Page 8 | Housing price crash

Eucalyptusbee · 2022-05-12T08:58:48+00:00

It's happening! AIBU to be excited

Slinkymalinky03 · 12/05/2022 12:17

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.

People really shouldn't be in for a shock. Responsible borrowers taking out a long-term loan should have considered this possibility before taking on the debt.

Jonny234 · 12/05/2022 12:17

Aberration · 12/05/2022 11:59

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.

It's not about 1% in isolation, its about what the level was and what it now is.

I bought my place when rates were 8% at the turn of the century, had it occurred a 1% rise from that to 9% would have been a 12.5% rise in interest rate repayments. Harsh but not unaffordable.

Now with interest rates at 1% if you apply the same 1% rise to 2% the interest payable increases 100%.

So a 0.25% rise here and a 0.5% rise there may not come across as being highly significant. In reality they are.

ReadyToMoveIt · 12/05/2022 12:17

TwinklingFairyLights · 12/05/2022 12:12

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

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They wouldn’t lose their homes just because houses drop.
However a genuine house price crash is usually a symptom of far wider reaching economic issues. Recession. The issue is when people are in negative equity and can no longer afford their mortgage repayments (due to high interest rates, redundancies etc). That’s when people lose their houses.

bluebellsandcustard · 12/05/2022 12:17

Not here. Still a shortage of (desirable) houses.

I can't see it changing any time soon in very popular areas.

Hrpuffnstuff1 · 12/05/2022 12:17

Jonny234 · 12/05/2022 11:50

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%.

Indeed employment levels are high and employers are struggling to recruit.
So what are people doing, people have left the workplace, where are they?😂
A friend is currently selling all his 50 rentals, they have got to the point the tax repercussions aren't worth it anymore. I think that will become more common.

Demand is very strong, supply is choked, employers are offering increased wages ETC. The post-pandemic world is very difficult to work out, all normal parameters are skewed. This is why doing nothing is better for inflation rather than government fiscal policy interfering.
Although I do feel Rishis' benefit cut was premature.

BordoisAgain · 12/05/2022 12:18

Eucalyptusbee · 12/05/2022 10:32

No mortgage and not planning on moving .

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Yeah.

You do realise we can see your previous threads right? The ones from a couple of months ago where you are asking about buying houses?

SinisterBumFacedCat · 12/05/2022 12:18

House prices are currently holding up the social care system, and subsidising those who don’t have a property to sell to cover it. Lower house prices plus the rise in living costs mean people will be running out of funds quicker and the tax payer will have to step up to cover it. Plus people in negative equity loosing their homes, means a higher demand for rental properties meaning landlords can put rents UP.

What we have needed for decades now is more social housing. If we had replenished the council housing when it was sold off we would not be facing a number of the problems we have today.

gothereagain · 12/05/2022 12:21

TwinklingFairyLights · 12/05/2022 12:12

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

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Because housing crashes are usually accompanied by job losses, wage stagnation/ cost of living increases making it harder for people to get mortgages. So if someones fixed term deal ends, they cannot get another fixed term, which is usually cheaper and they ended up on the tracker (often 4% or more about base rate, meaning their mortgage charge soars and they can't keep it up. Also if you recently bought, chances are your fixed rate is around 1.7%-2.2% if that then shoots up at the end of the fixed term to 4% plus base rate, they go from paying £500 per month to £700,

AnotherTroyforHertoBurn · 12/05/2022 12:23

Barkingmadhouse · 12/05/2022 12:07

I can see why your husband is no longer an economist

fruitbrewhaha · 12/05/2022 12:26

Op you are being incredibly naïve. A housing crash only benefits the rich. Anyone with a mortgage gets stuffed with bad interest rates and diminishing LTV levels. FTB cant buy because they are still unable to meet deposit and lending criteria. Banks either stop lending or tighten it up so people on lower incomes cannot raise finance. Rich people however will buy them up in swaths.

So well done for applauding further transfer of wealth to the rich.

KoblinsGiss · 12/05/2022 12:26

HI OP @Eucalyptusbee

You are not buying a house and you don't have a mortgage and this is all about your siblings right?

Then what is this thread, or this thread or this thread about?

TheVanguardSix · 12/05/2022 12:27

So are you like your husband's (AKA The Great Oracle, obviously) mouth of Sauron, OP?

Classica · 12/05/2022 12:28

hurrah.

Because house market crashes happen in a vacum and definitely don't go hand in hand with widespread economic hardship and major job losses.

LouisCatorze · 12/05/2022 12:28

It is a rather gleeful thing to post though? And what about all the people who could end up in negative equity with very high interest mortgages? You could find a lot of the buy-to-let brigade are more out-of-pocket and raise rental prices to compensate? So instead of being a good thing it could be a very bad thing!

thetemptationofchocolate · 12/05/2022 12:29

I apologise for mentioning the 15% interest rates (and doing so again in this post). My intention was not to belittle the struggles people have today. More to suggest that a rise in interest rates will not necessarily be the cure to it, as suggested by the OP.

Nocrispsinthehouse · 12/05/2022 12:30

I hope not, I am old enough to have witness several house price crashes and as they tend to come alongside a recession that’s not much fun at all, when that has happened the only people buying up the cheap houses were the established rich, greedy landlords and property developers. And on a selfish note I am hoping and praying the housing market doesn’t crash because the building trade is often the first casualty and 16 year old ds is just about to start his bricklayer apprenticeship and he will be absolutely gutted if he can not pursue his dream, he has struggled so much in school, he has been miserable and this is his light at the end of a long dark tunnel.

Jonny234 · 12/05/2022 12:31

Hrpuffnstuff1 · 12/05/2022 12:17

Indeed employment levels are high and employers are struggling to recruit.
So what are people doing, people have left the workplace, where are they?😂
A friend is currently selling all his 50 rentals, they have got to the point the tax repercussions aren't worth it anymore. I think that will become more common.

Demand is very strong, supply is choked, employers are offering increased wages ETC. The post-pandemic world is very difficult to work out, all normal parameters are skewed. This is why doing nothing is better for inflation rather than government fiscal policy interfering.
Although I do feel Rishis' benefit cut was premature.

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Rental properties for the govt are easy pickings, the squeeze just continues ever so slowly against big rental portfolio's. This is also a popular measure with most people against "the greedy landlords" so it's a win win for the govt. I have anecdotally heard similar stories.

The demand/ supply argument is one that's not easy for me to pin down. Is the demand real, or because people see the rise happening and more pile into the market creating a demand that exists but could be considered partially fake.

I cant really make my mind up on that one.

TwinklingFairyLights · 12/05/2022 12:31

LittleMissLego · 12/05/2022 11:17

But how much would they crash? Even if they crash by 50% (very unlikely) my house would still be more expensive than i paid for it 10 years ago (at the time of the last property crash). House prives are now so ridiculous that a 10% drop on an unaffordable house, will still leave it unaffordable to most ftb.

I think a slightly more likely scenario is that house price rises may slow, or stall, or drop a teeny bit. But high inflation will kind of erode the value of the house. Maybe. Which is great for people working in the private sector getting above inflation payrises, but public sector workers wont benefit in the same way.

They've dropped by 10% in NZ over the last 6 months. NZ facing the same economic headwinds as us but they raised interest rates more quickly.

I'm expecting similar here. Along with a less frenzied buyer market, due to people holding off because of uncertainty.

Oscarthedog · 12/05/2022 12:32

DappledShade · 12/05/2022 10:03

Not around here it isn't, slowing, but not crashing. Also not something it is nice to be excited about as many could lose their homes if there was to be a crash (which I highly doubt).

People would loose their homes only if they don't keep up repayments on their mortgage. The only people this would affect are probably those who bid up prices in the first place through lax lending and actually couldn't afford the house any way.

Interest rates are heading north and the era of cheap money is coming to an end and about time too.

Echobelly · 12/05/2022 12:33

The trouble is that if it were as simple as house prices fall and then everyone locked out could get on the housing ladder, then crashes wouldn't be an issue. What happens is that very little comes on the market and also access to mortgages gets really restricted or borrowing becomes very pricey, so people can't just buy a house when they couldn't before.

EvilPea · 12/05/2022 12:33

thetemptationofchocolate · 12/05/2022 12:29

I apologise for mentioning the 15% interest rates (and doing so again in this post). My intention was not to belittle the struggles people have today. More to suggest that a rise in interest rates will not necessarily be the cure to it, as suggested by the OP.

Interestingly
1/3 rent
1/3 mortgaged
1/3 own outright.

so potentially that’s a lot of people waiting to buy, that’s probably fewer people than you thought immediately affected by interest rate rises (although I know that’s not an isolated thing and there’s ongoing repercussions).

Floofsquidge · 12/05/2022 12:34

Everywhere we are currently looking that fits what we're looking for is sold either within 24 hours of appearing on Rightmove, or before it even gets on there. All that is left are the houses that have something wrong with them. There is a severe housing shortage at present here. I would take your uncomfortably gleeful and tone deaf news with a pinch of salt.

godmum56 · 12/05/2022 12:35

Eucalyptusbee · 12/05/2022 10:11

Hahaha yes true mid 30s. maybe naieve optimism!

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no shit sherlock?

JesusInTheCabbageVan · 12/05/2022 12:38

KoblinsGiss · 12/05/2022 12:26

HI OP @Eucalyptusbee

You are not buying a house and you don't have a mortgage and this is all about your siblings right?

Then what is this thread, or this thread or this thread about?

Interesting and would certainly explain the tone of OP's first post.

Anyway, if you Google 'Daily Telegraph house price crash' you'll see that they also predicted a crash in 2021, 2020 and 2016.

House prices are bound to fall at some stage. If you believe in the 18 year cycle, then you'd be looking at 2026. In reality, we're living in unprecedented times and I think it's just impossible to predict when and how much.

The only certainty is that the only people who will benefit from it are cash buyers.

Jonny234 · 12/05/2022 12:39

fruitbrewhaha · 12/05/2022 12:26

Op you are being incredibly naïve. A housing crash only benefits the rich. Anyone with a mortgage gets stuffed with bad interest rates and diminishing LTV levels. FTB cant buy because they are still unable to meet deposit and lending criteria. Banks either stop lending or tighten it up so people on lower incomes cannot raise finance. Rich people however will buy them up in swaths.

So well done for applauding further transfer of wealth to the rich.

I dont believe the Poor/ Rich argument necessarily holds.

Someone could live in a £150k house with no mortgage. Another person could live in a £750k house with a £600k mortgage.

They are both worth the same (£150k equity). In the good times the leveraged person is fine, in the bad times they are in trouble. If house prices fell 20% their equity is wiped out.

I'd conclude it's more about people overleveraging their position.