House prices

[Newbie1999]

Realistically, how much do you think house prices will fall over the next couple of years?

I don’t think there’ll be any fall as the market will just go into deep freeze with nobody moving until this all blows over unless they seriously have to.

If anything you may see the prices of houses with gardens going up as those stuck in flats are desperate to move. I have friends in zone 2 who live in a flat and are looking to move to NE London in zone 3 as they want a garden and access to the forest.

3% sounds very very optermistic, they fell by 20-30% in 2008 and this is different

i don’t think prices will fall much, I think they’ll stagnate for a time, much like with Brexit, with few sales going through

Look at who is saying 3% though, Knight Frank have a vested interest in house prices not falling!

Quite! Confidence is everything when it comes to markets, because people are more likely to keep buying if they think prices will rise or remain stable. Any estate agent will want to maintain that confidence.

Governments tend to be wary of house price crashes, too. Voters don't like seeing tens of thousands of pounds being wiped off the value of their most expensive asset, so governments try not to let it happen.

But if it comes to a massive contraction of the economy, and lots of job losses as a result, it's hard to see how current house prices can be maintained. And it sounds brutal, but if we don't get a handle on this virus, there'll be a lot of homes coming on to the market because their owners have died.

Knight Frank operate in a very different part of the market to where most people buy.
Where I live there was no price drop in 2008, just a slowed growth. The last price drop here was in the 1990s. The town has a lack of housing, and is very attractive to overseas buyers/those moving out of London. I actually have no idea how people are affording the house prices, but we do still have young families buying houses. And most buyers seem to buy with huge building projects in mind.

I will be putting my house on the market after lockdown, and I really don't think the price will be that much lower than before. It might not go for what it would have made possibly at peak a few years ago, but we will still have made a handsome profit on what we paid years ago. People will still have to move - and my house isn't a bad place to live out a lockdown. And that is something I will be looking for in the future.

The Telegraph is reporting a predicted 13% dip

www.telegraph.co.uk/business/2020/04/12/average-house-price-slump-30000-market-frozen-covid-19/

There may be a small (low single figure) percentage decrease in the next 12 months. Things will be back to normal with modest annual rises beyond that.

The only reason house prices would fall would be a sudden increase in available housing. This would need a dramatic population decrease - millions would need to die or be deported.

Even if there was a decrease in house prices, things wouldn't necessarily be easier for younger buyers. Banks will tighten lending, requiring bigger deposits and charging higher interest. Why? They need to protect their investment, their loan-to-value rate will be dropping all the time unless the buyer pays increased amounts.

The best for all parties - existing homeowners and new buyers - is a modest, predicable increase year-on-year.

I think there will be no fall in house prices. With interest rates so low, mortgages will stay cheap, supply is already low, will become even scarcer as people try and second guess the market and stay put, like they did in the run up to GE and Brexit. Finally, I would not surprised if the govt come back with some sort of SDLT incentive for FTBs or everyone in general in the autumn. Buying and seeking of houses creates movements in a lot of sectors of the economy, tax revenues from which the govt can ill afford to lose after the crisis is over.

That's really interesting Autumncrow

I think what people are missing in their optimism is the deep recession that will shortly follow. Once furlough is removed a lot of companies will fold by lack of demand. This will potentially create an oversupply in the form of reposessions, second home selling and BTL exodus. Of course some home owners will sit it out but many won't be able to. There will be more houses on the market with less available buyers.

It's interesting in that article that they predict the average cost of a house will fall below £200k, that is a key marker.

You'll have a massive problem buying or selling a house in the next year but beyond that there's won't be a massive change according to most predictions.

Where I live the terraced houses in good condition sit at that £200k mark, @TigerKing. Quite a few are owned by landlords and let out to overseas students, who now won't be coming to the UK in September.

I can see a lot of business models collapsing.

House prices were already stagnant due to brexit so this won’t necessarily cause a shock to the market to cause major drops like some people seem to be wishing for

Economists predict 3-5% this year with recovery next year but it’s all dependent on how long the lockdown lasts for

It also depends on the area

Central London and the north are likely to see bigger drops where as the Home Counties might see nothing to just a few percent losses because people need to live there.

House price crashes happen when houses need to be sold and people aren’t wanting to buy

Think a lot of it will depend on how much LTV the banks are prepared to lend and how many people lose their jobs and job security.

I think people are being rather complacent about the possibility of house price collapse. According to the news there were 1 million extra universal credit applicants in the last month and I’m sure there were more than a few surprised that you are no longer able to claim mortgage interest payments as a benefit; in fact it is now a loan repayable with interest when the house is sold or transferred, and most people can only claim this help after claiming UC for 9 months. Not withstanding the 3 month repocession moratorium, if the economic damage is worse and lasts longer than was earlier predicted, then thousands of people are likely to have their houses repocessed with a resulting effect on house prices. Having said that, I think a really severe crash would only happen if interest rates went up, which would probably only be likely in a no deal brexit and there was a capital flight from the UK.

The universal credit applications are higher because of the self employed that can’t access the furlough payments

Many people are doing it because it’s what their entitled to and the parameters have been dropped for now

This is also applications stats and not stats as to the amount that will actually be approved

Many people using the furlough and universal credit schemes in the last 3 weeks still have secure jobs to go back to. It’s just that they haven’t been able to work due to supply issues and other reasons

Confidence is everything when it comes to markets, because people are more likely to keep buying if they think prices will rise or remain stable. Any estate agent will want to maintain that confidence

This with bells on.

No one in property with a vested interest is going to be honest in their predictions right now - they’ll say the right thing to maintain confidence - so I don’t really believe any article or forecasts atm.

Imagine seeing the forecasters coming out with ‘house prices to collapse by 50% by 2022’ predictions - EVERYONE would try to sell, no one would buy and prices would plummet.

The one thing I do know is that no way in hell would i buy a house right now as a FTB - I suspect those who do may well regret it massively in the year to come.

But some forecasters are saying that.
You just have to take it with a pinch of salt as it’s been the same people who said the same about house prices due to brexit.

House price crashes have been predicted by the masses since we were done with the last one.

They would have done if Rishi Sunak hadn’t offered furlough to keep people afloat financially. Those people would have ended up unable to pay their mortgages and being forced to sell cheaply. Now they can keep paying their mortgages.
Plenty of people aren't covered by those arrangements.

Ultimately it will be the amount of job losses post COVID that determine house prices. Heavy job losses will hit market confidence and make lending more strict.

You just have to take it with a pinch of salt as it’s been the same people who said the same about house prices due to brexit

Brexit hasn't even begun to take effect economically so too early to call that one a duff prediction.

More importantly the pandemic is a global crisis not just europe focused, therefore it will result in a global recession. Much bigger, deeper and more challenging.

I have no skin in the game as I'm not looking to buy or sell but I think it's dangerous to underestimate the long term fall out from this. As a PP said there is no way I'd be buying right now, way too risky.

The brexit affect happened before brexit happened

Short dip in confidence and then before COVID confidence was higher than ever.

So many people had been holding off for brexit to move house

Those people still need to move

We haven't finalised the brexit deal yet so we really don't know what the true economic costs are going to be. What you are talking about is sentiment not economic impact. That is the unknown.

The global recession post covid is also unknown as we don't know when this pandemic will actually end. We could have several periods of lockdown as the strains mutate and re-surface. The APAC region is already bracing for the second wave. But as Bill Gates has recently said when (not if) this happens again then we should be better prepared.

Its a very long way from over yet I'm afraid.

In my experience property economists tend to be out by about 50% - 100%. Estate agents tend to be bullish so if they say a 3% fall, it is likely to be between 4% and 6%.

If they are bearish by nature then it goes the other way. A predicted 10% fall means they really expect it to be 5%.

Yes I would agree