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.

I'm sure high energy bills will influence purchases too.

I can't see huge increases if interest rates return to 5% long term.

Brexit definitely had an impact on my part of London & it was the SD pause that got things going again but some flats have still sold for less than what was paid for them.

Plus, what happens when prices drop is people stop selling, unless they really have to, which reduces availablity and off we go again.

some do, we sold in a "dip" because it made moving up the ladder easier as the % drop was a bigger cash value for the next propert.

I think prices might temporarily drop a bit but if that happens fewer houses will come on the market (people will tend to stay put in their current house for longer than they would have in the good times)....so the supply might drop but demand will keep prices relatively high. I don't think the housing market will collapse and I think the only people at risk of negative equity will be those who've very recently bought.

I thought the population was going to stop increasing soon & what was left was an ageing one?

I believe there will be a fair few larger properties on the market due to couples putting the previous family home up for sale to enable them to downsize to a property they can afford to hear .

Why?

Because net migration into the UK stands at around 250k a year. People need to live somewhere.

My inlaws are looking at downsizing now as they reckon in 5 yrs time it will be harder. They sold off their 2 BTLs earlier this yr.

Ukraine has nothing to do with house prices.

And what is a correction? What is the correct price of a house? There isn’t one. It depends on how many houses there vs the number of families/people needing somewhere to live. We have too few of the former and too many of the latter.

Local housing allowance stopped covering all of the rent years ago, Where I live the LHA is £850 for a 3 bedroom house, the rent for a small 3 bedroom here is £1300 minimum, most go for £1500, I'm not sure many landlords could afford to drop the LHA rates.

I think the scary thing about energy prices are the impact on hospitals & what the costs do to businesses & employment figures.

Because net migration into the UK stands at around 250k a year. People need to live somewhere.

According to Google the UK population increased by 284,000 in 2020. (Can't find the population increase for the following years but it's decreasing on a average apparently.

Between June 2021 and June 2022 183,450 new dwellings were built in the uk (no point doing earlier year because of covid)

So, assuming that each new person doesn't want a "dwelling" completely to themselves surely theres actually more new properties available each year.

Prices will go down in some areas due to repossessions, and the limitations that valuations will cause (I bought a second property that was easily worth 15-20% more than the valuation stated and it reduced my ability to get a mortgage on it)

I bought my 3/4 detached family home in 2009 for 5% less than the sellers paid in 2004. It’s all area dependent though, there will be plenty of places that don’t feel the changes to market prices because they are better insulated from it, and there will be some places that get hit very hard by it.

3/4 bed…lol obviously didn’t buy three quarters of the house

Am I right in thinking though, that negative equity will only be an issue if you were to sell the house?

If someone was to buy a house now as a long term (10+ years) home, wouldn't a decrease in the next year or so be irrelevant?

If someone was to buy a house now as a long term (10+ years) home, wouldn't a decrease in the next year or so be irrelevant?

It would be very relevant if their fixed term mortgage expired and they needed to remortgage.

It'll be an issue if you wanted to remortgage to withdraw equity to fund home improvements (or a holiday or car or whatever).

It'll be an issue if you want to change bank at the end of your fixed rate term and don't want to stay with your existing lender - i.e. it will stop people shopping around and moving to get a better deal, etc.

The war is affecting fuel, food and energy prices and sterling has taken a hit not just from Brexit but also Ukraine. The stock market also likes stability, not war. The higher cost of basic resources and instability is creating inflation and pushing up interest rates. If a 4/5 bed suddenly costs 6k to heat when it only cost 2k a couple of years ago, the 4/5 bed will be less attractive to a lot of buyers. Ukraine could therefore potentially have a lot to do with house prices. We are being tipped into recession. Recession usually leads to house price reduction. I was speculating there will at the very least be what I call a correction to 2019/1st quarter 2020 prices.

So with that in mind is a longer fixed term a safer bet?

Talking to an architect today a new build now costs £2800 per square metre on average. Construction costs are in the stratosphere

Property rises will slow or flatten.

People have pretty much stopped selling where we live. Nobody will move unless they really have to as the cost of moving is high and there’s too much economic uncertainty.

Also foreign investors will take advantage of the weak pound and continue to buy up properties in prime and surrounding locations.

So with that in mind is a longer fixed term a safer bet?

yes but depends on circumstances eg jobs, when you want to move, LTV, if you want dc etc

So with that in mind is a longer fixed term a safer bet?

Definitely, not least because interest rates are only going one way.

There are still some 10 year fixed rate deals out there. That's the type of mortgage anyone who doesn't expect to move for the foreseeable will be best off getting.

The potential downside is that if in a few years rates fall, you could be stuck paying more than you'd like. That may be a small risk because rates have been abnormally low the last few years which suggests that the "new normal" will be higher than it is today.

As long as the rate you end up with is affordable you can't go far wrong.

Been reading a few articles which cross over and influence what will happen.

First of all the market prediction is that prices will drop between 5 and 10% but that won't be uniform across the country. Some areas may be worse hit. I think that's a pretty reasonable assessment and not that dissimilar to 2008. But I don't think that qualifies as a crash and needs to be seen in the context of how much prices have gone up in the last few years. I know the value of my property has gone up 38% in 3 years. So even a 10% drop isn't awful unless you have only recently bought in the area. And in the context in terms of affordability. It doesn't mean its easier to buy a house if you need a mortgage. Rising interest rates is your first clue on that one.

Second. This was a comment on the number of new households expected every year. 250000. Compared to 150000 new homes built. The trend in recent years has been for more people to live alone. Thats obviously a problem. Its a historical trend that hasn't happened in the past. People didn't live alone to anywhere near the same degree in the past. And the increase in households is why rents can stay higher even if people can't afford them. There's someone else waiting who can... The issue for landlords is getting rid of existing tenants who can't find alternative accommodation or default. Not finding a new tenant willing to pay more money. This is where tenant rights really need tightening and rental prices look at by government. The biggest losers are families with children, particularly lone parent families, as they often can not compete with the purchase power of a single young professional looking at a 2 or 3 bed. Families with children, especially single parent families, are more likely to be classed as living in poverty.

This also needs to be looked at in the context of this winter. It looks increasingly like there is a gap between our energy demand and supply. We nearly exceeded demand at one point in London over the summer and had to resort to emergency measures of importing energy. Thats less viable over the winter. There is already emergency contingency planning going on for this. The first thing being talked about restricting is power for building. Building being the thing we need more desparately...

So the only way this really can go in the short term of where people live is live more densely. Particularly with the double whammy of energy costs. That's people moving back with parents or more people in HMOs. Or more people with lodgers. And it's going to push more people out of the market into local authority responsibility. That's going to be hotels and in the medium term, into repurposed office and retail buildings not new homes. Places that are often not really suitable, especially for families with kids. There isn't any other government level planning which will resolve this in the short to medium term. In the long term we STILL aren't seeing any policy making likely to change this.

This trend isn't happening in the US, Australia or NZ which people like to point towards as leading what will happen here. Our demand/supply issues are totally different.

The drop in prices will be reflective of restrictions to lending and slightly few people being able to borrow. Noting here the cash is king issue in property. Not a significant drop in demand.

Given those are your key driving factors probably for the next 5 years or so place your life choices on them. Location, location, location is your real gamble. Where are people going to want to be living most? Where is going to turn into a problem area?