To think that house prices will ever fall to affordable levels?

[MumNWLondon]

I saw this in the Daily Mail:

link

For those that know me, I have been a property bear (ie I think that house prices will fall) for a while now; I think its very sad that its no longer possible to buy an average family house for three times family income, and ever sadder that many bought in at the peak and now face negative equity in small properties and hence will not be able to easily move to a family home.

So am I being unreasonable to hope that house prices will decline to sensible levels and do you think its likely?

I hope so too. The cost of mortgages and ridiculous high rents are crippling most people.

Trouble is most people can't bear to think their property is worth less than they think it's worth. They don't understand that their children and grandchildren would never be able to buy without house prices coming down considerably.

I personally don't care if my house is worth half what I paid, so long as all house are worth less. However, for those with outrageous mortgages it will mean terrible times ahead. Don't know how this will eventually pan out.

Depends what position you're in.

If you bought yonks ago and have tons of equity or if you haven't been able to afford to buy yet then it's not unreasonable to want that.

If you bought in the last 3-5 years then you have much more to lose.

i think that housing should be affordable too without ridiculous mortgages but at the same time i don't wish for a crash that puts everyone into negative equity and means nobody can sell to move.

i suppose the best solution would be if they just stayed level, so that eventually inflation would catch up and make them affordable but without anybody having to get trapped by negative equity.

UK house prices will always be ludicrously inflated until there is no longer a housing shortage. Having said, too many people value houses at far above the intrinsic worth of the building and will sacrifice everything just to own a house.

YABU, I hope the same thing. I'm looking to buy a house with DP soon and its soul destroying to think that with two graduate salaries we will only just be able to afford the 3-bed terrace house my mum and dad bought at 18 on shop assistant wages. I also find it annoying that while we actually want to do the sensible thing of saving a decent deposit (as my parents had to do) my SIL took out a 100% interest only mortgage and is now whining that they can't afford to move.

The thing is though, wanting it to happen doesn't mean it will happen. And I can't believe that the market will fall that much - where I live prices are starting to rise again and lots of houses are snapped up as soon as they hit the market. Sorry.

The country is not out of the woods yet though sybil. There are many factor that could cause house prices to go either way. If interest rates go up then there will be fewer buyers and house prices may be forced down.

I think for the most part, areas with house price rises are experiencing a lack of property on the market at the same time as rising demand. If more properties were on the market or there were fewer buyers then this wouldn't be the case.

yy Sybil. We;re selling our flat in London. We'd expected it to have gone down since it was valued in 2007 but has gone up[ because there is such a shortage of property.

I'd be quite happy for all house prices to decrease generally and become more affprdable but there is a huge onstraint esp in London and the SE that there aren't enough and scope to build more is limited and often comes with vast remediation costs for sorting out contaminated land etc. Public transport/ trains / road links etc would also have to be dramatically improved to make a long term difference IMO

Unfortunately, I think YABU. Prices here have never fallen that much during dips in the property market and prices rise again quickly. Over the long term, property prices are going up.

Sorry but do you have any idea of the economics of development? The building land in the uk will always be in short supply unless you want your lovely fields and parks built over, plus the actual costs to build a decent quality property on an estate setting will cost around 900 pounds per sq m and probably more once you have paid the local authority its pound of flesh for Low cost housing.
The brickies and chippies deserve a decent wage , say 1000 per week for a job most people would not do as it involves working in a dangerous and very exposed job(I mean weather and surety of work.
So look in to the facts of development please.
ps when you could buy a house on a shop assistants wage how many houses had heating, double glazing, cavities, insulation full safe electrics, 2.5 bathrooms, and a workforce that requires decent pay?

I agree that there may (and probably should) be a period where prices stay level, but I don't think a huge fall is that likely.

I hope not anyway, negative equity is not something I would wish on anyone however desperate I was to get on the housing market.

Property prices have been going up recently because of the insanely low interest rates - hence very few forced sellers, and becuase of the feel good factor of all the economic stimulus the previous government supplied.

re: the land being in short supply well prices have been falling in Japan for 20 years despite it also being a densely populated island.

re: azazello your flat has only gone up once its sold. My SIL is trying to sell hers (also was told it had gone up since 2004) now several months later they'd settle for an offer the same as what they paid in 2004.

For us it doesn't really matter as we first bought in 1997 and have property equity - I just think its dreadful for those starting now.

92% of the uk is farmland - if a tiny fraction of this was built on, there would be enough housing...

but as it is, it is nigh-on impossible to get planning permission, therefore as people live fewer people per house, more households are created, (i believe - 400k new households per year - 85k new houses - the supply/demand ration is bound to push up prices)

the consequence of this in some areas is depopulation (particularly in AONBs and Park areas) whilst in towns a reasonable size house can be knocked down to make way for four houses....(as planning for this is possible to get..)

Meant YANBU earlier btw.

Beast, why should a shop assistant not be able to afford to buy a modest house so a tradesman can earn £1000 a week? Most of my family are tradesmen and they are getting priced out of the market too.

Their house may not have had 2.5 bathrooms (but thats not something I'd expect either) but it was done to the standard of the day.

YANBU
We've spent years waiting for house prices to fall whilst renting and writing to MP's who just aren't interested.

Thanks to an inheritance we are now buying the rental property we are living in as the landlord is selling up. Otherwise we would be desperately searching for another rental which are really thin on the ground around here. Buying will cost us everything we have and more but I am fed up of having no security!

Housing is in a shocking mess in this country. I do think there may be some falls later this year but there is so much vested interest in keeping prices high it may not be by much.

House prices are already falling, if you instal property bee onto your computer, it will bring up a box on Rightmove and Prime Location, detailing the history of the house, showing reductions in price. In the area I live a third of the houses under 200k have been reduced. I also looked on the House Ladder site today, and checked out the charts for a few different areas, they are all showing a fall in house sales. How could house prices possibly rise with the economic problem we have and the lack of Mortgage availability. Add in the proposed rise in capital gains tax, which is going to have an effect on the buy to let purchases and we are looking at a buyers market.

incidentally house-ownership is vastly increased - to 70% of people living in an owner/occupier house house (from 42% thirty years ago) - in the past it was phenomenally difficult for people to get access to the kind of credit that gets a house, even if houses were cheaper relative to average wage.

and according to the Nationwide house prices rose 10% this year...(and 6.6% according to Halifax)

short term, you'll get dips in value - for the forseeable mid to long- term future they will go up.

Hopefully the OP from Housepricecrash is getting the message that not all Mumsnetters are totally unaware of economics!!!!

I got rumbled! Yes I do post there as well. Someone commented (joked) yesterday there that would be interesting to see what MN members thought so I thought why not.

I am not a troll though totally geniune mum who is slightly obsessed with house prices and whether we should continue to rent or whether we should bite the bullet and buy. I do think houses are totally overpriced and I hover betweeen sometimes thinking houses can't fall in value and at other times thinking they will collapse...

House prices are already falling, if you instal property bee onto your computer, it will bring up a box on Rightmove and Prime Location, detailing the history of the house, showing reductions in price. In the area I live a third of the houses under 200k have been reduced. I also looked on the House Ladder site today, and checked out the charts for a few different areas, they are all showing a fall in house sales. How could house prices possibly rise with the economic problem we have and the lack of Mortgage availability. Add in the proposed rise in capital gains tax, which is going to have an effect on the buy to let purchases and we are looking at a buyers market.

?92% of the uk is farmland - if a tiny fraction of this was built on, there would be enough housing...?

And where would we grow our food?

92% UK land is farmland? Never realised that it was that high! Does that include national parks (quite a lot of national parks have grazing land inside their boundries).

We bought our house at the height of the housing boom (moved due to DH's job - he was home based but was promoted to a Head Office job, so we moved closer to his work, to cut his commute from nearly 2 hours to under an hour each way). We had masses of equity at the time, but that has virtually vanished.

We are now trying to sell our house, as DH has taken up a new job and so again we are needing to relocate again to reduce his substantial commute.

It is really frustrating for us because he has had a big increase in pay, so we can afford a bigger mortgage, only we can't shift our house! We originally puchased our current property with a 85% mortgage, but now the LTV has dropped to over 95%. If we managed to sell the house now, we will be selling it at around £25,000 less than we paid for it. We will have enough to pay all the fees but not enough for a deposit on the next house, unless we take out an additional loan.
However the brutal fact is houses are only worth what people are willing to pay for them. We should count our blessings that DH is on a good income and that we haven't as yet gone into negative equity as some people have On the plus side there are a lot of cheaper houses where we want to move to, so could potentially end up with a smaller mortage!

The ironic thing is I don't particularly want to move - I love the house, love the location we have everything on our doorstep and I have friends and a social life that I will miss a lot! If DH's new job was anywhere but the city it is (we both went to Uni there and still have lots of friends there, plus we will be moving closer to family) he wouldn't have taken it.

I presume you are in London OP. I fear houses in nice parts of this city are less likely to fall than in other areas of the country. The DM article you linked to observes the crash may apply only to certain areas. In
our part of London family houses are back to, or above, peak prices. Looking round it seems to me that the city boys are getting their bonuses again and that will support the prices of the nice areas. foreign buyers have also helped support prices but maybe the crash of the Euro will limit that factor. The new gov is already clobbering public sector workers but few of them could afford to compete for the nice houses anyway so I doubt that will affect prices. It's all very depressing.

Avacadoes - I think the OP's username is a bit of a give away

But yes I think in London the property market is different to other places. I live on Teesside - don't think there are many rich foreign investors and bonus boys living around here!

mintyfresh/MumNWLondon - I am a veteran poster on Housepricecrash too but not so much now. I like it for the economics discussions.

Given the UK economy, the tax rises coming, the cuts in public spending and the fact that wages are already falling I just cannot see how house prices can stay up. The problem is wages might fall faster than house prices so may remain unaffordable for many. The availability of mortgege finance will be severely restricted for several years in my view as the banking system is under severe stress still and falling prperty values will make banks even more reluctant to lend.

What will really make them affordable though is taxing property properly. Second homes and old people living on their own in family sized houses is a form of wealth hoarding caused by the way that residential property is virtually untaxed compared to other forms of assets or earning a wage.

This causes a an artificial shortage - property has become a tax shelter for most older people rather than just a place to live.