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

I know there are beautiful places surrounding those places and I really like Leeds.
But there are truly beautiful places in Britain, with cheap house prices and little work. Places in Wales and Scotland for example. If I could live anywhere I would live there. But I don't because of work. Most people can't live exactly where they would ideally want to.

Also just looked at house prices after Xenia's post, and I see in some northern towns house prices have fallen quite dramatically. So it has already happened in some places.

crunchy, Bishop Auckland. It's an end of terrace, looks victorian and it is still standing. I just saw it on Street View.That is the address he lived in in 1914. They rented and moved a few times within that town untl buying I think around 1942 there and lived there until my granny died in 1971. That final house was mid terraced with 3 beds and what I thought was a huge cellar but actually it's really small and coal cellar which shows how small I must have been when I visited it.

There were jobs in the NE so they moved up there from Lincs. I have his draft papers to join his brother in the US or Canada in 1929 which has a lot of detail about savings, dates, addresses and they were planning to move because times were so hard up there then - late 1920s but they never left and my father ended up settling in Newcastle where there was more work. in fact my grandfather lived in Newcastle in 1901 in a boarding house with 26 other young men but I am not suggesting people should live like that now. My only point is the UK has a lot of fairly cheap housing and we seem so useless at meeting supply and demand and so very many of the press articles are all about London, London, london all the time.

Thanks xenia. Yes house prices are cheap there. If there were no foreign investors or buy to let, London house prices would be much cheaper.

Ours has quadrupled in value and is still rising (South West)

When we brought in the annual tax on enveloped dwellings (ATED) charged on residential properties held by a company worth over £500k a lot of investors in London instead of buying 1 £1m flat then moved up to Manchester to buy say 4 flats instead - which is Government policy I suppose working as intended but it's hard to get it right all the time.

My sibling bought in Yorkshire (and goes to London a fair bit for work) and works in Leeds which has worked out well. I suppose whenever one place gets too expensive people then move elsewhere. it's one reason prices rose in my bit of outer London zone 5 as people moved further out as prices rose.

They also seem convinced that the op is one of their own!

@SimonBridges 'she' probably is - HPC forum users love trolling MN and have done for years

Nice parts of Leeds, Sheffield, York etc are quite expensive anyway!

York is a very desirable place to live. Sheffield and Leeds are cities with lots of jobs.
But plenty of other places in the north where house prices are cheap.

SimonBridges and Furano - no, I am most definitely NOT from HPC - and in what way do they object to women?

I've been on MN since 2005 I think - so longer than the 10 years I guesstimated. I nc very regularly and am posting elsewhere on other threads under other names right now! (Can you spot me?)

Housing is one of my interests - my dd laughs as it is one of my 'hobbies'. Posting on MN is another. I don't have enough free time to develop a HPC habit too - and don't think I'd care to, if they are misogynist.

I do read lots of stuff about house prices (can you guess? )

BTW - troll-hunting is against MN policy.

Maybe, being relative newbies yourselves, you are unaware of this...

Not about to out myself under any of my other usernames given the quite insane amount of personal attacks I have faced on this thread though.

Lots of attempts to shoot the messenger here.

Not going to change the message, though, you know that, don't you?

Sorry you bought recently Furano, but from what you posted previously, you bought knowing that prices might well fall and should be fine.

xenia - thanks for interesting anecdata on the NE - I had no idea prices had already fallen by that much there.

I assume there's little in the way of employment round there?

Wondering if they voted for Brexit...?

Just wanted to repeat how utterly fucked off I am that posters are implying I must be male.

I repeat - people with opinions and interest in financial matters are not necessarily male.

That assumption in itself is so outrageously sexist.

FFS.

Businesses in London are hurt by high housing costs too and would welcome a fall:

www.ft.com/content/30672d24-48ad-11e8-8ee8-cae73aab7ccb

So somewhat contrary to the assumption that a fall in house prices would be a disaster for the economy.

But is that a bad thing?

Yes.
It is.

We got caught in a really ridiculous situation.

Our house was shared ownership. We bought at top of the market because we were well aware a crash might not work to our favour.

People forget that after a crash lending criteria tightens. So even though house prices might drop it doesn't necessarily make them easier nor cheaper to buy for people. We took the gamble that we were better to buy in a location we wanted to live for a long time and would recover it's value faster rather than wait. Every year we were not on the property ladder meant money going to rent anyway and we didn't know at the time if that might mean we'd never get a property.

The fact our house was shared ownership, meant we mitigated some of the risk of buying at the top of the market too. We also ensured we put a 10% deposit down so we didn't take out a 100% mortgage to mitigate the risk of going into negative equity.

As it turned out, DH's career took off and after a couple of big promotions we decided to buy the other half of the house at the bottom of the market. The problem was that we couldn't get a mortgage that was more that 85% LTV. This left us with something of a problem.

Our rent and mortgage was MORE than a mortgage on the entire property. There was no question about whether the house was affordable to us.

DH salary was good. We'd over paid our mortgage and built up some additional savings. We'd done everything right. But even then we struggled.

Our lender looked our figures and were utterly shocked. They couldn't get their heads around it. On paper we were a very safe lending prospect and they were in theory happy to do it and didn't see us as a risk. Just an ideal customer. The problem was the new rules.

In the end we managed to scrap the money together to do it with another company. Just. By cock up that was honoured in our favour. We'd have been totally screwed under any other circumstances. It was much harder to do than when we'd bought for the first time, even though on paper we were much lower risk.

But this is the point. We don't think a dip in prices would help us. Even though we have some equity, if we want to move up, if prices drop, another drop in equity would be a problem for us. It wouldn't be our household income that was the issue. It would affect what LTV mortgages were available to us, which in turn would make a difference to how much a property actually cost us in relative terms because of the difference in interest rates. (A property several thousand pounds less in value wouldn't necessarily cost us less in the long run with compound interest). It might well, restrict what we could buy even if the sale price of that house was lower because again lenders would be more restrictive.

A drop in houseprices won't that better for those people who still are in negative equity or have little equity in their property from the last crash.

The reality this is potentially anyone who has bought within the last 12/13 years in many areas is at risk. Not just people who have bought recently as the market has peaked again.

There will be even more people trapped and unable to move. The BoE has already highlighted the problem of people on mortgages that they can not get out of and remortgage. This is going to have to be dealt with by the market somehow.

It doesn't help First Time Buyers either. Prices at the bottom of the market remain out of reach because lenders are more cautious and have to cover problems with those slightly higher up. Right now multipliers are at their highest level ever. This is the thing I suspect would change and be tightened in the event of a big slump.

We also can not rule out interest rate rises. Rates are currently low but the BoE is making noises this won't be forever. Even a couple of percentage points would be a huge problem. Banks are having to plan for this possibility.

It's therefore people with no or little equity who would still struggle. They will be less able - not more able - to compete with cash buyers for smaller properties.

On a personal level for us, I don't honestly think it will make a blind bit of difference whether prices go down or stay the same. It will ultimately end up costing us the same long term if we move to a bigger house locally. Prices going up would ,however, be an issue. So given we plan to move and stay put for a long time, there is possibly as much risk in waiting as moving now.

In comparitive terms with our peers of a slightly younger age, we are in a far better position. Prices here for a two bed are roughly where they were ten years ago but I think it's harder to buy here. I do think we've reached a natural ceiling in the market for the most part. My attitude is that if people in good positions can't move here, there is a structural problem that prevents prices continuing to go up.

I've laboured the point somewhat, but it's essentially this:
The issue with the housing market is NOT house sale prices particularly. It's actually about what equity people have.

Not forgetting the cost of a house isn't purely about the price on Rightmove. It's also about the full value of what you pay due to compound interest over a 25 year period too.

Apparently 300,000 FTBs have used Help to Buy equity loans over the last 5 years but 95% of them have been outside London. So even that is a small exposure.

www.theweek.co.uk/house-prices/55455/help-to-buy-how-it-works-and-who-should-apply

Agree, RedToothBrush.

People with low equity will get walloped.

But the alternative is what we have now, where hardly any people in professional jobs can afford to buy in London. Which is ridiculous.

Someone has to take the hit and at the moment it is the propertyless. That is not fine either.

The reality is that property is a zero sum game.

There is a finite amount of property to go round and you can't redistribute it more fairly without some people losing out.

howabout - how is that a small exposure? It's a large exposure just not all in London.

I don't think anyone here has argued that the only or main reason London house prices are so high is Help To Buy.

Help to Buy is walking about 20% on to the value of land in my local area, and just encouraging developers to build properties bigger than are needed.

It structurally is distorting the market for the sake of a one time only action, which isn't necessarily helping FTBs anyway. It only really helps the developer.

No idea how it's playing out in London, but it's desparately unhelpful here. It causes more problems the higher the value of the house.

Wales has a cap on properties worth £300,000. In England it's up to £600,000. That cap makes no sense whatsoever ever in the NW and I find it inexcusable.

NE England will be like a lot of the country - central Leeds, Newcastle, Manchester, London - mostly voted remain and less well of bits oten voted leave - Sunderland for example had quite a strong leave vote. Basically if you hardly have enough to eat then a change cannot make things worse - if things are so bad already it might even make things a bit different or better so it is not surprising leave won really in a lot of areas (I voted remain).

Yes there are fewer jobs up there. I was looking with my son the other day on line and he found he could move jobs to leeds but the nice and much cheaper Northumberland country places there were not the jobs - you could plot it fairly easily - lots of jobs, higher rents/house prices although it is still much easier outside London to commute a fair bit eg chaper bits of NE into Newcastlef or a good job there or we have relatives near Bradford where it can be quite cheap and people commute there into places like even Sheffield although it's a bit of a trek.

On the tougher lending criteria point I would rather we had let the market decide if people get themselves in a pickle so be it but we decided to be a lot more interventionist instead and that means some people cannot afford to remortgage to a better deal etc.

Yes large bits of NE did vote leave but can you blame them?
That area apart from big cities has been royally fucked by the government.
I grew up there and many who voted leave said they did it as a way to go against the governemnt.

Well things actually can get massively worse and are likely to for the north east if we leave, so yes I do blame them for an unwise choice. Speaking as a fellow northerner. Going against the government is meant to hurt them more than it hurts you, for it to be an effective protest.

Sorry unfortunate cross post. I think house prices will fall in areas with significant gains since 2008, but I think in areas where there has been no recovery a substantial amount of the correction has already happened so at worst prices will stay flat. My comment re Help to Buy was in the context of the London market. 15,000 HTB mortgages with the majority of them having benefited from a proportion of the recent double digit price increases probably means less than 10,000 are exposed. If they bought to save on rent and in anticipation of future pay rises to buy out the Government then in a falling market they are less exposed than a FTB who doesn't have the Government sharing the equity loss.

There will be some who will end up trapped and I think the literature is very misleading. I was looking at it for a friend's DD recently and everything is predicated on the notion that house prices only increase. The Scottish scheme is better because it is capped at £200k and there is no interest escalator to penalise not buying out the Government. Also there is much lower risk because house price average income multiples in Scotland are closer to 5 than 10.

In a static or falling market I would have thought the way out would be to leave the Government share alone for them to share the loss?

Howabout I agree about schemes not really working in a falling market.

Help to buy could be a nightmare in a falling market in certain circumstances, with people being forced to sell up to avoid home to buy fees (which can rack up quickly if interest rates go up) or stuck with them AND with negative equity. I had a good look at the scheme, as there are some properties locally with them on. DH and I came to the conclusion that you have to be crazy or very, very desparately to go anywhere near the scheme on above £300,000. It's too risky imo.

As for shared ownership, I have experience with it so I appreciate the pitfalls more than most. It worked for us, but I'm not convinced it really works for everyone. In fact I'd probably argue that we are the exception rather than the rule. I know a couple of my neighbours have had various real difficulties.

They are also particularly difficult in a falling market. As a rule people who go for shared ownership will have little equity, which is why they are attracted to shared ownership in the first place. It means they are particularly vulnerable to issues with negative equity. The law on shared ownership means you can not rent out your property as it's sub letting so if you need to move and you are in negative equity you can be completely screwed.

In our case our rent increases meant we ended up paying more than if we owned the whole premises too, which is nuts. I believe it became such an issue for one of our neighbours they switched to an interest only mortgage, which makes it little more than secure long term renting (though there is also something for that too).

Shared ownership also inflates price. The houses on our estate still on the scheme are currently going for £100,000 (not the real price) for 50% but the ones which have been bought out and are on the market for full price don't go for the £200,000 asking price. It's more like £190,000. Which just highlights the market distortion. But if someone was to buy out they would have to pay the £200,000 valuation price. (It does perhaps still make sense to do it as you don't have moving costs to increase your potential equity but it's a glaring issue with staircasing).

The trouble is that I don't think most people really understand the risks with these type of schemes. They are rather glossed over. They are actually rather limited in their effectiveness. If you are not younger and in a career which has good career progression and/or potential wage increases I perhaps say they aren't so wise. If you can move somewhere else and commute, frankly it's properly smarter to do so.

I therefore, after much reflection, have come to the conclusion that all these schemes really are not doing what people think they do and in practice are not much of a solution. They only serve the interests of developers not buyers. No one is really giving particularly great and honest advice about them imho.

The only solution I can see working is simply building more smaller properties and forcing empty properties that are being sat on by investors to be used. I think it is the only way forward. I also think this is much less attractive as policy than fancy schemes to politicians.

I find it all very frustrating and depressing.

We should also perhaps do a better sales job on all those many areas with very cheap properties, near the sea, access to countryside, ability to work remotely etc as it's all that property just sitting there unused but just not in the place that person wants to live.