People talking about houses dropping 30%

[ayvian]

AIBU to think they should shut up.

Banks are still lending, furlough has saved millions of jobs and no one is going to sell their biggest asset at a 30% loss. It just won't happen all it will create is a mexican standoff that will freeze the market until buyers get a sense of reality. We want to move, but not that desperate to accept a loss of what something was worth a few weeks ago. We'll hold on. It's wishful thinking that anyone can get a bargain right now

@littleblackdress04 - so it’s the deposit that’s the problem ? They can’t save 5% ?

You’ve always had to save at least 5%
It was 20% back in 1980
It was 5% in the 1990’s but you always had to save something

@littleblackdress04 I expressed no view as to whether the government supporting the market was right or wrong. I merely stated that it is inevitable that this government will take measures to support. I’m not ‘complaining’ about a 30% drop in the market, I’m simply suggesting that it is wholly unrealistic and not grounded in sound empirical analysis. It does sell newspapers though.

I think the worry might be that if house prices do drop 30%, they'll be snapped up by the BTL landlords again.

Even if they fall 30% from values in Feb 2020 - the 'loss' really depends on when people bought the property, and the equity they hold. Additionally although there will be regional variations, the property they buy to replace it will also fall.

@ChrissieKeller61 are you being deliberately ignorant? In my town, house prices are 12 times the average income. Do you have any idea how high rents are? How can someone even save 5% when half their income is going on rent? Maybe these young people are just eating too much avocado toast & buying expensive iPhones eh

You’ve always had to save at least 5%

But when we saved 5%, that 5% was under £2k, it's tens of thousands of pounds now.

Plus average income multiples are far higher.

@littleblackdress04 it really isn’t a human right to own a house 🙄

@Rowantree2020 but it is a human right to live in decent housing

And many many people really don’t - there was a programme about homeless children on CBBC last week and it was deeply upsetting

@littleblackdress04 hmmm there’s plenty of houses where I live that are 20 times the average salary and then there are others that aren’t.

Buy in a cheaper area, rent that out, clear the mortgage use that as a deposit on the house you want. If the deposit is actually the issue. Took me 6 years to save but I got there in the end

So when people come on here complaining about their house losing value, it really doesn’t sound great

@ChrissieKeller61 do you actually live in the real world? Not many people can afford to become buy to let landlords either and your post is everything that is wrong with housing in this country- the whole ‘just rent it out’ brigade

I really don’t think a house price crash will fix people living in sub-standard accommodation.

@littleblackdress04 - no they can’t ... but then those people will never be home owners. As I say it took me 6 years to save £10,000 but it can be done. I didn’t work much in that time and had kids. Depends how badly you want it

@ChrissieKeller61its completely unreasonable to ask people to work hard and save for their first house. The government should just gift a new house to each person on their 18th birthday.

@Rowantree2020 what measures do you think they will take?

completely unreasonable to ask people to work hard and save for their first house. The government should just gift a new house to each person on their 18th birthday.

Oh ok you're one of those.

I don’t think the government will support the housing market this time, they have bigger things to worry about ie the whole economy rather that just an element. If you are selling and buying to upsize, house price falls will work in your favour, as the gap between the two is smaller. First time buyers will take the hit and expense of any falls.

I agree, sellers will generally not sell at a loss, but there are situations where by they are forced to sell. Those taking mortgage holidays at present, are currently being refused a fix term mortgage period renewal, when their current one expires. It’s the same with those currently on mortgages of more than 85% LTV, if you loose the equity in your house due to house price falls, you will no longer meet the criteria of 85% LTV mortgage deals and will be moved to a SVR mortgage where the interest rate is higher.

All things being equal, houses should cost 3.5 x an annual salary, with an interest rate of between (5-6%). I think Covid will force the housing market to return to these levels, which were historic before 2008.

But a lot of folk won't be selling at a 30% loss. People looking to upgrade to a better house will benefit if they bought a few years ago. First time buyers will benefit.

@Rowantree2020 but it’s perfectly fine for the government to intervene in the housing market using Tax payers money to stop it crashing though is it?

All the ‘we managed to save, why can’t the youth of today’ brigade complaining because their house is going to lose value and expecting tax payers to bail them out make me 🤢

House prices are also political. It isn't a free market. I doubt a conservative government would let them drop that low

This is an interesting point. I certainly agree the Tories won't want a drop, because their support comes primarily from homeowners. It would politically damage them, and they already weren't doing very well with the priced out generations.

But while I'm not saying we'll see a 30% fall, there really are very limited options for the Conservatives at the moment. They can hardly cut interest rates any further. They never facilitated a proper recovery from the last crash, and spent the last decade doing everything they could to artificially prop prices up. That means they have many fewer options open to them now. They're not exactly going to have much money to throw at anything either!

No they weren’t @Emma939 - you’d have to go back to 2000-2002 for those levels, maybe even before.

But while I'm not saying we'll see a 30% fall, there really are very limited options for the Conservatives at the moment. They can hardly cut interest rates any further. They never facilitated a proper recovery from the last crash, and spent the last decade doing everything they could to artificially prop prices up. That means they have many fewer options open to them now. They're not exactly going to have much money to throw at anything either!

I agree & they are not going to want to lose the gains made in traditional labour areas so they are going to have to walk a very fine line.

@Viviennemary what about the young people who have saved for years and managed to buy in the last couple of years? Do you think it’s fine for them to lose all the money they have saved and be stuck in negative equity?

Much of the government measures will be indirect through support for the wider economy and employment which will in turn support the housing market. Interruption to supply caused by lockdown will also underpin prices. This government has a history of propping up the market - e.g the help to buy policies pre-Covid. When Covid hit they were fast to ensure the banks provided mortgage holidays but didn’t enforce corresponding rent breaks for tenants. As I said before, there will be falls (and in some regions these may be significant) but they are unlikely to be on the scale some here would welcome. And no I’m not ‘one of those’ and would welcome a managed correction in the market. But those who relish a sudden crash as a fix are simply ignorant.