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

The only ones who matter are those who do sell. And there will always be some who have to sell, even in a falling market, maybe they need to move into a nursing home, get divorced, die, need to downsize before retirement etc. Maybe they get repossessed. Whatever

I do see what you are saying...however I know of people who sit tight because the margins are too tight eg not.enough equity for next property, or there are changes to affordability criteria...
I think this can help to at least sustain prices because supply is lower ... could be wrong....but it's how I observe the market in Belfast

Bolokov made it perfectly clear that they were talking about outside London.

And @qwertyflirty I will repeat my post for you: What a house is "worth" is completely irrelevant unless the owner chooses to sell, which most won't if they can't sell for the price they paid. Houses being "worth" less doesn't lead to houses being sold for less. It just leads to stagnation because people choose not to sell.

Yes there will always be a few forced sellers due to death or divorce etc, but not any more than there are already. A crash would require a large increase in the number of forced sellers, which would probably imply recession and widespread job losses.

It's a virtue narrative. "I'm good, I pinched pennies and was prudent, so I'm alright Jack. Others are bad, feckless with money and imprudent, and so they deserve not to have a house". Aka the Iphone narrative "They have iphones and avocado toast, they don't deserve a house".

What it conveniently ignores is the macroeconomic trends to which qwerty is drawing attention, especially the wage/housing cost ratio. No amount of virtue signalling can get around the fact that it's been getting harder and harder to afford to buy in London. What it also ignores is the fact that things that are as important as housing prices (and other macroeconomic trends) are not a 'natural given', but an artificial market that is mouldable by policy. We should be looking to those in government to shape the housing market, to ensure that a couple of people on steady incomes can afford a place of their own to live without having to undertake excessive amounts of financial contortion. This is partly about supply, but partly about using regulatory tools to calm things down.

freezerfoodyum

"a friend of mine ... has just bought her first flat in South East London. A one bedroom ex council place for 300k ."

And that, my friend, is why house prices have to fall.

When we live in a world in which a "flat in South East London. A one bedroom ex council place" costs 300K!!! then prices are just insane. Over 10 times average income for a shitty one bed flat?!

I've seen a lot of ups and downs including the dreadful 1970s property crash and we suffered in the 90s one - sold two buy to lets at about 50% what we paid for them and also our last London house at less than we paid for it in the 90s. I was looking at my diaries recently and scanning some of the property particulars back to the 80s that we bough. The day we had 4x salary loan, rates rose on Black Monday to about 15%, property worth so much less than you paid for it - it was dreadful. We didn't have to sell but chose to because we were moving up to a more expensive house so drops in prices meant the next house up cost less (I have never traded down and hope like my parents never to - they owned their one house for 50 years and died in it (literally)). So when you own property at a loss and would be better rentning and lose money each year as many of us have experienced you just have to hold your nerve and unless you can't make the repayments you keep on there making the losses.

The people that get stung are those forced to move - divorces, job moves etc. I have no problems if my house drops in value even by 90% because I want to live in it for another 30 years or until I die so it's not really a cash asset. Also I thikn all the children will either buy (3 have done already) or move up to a more expensive place so price falls will benefit them all.

And there will always be some who have to sell
In particular overleveraged landlords are likely to be forced to sell or face bankruptcy
Not to mention over leveraged landlords who previously didn't declare their income to HMRC because they weren't making a profit
this group will find themselves in a very tricky situation when more of their turnover is counted as profit and HMRC comes looking for them

I can counteract your anecdotes with the fact not one of my circle (which includes surgeons, barristers, teachers, analysts) have got on the ladder without parental help be that in the form of deposit, guarantor or living at home to save

I believe you. But why is that?

My experience is that the more affordable areas of London that people on average London salaries COULD afford to live in, they don't want to live in. I live in Lewisham. That frequently gets spoken about on mumsnet like it's a ghetto in the seventh circle of hell. But this was where we could afford to buy, so we compromised.

Of my friends who don't own, a decent percentage of them don't own because they are renting in better areas they could afford to buy in and they don't want to move.

I'm sorry if that's not your experience, but it is mine.

The London housing market in most areas is an absolute joke, I agree.

qwerty
What I am seeing is not that sold prices are dropping in the way you are suggesting but rather people who were pricing in further gains in their asking price are not getting the increased value. Also in London the scale of the correction required to make some areas affordable is just not going to happen unless the whole economy is going down the pan.

Additionally, the BTL tax changes have the biggest impact on people who are highly geared and not purchasing through a company. I think there is a real danger that if prices drop in London there will be corporate landlords buying up property portfolios.

When we live in a world in which a "flat in South East London. A one bedroom ex council place" costs 300K!!! then prices are just insane. Over 10 times average income for a shitty one bed flat?!

It's a very nice one bed flat actually, ex council does not mean shitty although all of MN seems to think it does!

I actually think the Tory government realise there is an issue & are trying fo bring in some change hence why dementia tax was highlighted.
Local councils are suffering, I see that Islington are now introducing a voluntary council tax to help the shortfall but I don’t believe it’s been very successful in Westminster.

And how are we going to fund the NHS going forward?

I think the average salary in London is much more than the national average though isn't it - something like 40k IIRC.

"My experience is that the more affordable areas of London that people on average London salaries COULD afford to live in, they don't want to live in."

I do actually agree with this. Part of a much wider issue we have is that people see community and place as commodities that they 'buy into'. Not as things that they help to build by investing time and effort. I get ragey with the attitude of "I'm too good to live THERE" when other people's kids have to.

Murane

You don't seem to understand basic economics. I've tried to explain it to you twice, but you don't seem to be listening.

If you don't sell your house, it makes zero difference to anyone who wants to buy. Provided you can continue to afford your mortgage (if you have a mortgage), it also makes zero difference to you.

BUT if one person has to sell for less, then the value of all the other identical houses in that area also falls with it. Of course those losses might not be realised - any more than recent rises have been realised. All those paper rises and falls are just that except for those selling/buying.

But those buying won't be buying your house if you're not selling. What matters to them is that they will pay less next month than they would have paid 6 months ago, if they're in London/SE. That is what this thread is discussing.

well said I hate this narrative that you should scrimp & save & feel #blessed to get a mortgage on a 2 bed without a garden for 350k.

I don't mind at all, I love my little flat and I knew perfectly well that if we'd moved out of London we'd have got a house for the same price. But at the time my mental health was so precarious that it was safer for me to be near family.

We had to make the compromise.

Taken from the Metro:
The median average UK salary is currently £27,531 while the City of London is the highest-earning region, boasting an average salary of £48,023.

But I should imagine there is greater variance on wages in London.

"My experience is that the more affordable areas of London that people on average London salaries COULD afford to live in, they don't want to live in."

There are no affordable areas in London, relative to incomes, any more.

That is the problem.

But if the prices on paper are falling, fewer people will be selling which means actual buyers won't be able to take advantage of the supposed lower prices.

My son's house a year ago was £330k end of a tube line. We had a good look recently at a few other areas - a lovely house in 10 acres in an area of Northumberland I adore which was not much more than that but his job doesn't have jobs up there - he could move to some other areas of the country but not there so we look at leeds - we also have relatives in Yorkshire - but there the housing he would want then became more expensive (more jobs in Leeds than rural Northumberland). You could almost plot it on a graph as I suppose you'd expect - the better the job situation the higher the prices so I suspect he'll stay put for now. But for his £330k you are on a tube line and you have a 2 bed terraced with garden, freehold. Some people would chose a flat over that and be closer to London. Reading my 1980s diaries recently we had the same issue then - I wanted to live near work in the middle of London but we ended up in zone 5 (and people still almost wince when they hear where I live) outer London, one hour commute.

however I am not disputing London prices are high. It is a regional issue. We had to knock masses off our parents' house in the NE to sell it in 2008.

I do actually agree with this. Part of a much wider issue we have is that people see community and place as commodities that they 'buy into'. Not as things that they help to build by investing time and effort. I get ragey with the attitude of "I'm too good to live THERE" when other people's kids have to.

Yes, quite. The things I have seen people on here say about the area I now live in are insulting tbh.

My friend lives (rents) in Putney and rents a one bed with her boyfriend for £1700 pcm. The one bed flat downstairs, here in Lewisham, which is the same size if not bigger, costs 950pcm. She keeps complaining they can't afford to save for a deposit, which I don't doubt, but at the end of the day they chose to rent in a very expensive area. They didn't have to.

We had loads of threads like this last time and the ‘crash’ never actually happened. All the same arguments (minus Brexit) were bandied about but it just didn’t turn out the way the house price crashers hoped it would. At best/worst, depending on what your point of view is, there would simply be a long period of stagnation while wages caught up a bit with house prices.

Some people still have to sell. Personally we sold our house at a loss as we were buying a bigger house, and it made sense financially to pay less for the house we were buying and take the hit on the house we were selling.

freezerfoodyum I agree with you, it isn't just about the actual home size but also proximity of friends/family/support network and where you grew up or where you want to live.

Although, it is a shame that just to live closer to where you grew up or closer to those people you have less choice about what property to buy.

There are no affordable areas in London, relative to incomes, any more.

Not relative to the national income, no, but relative to London income, there are.

I mean no, not many first time buyers are going to be able to afford a three bedroom period semi with a garden, but modest flats are within reach for many couples who might be on 30k each.

qwerty - Houses have value all the time, they only have a price when they are sold. It's not the sale price of one house at £425k that affects the value of all others - the value of all of them will have decreased because of macroeconomic trends, and that is reflected in the indicator of the price of the one that is on sale. The reduction is a reflection of wider trends, right - trends that become visible to those living locally in that price?

Of course, it's not an absolute science - in reality, apparently similar houses on a street can be very different in terms of interior space, decor, etc. And price can reflect circumstantial factors, e.g. it can be reduced for quick sale.

Totally get the point that, provided you can afford the mortgage, the sale price is a slightly academic issue. Which is why the illiquidity of houses needs to be borne in mind whenever you are buying - houses shouldn't really be treated merely as investments that will absolutely definitely hold their value, but as homes that people are prepared to stay in for a bit, should things go rather pear-shaped.