Housing price crash

[Eucalyptusbee]

It's happening!

AIBU to be excited

Right, so someone who is lucky enough to own a house with no mortgage and doesn’t actually understand the wider economic consequences (but has a husband who might have attended an economy’s lecture 15 years ago) is excited?

🙄

I get if you're struggling to buy, it would be good news but it's poor taste not to consider the very many lives that will be impacted negatively by a housing crash.

On a personal level I would be happy with a crash as we have no mortgage and are looking to buy a second home, mainly with cash. However, on a countrywide level and considering others I would be happy with a cessation of the rising prices we currently have.

House prices have got beyond ridiculous and something really needs to be 'reset'.

I see a lot of interesting comments, imho the most notable from those who have lived through experiences and have first hand knowledge.

I think 2 things affect the housing market above all, unemployment levels and interest rates. Fortunately at the moment the first does not appear to be much of an issue.

Interest rates are an issue but before I get onto that something else unprecedented is at play. That is the balance of household expenditure. In the last 2 years of the pandemic many have had limited acess to spend money on other things such as eating out, foreign holidays, etc. This means more has been accumulated in savings, and more diverted towards household expenditure. This has fuelled the rising housing market.

What is occurring now is rebalancing back to historic norms. People are going out more, and spending more on non housing. Allied to this we have rising inflation which puts a further squeeze on household finances. The amount families have to spend on housing costs will definitely have fallen vs 12/18 months ago. I believe markedly so.

Then you throw rising interest rates into the mix and things get worse, its another squeeze.

So perhaps 12/18 months ago a household maybe had income of £3,000pm and spent £1,000 on a mortgage, and it was fine. But now that mortgage is £1,200 a month, their back in work and have travel expenses, want a new car, holiday, visiting friends, family etc, it all costs. Things are tough.

Now some may say it's fine because lots of mortgages are fixed. When these deals end people are in for a shock as the new deals will be far higher. Also you have another thing in play, if house prices fall, and I am sure they will, applicants then may be faced with a higher LTV. If I bought say a £300k property and had £75k deposit then I'd have 25% down and would get a deal considering that. If house prices fall even 5% my equity drops from £75k to £60k and that 25% deal is no longer on the table, so I drop to a 15% deal and pay even more.

People forget that mortgages are leveraged products, instead they look at the romanticism of the rising property market.

This will be painful. I would not be surprised if interest rates reach 3%, and this resulted in London prices falling 15-20%. Across the country I believe it will be more pronounced, perhaps 25%.

A house price crash is well overdue. If it hadn't been propped up after the GFC things would have been a lot better by now.

if you think house prices are ridiculous (which they are) you could always not buy a second home and leave it for sale for someone who doesn't even have a first home yet!

You may see a correction, but you won't be seeing a crash anytime soon.

Too many people, not enough houses. If we need to build over 300,000 houses every single year for the foreseeable to deal with the current problem, there is no real economic reason for prices to massively decrease.

You may see prices decrease in areas now the rush to move for WFH etc has died down but as it is, prices will keep moving up accordingly.

Yes.

Yay, OP!

I do not want anyone to lose their home but if they lose some of their properties, I personally couldn’t give a shit.

A decent one bedroom flat in my area is approx £250/275k. A tiny box. I’m single and currently on a low salary due to mental health, although I’m well qualified. Ain’t gonna get a mortgage currently, however many degrees I hold.

People complain that the banks insist they can’t afford a monthly repayment of X when their previous rent was x +y but it’s to protect against the doom and gloom people are spinning here in regards to rising interest rates. It wouldn’t stop people going bust if interests rates went up by 15% but a rise of 1% won’t result in the average mortgage being unaffordable.

I think it's highly likely if inflation is not controlled.
As interest rates rise mortgage repayments will increase leading to less affordability in getting a mortgage for a property purchase. This will lead to market stagnation and inevitable price reductions.
When you couple this with cost of living rises then personal finance will come under alot of pressure.
Unfortunately this will lead to repossessions and a possible crash and the inevitable negative equity for those who purchased in a more buoyant market.
House building will also reduce due to raw materials price increases where the cost of building a house with a suitable profit margin cannot be achieved for the developer as property prices fall.
Then it will go full circle again as the economy recovers, demand rises for a small housing stock, prices rise and we're on the merry-go-round again.
Look at history it a cycle that is repeated many times.

Absolutely agree.
Second home owners especially ruin pretty rural areas and drive up prices for Locals with ties to area who really contribute to the community.

will be a good thing for some but bad for others , i dont profess to know much about economics but isnt house prices crashing a sign to come of a recession ?
to echo someone else id like to see rental prices drop , they are bloody stupid and its the reason i and my dd became homeless in 2015 . because my landlady wanted to increase the rent yet again to a level i finally wasnt able to afford , when we had gone she advertised the house at over a grand a month , i was paying nearly 800 a month for it at the time

Define crash for me - are we talking a 50 percent drop or a ten percent correction?

Hear, hear. Second home owners make the crazy housing situation in this country even worse.

This has made me roar.

I went to the school of living through too many recessions.

I can see why your husband is no longer an economist

You know what is a huge driver of high prices? People buying second homes.

If this was to happen it would benefit first time buyers only - everyone else would end up in negative equity.

Especially when they tend to be in holiday destinations so air B and B central. Where renters struggle to rent long term as landlords can make monthly their yearly rent.

No crashing round me.

And where my parents live much housing us bought by wealthy people as holiday / second homes. They are suddenly even more keen to put their cash in property.

I remember the days of 15% interest rates. Housing was certainly not more affordable then.

It really irks me when I read comments like this because it echoes older family members' views.

Especially the family member who's so vocal about that moment in time with the 15% interest rates, yet he was able to buy a 3 bed bungalow with a massive garden in his late 20s, 2 kids, SAHW... as a postie. On what planet would that be possible ANYWHERE in the UK these days?

Why would they lose their home if prices drop? You don't have to move just because you're in negative equity 😳.

Massive rents, expensive areas (like London) make it difficult to save up a deposit. Are you aware that not everyone has access to the bank of mum and dad?

Did you sleep through 2008?