Is this the start of the house price plummet?

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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/

I don’t know what will happen to the tenants in financial distress. Tenants have no protection and can be given 2 months notice. Housing benefit will cover a portion of the rent (amount depends on area and family situation). Where I live a 2 bed terrace is £1200 a month to rent. I believe housing benefit would cover between 700 and 800 a month, so massive shortfall. It’s ironic really that BTL pushed the market (house prices) up and will now be bringing it down as forced sellers.

In addition, most BTL mortgages have a clause that does not allow UC.

@susan867 - oh really?! I learned something new there - I had no idea about that! That sounds a little... discriminatory?

Just did a google search and it seems like the government is cracking down on that. Quotes below from www.buyassociation.co.uk/2019/03/08/government-crackdown-on-buy-to-let-landlords-no-benefits-no-dss-adverts/

"The minister for family support, housing and child maintenance, Justin Tomlinson says: “Everyone should have the same opportunity when looking for a home, regardless of whether they are in receipt of benefits. With Universal Credit, payments can be paid directly to the landlord, and we continue to listen to feedback and work with landlords to improve the system.”

"Mortgage lenders have a responsibility too

"According to the Residential Landlords Association (RLA), over two-thirds of the largest buy-to-let lenders do not permit landlords to let property to tenants receiving housing benefit.

"However, in a market leading move, Natwest bank has announced that restrictions on landlords with buy-to-let mortgages from letting to benefits claimants are to be scrapped.

"Nationwide is another lender that doesn’t force landlords to discriminate against benefits recipients and is urging lenders, agents and landlords, to change this outdated practice. Paul Wootton, director of home proposition at Nationwide Building Society, says: “Everyone should be able to access a safe and secure home suitable for their needs. The continued presence of ‘no DSS’ restrictions in the private rented sector is unfair and denies this right to a significant group of people”."

@susan867 - I suspect that if there is a massive downturn then BTL mortgage companies will have little choice but to waive those clauses in order to keep the BTL market afloat. It's all speculation, but I can't see why they wouldn't try and help tenants in that way.

Up until recently, two thirds of BTL mortgage providers did not allow UC claimants. It looks like that has recently changed for new mortgages taken out.

That would have to come from the government. Maybe it will?

Landlords in some cases are still reluctant to rent to people on benefits.
Although they are not allowed to advertise as such they can weed out anyone on benefits by asking for things that they know tenants are unlikely to be able to provide on benefits eg a guarantor for example.

@CorianderLord I am also in the same position, probably raising an only child in a 2 bed flat (albeit in communal garden).. However, I would have thought covid may improve your chances of upgrading providing you overpay so you aren't in negative equity equity. If prices had continued to rise, so would the price of the house you want to buy.the property ladder doesn't exist anymore, whatever you gain in equity often is cancelled out by the rise in prices. If prices drop, you have to hope that the prices of the houses dip slightly less than the price of the flat, perhaps due to affordability..the houses where I am are £800k, my flat is £400k. Since brexit, the terraced houses dropped more than the flats maybe because fewer people could afford them.

If there is a recession and house prices go down no BTL landlord will sell because rents usually go up.

And vice versa house price rises = lower rent.

When the government stopped mortgage interest being put against income to reduce taxes everyone said there would be a huge influx of ex rental properties onto the market and house prices would reduce dramatically

But there wasn’t. All that happened was rents went up to cover the shortfall and the tenants ended up paying or landlords turned their property into Airbnb type rentals and were then able to put their income against the mortgage interest.

If a landlord has paying tenants then they are not going to sell.

If the tenant doesn’t pay then they are out and they moved onto another cheaper property and the landlord will find someone else. Otherwise they will turn the property into a holiday let type place till they get someone else.

Yes some will sell but I don’t think anyone should be waiting for a big influx of rental properties onto the market.

During the last recession landlords were desperately trying to sell. Your theory makes sense to an extent, but that's not what actually happens.

It depends which recession you are talking about

2008 hardly touched this area and I didn’t notice a particularly big rise in BTL properties coming onto the market.
Otherwise FTBs would have been out in force as the market would have been driven down everywhere and they would have been able to buy for a knock down price

The early 90s was a different kettle of fish
The extortionate interest rates meant people couldn’t afford their mortgage let alone rent even if there were 2 incomes

With a starting interest rate of .1% I don’t think we will have a repeat of the 90s

I’m an accidental landlord in that I bought my house in 2003 to live in and lived in it but then lost my job (great timing!) and my new job was in another country so I moved away to work, rented it out and been here for work ever since.

I put my rental on market back end of last year but got only derisory offers so took it off before all this hit.

I do plan to sell in 2022 but only because we’d like to invest in a holiday home in France instead. But if prices drop then I’ll just keep on renting it out as mortgage will be paid off by 2028. So I don’t think we will see an influx of BTL for sale since as long as landlords can still get rent, for most, it makes sense to hold on to their properties and sell on recovery.

But of course o could be wrong as quite frankly, who knows!!

Oliver, I’m sorry but I don’t agree with you. Landlords ARE selling and you only have to look on Rightmove to see this. In my area alone, 22 NO Onward Chain properties went on yesterday. And they are desperate, forced sellers and will be taking a heavy reduction on the price to sell. They see what’s coming and want rid.

Rents are reducing too, as more people are unable to afford their property and are moving in with family’s. People are leaving our country in droves due to Brexit. Again, Rightmove will show this.

How many homeowners took a mortgage holiday recently? When their current fixed term ends, they will have no other choice than to be put on a SRV product. This is an increase in 2% interest rates.

Foreign investors are selling and taking their money out of our country. Not sure if this is down to Covid, Brexit or maybe both?

Interest rates WILL go up due to Brexit, there is no other way. If they remain this low as we leave the EU, our country will be bankrupt. Our country and the pound has to be protected.

We don’t even know about the virus, waves 2 and 3 are expected, with possible further lockdowns. All economic data at present is assuming the virus goes away.

All sectors are shrinking and most furlough won’t have a job to return to. Companies are cutting staff now and making redundancies to try and stay afloat.

This depressed is forecast to be worse that 1998. The government will not help the housing market this time as it will be fighting to save our country.

This is not just our country, it’s global. The next few years are going to be horrendous for all of us.

Rents wont rise in this recession IMO, doubtful they really ever did in the past TBH, headline rent levels from VIs are usually well out of step with actual paid rents to private landlords by long term renters, and also BTL was still considered something to protect back in 2008, now it is just a tax grab opportunity/political football for the government. Of course low or no mortgage landlords with reliable tenants will probably stay where they are, but the over-leveraged/don`t really know what they are doing crowd will be under pressure, that is the point of the tax changes - to chase these landlords out of the market and get cheaper houses on to the market for FTB.

When it comes to paying for all this fiscal intervention I hope they also target the BTL market & increase stamp duty on 2nd homes.

I'm a midwife & DH is a doctor & now in our mid 30s have finally started to feel secure after yrs of working super hard, paying through the nose for rents & saving for a deposit (no family help). We bought a few yrs ago & it took us some time to get savings together again. We finally have some disposable income & security & are looking to start a family now. We have both worked throughout this crisis & the idea of pay freezes makes me so angry.

How many homeowners took a mortgage holiday recently? When their current fixed term ends, they will have no other choice than to be put on a SRV product. This is an increase in 2% interest rates

But you are talking about some homeowners

Mine is an interest only fixed rate tracker for life.
I know a few people who have similar
Yes we could afford to pay the £200/£400 etc per month mortgage but we prefer the money in our pockets and not somebody else’s.

There might look like there are many millions claiming UC and many millions on a mortgage holiday.

It doesn’t mean when this all ends there will still be the same amount of people on UC or that those taking a mortgage holiday can’t pay their mortgage

Rents won`t rise in this recession

So if everyone is selling because they can’t afford their house where exactly will they live?
If they all go into rented won’t rents rise just because of supply and demand

@Shinesweetfreedom - yeah but I think the discussion was about existing tenants who may go into financial hardship and require state support unexpectedly as a consequences of what's happening with covid etc. I suspect those tenants would be in a better position because they would be existing tenants and would have already built up a track record with the landlord beforehand.

Also, from another thread I just learned about how HTB works - it's 20% of the house's value regardless of the initial equity loan borrowed.

That got me thinking - that surely must be an incentive for the government to ensure that house prices won't drop too much, because they won't get back some of their initial 20% investment in HTB homes (because it could reduce to below the initial equity loan).

Just a thought - the government have a vested interest to ensure the property market is buoyant.

@Oliversmumsarmy out of interest, if it's interest only how are you going to pay off the capital at the end of the term?

@Oliversmumsarmy live with family. So many young people are now moving back to live with their parents.

@Desiringonlychild that's probably why that poster always talks up prices.

Reminds me of that SM4 (?) poster who would literally go on & on about amazing Sutton even if someone was looking to move to North London. Wonder where they went?

@ChocoTrio most governments want to prop up property prices, there are always more homeowners than renters as a percentage of the population. But it's not like the government can completely dictate the property market. I think the government would take extreme measures to prevent property prices from falling, but no demand and forced redundancies are out of their control as they can't be paying private sector salaries indefinitely.

@Desiringonlychild

That makes sense - the government has its limitation there for sure.

re: @Oliversmumsarmy out of interest, if it's interest only how are you going to pay off the capital at the end of the term?

If it's interest only then I suspect that a lot of BTL landlords do it for capital gains reasons.

Desiringonlychild

Not everyone has family. I know I couldn’t live with mine and if you move for work what then?