Housing market collapse on the way

[Whathastheworldbecome]

I see Nationwide and Lloyd’s have tightened restrictions on the “bank of mum and dad.”
There seems to be a degree of speculation that they are tightening the shoe strings as they know a collapse is on its way.

Does this sound likely?

My financial advisor was telling me she has never been busier than ever with arranging mortgages. Her words were: “economic collapse? What collapse?” It was interesting talking to her as she said she has seen people are desperate to buy property after lockdown. This doesn’t suggest prices are going to come down any time soon.

I’m a big fan of Rob Moore, who does all things property and wrote a few books. His best guess is a small fall early next year, which I can quite believe. But there’s just no predicting these things, are there?

There's so much more to happen before anyone can say. Unemployment may skyrocket. LTVs may be lowered cutting off the early life purchases. Other credit criteria tightened. Tax is the big question - what if Sunak changes the tax rules for second homes or even first homes to help repay all this furlough money? What if there's a big divergence in the market with flats in city centres falling hugely but houses with gardens well away from workplaces rising? Too many factors at play to be able to predict with any certainty.

*Which ‘other assets’ are in ‘free fall’ exactly?

My parents also had some shares etc which have plummeted in value since March.*

Yes, shares have plummetted since March, which in turn affects the worth of the pension pots held by large companies etc.

Someone I know, (who admittedly has a very decent sized pension) had £150k wiped off the value of his pension as a result of the shares plummeting.

What has “sold” and what ends up actually selling are two wildly different things. Here things appear to be booming but many many properties are coming back to the market after a short time, I’m assuming because people aren’t getting the mortgage offer they could before.

I’ve been following it closely and lots of financial pages are saying it’s pent up demand from no open market, and the official numbers still say that people and lenders are cautious.

I don’t think there will be a massive drop in prices but I don’t think things are booming as they appear. Will be interesting to see the numbers and not just some estate agents opinion on it though

@Wishihadanalgorithm

My financial advisor was telling me she has never been busier than ever with arranging mortgages. Her words were: “economic collapse? What collapse?” It was interesting talking to her as she said she has seen people are desperate to buy property after lockdown. This doesn’t suggest prices are going to come down any time soon.

Right now we all making hay while the sun shines.

But hard Brexit is acomin in and prices will rise as soon as the borders close. Coupled with Covid related unemployment and businesses folding next year will be very tough.

Currently we are headed for no deal. Unless the government gets realistic.

we just bought a house with a gifted deposit from DHs parents of £100K.
I cant see what difference it makes where the deposit is coming from if the mortgage has been calculated correctly and can be repaid?

Sales are up here, North West. Suspect that will tail off though when reality bites.

@Whathastheworldbecome

I see Nationwide and Lloyd’s have tightened restrictions on the “bank of mum and dad.” There seems to be a degree of speculation that they are tightening the shoe strings as they know a collapse is on its way.

Does this sound likely?

I'm more inclined towards it being a case that they are playing safe by veering more towards mortgagees who show greater evidence of financial self-sufficiency, rather than being reliant upon third-party finances.

I think there will definitely be a shift in the type of houses people want to buy. More home working means people will want larger houses with a garden outside of the cities as they will be less bothered by a long commute if they only have to do it once or twice a week.

House builders will need to modify how they design houses - going forward more people will expect/want a study area to allow them to work from home more efficiently, whether that is an extra room in the house or, like we have, a room above the garage.

our flats been on the market since just before lockdown. it has no garden. we can't sell it. I'm devastated and feel suicidal over it

I think it's ridiculous. A large deposit from parents will make the mortgage repayments more affordable. Especially if the buyers have been paying more rent than they would be paying in mortgage repayments.

@napody

Bellainthewychelm thank you for correcting the misinformation! They're cracking down on allowing 100% mortgages with a gifted chunk of savings alongside.

Agree that being gifted a deposit has no bearing on your affordability of monthly payments. And also that equity from house price rises is equally unearned.

Although I will say I find the Nationwide reasoning a little strange as that is purely not allowing more than 25% of the deposit to be gifted which if the borrower can afford the repayments I cannot see how if the full deposit is gifted there is a problem

To all those renters saying that a mortgage on an equivalent property would be £x per month cheaper; don’t forget owning - and maintaining - a home is a lot more expensive than renting.

Even aside from decorating internally or renovations, just the week to week maintenance - white goods, Windows, guttering, boiler/ central heating etc shouldn’t be overlooked as a not insignificant cost.

Prices dropped a lot a couple of years ago due to Brexit and are now back to pre Brexit prices. I'm sure that with the recession due to lockdown hitting harder at the same time as the Brexit transition period ends, there will be a crash. House prices will always recover and go up long term but I do think that by the winter they will start dropping.

Speaking with local estate agent (rural county, about 2hrs door to door into London) the other day and she said that demand is for village properties (up over 200%) compared with country town type properties (up 50%).

Is it still the case that shares and pensions are suffering? I only ask because my stocks and shares ISA absolutely tanked in March, but it's gone back up again now and is about where it was before all this. Wondering if I've been lucky.

@PiataMaiNei That’s been my experience too

I agree with you Daisydoesnt re upkeep of the building. That has to be taken into account. But rents are astronomical for not very good houses in not very great areas. IMHO. And most buyers can get a better house with less mortgage payments than renting. And probably a better house in a better area.

@Tolleshunt

I don’t know. The housing market is incredibly resilient. People will still need somewhere to live and in a time where other assets are in free fall bricks and mortar is usually seen as a safe and solid investment.

It's supply and demand. Our population is only going to increase, and short of a government building millions of new houses far above the rate of population increase, that's only going to increase demand over supply. Then the fact that a lot more people are single these days so more people live on their own.

The only variable is the huge differences between south east prices (and particularly London) and most of the rest of the country. They might start to drop over time if home working takes over.

The only way it'd collapse is if the economy completely tanks to the point of collapse.

I think it depends on how many are made redundant when furlough finishes.
If there are lots of repos and a recession then house prices will fall drastically and there will be bargains for those wanting to get on the property ladder, or investors.

The new planning laws will be a license to build slums. More supply combined with Covid recession means house prices are going in one direction in the long term.

Wealthy investors are divesting their portfolios. Banks are protecting their interests.

They are tightening lending so that those people who take out a mortgage can prove that they are able to budget their finances effectively and are able to pay the mortgage. By getting a deposit from mum and dad, buyers are not proving that they have the financial awareness to be able to save/pay debts effectively even if ‘on paper’ they are able to afford it.

By making people save for their own deposit, those people are proving they can save and budget effectively and are much less likely to default on a mortgage.

I’m not saying its right, but the banks are showing that they are decreasing their appetite to take on more risky debt

By making people save for their own deposit, those people are proving they can save and budget effectively

A lot of people are sore Ady budgeting successfully because they’re renting. A lot of people renting are paying such high rent they don’t have much left over to save through no fault of their own. A £15K minimum deposit (or whatever it is now) is a hurdle and once most people get over that they can easily budget and save successfully (mortgages are generally cheaper than renting)

aren’t* saving and budgeting