BoE: Prepared for house prices to drop 33%

[BoEbrexit]

Wasn't sure whether to post this on property or here.

I'm a FTB and just saw the BoE stuff about being prepared for property price drop by up to 33% and massive interest rate rises.

I already knew that now is not the best time to buy, but I'm moving to a new area, and I might not be able to get a mortgage in a year or two due to work situation. I may move after four years or so, and was prepared for the fact I might sell at the same price, or slightly less...but one third less would be pretty destroying! (FYI, its not an expensive area, but not that much available, so prices seem to have stayed pretty stable over the years.)

My parents don't seen phased, saying I could just rent out and move into rented if in negative equity, like they did in the nineties.

Anyway, is anyone else panicking about this?!

@Ta1kin

Exactly.

And I mean, a new kitchen costs 10 grand. Sorry but that's a bit mad. I could see the place I'm planning on getting going down to 75K (which would be shit as I'd lose deposit). But not 10K.

Demand for social housing won't go down because UC has screwed up housing benefit. Everyone needs a roof over head.

I would certainly hope that as @Bluntness suggests, Mark Carney knows more than I do

What do you do?

I know his credentials, and let's be honest they are impressive and the man has a huge amount of resource behind him predicting this.

What's yours ? Just so we can work out the credibility of your wild statements.

Do you also not own a property because you can't afford one by any chance?

I read what Mark Carney says (not the tabloid version)
I also read the business / finance press

House prices will only go below construction cost if there is a catastrophic population crash.
Unlikely.

Interest rates will only rise above 2% if the inflationary pressures outweigh the debt load of zombie companies
Unlikely

So Brexit will be shit for those without resources (many of whom voted for it)
and an inconvenience for the resilient (many of whom did not)

@Bluntness I certainly can't afford a property in the UK, but I wasn't kidding when I said I wouldn't buy one post-Brexit! My house is in France and is valued at pas grand chose. If I'm allowed to stay there after Brexit, I'm happy.

Like I said, I'm nobody in particular. I've just found out (thanks, wikipedia!) that I was at Oxford at the same time as Mark Carney and at a much posher college too! He has more degrees than me though.

You can't work out the credibility of my 'wild statements' by knowing my credentials. Plenty of prestigious individuals are wrong about all kinds of things, and Brexit is nothing if not an interdisciplinary problem which makes fachidiots of many commenters. Check out Dr North's blog today for an apposite example:

www.eureferendum.com/blogview.aspx?blogno=86952#disqus_thread

By the way, I don't think that Mark Carney is a fachidiot or that his comments are wrong. I suspect he has understated the risks of a No Deal Brexit in order to avoid causing panic. He'll be able to speak more freely when he steps down next summer,I'm sure.

House prices will only go below construction cost if there is a catastrophic population crash.

I agree.

Unlikely.

Disagree.

I think your biggest issue here Agusta is one of credibility. If I'm totally honest.

Sorry, I think you can keep posting about doomsday scenarios, catastrophic population crashes being likely, property losing 90 percent of its value, but sadly this is one of these scenarios where when your views become so very unrealistic you simply lose all credibility and your posts are viewed as such.

@Bluntness What factors would prop up UK house prices in the event of No Deal? I'm struggling to think of any. Because that's the issue here, not the credibility of any individual poster. We're all anonymous people on the internet and I've never laid claims to expertise on anything. If I make factual claims I back them up where possible, and if I make predictions I'm honest about how I arrived at them.

We all have underlying beliefs which inform our predictions about Brexit. Chiefly: is Brexit a cock-up or a conspiracy? If one takes the former view, one naturally expects the government to 'blink' soon and come up with some sort of damage limitation. If one tends to the latter view, one asks why the damage limitation anticipated by others has been left so late, and if this is not rather an exercise in disaster capitalism. And, to state the obvious, you can't have disaster capitalism without a disaster. Hence the diametrically opposed opinions.

We won't have to wait too much longer to find out which camp's hunches are right. Camp Complacency versus Camp Catastrophe. :)

There is no way house prices would crash 90%
I know many wealthy people that are cash rich and would pile in before prices got that low.
And people would not sale at that low price, builders would stop building houses so the housing shortage would get worse.
Just more scaremongering from people that for what ever reason are scared to leave the EU

God I came on here for sensible advice.

@Rosstac - the BoE stuff isn't scaremongering.

Btw I'm a remainer, and I think stuff is going to get really bad, esp if leave without a deal - I'm stockpiling.

But I'm sorry property is not going to drop 90% where the average annual wage is 24,000. I'm not listening to this. If it did then I'd just buy another house out of my savings :p. And that's why they wouldn't get that low.

I should have posted on the property forum

People say they want a 'correction' (ie drop) in the housing market, so that property is more affordable.

Whenever - and whyever - it occurs, people are going to be hit by negative equity to some degree.

And some people - different ones to those who want a correction - will deplore that, because they own an asset whose value has dropped.

There have been a few threads about this, and they do tend colonised by different groups of posters. On some, which are not in this topic, and not linked to any particular statement, a correction is a welcome and overdue outcome.

I have no interest whatsoever in house prices dropping (and think people talking about 90% drops are in cloud cuckoo land) but we sold our house just before the last big house price drop at the top of the market. Realising what was coming we didn't then buy another, we went into rented accommodation. We then sat and waited and the prices did come down. We bought our house at the end of 2009 for 25% less than what it was originally advertised for in 2007/8. Because of the uncertainty I personally would be waiting to see what happens rather than buying a house right now.

BoEbrexit if its not scaremongering then what is it ?, MC should just keep his mouth shut, He should report his concerns to the government,
with his track record of predictions and forward planning, I would have thought by now he would have learned to keep quite.

I think as the Bank of England have said it can be avoided, even in a no deal scenario, if we have a transition period, which we do, the built in transition perioed goes to the end of 2020, then we can rest a little easier.

The proposed transition period only applies if there is a deal. In a 'no deal' scenario we walk away with nothing agreed, and there is no transition.

@cloud

I agree that would be the best option. But my issue is that I might not be able to get a mortgage in a year or two.

My normal salary isn't regular or enough to get a mortgage on my own, but I've just got a fixed term contract for three years on top of my normal work meaning I can now get a fixed term mortgage for three years. So I don't think I'd be able to get one at all in a years time.

Although if prices dropped 90%, I could cash buy this house x 4 :D

@Rose

I could stand to lose about 15%, and I know stuff is stagnating. In the most expensive parts of London stuff has already dropped 30%. I don't have a problem with any of this, but a third of the value being wiped off all housing stock in UK seems a bit much.

It's not scaremongering because he stated it wouldn't happen, he simply said they stress tested and if we had a transition period it wouldn't come to that. We do have a transition period. The problem was the media have spun it out of context. They are scaremongering not MC.

As for the whole will they won't they drop argument, people are often over invested either way, some want them to drop so they can buy a house, others are concerned about being in negative equity.

The whole 90 percent thing has just derailed the thread into Lala land, the poster may have well have stated Elvis is alive and living in her basement.

Project fear well underway then. Good time to buy I'd say

I think that as long as there is a demand for houses, they wont fall that much.
Interest rates will cause a fall in the price, but interest rate rises are likely to be small and slow.
A crash in the economy, or redundancy caused by lots of big employers moving operations to other countries would. I would expect this to cause a lot of variation geographically: eg if a town/area is particularly reliant on one employer/area of employment, then this employer downscaling is going to crash house prices.

I live in Aberdeen. A few years ago, the oil price crashed causing lots of redundancies (from often high paying jobs). Lots of workers relocated/went home when they were made redundant. There was a slight lag, but within months of this the house prices in the area started to drop (especially the higher price bands), and there were loads of houses on the market. Eventually it flattened out again, but still a pretty scary time for anyone selling! Also, there was a very noticable effect on other areas of local employment not directly related to the main industry as things filtered down.
I see this as a sort of microcosym of what may happen on a larger scale if we lose some major employers, especially well paid professional jobs.

In many ways, it would be good to see prices drop a bit (slowly and slightly) or at least stop rising so much to help FTBs.
I would love this to be caused by an increased supply of houses.

But if house price drops are driven by a decrease in those able to afford houses, then who really benefits?
Maybe some FTBs who are lucky enough not to have their employment affected. But the people best placed to take advantage of this are those with lots of money who can afford to have it tied up long term, and who aren't dependent on a wage.
So yay, the very rich get richer the poor (and the middle class and the moderately wealthy) get shafted!
Hooray for Brexit and the disaster capitalists!

@bluntness

Only a transition period if there's a deal

I'm reposting this in property

But I'm sorry property is not going to drop 90% where the average annual wage is 24,000. I'm not listening to this. If it did then I'd just buy another house out of my savings :p. And that's why they wouldn't get that low.

If you were listening you'd sell your house and move your money out of sterling. The average wage today is irrelevant because any future devaluation of sterling (likely to be severe under No Deal) will wipe off a big chunk of its value. Wages are also likely to fall for the forseeable future after Brexit as jobs are lost and unemployment rises. Yes, speculators getting back into the market will put a floor under prices, but you wouldn't buy a second house and leave it empty and rotting, you'd plan to flip the house (where is price growth to come from when the economy has collapsed?) or rent it out (but prospective tenants will be destitute or have left the country). Ordinary property investors won't invest without guaranteed cashflow and/or an exit plan, and the economic collapse following Brexit will surely last a decade or more. Meanwhile anyone who still has money (because they moved it out of the UK in time) will be chasing better returns elsewhere.

Piss off with the "project fear" stuff. The BoE simply doing their job which is to anticipate worst case scenarios and prepare for them.

I don't have a house, you're not even reading my post. I'm moving this post.

Media are the ones peddling misinformation about Mark Carney's statement. Relying on people who don't read anything longer than a headline.

Only a transition period if there's a deal

That's not correct, this is already agreed and signed off. We have a transition period from the end of March 19 to end of dec 2020.