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

freezerfoodyum I agree that council doesn’t mean shitty & Lewisham is fine, like most places good & bad (I grew up in Lambeth & Wandsworth). Some friends have just bought & the mortgage was less then rental a month, were did you rent so cheap to allow you to save?

freezerfoodyum

It may be a lovely flat!

It's still a one-bed flat in the cheapest part of London and is ex-council. It is at the very bottom of the pile. It is too small for anyone to have as a long-term home and have a family in.

The median household income for London is about £39,100 - that's a slightly old figure but not seen great wage inflation since then. So to buy a 1-bed flat, a household (usually more than 1 person) would need to borrow 7.5 times earnings. But of course the max you can borrow is about 4.5 times earnings.

So to buy a one-bed, ex-council flat in a crap bit of London, you'd need to save 3 times your annual gross income AND borrow up to the max!!!

Can you not see why this totally unsustainable??!

There just aren't that many mugs with vast deposits.

Yes, average £48k salary City of London hides the fact a good few people earn a lot more than that. You can still buy the 3 bed terraced we bought in zone 5 in the 80s in the same jobs we were in - newly qualified London lawyer and head of department teacher. In those days actually we had nurses homes locally there because nurses could not afford to buy and we started out in a school provided flat because again most teachers could not afford to buy in outer London and the London weighting was a joke when prices were 4x the North of England and the London weighting was a tiny bit extra rather than a salary 4x as high.

We lived off pasta and lentils for 7 years living in a shared flat with 5 other people in order to save up our deposit, it's really quite disheartening to know there are people out there who would happily have us lose all that

Two working people in reasonable jobs should not have to spend seven years scrimping and eating pasta to save a deposit. This is nuts. House prices 'should' be at a level affordable on normal salaries with 1-2 years saving. This is such a massive opportunity cost on people's lives.

This is why house prices should be encouraged to fall substantially, to be in line with wages. I'm really sorry that might negatively affect you, but the alternative is that all future generations have the same shitty experience that you did.

"We had loads of threads like this last time and the ‘crash’ never actually happened."

Seriously? It might not have happened in London, but there are plenty of us in the north who remember the value of our houses going down and then flatlining. I think the average fall in 2008 was something like 16%. As I said upthread, it put us into negative equity, and we didn't recover for a number of years.

This is the peril of talking about the "UK Housing Market" in 2018. There is no one market - increasingly, we have a two-stroke economy where London is powering away at a different rate to everything north of Watford. We desperately need a bit of corrective rebalancing to tackle this.

freezerfoodyum

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.

Where?

Name me one affordable area of London.

Think it depends on the type of property too. Last year we bought our first house. Houses in that price range (typical FTB houses, £240-260k) were selling within a week tops.

A few weeks ago a house a few doors down went on the market - admittedly it is an end terrace rather than mid and they’d configured it so it had a teeny third bedroom and teeny bathroom, but it wasn’t as nice - and it sold for £30k more than ours.

Meanwhile, my late mums house which was worth almost double took a year and a price drop to sell. It was in a very desirable area too.

I think lots of people are staying put at the moment due to uncertainty so upgrade houses are not selling as easily or for as much, but FTB properties are still going in the same range.

"Name me one affordable area of London."

There aren't even affordable homes any more. I believe 'affordable' is defined as "20% below market rent", but where market rent is so grossly inflated, this makes them anything but affordable to those on the average wage.

Affordability needs to be defined in terms of wages.

Xenia

"You can still buy the 3 bed terraced we bought in zone 5 in the 80s in the same jobs we were in"

Just not true.

My db and his wife bought a house in Wimbledon in the 1980s. Cost 45K, sold a few years later for 60K. They were low grade civil servants.

Identical houses now selling for approx. 500K.

Do you think two low-grade civil servants could now buy a 500K house in London? No way. It would be about 10 X their joint salaries.

In my SE town prices have fallen by 5% over the past six months, but prices on my (relatively well-heeled/expensive) street have risen by 8% in the same period. Not sure what to make of that.

The value of my house means nothing to me as I don't plan to move. If people bought house as homes to live in rather than investments it wouldn't matter whether the value went up or down. It only matters if you want to move.

I think it was bound to happen sooner or later in areas where prices had soared into the realms of the ridiculous. And for many, ridiculously unaffordable. Which means London and much of the SE, plus more affluent pockets elsewhere.

There's a lot of 'blaming it on Brexit', which is a convenient and popular excuse, especially for people who can't bring themselves to admit that prices have been far too high for too long, and I dare say that's a factor, but I'm sure sheer unaffordability is the main reason.

Who on earth would ever have imagined 20 years ago, a nothing special 2 bed flat in a non fashionable London area like Tooting, being priced at anything between half a million and £600k?

That was how crazy prices had got.

I think the peak was around summer 2016. I see rather less 'optimistic' pricing now, and sold prices are often a fair bit less than asking.
But there are always those who won't budge from what they like to think their property is 'worth'.

YANBU, but there’s no way I’m going to make any predictions about house prices myself.

This is a subject close to my heart, as my partner and I are in the savings trap, brilliantly defined here.

...Once you get that first proper chunk of savings in the bank and you know how hard you worked for it, you're reluctant to gamble it on an insane market that surely has to sober up at any minute... Ten years down the road, you realise that you've got it cardinally wrong because you're living in an era of financial repression, so if you had gambled that first bit of savings and got into gallumphing debt you would have been richly rewarded. As it is, you didn't and now you're stuffed...

A lot of homeowners seem to think there’s an endless supply of money out there to throw at houses at the lower end of the market to help them up the increasingly mythical ladder. There just isn't. Brexit has nothing to do with it.

I don’t have much more to add at the moment as the OP and others are doing a great job laying it all out, but will add that even if prices just stagnated for a while that would hardly be ideal for those who would still have to wait years for their wages to catch up. I’ll never understand why a homeowner’s pain is more worthy than those priced out.

As mentioned above I think the issue is that the bottom rung is so high & the market relies on big gains. Many people won’t be earning 50k until their 30s so likely to be thinking about kids & schools. How does 1 afford the family house these days? People are moving less due to higher costs including stamp duty & it’s harder & harder to find a doer-upper. Take your flat freezer how much do you expect it to gain in the next few years & where will that allow you to buy a family home?

Also it’s not good for the wider economy if all our 20-30 year olds are not shopping, eating out & staying home to save for a deposit.

Qwery. Thanks for informing me that I live outside London.

Twittlebee. Averages and generalisations are very misleading. Interestingly the property I refer to was in East Anglia.

I don't think prices in some parts of London will drop enough to make them affordable. We bought our house in zone 3 just over 5 years ago and it has more than doubled in value. Even if house prices dropped by 55% as mentioned above, it would still be worth more than we paid for it.

If London house prices drop by 55% then buying a home is not what most people will be focussing on as the economy will have taken an almighty hammering.
If the value of our house drops by 20% it makes no difference as it was a paper gain i.e. it was an uncrystallised gain so of little benefit to us.

Threads like these talk the nation into a house price drop!

ChazsBrilliantAttitude

"What recent changes? Solicitors have been obliged to undertake AML checks for years, banks have been obliged to undertake AML checks for years"

www.propertyfundsworld.com/2018/01/22/260379/uk-government-announces-major-changes-property-owned-overseas-companies

I don’t think the economy is doing well hence the lack of interest rate rise this month.

Seriously? It might not have happened in London, but there are plenty of us in the north who remember the value of our houses going down and then flatlining. I think the average fall in 2008 was something like 16%. As I said upthread, it put us into negative equity, and we didn't recover for a number of years.

But a 16% fall isn’t the sort of ‘crash’ that these threads tend to be about. The threads that came up then (and look to be making a reappearance) were hoping for house prices to half or more. That’s just not going to happen. If you can only afford around the £100k mark, a 15% reduction in flats that were £500k doesn’t help.

And it does very much depend on where your house is/where you’re looking to buy. Prices can remain high and increase in particularly desirable areas even if the prices in less desirable areas nearby fall.

I’m nowhere near London and sold prices in the area I’m buying in are definitely going up. Most houses come on the market and sell above asking price very quickly (unless they’re incredibly overpriced and the owners are in denial about how competitive their house is, in which case they never sell). This same area wasn’t really affected by what happened in 2008 in house price terms and houses are considerably more expensive now than they were back then.

And I agree it’s nit all down to Brexit although I don’t think that helped v

I hope the market does 'readjust itself. Youngsters have no hope of buying a home where we live, Monmouthshire.

ChazsBrilliantAttitude

"I don't think prices in some parts of London will drop enough to make them affordable. We bought our house in zone 3 just over 5 years ago and it has more than doubled in value. Even if house prices dropped by 55% as mentioned above, it would still be worth more than we paid for it.

If the value of our house drops by 20% it makes no difference as it was a paper gain i.e. it was an uncrystallised gain so of little benefit to us."

Exactly my point.

I don't think paper losses will affect most people or crash the economy.

But they will make buying property much easier for future FTBs.

So win-win.

The only people who will lose out are those who own multiple properties, but they are also the ones who can most afford to take a hit.

Still rising where I am in midlands

We have just sold our house in London before it went on the market.

Our buyers missed out on 2 similar properties so moved quick.

There is nothing going up for sale in our area so I guess lots are sitting tight.