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?

@PiataMaiNei - I agree, Ignore the news and look at the indices.

Yes they fell, but lots of global indices are up to nearly where they were before the fall. Also, if you bought at the fall as one should, then there are some very very healthy gains to be had.

The upturn was almost as quick as the downturn.

I think there's too much pent up demand for a crash though as ecomony dives and job losses mount I think there may well be a slump.

Any price drop and people like DSis will be there late 30's -pays a fair wack in rent but can't afford anywhere big enough at the minute.

My parents can't afford to move to any local bungalows and the price increase for a two bed bungalow in poor repair vs their 3 bed terrance it too great.

I suspect there a fair few people wanting out of flats or bigger gardens at the moment.

Any price drops are going to be in cramped cities. Demand for suberbs and rural properties have soared, I have read in a few places now Londoners looking to move further away, driven by offices committing to employees that they can wfh on a permanent basis. Enquiries are up 58%!!

It will be interesting to see what impact this has on the economy overall, city centres will become ghost towns if we are not careful. Our city centre is under going loads of redevelopment, and it’s looking like it’s money wasted right now because nobody is going there,

But local economies will probably flourish. Slightly tempted to open a little shop in our village, I never seen the parade so busy..

We are now in a recession, and if you look back at the last 4 recessions in the UK, they have always been accompanied by a fall in real terms in mainstream house prices, and peak-trough house price falls have been significantly greater than falls in GDP. But it's not going to happen immediately - the scale will depend on what happens when the furlough scheme ends in the autumn and we end up with much higher levels of unemployment.

If banks let people in financial difficulties make payment plans rather than repossess, then impact should be limited, as interest rates remain low. This is what happened in 2008, lots of pressure from govt on banks not to force sales, so there was a relatively limited fall in house prices in the context of the scale of the economic downturn, and a quick recovery. But if we get lots of repossessions and forced sales, we could end up with a market that looks more like the early 90s.

@TinyLittleTeePee

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

@TinyLittleTeePee I'm so sorry, that's stressful. Can you afford to drop the price at all? It should sell at the right price. I'd try doing all the usual things like for selling property like decluttering (to make the space look bigger), deep cleaning everything for viewings so it sparkles and any redecorating on the cheap (painting mainly, do it yourself and it's cheap). I'd speak to your estate agent too, about the market for flats at the moment and what they think. If you aren't in an exclusive contract, try asking several agents for valuations/advice. They can be slippery sods, it can't hurt though to get some advice though.

Things are selling quickly, some of them are coming back onto the market again after a few weeks/months. Maybe the valuation surveys for the lenders are coming in lower than the sold prices (since they've gone up)?

Pretty sure I saw an almost identical thread title and OP just a week ago.

And fair or not, parents who can give their child a big deposit would be more likely to be in a position to bail them out with financial help. I think it's really short sighted of building societies if they stop bank of Mum and Dad,

I'm expecting prices to go down. I bought my first property back in 2005 at the peak when prices were rising rapidly. I lost 50K when I sold in 2015.

After furlough ends I would expect house prices to fall.

@Bells3032 DH and I bought in London without money from family. We did live rent free for 3 years which saved us tens of thousands.

what is amazing is that the previous generation bought in London with help too! when we first started looking, my DH was adamant that we should aim for a 2 bed cottage in hampstead garden suburb (currently 800K) as a couple in our 20s with no money from family. His reasoning was that his family friends all bought such properties when they were around that age so we shouldn't settle. But then when i actually asked my MIL, it turned out that particular person did so with huge parental support i.e. parents actually had to sell a property to help her and also it wasn't her first property, the first property was a flat.

I think london property has been expensive for a long time and most do get a disproportionate amount of family help from parents who own property in london. But covid presents a unique opportunity because there would be people moving out so it might be a good time to buy more centrally than you otherwise would. For my next property, I hope I can move to a 3 bed flat in Central London because so many rich people fled to bucks and Herts. And I am confident London would find some way to reinvent itself in a post covid world as it has done since Roman times. London has survived plagues, fires and the blitz, it can survive work from home but there would be a downward trend for the next 10 years.

Not where I live (Staffordshire) houses are selling within days.

I'm selling my house, and a buy to let and my sister is buying a flat in an unfashionable part of London.
All 3 properties prices have gone up since Covid (they were all on the market pre-Covid).
There will only be a crash if we have mass unemployment, and those with deeper pockets or in the booming industries/sectors will scoop up the bargains.

Young people rely on parental finance when they don't have savings of their own. Not having a financial cushion puts them at higher risk of mortgage default if they lose a job during covid cutbacks.

Older people may have a one-off stash of spare cash because they inherited from grandparents, downsized, or their pension provided a lump sum. But once its gone it's gone, and for most older people with pretty fixed incomes there will be no further bonazas, and they must keep some cash in reserve in case they need care at home..

  So, don't assume that  a parent who gave one generous gift , is either wealthy, or could ever repeat it.

The sort of people who are going to be made unemployed when furlough finishes in October and people who work in retail and hospitality, not your traditional homeowners and they don't fit into the homeowning demographic so these job losses won't affect mortgages thus leading to a crash.

The only thing keeping the tories in power is the money that people have got in property and the tories intend to keep it this way, thats why they offered a stamped duty holiday.

@NotSuchASmugMarriedNow1

The sort of people who are going to be made unemployed when furlough finishes in October and people who work in retail and hospitality, not your traditional homeowners and they don't fit into the homeowning demographic so these job losses won't affect mortgages thus leading to a crash.

The only thing keeping the tories in power is the money that people have got in property and the tories intend to keep it this way, thats why they offered a stamped duty holiday.

They could indirectly contribute towards a crash if they rent.

A lot of hobby landlords wholly rely on the rent paying the mortgage and have very little leeway. If the tenant loses their job, and the landlord has to evict, and can't find another tenant quickly, they could also go under

This site has been around for years
enjoy
www.housepricecrash.co.uk/

MoistMolly this was always a risk for landlords. I don't have much sympathy for them - they will still have their own homes!

@MadinMarch

*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.

Shares fell initially, but have recovered well. Someone who is well advised would and will do better in shares over coming years. Property is going to carry significant risk in the short term, plus its highly illiquid and carries a high transaction cost.

people who work in retail and hospitality, not your traditional homeowners

Up here they are. You only need a min wage here to own your own home.
My ds1 is a mortgage broker and this demographic are a constant supply, whereas there are far fewer remortgaging from the better paid employment cohort.
You don't need mum and dad to bail you out, either.
I think this must just be in the south/ London where house prices are extortionate.

Having lived through the horror that was the crash in the 1990s I am so cautious. However, the banks in part caused that. The bank of mum and dad thing means a second charge that alot of lenders are not keen on and do not give a realistic picture of affordability. I think house prices will come down but I hope it will not collapse. Also if things wobble and you can people will stay put

There's was a report either yesterday or today in a newspaper saying that first time buyers' homes are selling well and that they are all going for over the asking price.

In the US shares have already made up the fall and are back to prepandemic prices. Some tech shares have absolutely soared.

All of this "the housing market is going to collapse" rubbish shows up on MN every few months. When prices fall more buyers enter the market, putting upward pressure on prices until they reach a new equilibrium. It's really very basic economics.

The bank of mum and dad thing was about being loaned/lent? the money. It didn't say anything about it being a gift.

The sort of people who are going to be made unemployed when furlough finishes in October and people who work in retail and hospitality, not your traditional homeowners and they don't fit into the homeowning demographic so these job losses won't affect mortgages

I assume you live in the South East where your average starter home is £300k 🙄

In the —real world— majority of the UK, retail and hospitality workers are perfectly able to afford a mortgage - and yes, the loss of thousands of jobs from these sectors will affect mortgages.

Lenders are tightening underwriting criteria because they are expecting some loss to value and a higher risk of people defaulting due to job losses in the future. Total crash? who knows. But they need to ensure there is decent equity in the first place.
The reduced / no stamp duty scheme will also creat a mini boom. But that will only last until Feb. So there will be a natural low after that.