To think most property owners don’t understand how hard it now is to buy a house

[Boredfromboredshire]

DP and me earn 40k between us and our rent is 1200 a month for a 3 bed house. We don’t have rich relatives, we are in our early 40’s and circumstances (ill health) meant that we didn’t buy a house before. We can’t save a deposit & houses are expensive by us. We have stable jobs & our kids are happy so moving in the current uncertain time’s isn’t an option. Life has happened to us & some of it has been out it control.

Cue well meaning friend (who bought their house for peanuts) asking me why we couldn’t afford a house when we could get a house in a cheaper area for ‘only’ 400k. I’m so fed up of it. We really want a home of our own & we would move but in the current recession, it’s not a good idea to give up a job. And we can’t afford to save. My friend (whose deposit was 12k can’t understand it and looks on pityingly while telling me the house they bought for 120k is now worth 700k.

For many of us, the housing market is closed for ever. I’m so tired of the pity and the complete cluelessness- I quite often feel utter despair about it. It makes me feel such a failure for no real fault of our own. Some people were lucky because they happened to buy at a particular month in time & then some of us couldn’t & it’s over.

I don’t think people who own really understand what it’s like. Low interest rates, cheap mortgages, everything weighted in favour of owners while renters are treated like the Victorian poor.

Aibu to be sick of it. We are a normal family in normal jobs.

@blackdoggotmytonguestill
You're right. I was wondering when the right to buy would come up.
It's not even ironic really because it was always a policy to get people off state help and onto the merry-go-round as you put it, becoming Conservative voters in the process.
Wouldn't have been that bad a policy if the government had reinvested the proceeds in providing replacement council housing but of course they didn't.
Someone below suggesting that councils should buy back the properties sold under right to buy. Well, in some cases they are. And the taxpayer is being shafted two or three times over because the property was sold in the 80s or 90s at a massive discount, rocketed up in value and is then bought back by the council at full market price. Then they put a tenant in who waits a few years and buys it at a 30 percent discount using the right to buy.
Meanwhile there aren't enough council houses so the taxpayer is subsidising private tenants/landlords via housing benefit.
Governments are only in power for 5 years at a time so none of them give a shit about the long term problems that come from buying things on tick or selling the family silver.
Actually a better policy than the Right to Buy would be to say to tenants that they can have 30k towards the deposit on a house purchase if they give back their rented property and sign away their right to ever access council housing again. Then those who could afford to would move out and someone who needs it more could move in.

This one predicting falls of 50% www.investmentweek.co.uk/investment-week/news/1399619/woolnough-house-price-correction-record-crash

@Boredfromboredshire bearing in mind that not all areas would be hit equally. London and the SE have a large knowledge economy- operating as per normal during covid..they might have experienced the largest surge in prices but they are better protected from the covid fall out. The same cannot be said for places.like Cornwall. Or the manufacturing hubs of the north.

Interesting Guardian article, and the comments below. It does seem likely that we have finally reached the point where the government will no longer have the resources to prop up the housing market and the correction that should have come 15 years ago actually happens. If it does, it will be incredibly painful because what should have happened gradually over 15 yrs is going to happen overnight.
There will be winners and losers from his covid situation. Maybe first time buyers will be the winners.

I hope it falls by 50% my son still lives at home with us at nearly 30. He’s a teacher so will hopefully keep his job. We have £10,000 saved for his deposit, just waiting for the right time for him to buy.

@Alex50

I hope in years to come there aren’t people wishing and hoping his house price will fall so he looses everything he has put into it and more

Most house price predictions I've seen only predict a temporary dip and then they are expected to rise again. A lot of south east wealth seems based on property so I feel like the government will do everything to protect that. It's likely that what this recession will do is increase housing inequality further. If you have secure employment and are already on the housing ladder then you'll very likely be ok, those in the private rental sector and especially those with employment concerns will struggle. But that's been the case for some time now so no real change there.

Alex50 I hope you’re wrong. So many young people who’ve struggled to get a foothold on the ladder would lose so much.

He has a deposit, could easily pick up extra work and can buy in todays market unless your hoping he’ll get a central London townhouse.

I think house prices are long overdue a major correction. I'm not sure whether it will mean many more houses coming onto the market though, as those in neg equity may well choose to stay where they are and try to ride it out.

Our son has been advised that the market for first time buyer property is strong and likely to remain so with lockdown leading to couples deciding they do want to be together and couples deciding they can’t be together any longer.
He’s put his on the market with estimates suggesting a 30k increase from purchase price in two years.

Posted too soon.

The only real beneficiaries are likely to be cash buyers (more btl properties) particularly if banks are reluctant to approve mortgages. This may be countered though if negative interest rates come into play though?

(this all reminds me of A level economics aagh 😂)

Interesting read. I feel for OP. We rented at £2k/month up until the start of the year in London. Wasn't even a nice pile (think rodents through holes in the wall left by shoddy workmen). Whilst we paid that we saved but not as much as we wanted. I don't begrudge anyone owning their own houses though through whatever choices and sacrifices they have made. Just as we choose to live in an expensive city for work and the diversity London has afforded us.

I can't believe people still don't understand that house price fall doesn't happen in vacuum... And what effect negative equity may have on people. Stop being dicks and wish for economic downturn. You or your children will NOT benefit from it. That's why people look at people wishing for house price fall.

Don't wish for house prices falling. A freeze would be better. So wages could catch up. No one wants, or should want, a recession or even depression.

Just coming to say what OMG above said.

House prices won't fall 'just because' and everything else stay the same.

House prices will fall because we will have a recession. People won't be able to afford their mortgages because they've lost their jobs. Lots of negative equity (anyone remember the 1980s?) and people having to hand back their keys. Left with debt and no home.

Manchester University has already said it is likely to shed jobs. Oxford Uni may well be the same. So while house prices may drop due to the recession, your DH may lose his job due to the same recession.

Be careful what you wish for.

Two questions for those wishing for house prices to fall:

1. Do you have a deposit available now if they do fall?

2. How would you feel if house prices fall (the same amount as you are wishing for now) after you brought your house?

What does a fall of 50% mean for those of us who just bought recently?

@Rlw2020 I bought a london 2 bed flat last year but have come to terms with the fact it will fall 20-40%.

Tbh whether it rose or fell, I would still be living in my flat as a 3 bed house is double what my flat costs at £800k... I might feel a sense of injustice like I should have waited but that's all water under the bridge and I have enjoyed my home with its large communal garden over lockdown.

@Esta76 negative equity. Can't move but plenty of first time buyers couldn't get on the next rung on the ladder due to rising property prices pre covid anyway. Possibly can't remortgage if you didn't take out a 5 year fixed term mortgage.

@desiringonlychild that's an interesting answer. I personally don't think prices will fall as much as that much, I don't think it will necessarily help first time buyers unless they have a deposit and are ready to go.

Have mortgage companies resumed to offering above 75% ltv now?

@Esta76 We bought recently (moved in just before lockdown) and actually think we're in a better position than homeowners who were planning to move or re-mortgage soon. Just hold tight and wait for house prices to get back to normal in a few years.

@Rlw2020 they are still offering 90% mortgages but the selection is far more limited. Also people are holding off buying due to economic uncertainty.

@desiringonlychild I see. The lending criteria will continue to change I would imagine. We have not long moved and have a 3 year fixed. My parents lost their house is the 80s recession and I do not want that to happen to us.

@Rlw2020 could they no longer afford the payments due to increased interest rates? Sorry about that.

On a separate note, the 80s crisis enabled my MIL to upgrade. She bought her 1 bed flat in Hendon for £70k and had to sell for £46,500. As she had 3 kids by that time. However she manages to pick up a terraced house for £100k which she previously would never have afforded. That terraced house is now worth £700k so I would say she did quite well out of the property market.

Agree that house prices won't fall in a vacuum. I do remember the negative equity of the 1990s but that was caused by other factors and took place when mortgage rates were around 10-15%.

I wish the housing market was less distorted and that house price inflation was not so much higher than wage inflation. I also assume that different parts of the country will be affected differently. However, I think rent controls are a blunt instrument but empty properties where the owners pay no UK tax are another matter. There is a large block near me. Flats have been bought as an investment and you never see any lights on so they are not anyone's home.

I am also a bit cynical about some housing associations- they seemed to think Housing Benefit was for their benefit until it was limited. Perhaps we could create incentive for people to set up housing coops. Owning property gives security but wevwill always need a rental market - especially if people need to be able to move to areas where more jobs are available.

@Boredfromboredshire

It is extremely unlikely you will see falls of 50%.

Firstly we have a conservative goverment, the ideology is survival of the fittest, natural selection and free market capitalism.

Seconldy, the ingredients which caused the great recession of 2008, are missing, people do not have subprime mortgages. 2008 was caused by irresponsible lending by banks, this is a natural disaster.

So, what can the government and banks do to protect the economy.

£200 billion of QE, acts to push up assets prices.
Goverment backed loans, which are unsecured. Acts to inject money into the economy.
6 month mortgage holidays. Provides relief and management of finances.
Furlough scheme prevents defaults.

So far that has saved people from repossessions, however theres more.

Building societies such as Nationwide, are now saying they will not repossess any home for the next year, moving mortgage holders onto interest only payments..

The bank of England is now speculating, wether to have negative interest rates. If that occurs, you can effectively borrow more and pay back less.

This could act as a driver to increase house prices with easier borrowing by 15%, especially if we see -2% base rate. That may be enough to offset alot of damage.

The reality of this is, if houses loose 50%, investors will loose faith in the UK market. I would have less capital to generate other investments. I would be incentivised to join the social housing list. It would be a armogendon, seriously you actually wouldn't want to see, what you are hoping for.

It would up root most millennials whom have just done as they were told, saved hard and jumped on the ladder. Alienating future conservative voters and current.

So I would suspect, what you might find is this.

London is at the top of the bubble, so possibly 15-30% falls, which would then bounce back to new highs.

5-10% falls in areas with first rung of the ladder properties, due to the already pent up demand and bounce back even higher.

Some sales will occur, pent up demand will prevent a massive fall. Panicked sellers will look to move to remote villages, discounting more generously.

There will of course be some repossessions from overleverageed individuals, this will bring prices down and then they will recover.

If I was considering a bargain, I would be waiting for the redundancies to hit massively, watch what the goverment does and make your move. Have £30k in savings ready to pounce. There a window of opportunity yes, but it wont last forever and dont overlook the goverment and BOE capacity to prop up the market.