double figures."

It's hardly impossible - it happened in the early 1990s.

It wasn't nice for those who were in negative equity at the time (like my brother) - but they did survive. We're still here.

And I don't think anyone is suggesting that interest rates are heading to double figures!

If that happens, we're all fucked!

I don't know about nationally, but here (se but outside of London) they are still going up. Rental prices are stupidly high, and there are lots of homeless people too

I don't personally want to see a house price crash because it will leave lots of people in negative equity. The worst effected people would be those who scrimped and saved to buy, with high mortgages, or who bought small flats in the hope that they could size up in a few years.

I think the answer is to build more housing and keep it publicly owned and rented at fair rents. Private rentals should be much more regulated and rents should be controlled. If this happened then people would not be so desperate to buy. I guess that prices would eventually go down, but hopefully not so quickly as to ruin people's lives.

We could also try to match up supply and demand better. There are empty properties and lots for sale in my mother's home village in the NE for example. In my father's town (I just checked) flats at auction for £25k, lots and lots of them - not gerat ones but you can imagine the houses are also similarly cheap. How can we get people to move there? My ancestors moved to the NE for work. So places with loads of space and cheap housing and cheap rents do exist but there are not many jobs there.

Yes lots of people have been in negative equity before, with lots of repossessions. Historical memory is incredibly short.
House prices are being propped up by buy to let, and in London, foreign investors. Issues with any of those will see prices reduce.

I just looked up my grandfather's 1914 address. That's quite a drop in price even for NE England between the 2006 price of £63k down to the £39 950 (end of terraced).

01 Mar 2018 Terraced, Freehold
£39,950 Land Registry
07 Jul 2017 Terraced, Freehold
£39,950 Land Registry
13 Oct 2006 Terraced, Freehold
£63,000 Land Registr

The thread on HPC is worth a read. They have a very low opinion on women it would seem. They also seem convinced that the op is one of their own!

How can we get people to move there? My ancestors moved to the NE for work. So places with loads of space and cheap housing and cheap rents do exist but there are not many jobs there.

I think it might come eventually as technology improves and there is less/no need to physically be in an office. I know someone who is based over here in the UK but works for a US company from home. She could live anywhere. I think it might take a long time for those kind of jobs to become widespread though and some will always require people to be at a certain location.

People I know who can live anywhere, tend to live in beautiful places such as islands in Scotland, or by the beach. Not in northern towns

In London house prices have almost doubled in 10 years. At the same time sales volumes have halved and the buyers have been disproportionately cash buyers and BTLers. Because income multiples are so stretched even FTBs have large equity stakes to buy in. This means there are relatively few (in population terms) exposed to negative equity in terms of the market as a whole. However this makes the likelihood of sellers bailing rather than sitting it out a lot higher and therefore also increases the risk of of larger shorter time scale correction.

The one area of exposure is Help to Buy equity loans on new builds.

People I know who can live anywhere, tend to live in beautiful places such as islands in Scotland, or by the beach. Not in northern towns

True. And I think a lot of people will want somewhere with good amenities/schools etc.

I am wondering the address of xenia's grandfather though.

People I know who can live anywhere, tend to live in beautiful places such as islands in Scotland, or by the beach. Not in northern towns

There are plenty of beautiful places on the outskirts of northern towns, so the best of both worlds. Even places like Burnley or Rotherham.

I took this photo a few miles outside Wakefield just last week. The town centre isn't particularly nice, but Leeds and Sheffield are very vibrant, with lots going on. You have lots of amenities and culture, but can be in real wilderness in under an hour or the coast in about an hour and a half.

Many people can easily afford housing. In this part of the country, we have just about everything most people could need. Including 4 national museums within less than an hour's travel.

Unless you have an income very much above the average, I fail to see how the quality of life in London and the South East can be significantly better. In fact it is probably worse for most people due to the cost of housing, congestion, pollution and overcrowdedness.