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

If your house is worth more to you that a 30% implied cut, then I can see why you wouldn't sell. But say, you were trading up, and you offered an equivalent 30% cut and it got accepted, why wouldn't you sell? Overall you'd be financially better off than waiting for a recovery.

Personally I think a big impact on the economy & house prices will be if remote working becomes the norm. Yes it's been growing & obvs has many benefits however it's potentially a big change in a very short time. Businesses generally need time to adapt & so many businesses depend on the commute/city working lifestyle & house markets are structured around it.

The housing market is incredibly slow where I am. I started looking at sales about 16 months ago and there are loads of properties still listed that were on at the start. It suggests the sellers dont really need to sell but covid may have changed that situation for some. I’ll be keeping an eye on it anyway.

@sirfredfredgeorge I'm not so sure & think it's only saved them temporarily which is a good thing, but when it ends? Yes McDonalds will be fine but small independents? High street fashion is struggling hugely so will those retail jobs still be there?

The furlough thing worries me
Som (a lot?) of people on furlough have really lost their jobs,they just don't know it yet
Will be a period of readjustment but in good areas I would be astonished if prices fell by anything like 30%

Thisismytimetoshine
Of course you haven't "touched a nerve" . It's of no real issue to me that you're talking bollocks 🤷🏻‍♀️

Oh really, Dominic?
Lol.
Here - have a sit down and a biscuit and stop being so abusive.

This is fascinating to me.

I've lived through the Irish property crash where houses dropped 50% of their nominal pre-crash 'value' so I would say anything is possible. The effects on the UK economy of a global recession we're looking at will be at least equivalent to the crash Ireland faced after the financial crisis. But a 50% drop in prices only refers to houses actually sold.

There were a significant number of years where the only houses on the market were executor sales and repossessions, as the OP has said, nobody who had any choice in selling sold. And equally, mortgages were very difficult to get: strict salary multiples (3.5 d salary max) 20% deposit requirements, etc etc.

But also, I think you underestimate the number of people who would sell in that circumstance. People who have to move, people who have more children and no longer fit, people who are trading up.

If the government try to inflate their way out of this, there may be less of a drop in value on paper. London is hugely exposed to international capital so who knows what will happen there. Your need a crystal ball to figure out how this will all play out. But it 100% is possible it will include a 30% house drop.

but in good areas I would be astonished if prices fell by anything like 30%

Economic impact / recession aside, I think the definition of a 'good area' might change in future. In the past, many workers (me included) have factored commuting into our house purchase decisions. Being near a good train line or fast road into town has generally meant an uplift in house prices in that area, similarly not having access to good transport has kept prices lower in other areas.

If more people move to working remotely that may shift. I know not all jobs can be done from home, but if most of those that can wfh starting doing so 2 or 3 days a week, house prices might start to move in different ways. Areas with long commutes into town may become more popular.

I think the lockdown has also led to some people becoming dissatisfied with living in cities. We might see more demand outside cities, while demand for city centre flats may plummet.

Things have changed so much in just a few short months - it will be interesting to see how it pans out. I am happy where I am, and planning to stay here for a while, so the only factor for me is being able to afford my mortgage.

We might even see (god forbid) more of the north of England turn into the London commuter belt.

No bank is going to repossess a house at the moment for 2 reasons, a) it's reputational suicide in this climate, b) they don't want to take possession of houses worth 30% less and then have the hassle of holding them/selling them. [I work for a bank]. They will extend mortgage holidays/switch to interest only/do anything they can to avoid mass repossessions.

Much more likely that the market will simply stagnate.

This could all be avoided if people did not go for this silly business of "making an offer". When we have sold we always put "Fixed Price" on the sale and always when buying pay the asking price [or not buy if we feel it not worth it]. It shows that you are serious and prevents the idea of others snatching the purchase.

@ayvian

We might even see (god forbid) more of the north of England turn into the London commuter belt

Yeah, we don't want all the overcrowding that is a problem in London and the SE, even if it would be financially beneficial to those of us who already own property in northern England.

Although better investment in transport would be good, eg decent rail connections to cities that are not London and a mass transit system in West Yorkshire. A significant objection up here to HS2 is that it will serve to expand the area which people can live in and still commute to London but not actually bring any more/better jobs to the people who want to live and work here.

Totally agree!

Already two repossessions (I'm guessing - sale by auction) within a six mile radius of me on Rightmove today - normal asking price for one is £155k, this one's on at £105k. The other would normally go for £220k, now on at £170k. Ofc repossessions happen all the time anyway but I've not seen as big a drop before and there's not been much put on in the last 6 weeks or so anyway.

They aren't going to drop by anything like 30%, that's just scaremongering.

They aren't going to drop by anything like 30%, that's just scaremongering.

how do you know?

They dropped by more than that in Ireland 10 years ago.

The thing is first time buyers are increasingly being priced out of the markets, combine that with banks increasing the LTV and there won’t be people able to buy a house. If you need to sell to move the r circumstances change then you may have to sell less than you want. It really annoys be that house prices have risen at a much higher rate Thant wages it’s impossible to rent and save to buy.

Another way to look at it. Remember 2008.

This time, many more people will loose their job once we go back to work.
Many people will have to sell because they cant keep with repayments.
Prices will go down.
(I remember the 2008 crisis when people had houses that werent worth the mortgage tgey were paying :()

Add to that possible inflation (Just look at the increase in proce fr the cost of food in the lst two months).

Yep I would say the prefect storm is brewing.

Please forgive my ignorance (and also selfishness), but we were planning on putting our house (our first property) on the market to make our first move up the ladder, before the current situation unfolded. We currently have a modest amount of equity in it.

If house prices drop by a significant amount, is this usually uniform over all types of properties? As 10/20/30 off our modest starter home although a blow, would be less than off the family homes we aspire to. My husband is worried, I'm guessing there may be less houses available but surely this would then inflate the prices again and start people moving?

You can't say whether it will be uniform over different types of properties/areas because nobody knows and it can vary.

You might be in a good position because it could cost you less to move up the ladder if both houses lose the same percentage, it's a bigger amount of money off the more expensive house.

However, if prices drop, FTBs might find that they can also afford a bigger house, and wouldn't bother buying a starter home, if lower prices mean that they can now afford a bigger house so you might struggle to find a buyer.

However, that's less of a worry because you might get interest from the people who couldn't afford to buy a property of any sort before, because they were all too expensive. They might now find that they can afford your starter home.

For those saying a 30% drop is impossible, they probably dropped more than that in the early 90s. We paid £32k for a 2 bed terrace that the couple we bought it off a couple of years earlier had paid £45k for. They were selling because they'd split up and each walked away with a debt that was about the same as my annual salary at the time.

Thanks @BarbaraofSeville that's really helpful.

Well of course it's just my opinion, but it's based on what the banks are doing and saying. Nobody ever knows what is going to happen for certain, but it also helps no one when people make such (again only in my opinion) ridiculous claims.

The thing is first time buyers are increasingly being priced out of the markets, combine that with banks increasing the LTV and there won’t be people able to buy a house

This is why I question the concept of never ending growth surely that has to be reflective of wage growth which we haven't had, particularly since 2008. Historically most moves up the ladder have been driven by equity (mine included) but that's because the lower rungs were still obtainable to many. Is the 600k 2 bed flat today really going to be 1m in 5 yrs time? I think there is a big problem in London & the SE with people stuck on the ladder.

I think it is realistic to expect a drop. Lots of jobs are being lost and businesses going under. I have many friends with huge mortgages and not much in savings. Lots of people are worried and therefore spend less resulting in more lay offs and downturn.

Sold your townhouse yet Sonja? 😆