AIBU to want house prices to fall

[Viviennemary]

I thought a house price fall was on the cards but it doesn't seem to be happening. It would have been a good chance for first time buyers to buy their first house and get out of rented accommodation. And a chance for people to move to a bigger house for more space.

I was born & raised in London, neighbours & parents were teachers, nurses, police etc many with just one parent working. those houses are now 1.1m plus. How do we pay salaries to fund that?

Prices should definitely drop but not as a result of an economic crash, instead CGT exemptions should be scrapped to fix the mentality problem and planing rules should be relaxed to fix the supply problem.

Lots of people won't be in negative equity though & lots of people aren't FTBs. It's true that many FTBs are unlikely to see huge equity gains (regardless of a crash) & will find in difficult to move up the ladder but that's happening already. I never claimed a price reduction made it easter to get on the ladder just that it made it easier to move up.

That’s only true if the people looking to buy their houses aren’t reliant on selling theirs in a reasonably functional market.

FTBs are necessary to buy the ‘starter’ homes and flats that those wishing to move ‘up’ need to sell to fund the purchase. Not many people can afford to buy without selling - not even if they have enough equity to convert to BTL, remortgage and use the split equity as a new deposit.

The other way the market works, in the absence of FTBs, is what we’ve been seeing in the guise of investors buying up those houses. Which does nothing to improve the affordability or availability of home ownership.

If prices fall then people won’t sell as they’ll be in negative equity so it wouldn’t help first time buyers in the way people think. People would make less profit so it’s all relative.

(I totally agree the market is screwed. But a crash will actually fuel the inequality and not help FTBs. Better is a slow, steady price decline based on increased supply, and an economy geared to productivity improvements (rather than short term profits) to increase wage levels and tax treatment to further reduce the attractiveness of BTL.

[quote dulciepepp]@RiverFlowers but when you move are you moving to a different area? If your house increases by 20% so will what you are buying.20% of. more expensive house is more than 20% of a cheaper house. [/quote]
Not necessarily, our house has increased in value by over 20% since we purchased it - the areas we are looking at haven't risen as quickly (we live near a holiday destination so property costs more).

A crash won’t help ftbs. Ireland’s recent crash made things considerably worse for ftbs not better.

The only thing that will make a considerable difference to ftb is a significant increase in supply.

@Rhayader

House prices are totally out of whack with earnings, they are surely due a correction? However, as most banks are anticipating a fall in house prices all of the 10% mortgages have been pulled and quite a few of the 15% ones too so it’s really not much help for first time buyers.

They're really not, interest rates are low and central banks are printing money. It's all pretty balanced

@jessyradlett I moved up the ladder in a "downturn" & I will be ok to lose 30% value if what I'm buying has dropped by the same percentage. Much less stamp duty too.

@riverflowers

Not necessarily, our house has increased in value by over 20% since we purchased it - the areas we are looking at haven't risen as quickly (we live near a holiday destination so property costs more)

Hence why I asked if you were moving to a different area.... If you were staying in the same area then your increase will be relative to the increase in the area. And if you're moving up the ladder 20% of a more expensive house is more cash to find. A 20% drop (providing you have at least 20% equity) makes it easier.

A house price crash comes along with economic downturn, they arent just going 4o spontaneously drop without the economy going south.

Economic downturn means job losses and banks being very cautious about lending, so FTBs would only be able to buy if they a. didnt lose their jobs and b. had a very large deposit and a good salary.

Do you realise how much of a drop 20% is? Round here an average 3 bed is around £350k, so that would be a drop of £70k. There are a lot of people who wouldn't have that amount of equity in their house. But as long as you're alright, that's OK isnt it OP?

Unless you own enough cash to buy outright a crash will make things worse. Borrow all you can to buy now, they always go up compared to cash.

Cash is trash

Do you realise how much of a drop 20% is? Round here an average 3 bed is around £350k, so that would be a drop of £70k. There are a lot of people who wouldn't have that amount of equity in their house. But as long as you're alright, that's OK isnt it OP?

So they took out 90/95% mortgages?

If an average house is £350k is that not far far too high in comparison with wages. I'd say it was.

House building has not kept pace with population. Need more social housing. Developers need time limited contracts to build as otherwise they hoard land to keep prices of new builds high

It’s strange that many posters on this thread would be happy with wage rises which would be inflationary and directly improves the position of borrowers (eg those with mortgages) but see house price falls as ‘selfish’. Try living with inflation at 26% like the UK had in the 1970’s and you might feel slightly different about wishing for wage rises.

Of course it is not selfish for renters to want house prices to fall so they can buy a stable home and not be at the mercy of landlords and the rental market. It is not selfish to want things which are going to make your life better, even if they make other people's lives worse. Of course, as many people have pointed out here, house price crashes are usually accompanied by other unfortunate economic problems. But that's a separate issue.

as long as you're alright, that's OK isnt it OP

This is the principle upon which most of us run our lives. We make sure we are ok first ('put on your lifejacket first before helping others'). Some people on this thread are being very hypocritical.

But first time buyers aren’t going to get an “average” house, they’d go for the lower priced homes and then it’s also skewed by those buying £5million homes. The average price isn’t what you go by when assessing affordability.

It is not selfish to want things which are going to make your life better, even if they make other people's lives worse

It’s the definition of selfish, and it doesn’t matter what it is you’re looking for to make your life better and others worse,.

Wages growth (or lack of) is a big part of the recent problem - we could sustain higher wage growth without getting to 26 percent inflation. And building.

‘Younger workers fare worse during downturns’ :

fullfact.org/economy/how-have-wages-changed/

...the definition of selfish...

I'm not Christian, but Matthew 7:5 seems particularly apropos.

As people have already pointed out, a house market crash usually coincides with an overall economic crash which impacts everything else. The people who benefit most from house price crashes are cash buyers and developers, not young people.

More needs to be done to help first time buyers who can afford mortgages but not deposits thanks to the insane increases in rent for what is generally substandard living.

I’m remortgaging at the moment and my broker & conveyancer have never been busier since the stamp duty cut. We have historically low interest rates and people are getting great deals.

Interest in houses in commuter belts and / or with outside space have also never been busier.

This may not last but the predictions of ‘wait six months and prices will fall’ have not and will not come to fruition.
When I bought 7 years ago I had people tell me to hold out, prices were crazy. In the year that I spent looking or being caught up in failed sales, prices went through the roof and I went from being able to afford a place with a garden in a nice area to a flat with no outside space in a much less nice area.

My advice to anyone is, if you can buy, do it, don’t wait about.

Even as far back as 2001 people thought goose prices were going up too fast.

I don’t have a garden - you’d have to have some chutzpah to think there isn’t a good chance of another lockdown over the winter etc, can’t blame anyone racing to increase their access to greenspace.

It’s the definition of selfish, and it doesn’t matter what it is you’re looking for to make your life better and others worse,.

Well, what's sauce for the goose is sauce for the gander. Selfishness is defined as 'lacking consideration for other people; concerned chiefly with one's own personal profit or pleasure.'

You could apply that just as appropriately to people who want house prices to remain high to protect their own investment or profit as to those who want them to fall because they desperately want to get on the housing ladder. It is entirely justifiable to prefer events to work out to suit your own personal circumstances. Anyone who denies this is a saint (unlikely!) or a hypocrite.