Is this the start of the house price plummet?

[Home2018]

Slowly but surely the papers are reporting reductions in line with the projected economic difficulties.

The Telegraph has today published an article which says those under offer should 'definitely try to negotiate a reduction'. The 'expert' then goes on to suggest trying for a reduction of 10-20%.

Is this the start of things to come?

www.telegraph.co.uk/property/buy/buying-house-coronavirus-advice-lockdown/

@ChocoTrio or:

www.independent.co.uk/news/uk/politics/coronavirus-furlough-cost-how-much-banks-bailout-trident-hs2-a9514231.html

The Office for Budget Responsibility estimates that the impact of all these crisis-related packages will add up to more than £100bn this year.
...
In the 2007-09 financial crisis the government had to bail out UK banks to stop the financial system melting down. The National Audit Office says that at the peak of the crisis the government was forced to pay out £133bn in cash, including taking public stakes in Lloyds and the Royal Bank of Scotland.

It also had to provide various public guarantees of banks’ balance sheets adding up to more than £1 trillion.

This has only just begun. Banks may need rescuing yet through this crisis. The bill for this is going to cost us all, for many years. Raising interest rates, high employment from companies closing and the end of the furlough scheme, causing mass unemployment, as industries have shrunk. Gloomy times ahead and house prices plummeting will be an effect of the above.

Just heard from a colleague who has their property on the market that their buyer who has revised their offer from £600k down to £500k, sounds like the reductions are already happening

I wouldn’t take much notice of just one persons offer. They could be like a couple we had who offered us a paltry amount for the house we had up for sale during the early 90s
We were moving because Dp had changed jobs and was commuting 2.5 hours each way to work.

We then found out they had been banned from estate agents in a nearby town because of their insulting offers.

They were being shown round country manor houses and places up for sale for several hundred thousand and offering £75,000.

They were convinced that everyone who was selling was in dire financial need and they could pick up a bargain.

Demise of the EU is looming IMO, that will lead to very unpredictable interest rate movements and credit market volatility, people need to be very wary of big debt loads going forward.

FYI re house prices.

'Coronavirus: House prices may not recover from lockdown slump for 11 months' - Surveyors expect an initial downturn in prices as the market gradually reopens with lockdown restrictions beginning to be lifted.

And

'How will coronavirus affect house prices – and should I hold off buying a property' - Forecasts vary, but analysts can agree mostly agree on one thing: prices are going to fall. Some predict by -5pc, others -30pc.

Those kind of percentage drops are the equivalent to what some people would put down as a deposit - it is going to cause a huge shift imo!

Except for no one is talking about the following recovery.

"House prices will take nearly a year to recover from a slide caused by the coronavirus lockdown, according to an industry poll.

Surveyors expect that prices will fall as the market slowly begins to reopen following restrictions imposed in March to curb the spread of COVID-19.

They are not expected to return to pre-lockdown levels for 11 months, according to the report from the Royal Institution of Chartered Surveyors (RICS)."

A year isn't that long is it? Personally I think this is such an unusual situation that any predictions are as likely to change as often as the data about Covid-19 is re-interpreted.

Maybe its just me, but the last people I'd take market advice from are those with vested interests in maintaining the status quo.

The BOE know just how much confidence affects the market so their statements are not made lightly.

I'd certainly take their 15% and 'U' curve data over a private companies 5-10% data and reassurances of a 'V' shape.

Especially if those companies benefit off our spending in some way!

But maybe that's just me....

I agree with home. Vested interests in the property market, some people’s careers are based on rising markets. But markets are markets. They go up, and they come down. House prices can go down also. Recovery likely to start between 2024-2026.

@sbplanet a year isn't that long - but then we also have the impact of Brexit hitting us in about a year.

It might just be one major setback after the other

The house price plummet won't be a blanket 15% or whatever everywhere, surely? There are going to be some pockets of the country (possibly including London) that will be more resilient than others. Location, location, location... at least that's what I'm hoping!

@ChocoTrio " Location, location, location... at least that's what I'm hoping!" Is always true. :) But it's round the edges it gets a bit iffy! ;)

"However, the feeling that we may have bought at the peak and it might go into negative equity so soon is annoying and makes me feel a little foolish (not that anyone was to know that this coronavirus would act as a catalyst for a major recession). It's causing some anxiety - and I think it's normal - but just have to remind myself that we did the best we could (bought in a desirable location, good schools for dc, good transport links and with good amenities etc.). Will just have to see. Affordability is fine - it's just the whole knowing the value may drop and I feeling like we overpaid like a fool when could have got something bigger/better in the same location in a few months time etc!"

I understand why you feel this way, at least initially, after all no-one likes to think they are losing money. But you've not lost money until you sell. :) I think it sounds like you been lucky to find somewhere you feel you and your family are going to be happy living in for some time to come. If houses in the area you bought in are really desirable then their owners are unlikely to want to sell them at a loss. So you might find that the market in your area stops completely.

Are you an estate agent sbplanet? You seem to be constantly talking the market up. I agree with home, and feel that the economy and Brexit will lead to falls of 50%. I am neutral but realistic.

Lol @susan867 I'm certainly not an estate agent. Are you and Home2018 landlords, you view homes as property. I've been positive about the housing market because long term is what property is all about for most people - it's their home.

@susan867 - I don't think you have to be an agent to talk up the market. A lot of homeowners I know in rl are trying to constantly talk up the market to themselves and others because the idea (realistic or not) of the house market crashing is quite scary and upsetting; the mere idea of it threatens a lot of people's emotional and financial security! So, talking up the market is an understandable defence mechanism, I guess.

Hope for the best, but expect the worst!

@sbplanet - thank you for the encouraging words! Means a lot!

I agree that it's peoples' homes and a very personal topic - long term is a healthier way to think about it under the circumstances.

I see properties as an asset, shelter and I’m not a landlord, I’m a surveyor. I understand that for most people ,property is their home. Fair enough. But what I don’t understand is why the same mentioned people get so bothered about the possibility of a house price drop. If it is their long term home, they have nothing to worry about (providing they can pay their mortgage). There are others that see property as an investment and own more than one. I don’t agree with this and believe this will be an advantage of falling house prices. Family’s that are currently out priced of the market, can finally afford a home.

What area of surveying are you in @susan187?

Do you have any insight into whether surveyors have been given RICS guidance (or any guidance actually) on mortgage vals in particular?

I imagine that it must be a tricky thing for them. As per another thread and a poster who has had a 5% down valuation, 5% seems conservative. But, since this situation is unfolding daily, it's hard to know what sort of percentage they can tangibly go with.

Of course, this is house and location specific, but I'm interested to know whether there is some collective thinking or whether surveyors are going it alone!

I’m in valuations with a real estate and economics degrees. The fact is, nobody has a crystal ball. No one can predict how this will pan out. The Bank of England states we are currently 16% down and mortgage providers are lending to this, with 85% LTV. The V shape recovery is now looking unlikely and it will possibly next a U or L. It all depends on when lockdown is released, the longer the lockdown, the worse/longer the recession/depression. We are in unprecedented times. With Covid closing the economy, and with it, jobs, companies, stocks, shares and house prices are all being deflated. You can read a lot through economic models, but it remains that house prices are in a huge bubble (as all assets are/were). When a newly qualified doctor can’t afford a house, there is something very wrong. We have never recovered from 2008 and still have emergency interest rates. Far too many people in debt; mortgage, credit card, pcp etc and not enough savings. What would happen it interest rates rose to 5%? It’s really not good. I am very concerned for my children’s future.

Sigh, not good news for us. Bought aged 22 in 2017. Hopefully we can stay here long enough for it to rise again before we need a family home. It would be better overall if the price falls of course, but negative equity isn't fun

@susan867 "There are others that see property as an investment and own more than one. I don’t agree with this and believe this will be an advantage of falling house prices. Family’s that are currently out priced of the market, can finally afford a home."

I would like to think that if we end up with a market that falls a long way it meant that people currently priced out could afford them. But the market has limited supply and lending would also alter, just can't see you hope happening. I'd prefer that more social housing was built by local councils, but they shouldn't be sold off.

@susan867 we're bothered because while our flat is our home, I can't raise kids in a 2 bed flat with no garden. So we want to upsize but negative equity may mean we can't afford to where we live and we will have to live somewhere and commute 1.5-2 hrs

Sp, if landlords sold their portfolios, there would be enough houses. There is enough houses in the supply for one each. They have out priced family’s with their interest only BTL mortgages and now said family are renting these houses from them, paying ridiculous rents (more than the mortgage would have been on same house). Start saving and hope for the best. Interest rates are the key and could potentially rise to protect the pound due to Brexit.

@CorianderLord - you never know until it actually happens. I'm a big believer that if there's a will there's a way. So, you should be ok if you play your cards right. You may need to compromise - maybe means moving area completely or doing a part-exchange with a builder or something, but you'll find a way I'm sure!

Good luck!

@susan867 - I don't see BTL selling up their portfolios if there's to be a major recession and house price slump unless they really have to.

Yeah - interest rates are key here. The thing about covid is that the Euro and other currencies may suffer alongside Britain in Brexit mode. It's a bit unpredictable - however, I suspect there may be an international effort to progress from this situation. Here's hoping for the best but expecting the worst!

Tenants are not paying their rents, due to unemployment and reduction to income. They may not have a choice. A influx of BTL properties hitting the market will contribute to the house price falls over next few years. You can see them on rightmove, lots of flats in last few days and few houses in my area. No onward chain.

@susan867 - I guess that makes sense. However, if there is high unemployment and dire financials then surely tenants would get some help from the housing benefit system? Or are you suggesting that wouldn't cover the costs of the rent? Where else will people live if they can't rent? I guess move home?

*as in move home to parents etc.