To say house prices have to fall?

[Mushroo]

We’re planning on moving house in the next couple of years and in London so prices are mad.

we were looking at borrowing £550k which previously was about £2500 pcm. This was affordable for us and gave us a budget of c.£700k.

just had a look and the monthly repayment under the new rates is about £3600 - completely unaffordable so our new budget for a house would be £550k - £600k to make it affordable.

I know were in a very fortunate position but it will be the same across the board. A £200k mortgage was about £800pcm and it’s now £1,239pcm, so the people who were buying a £200k house now have a budget of £150k.

will we finally see a drop in prices?

Even in the first half of this year, something like 1 in 4 or 5 valuations in my area were coming in quite a bit lower than the right move price.

So what happens is, house goes on right move, there is often a bidding war and the offer is higher than that. But a month or whenever later, when the valuation gets done the problem emerges. Either the offer is re negotiated down, or the house goes back on the market.

But in the meantime, other vendors have seen what that first house was on right move for, and put the next house for sale on at even higher... and so on. And it's taking time for all of that to be seen.

Right now a lot in my area isn't shifting. It's just sitting on right move. I wouldn't say it's a buyer's market, yet. I think buyers are waiting, biding time and a bit wary. And the affordability criteria are already getting tighter.

There are still bidding wars at the lower end of the market in my area. I know 2 people looking to buy who both keep getting outbid.

Not sure about the more expensive houses.

Houses are not a commodity like oil with a market price reflecting the present supply and demand then instantly revaluing all the stock of that commodity. Many sellers are not forced so will pull their houses from the market. Forced sellers will have an effect on the market. The other issue is that mortgage offers get pulled or require larger deposits so FTB in particular struggle to benefit from any marginal drop in price. Another dimension is investment/cash buyers who want to have exposure and look more to the medium/longer term. Buy to let mortgage price rises will affect some demand but rising rents may eventually stimulate demand as well. As PPs have said, the ones who will struggle are recent buyers on variable rates and forced sellers.

With the pound being so weak, I wonder if foreign investors will snap houses up if prices do fall (and people find it harder to get credit here).

Not falling where I live and they seem to keep going on the market at silly prices and sell if it’s a decent house.
I can see a slow down in price increases and if people bought at the peak and they need to sell maybe a slight drop. More than half of home owner in my area don’t have a mortgage and many with mortgages have a significant deposit so I can’t see many forced sales.

RICS economists are anticipating a 10% drop in house prices next year. They are already reporting that the market has slowed to the same number of sales as in May 2020 when they were disrupted by COVID.

No, you can't just switch to interest-only. You can borrow a max of 75% loan-to-value on those. A lot of people have also borrowed up to their 70th birthday and would need to switch lender/pay ERCs to extend the term.

How many people fit into this bracket, don't the majority fix? Are most people really maxing their borrowing, length with long terms & high LTV?

Well considering how much rent and house prices have gone up by, them going down is hardly a disaster. The price of property and rent needs to be more realistic.

I am sure if rent goes down then the help the government provide towards housing benefit will also go down. Perhaps they could use this to either build more social housing or help people who are struggling with buying/owning. Probably wouldn't happen though.

I'm in London & can see it impacting here. Tbh Brexit did & only the stamp duty pause got it kicking.

I do know a few older people who are looking at downsizing despite no mortgage debt simply because of costs going up everywhere so I wonder if that will be a trend.

Agree on the slowly. I lived in the Netherlands for 5 years just after the financial crisis, and real estate prices went down 20 percent over that period. Took several years in part bc banks wouldn't agree to sales at negative equity, so you'd see for sale signs everywhere for ages- simply not enough buyers at the prices being asked for.

The government won’t be bailing out home owners. Owners who can no longer afford their homes will have to privately rent or be housed by the council in emergency accommodation. Ridiculously low interest rates were never going to stay as low as they were.

She’ll either sell at a price which someone will buy at and buy something cheaper or rent, hang on and possibly default, or find a way to increase her income. This is more or less what happened in the US from 2009-2013.

Your post was interesting that you want prices to go except in the case of your own, I mean that’s what we all want but not very realistic.

I do feel bad bad for everyone going through this for the first time. But it’s pretty cyclical. For anyone in a house … hang on it’s going to be a bumpy ride. For anyone renting and thinking about buying… pay close attention to what others are going through, learn from the experiences of those going through it now. It will be you one day.

Not really because you are forgetting demand from investors. The value calculation there is different and depends on rental yields. Some of these investors are cash buyers not linked to mortgages.

The shortage of supply means people are forced to pay ever higher rents, in some cases people will squeeze more into one house etc to afford it.

Prices will only fall if both demand from home buyers AND demand from investors. For that to happen there needs to be enough supply, and there just isn't, plus private housebuilders can easily limit what hits the market to maintain that supply shortage, because they do not want values to drop.

A state mandated housebuilding program on a huge scale is possibly the only thing that will increase supply enough.

Already seeing reductions here and increase in supply. Someone reduced by 50k 410- 360 so things are happening this quickly.

The Government will butt in to artificially keep prices high again, as they have previously done with all the other various prop up schemes, need to let people who have over leveraged take some self responsibility because there would of been others in the same position financially who brought a cheaper house and didn't over leverage themselves, so isn't fair on the people who have been responsible and borrowed within their means. Unfortunately Government will allways help people out when it comes to house prices which are ridiculous high

Yes, I think the majority do fix - that doesn't have anything to do with what I have said though? And yes, many (not most) people are borrowing over the number of years between their current age and 70. Some lenders let you do 75 or 80 with proof of pension.

I just thought if people had fixed, their LTV may improve at the end of the fix. Plus in this current climate some will overpay if they can whilst on their fix.

I'm not seeing it happen in the pretty village where I live. There is nothing at all to buy except some as yet unbuilt developer properties. Nothing at all. A few weeks ago there were listings from 320,00 up to £1.6m. Not much chance for FTB. It is a very pretty village with a strong community spirit in an AONB.