To think property prices will go down in next year?

[WagathaChristieMystery]

With the ongoing cost of living crisis and the possibility of a recession, I wonder if house prices in the UK will fall over the next couple of years?

I know we have a really serious shortage of houses in the UK, which is one of the reasons house prices are particularly high, but I’m wondering whether the cost of living crisis will lead to house prices dropping.

It's happened before. We lost £500 on a property that we bought in 1987 and sold in 1992. Obviously other, more expensive houses lost a lot more than that. It was only for a very short perios though and prices have risen ever since.

No.

New builds will get more expensive to built, prohibitively expensive even. You have the increase in costs, and shortages of material. Ukraine was a big exporter of building supplies. That's not the case.

Population grows, and the influx is not children, who live with there parents for years and whose housing needs are met by the family home at first, but adults which adds pressure to the immediate demand.

So, no house prices will not crash. It will get crowded though.

Sorry, this should be that's not the case now.

It's going to be very much a localised issue.

We bought in 2007 knowing there was going to be an economic crash. The writing was on the wall and we knew it. What we didn't know was how it was going to play out, but we could take an educated guess and balance that with what we wanted from life. We bought in an area we liked a lot and wanted to stay. We knew prices would eventually pick up, it was just a question of riding it out. We made sure we had equity so didn't get too exposed. In the end we did have some problems and 12 years later only sold for what we bought. However we had 12 years living in the place we wanted. We could have held on 12 months but the way things played out, we wouldn't have been able to get onto the market at all for 4 or 5 years and in that time we wouldn't have increased our savings as we'd have had to rented in an area we didn't want to live in. That's 4 or 5 years of pouring money down the drain rather than building equity instead. Then calculate the compound interest involved. The numbers weren't better for waiting and 'paying less' for the value of a house. And thats what you have to consider. It's a gamble whatever you do.

In terms of educated guesses now, energy costs are not going to improve anytime soon and actually long term people are going to be much more conscious about being green full stop. It's a watershed in terms of decision making That means places where commuting by car or driving to amentites are perhaps going to fair differently to areas with good public transport. Equally the type of houses people buy is likely to be affected. People are going to be looking at period properties and saying no, when actually in the past they've often had added value because people like the character of them. Choices are going to be driven by practicalities.

Certain places which are further out but desirable will hold value because they will be popular with people who work from home and still seek the lifestyle. But people who traditionally commute and need to continue to will change their buying patterns. People who retired to big properties in leafy villages are going to find it difficult to stay in those areas due to a lack of smaller properties. They may move back into provincial towns more.

Cities will continue to have huge pressures. And its the well connected suburbs which will maintain high values most, possibly seeing increases in smaller housing stock. Provincial towns will have more gentrification. Desirable commuter areas will probably stagnate rather than drop imho. Places that suffer are less desirable, poorly accessible rural areas. If you retired to the country and moved to a less fashionable area and bought a big house, you made a mistake.

No you didn't lose £500. You bought security and increased your share of equity in a property instead of having to pay rent. Thats a long term investment and it put you in a better financial position than if you had rented.

I think we need to stress this, for anyone considering buying or thinking about whether they should wait for another couple of years...

Its not as simple as purchase price alone.

Interest rates are also about to go up. That's relevant too. Get in now and you might pay significantly less over the course of your mortgage due to the effects of compound interest.

I have noticed that the properties needing modernisation or complete refurbishment are sitting on the market for a long time and then being reduced when they would usually have been snapped up instantly for above asking price.

The cost of refurbishing property is now prohibitively expensive and materials and labour costs have skyrocketed in the last few years. I would be loathe to buy anything needing work nowadays.

Modest and well maintained family homes near a good school will always keep their value.

Not in London.

Houses on my road often don’t even put a for sale sign up.

House prices have doubled in 3 years here. I live in my old family home. It has never dropped in price since 1948. A couple of years it’s been flat but mostly it just goes up and up.

They are snatched up as soon as they are on the market. It’s akways been like this, with offers over the asking price.

Also the market might fall out of the Airbnb market which is no bad thing in certain areas, even if it goes to long term rental rather than available for purchase.

I can see that people going to Cornwall etc every other weekend for short breaks is going to drastically reduce. People will try and maintain their annual family holiday as long as they can. The short breaks are the thing that will go first. That will mean that demand for holiday lets will go through the floor.

Course they are going to fall,

There's a whole load of reduced demand

• EU workers going home.
• UK people escaping the shitshow
• Covid deaths, Deaths of depair
• NHS overwhelm leading to higher death rate.
• More careful family planning with 2 child policy and tight budgets
• House shares esp ones with bills incl. becoming more attractive.

IMHO the landlord sector is the one to watch, thats where it will start. Landlords with flats with poor energy efficiency will struggle for tenants with little inclination to invest in the necessary energy saving measures (cos they dont pay the bills). Margins are pretty tight on rental properties and a 6 month void will cause problems for a lot of small landlords with only a few properties, esp with the increase in interest rates.

Be very careful what you wish for.

The Irish property crash of 2008 of probably the best example of why this isn’t a good idea.

I was a first time buyer in Dublin in 2007. Got a 95% mortgage. The market crashed massively and I was in severe negative equity. When my fixed rate ended, my options around moving banks were limited as I didn’t meet any favourable LTV offers.

One of the biggest markers of a recession is unemployment. It’s going to be interesting to see what happens to businesses in the UK with rising costs. I’d imagine a lot of businesses like cinemas, soft play, cafes, bowling alleys etc that have to keep the lights and heat on all day but don’t always know exactly how many people will be coming through their doors and have to reduced operating hours, or shut down.

If a number of cafes close, not only will the cafe employees be unemployed, there’ll be less demand for coffee roasters, for wholesale bakeries, for companies that make and service tills, for software that runs their booking system. There’ll be fewer transactions and so banks will need fewer staff.

When a string of cafes shit down, people worry for the service staff, but they also need to think about the impact on software engineers and paper cup manufacturers.

So back to Ireland, house prices drop as people can’t afford to keep their mortgages as their interest rates are increasing and suddenly you land large-scale unemployment on it. There’s public sector pay cuts and general wage stagnation.

People are defaulting on mortgages and banks are losing money. Some are bailed-out by the government at the cost of billions to the tax-payer.

First-time buyers are most impacted as they didn’t buy property with a high deposit from equity held in previous properties.

Cheap and easy mortgage products are blamed. There’s no more 100% or 95% mortgages. If a bank needs to repossess a property that’s been defaulted on, there’s no point needing to reclaim the 99% of the mortgage that’s still outstanding when they’ll only get 70% of that on the market.

New lending criteria is introduced. Borrowers are capped at 3.5 times their incomes. First-time buyers need a minimum of 10% deposit, everyone else needs 20%.

Some people do really well out of this recession, namely those who were very rich to start with and have the money to snap up cheap property. It’s not worth their while selling or renting it out, so they hoard it. Lots of boarded-up houses, apartments, and shops.
Recessions move money, and it’s never towards the poor.

Those who have nice properties to sell but aren’t in a situation where they’re desperate for the money hold off on putting them on the market. If you’re thinking of down-sizing but will only get 60% of the price you would have sold for a year ago, why would you put your nice 4-bed detached house on the market when you don’t need to? You’ll stay there until the market recovers.

Lots of people having their new houses built on their own land had the banks decline to release next phases of funding halfway through and so the countryside was littered with abandoned half-built houses. Lots of them had to be demolished as they’d deteriorated over the years.

Then a new thing happens. Vulture funds. Overseas private equity companies realising there’s cheap property in Ireland. A lot of these are linked to pension funds so someone in Canada invests in a pension that buys up loads of cheap property in Dublin. And I’m talking tens of thousands of properties.

They're buying in such volumes that a lot of properties don’t even go onto the market- estate agents know what the vulture funds will pay and so competition is very limited.

This has been happening in London for a long time in terms of Chinese and Russian investors buying up expensive real estate to let it lie vacant. A property crash would likely accelerate their rate of purchase. Maybe not Russians with the sanctions, but a Chinese housing market crash is predicted so you’ll see them look outside the Asian market.

Fast forward to c. 2018 when Ireland has recovered fairly well. Employment is up, lots of people have been quietly paying their way out of negative equity and so have more freedom to choose better mortgage products. Globally, economies are doing well and house prices increase. But there’s a supply issue. Not as much construction took place during that big recession so there’s a shortage of houses. Those who survived the trauma of buying and then facing immediate negative equity want a good price for their house.

There’s a shortage of rental properties. Those vulture funds are basically dictating the supply and demand in the rental market. Indigenous property firms are also massive contributors to this. A lot of apartment developments in Dublin city centre are buy-to-rent so again, vulture funds and rich individuals buying apartments and renting them out at massive, MASSIVE rents. I’m talking €4,500/month for a two-bed apartment.

Small landlords are exiting the market because tax on renting is so prohibitive (52% on all rental income for those who are above a not-very-high high-earnings tax band, with relief on the mortgage interest). Funds and developers are buying those properties up and again have more control of more properties.

I recently needed a valuation on my Dublin property that I bought in 2007, for tax purposes. The EA told me to let him know if I intended to sell as he has an overseas investment company who will give me 20% above the valuation without it going on the market. I’m not selling and, if I did, I’d like it to go to a family but the truth is I was on my knees trying to keep the mortgage on it when the market crashed. It’s only in the last two years that it’s to the level where I could sell it for the same price I originally purchased it. That property was a weight around my neck for a decade and prevented me from being able to sell, relocate, and buy a house that better suited my family. As much as I’d like to say I have the integrity to tell a vulture fund to fuck off, making as much as I can out of it would be very, very tempting.

So now you have a situation where there are loads of young people who can’t buy in Dublin and across Ireland because-

• Not enough homes are being built.
• When they are, a lot don’t make it to market due to vulture funds
• Young people are paying massive rents and so unable to save for a 10% deposit

If you look at any Irish newspaper, you’ll be articles about dozens and dozens of viewers coming to look at one available rental property. They’ll offer higher deposits, 6 months rent upfront. They’ll even offer a higher rent amount and will cause a bidding war. To rent.

A massive property crash benefits only the wealthy. Sure, you’ll have a small cohort of “normal” people who have a big deposit already, secure jobs, and a market crash will benefit them, but they are in the minority.

It's not just the cost of building materials. Again it's more complicated.

Friends who are currently getting a new extention/kitchen to replace an old conservatory wanted to get the work done last year. But covid delays and the home improvement boom it produced combined with labour shortages and delays to get materials meant that getting a builder was impossible. They booked theirs last summer.

So no one wants to take on projects either because they are a builder who already has plenty of work on or because they know they are going to be unable to get the contractor they need in for months.

Thats going to unravel. The covid building boom from people building extensions for home offices etc or because they cannot afford to up size on the fast moving housing market so go for the home improvement instead will grind to a halt.

Builders may find projects they had lined up get cancelled. You are going to see demand for specialists shoot up though. The open plan trend will stop and there will be lots of walls going up. You don't want to be in bifold doors and lintels anymore. You want to be in insulation, roofing and solar panels. So there will be work for builders but I think its going be different types of work.

I don't think cost will necessarily be a killer, if the gains are there to be made. A newly renovated place which is well insulated will regain a lot of that value simply because of the concept of long term affordability. People will pay for it.

It might stagnate for a bit and then I expect it will get much worse as banks have started buying up properties to make large rental portfolios. Once the bank starts buying it will be very hard for individuals to compete.

There is a LOT of denial on this thread. The reason house prices have risen so much is low interest rates and therefore people Al have been able to borrow more for less. That era is coming to an end & housing has long resembled a giant Ponzi scheme in the U.K. Schemes like Help to buy have made it worse.

i hate to say it but people are in for a huge shock especially with interest rates rising & set to rise even more. And I say all of this as a homeowner.

My property price is about the same now as it was in 2016. But in 2016 it was double what it was in 2012. And in 2012 ist was double what it was in 1998.

Assuming no dramatic changes in the size of the population, I expect it to go nowhere on average for a few more years, then resume the usual rate of growth. (That's also assuming other economic forces have no particular impact. Not because they won't, but simply because the impact will be temporary and their will be reversion to the trend later.)

Anything can happen over a period as short as the next couple of years, I would not base any decisions on predicting what will happen.

In the short term I think we'll see modest falls and people having to price realistically, accept offers and consider reducing after months on the market.

Then we'll see a long period of stagnation before they start to climb again.

How your property is affected will depend where it is and what it's like. New builds suffer the most in these conditions.

Family members working in finance and property tell me that they are forecasting and fully expecting this scenario, and my previous experience of recessions tells me that it is likely.

At this stage, on the cusp of a recession, people - especially those with a vested interest - will talk the market up and take comfort from sales in areas that are behind the curve, but it is inevitable.

The demand for investment remains though. Certainly in key areas of the country. Even if there are lots of repos and people selling up the value will stay high due to disaster capitalists moving in to buy and competing with each other.

That doesn't mean it will be easier to get on the housing market. It means that the people buying arent going to be families and individuals but companies and investors.

Why?

Because the demand for housing continues even if the ability to afford housing stops.

Our population hasn't seen a large scale net decline even with covid and Brexit.

It means the affordability of housing will continue to get worse and instead of the market being purely about needing to accommodate people it's also about profit. Therefore those who make the profit will work to control and stabilise the market in their favour because they have the resources to do so. Fixing the market if you will, because there is a longer term profit to be made from the exploitation of the fact that people always need somewhere to live.

Except if you live in a rural area where its not desirable to live or visit because there are no jobs and no where to visit. It doesn't have the demand so it doesn't have value.

But big cities, provincial towns and desirable commuter areas where people working from home can live? They aren't going to see a 'crash'. Some decline is possible, but not a crash. And a decline doesn't make property more affordable for the general population. It only makes it affordable for the cash rich.

So if you haven't got cash and assets you aren't going to benefit from a crash anyway.

Normally I'd say that new builds suffer first.

Not this time. New builds have better insulation as standard and have lower running costs.

They will retain value better than in previous recessions for this reason.

Its your doer uppers that traditionally were attractive that actually lose some of that shine.

As i say, the emphasis is on affordability being a different concept to market value.

I often wonder why people come on here make statements like this and look silly.

This poster thinks there’s a whole load of reduced demand.

Indeed.

Everything in that post is a load of nonsense.

This is often said by people who have been wrong time and again.

What is there to deny? That net immigration is still at highest levels. Or that housebuilding is at an all time low. Or that people still need somewhere to live.

"Normally I'd say that new builds suffer first.

Not this time. New builds have better insulation as standard and have lower running costs."

I disagree. They don't suffer because they're undesirable, they suffer because their prices are so inflated to start with against the established homes on the same market.

But we'll find out soon enough

They may stagnate but the shortage of property will mean that it is unlikely that they will fall overall.

Many areas have micro markets my area is semi rural it's never been an offers overs place. You need a car to commute to any decent job there's not good public transport , offices are starting to demand more hybrid working. My area isn't good for the elderly who will need to visit hospitals more etc. House prices are already falling in USA , Australia , NZ who have been aggressive with their rate rises we will have to do the same so our currency doesn't tank. In the last correction US house prices fell first then ours. I say this as a home owner I don't think massive 15-20 percent then stagnation. My area didn't recover 2007 prices until 2016 Im a property owner but many people are sticking their heads in the sand. If you aren't moving why are you bothered about any property falls just ride it out.

But that extra cost, now in effect has value compared to a period property. The maintenance cost and the cost of updating to control running costs has a tangible value in a market were concerns about long term energy costs are in the forefront of people's minds.

In an era where the is cheap energy, this isn't the same. There isn't the added value to a new build.

Its the same reason as why in the past homes with solar panels didn't get a premium on the market. Estate agents weren't putting a value on them. Now they are because they affect affordability.

Thats a market shift in the last year.