To think the tories want a housing crash now

[Seagullsbythesea]

All the rhetoric around interest rates has suddenly changed- lots of papers quoting Hunt saying he’ll risk a recession to get inflation under control- lots of papers saying we might see 6 percent by the end of the year.

Seems like they actually WANT a housing crash now- why now?

My friend’s mortgage has just gone up £500 a month.

The SE & London ‘soon recovered’, but in the rest of the U.K. the majority of house values did not recover to their 2007 values until 2019. I wouldn’t say the negative equity was due to buyers borrowing too much. They all had deposits, they all had equity. To go from positive equity to over a decade of negative equity due to the market falling isn’t their fault. It’s bad luck.

When you are a young couple, or young family a decade is a long time. What was a 2 bed starter home with a baby & a toddler quickly becomes an overcrowded childhood home.

It's not their fault no. People borrowed what they could based on what the banks allowed. Why would you say "no no, I won't borrow 90%, I'll stick to 40% and get a small house thanks". But the level of borrowing that was available and happened at the time does not happen now. I am not blaming anyone, or saying it wasn't shit for many. But the "inevitable" crash everyone was panicking about just didn't happen.

Also it didn't really help renters or new buyers, because as people were stuck in negative equity thye couldn't sell and had to stay put. So all those starter/ first homes weren't going anywhere.

https://www.hertsad.co.uk/news/21726747.final-uk-areas-recover-2008-housing-crash-11-years-behind-st-albans/

Took 14 years for all homes in the U.K. to recover to 2007 levels. October of 2022. Majority of U.K. homes didn’t recover until right before the pandemic.

Yes, I agree an entire generation had no starter homes to buy. Which is why we now have record numbers of families renting in the private sector. Those families aren’t saving for a starter home, they need a family home.

So any home building planning needs to take into account the fact that recent history means there are families who need to get on the property ladder at a different place than at the 2 bed starter home place.

I can’t see there being a crash. The dynamics are affordability and supply.

If there was a dip caused by people with big mortgages unable to pay, that stock becomes available. However there is still a lot of competition for too few houses, so only those who can get a deposit, afford higher interest rates and overall high prices can afford it - so the price is still inflated due to supply issues and there will be competition within that segment of buyers too.

Also those people who sold up (or perhaps had a foreclosure), still have high salaries since they afforded that house in the first place. That might push private rentals up even more, meaning those prices are more valuable etc.

The only way is to build more.

People also need to understand the broader economics re. savings. There is still a lot of money in the system with over £3.5b deposited in savings in March. People are adjusting their spending, so whilst a lot of people are really struggling MN is not indicative of everyone. Look at the data.

The SE & London ‘soon recovered’, but in the rest of the U.K.

The economy never really recovered & not did wages. The low interest rates were just a sticking plaster.

The population has gone up by 20 million since I was young.
That's more than most european countries (possibly all european countries).
600,000 immigrants last year - that isn't affecting housing ???

I’d like someone to explain to me how house price crash would help renters get on the ladder?

If vast numbers of people are in negative equity, surely the supply of properties hitting the market will slow down massively - people won’t sell if they can’t cover their mortgage.

And if there’s a house price crash, won’t banks be far more conservative about lending, reducing the availability of mortgages or asking for more deposit?

I don't think it is like the past - I can remember 1990s 'crash' which didn't affect all the uk mostly the SE.
Because people are buying property as it is a safe investment in a dodgy world.
Best thing you could buy to hand on to your kids is land. Or a house but a house takes more attention and money to maintain.
I can't see a way round this. Rich Chinese/Russians/ Qataris buying up property in the UK as the UK isn't a dictatorship and has a reasonable judicial system.

I’d like someone to explain to me how house price crash would help renters get on the ladder?

It depends on the renters. Not every FTB only has a small deposit. Lending has already tightened up, how much tighter do you think it will get?

We tried to buy in the 2008/2009 crash. Just as it was starting to progress lenders pulled all offers off the table and stopped most mortgage offers.

we still rent now.

I was a ftb in 2010

Yes that is true for things other than house values, which is what I and the poster were discussing, the recovery of house values.

There can only be a sustained reduction in housing prices relative to wages if there is a huge increase in supply, which is only possible with a big increase in building.

A housing crash would certainly help those in a position where they currently cannot buy, but that’s balanced with the many, many others who would then be in negative equity. I honestly can’t see a way to square this circle.
If the people who currently have the houses can’t pay the mortgages, it’s likely that the people who want to purchase the houses can’t pay the mortgages either.

If vast numbers of people are in negative equity, surely the supply of properties hitting the market will slow down massively - people won’t sell if they can’t cover their mortgage.
The only sellers will be forced sellers i.e. repossessions. So as I said, if those people can’t pay their mortgages and are getting repossessed, it’s likely that the same economic conditions will also make it impossible for potential buyers to pay the mortgage.

I don't think the Tories want a house price crash.

But they don't want rampant inflation either.

At the end of the day, curbing inflation is more important to them than the housing market. If the housing market is a casualty of that process, then so be it.

This.

Eveni if there is a crash it doesn't mean renters will suddenly be able to afford to buy.

Also LL's who are forced to sell their properties - well, all that leaves is less rentals homes and more renters with nowhere to live. The rental market is already dire, there are barely any properties to be had.

At the end of the day, curbing inflation is more important to them than the housing market. If the housing market is a casualty of that process, then so be it.

True but all that money servicing mortgage debt is going to have ramifications on the wider economy eg jobs.

Some people will lose out if there is a crash but it’s absolute madness currently and we need an adjustment.

So what are renters supposed to wish for ? Ever increasing prices ? That landlords should make a ton of money on house price appreciation ? Renters should "know their place" and keep renting forever, as prices become ever more unaffordable ?

I am not a renter and I want house prices to come down. Because high prices make the country a crap place to live for the majority of people, and make it dangerously unstable as people load up on credit in the hope of making a quick buck, only to go spectacularly bankrupt when the whole thing goes tits up.

I'd like to see a government policy of attempting to cap house price inflation at no more that 2% per year. I wonder how many howls of protest that would generate ?

Which is exactly the mechanism of how inflation will come down.

Selling off council properties at less than market value and without ringfencing the council income for new builds was so short sighted it was unbelievable.

However, house price inflation climbed in the Eighties partly because so many more women were working and continued to do so after marriage - I was one of them. It meant an increase in buying power per couple and gazumping was rife especially in cities. To have kept inflation in check it might have been wise to lend on a smaller multiple of the combined salaries than lenders did at the time. Many people had to surrender the keys during the recession and galloping inflation of the early 90s.

But how would a housing crash improve those things?

We would still have the same number of houses (Which is not enough!)
The only thing a housing crash would mean is that the majority of home owners would stay put rather than move to try and wait it out. A small number (and I'd like to think nobody actually hopes for this to happen to other people) might lose their homes but even if it meant people currently renting would then buy those homes, the original owners would still need to live somewhere so would then presumably have to rent themselves.

It's possible that some landlords might struggle to pay higher mortgages so sell up and thus those homes might come on the market for buyers... but they also might just pass the mortgage increases on to their renters, or other landlords might buy up the houses.

It's not like there are hundreds of thousands of homes lying empty and it's just that first time buyers can't afford to buy them. First time buyers houses will only become available if the current owners move out of them so (unless a home gets sold when the owner dies) they need to have somewhere to go.

The only way to make a significant amount more homes available for renters who want to buy is to build more homes (or for a significant amount of homeowners to die!)