Are house prices going to go down in 2012?

[Deadsouls]

Hello,

As the title says, anyone know anything about these things. We live in West London, where prices on 3 bed houses have gone up by about £50,000 in 1 year, so prices seem high.

We think we are going to buy, a little out of our ideal area, because we can't afford our area. But it seems so crazy that prices are going up and up and up....so the dilemma we are in is that soon if prices do keep going up we won't be able to make the jump from flat to house (that is in the rough area we are in near DCs school).

OR are we buying at a peak and are prices going to go down...do we wait? Clueless about these matters, who can I ask, estate agent??

I live in Surrey and I would be very very surprised if the prices went down here. During the last crisis they just slowed in going up really.
I have also heard Estate Agents predicting prices would go down for most of the last 12 years, and it hasn't happened yet.

Well I renovate for a living and don't do buy to let but usually when my buy to let 'friends' start selling off (which they started in sept last year) That is a ign of falls coming. The economy is dire and it is only the new tax year with all that brings for people's finances that shows how things are. I think 5-10% down by xmas is not unrealistic. I am looking to buy and had several offers declined at the end of last year most have come back to me this year indicating they would now take the offer. But a home is a home and if you need to move and are comfortable with payments etc that is a big consideration.

I heard on the news recently that there are 30% fewer houses for sale in London now than 5 years ago. Perhaps prices will go down when more come onto the market, but there is also a baby boom which I don't think has peaked yet so catchment areas for primary schools will get smaller and more expensive in the near future imo

I think any falls will be led not by the agents and sellers as it has been in teh past but by teh banks and tightening of lending criteria which is starting now but will become law in 2013.

There are very few properties in general, within our budget or not, in our area, compared with this time last year. For the whole of this year, so far, it has been very quiet. And houses go within a few days.

Several times we missed out because we weren't together enough. This house came on that meant most of our criteria, so we made an offer for the asking price. Being FTB, in retrospect I may have been able to negotiate more, but I think the vendors were set on asking price and we had missed out on so may houses before. I might have been able to get £5000 off, but anyway didn't.

AND the house has been done completely so we don't need to do anything. It is also in catchment for an outstanding primary and as my DH says we can 'add value', (estate agent speak).....I am concerned that we might not come across a house like this again for a while

I would take it, a good catchment area in London is not going to drop in value. The London market (well the SE as well) is stronger than the rest of the country, and if it is a good house near a good school it won't drop.

As long as you can afford the mortgage etc and are intending to live there for a good stretch of time, then even if by some massive fluke the London market does drop it will come back up and all is relative IYSWIM.

Don't lose a good house!

If you're planning to live there for the long term i.e 10+ yrs, I wouldn't overly stress about it. If it's less than 5 yrs, I would buy something that is easy to sell on i.e prime location, good school catchment, etc. It's hard to get a 'bargain' if there is not a lot of quality housing stock coming onto the market. The good stuff ime sells quickly if they are priced competitively - in a matter of days!

I can't see how house prices will ever go down in west London - we are renting there at the moment, but you never know, one lives in hope! My mum is in the midlands and the house there has lost a lot in value.

I think prices will go down in most places this year but London is a different kettle of fish what with all that foreign money coming in.

I'm not sure asking an estate agent will help unless you know a very blunt one.

Have you done all your homework researching sold prices on the Land Registry? You can get a general idea of movement in your area on Rightmove. It might not tell you what's going to happen in the future but at least it will tell you if people are telling the truth about what's happened in the last few months.

Asking prices going up does not mean sold prices have. The gap between them has been growing.

Firstly, what would you expect any EA who wants to sell you a home to say: "Yep, I believe prices are falling, you're better off waiting until next year"?

Secondly, you need to look at what is supporting London prices and importantly whether it is sustainable. Foreign investors seem to be largely responsible for London prices at the moment; this is due to a number of reasons including the current geopolitical climate and exchange rates - both of which are temporary and subject to change. Also, the London market is increasingly looking like an investment market - which means it will be subject to the whims and panic of investors (google 'dotcom bubble' for precedents). What about the 'olympic effect' - investors bringing forward purchases to take advantage of the much-hyped sky high rentals over that period? What happens after the've finished though? Consider too that LHA rates are in the process of being reduced which means lower rents and so less incentive to get into BTL (this will have a larger impact in London due to the higher rental costs).

Finally, and this relates to the UK housing market in general, prices are being supported by a number of factors: Low interest rates, incentives (e.g. FTB stamp duty break), bank forebearance etc.; non of these are sustainable in the long-term and some are already being removed e.g. stamp duty holiday ended at the end of march and mortgage rates have been rising since the end of last year. And remember this is all against a backdrop of rising unemployment, wages dropping in real terms and various benefits being cut.

I'm giving you an economic viewpoint but of course the other side of the coin is that a home is for living in; if you are happy you could afford mortgage repayments when rates go up again and have sufficient equity (i.e. so you wouldn't be at a disadvantage when you want to remortgage if you had less equity) - it depends on what your priorities are really.

The problem in the South East especially the nice bits, is there is huge pressure on housing, not much land to build new homes. Never mind that the new homes built have tended to be two bed buy to let, not three bed or more family homes. Never mind that new homes seem to be particularly over priced, eg. a new house bought near me ten years ago will at the most have only increased a little in value, whereas my house is worth at least 50% more. The newer houses are smaller in terms of room size, and have very little land/garden.

alabamawurley, good analysis - the foreign buyers have had significant impact in London as the £ has been weak against the Euro and Aus$. However to balance those factors interest rates are likely to remain low for a period of time, London's population is still increasing and there is political "will" to keep house prices steady or certainly not in major decline (as in the past recessions when repossessions soared). Is is sustainable, that's the question we have all been asking for years. The Australian house price bubble still looks like it's continuing but most bubbles do eventually burst.

Buy if you like the house enough to stay for at least 5 years (the costs of moving is so high that you have to factor that into the equation) and if you can still afford mortgage costs at higher interest rates (6-8%).

I think the gap between wealthy areas and non-wealthy areas will grow. And prices in non wealthy areas may well fall, while prices in wealthy areas may well increase.

I don't think it's as simple as North and South any more.

I see where you're coming from Smum and I'm inclined to agree that base rates will stay low for some time. However, as a number of lenders have proved lately, this won't stop them raising their own rates regardless.

With regards to population, yes no doubt it is rising, but the strict definition of demand is desire and ability to pay - in other words, it is the rise (or fall) of individuals with access to sufficient funds that drives prices. Remember, prices dropped around 20% in 2008, not because we experienced mass emigration but because mortgage lending was suddenly tightened. Mortgage rates have been rising since early this year, mortgage approvals have started to drop and the Bank of England recently said that they expect the criteria for mortgages to be tightened further in the coming months.

The most common form of home loan in London is an interest only mortgage.

These are being discontinued by almost every lender; banks that continue to offer are doing so only for those with a 50% deposit.

The mortgage rate for borrowers has completely departed from the base rate - the best fixed rate deals are in the 4.5-4.75% range.

Asking prices in London are rising and good houses are going under offer very, very quickly. HOWEVER, chains are not completing successfully. There are very few houses that are actually being sold. Put your selected postcode into Zoopla and it will send you an email of how many houses actually completed. In my supposedly booming part of West London, there have been fewer than a dozen sales above £500k.

This is a long way of saying there's going to be a lot of volatility in the market, and there's no point in second-guessing. The old City saying that the market can stay irrational much longer than you can stay solvent has a lot of truth here.

You need to balance affordability of the mortgage versus the needs of your family, not try and second guess the market.

FWIW, I think there's going to be a very long period of stagnation in real terms, and we aren't going to see capital growth in the housing market like that which occurred in 2002-07 for another generation. The cheap Chinese money isn't there to finance cheap borrowing any more.

sorry, that should be new borrowers.

they are going up in my city (se) - lack of housing means demand has gone up. Lots went into rented a few years back and are now regretting it and keen to buy. Nothing to buy. So the odd house that comes up in a good area is selling in days at a good price.

I'm with ThomasBodley on this one re stagnation. IMO in the London area house prices are going to stay the same for at least the next 10 - 15 years, or fall, depending on what happens in Europe.

I think there could be a another big bank bust up soon which will have ramifications for the UK.

Agree with Thomas we havent seen the end or in the opinions of many the start of banking failures and credit tightening. I know someone recently sold her house to divorce and between it exchanging and completing her agreement in principle was reduced by 75k and shecwas toldvit had to be 100% repayment rather than the 50:50 she had originally agreed

Newgirl "The odd house that comes up in a good area is selling in days at a good price."

Don't believe this classic example of estate agent piffle.

A house does not "sell in days".

I was a 100% cash buyer (had sold two years previously), bought a chain-free property, and had an attended exchange. It took exactly 30 days for the deal to be done - and it was the fastest residential exchange my estate agent with 15 years' experience had ever done.

Just because a house goes under offer within days doesn't mean it's sold. To buy at that price, the buyer has to have the funds to pay the asking price.

I know a surgeon and a GP who have a combined income of over £200k; their mortgage application was turned down in so-called "bulletproof" SW11 recently, and they're back in rented.

There are people with cash propping things up atm

We did 25 days in 2008 buying from a btl landlord whom was getting rid of some houses. I think we will be back in that territory again later this year wearily next.

We are in surrey in the catchment area of 3 outstanding primary schools which are oversubscribed every year. For that reason prices have not gone down but up. We constantly get estate agents letters through the door asking if we want to sell as they have buyer's waiting. I'm sure the buyers are wanting to get into one of the schools.

So, if you are in the catchment of a good school your house will hold value, regardless of other economic factors.

Agreed, Noddy.

The very poor returns in banks for cash - and the fragility of some banks - mean people who sold and moved into rented, people who have inherited, people whose industries are still booming etc are reluctant to keep large cash deposits and have spent it on a house, not least because the borrowing is so low that it's an ideal time for them to make capital repayments.

Cash injections of foreign money is another estate agent myth - it affects about four London postcodes, and very specific kinds of properties. Oligarchs do not buy off the Goldhawk Road!

Nonetheless, prices here have tripled since I first bought in 2002, but the growth has all been funded by cheap mortgages in the early 00s and the demographic blip of 70s kids reaching prime earning potential and house purchase which involve two incomes rather than one. Moreover, my "growth" is illusory - I will only realise this if I cash out of the market at some stage. Then where will we live?!

I've no idea how long this cash is going to last, but I also don't think we should fall into the trap of thinking our homes are investments. They're opportunity costs which give us the means to live our lives and earn our wages.

Jasminerice I agree with you on the enhanced desirability of homes within catchment areas.

But I don't think it's true that they will always "hold their price".

Some houses (for example, in Surrey!) now cost £300k more than similar houses a mile away in a less desirable catchment area; but £300k is enough to put two kids through private education. More and more people will go down this road, IMO, as soon as they realise stellar capital growth isn't returning.