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/

M&S profits down 20% (thought they sold food and toilet roll?) we are just at the start of the job cutting unfortunately, I don`t think buying over-priced property will be the fixation it used to be once we get clearer on where the global/UK economy is going TBH.

Posters on here keep going back to the same points.

Houses in my area are still selling for pre-COVID prices

These are transactions in chains were finalised before lockdown or ones currently in the process.

Estate agents round my way say they've never been busier

Lots of delayed chains, want things sorted ASAP. Both the estate agents and solictors have got months of backlog to get through. It is going to cause a flurry of transactions in the next two months that will skew statistics and make house sales look like they're booming.

Supply and demand, we have a shortage of housing in this country. We will always need more housing for low paid key workers and service staff immgrating to this county.

Wrong.
We will only see the full impact of this once the furloughed period is over. Millions will be unemployed. A lot of those will be low paid service and key workers (transport staff, office cleaners etc).
The London (and major cities) landscape will have changed for a long time if not for good. Office space will be in abundance (why come in centrally when the infastructure is more effeicent/less expensive and been proven to work from home). Transport will be used in limited capacities. Resturants, bars and pubs that rely on turnover will be decimated. Construction workers will be layed off and sites mothballed as they'll be zero demand for shoebox £500k luxury flats that are being built on every square inch of land.

All those effected in those industries are more likely to be EU nationals in the likes of HMOs. If theres no employment, people return home, or seek social housing, HMOs become unrentable/unsellable.

Months of void payments will quickly make BTL landlords realise the gig is up and entire portfolios will come onto the market as well as AirBnBs. Then it will be apprant that we do not have a 'supply' issue after all.

Low interest rates means house prices will only ever go up

Wrong again.
The three D's, Death, Divorce, Debt will force sellers on top of the BTL brigade heading for the exits. Banks not lending (or requiring massive captital) to reduce risk in the forthcoming financial shitstorm will put the skids on the housing market. That will dictate house prices not interest rates.

@Lightscribe
That’s interesting,I did read that Airbnb’s were having problems,I guess unless they sell quick they will have to fight against the other landlords,so plenty of landlords chasing fewer tenants.
Do you think the government will target landlords further for more tax to try to make up the budget.

completely agree with this assessment, especially in the cities

Newsflash from Airbnb central -

www.edinburghnews.scotsman.com/news/people/dj-alexander-edinburghs-biggest-letting-agent-says-2008-crash-tea-party-compared-covid-19-around-15-jobs-be-cut-2856517

I think the government will find it hard to resist skimming more and more tax from property TBH, it is an easy target?

www.telegraph.co.uk/tax/capital-gains/13m-grand-designs-style-dream-build-now-40000-stamp-duty-nightmare/?li_source=LI&li_medium=li-recommendation-widget

I thought that was what the Scottish government wanted. Less air bnb and more long term rentals available to help the shortage of housing.

I thought that was what the Scottish government wanted. Less air bnb and more long term rentals available to help the shortage of housing

So why discourage landlords by talking away the ability to put interest on btl mortgages against tax which just encouraged what were long term BTL properties being changed to Airbnb type rentals that do allow mortgage interest to be put against income.

I think there has been a lot of knee jerk policies which have resulted in the opposite to what people actually thought they were going to lead to.

No I don't agree with the tax benefits for landlords. It keeps prices high and less folk can afford to buy so they are stuck in long term rentals. I can't see the property market in Edinburgh crashing. The prices seem horrifically high in some parts so they may not continue to rise. I don't know how much the cancellation of the festival will affect things. That's the trouble with CV. It's hard to say exactly how much impact it will have financially.

I agree about the knee jerk policies.

You might not agree with the tax incentives but if you want secure long term rental properties then you have to make it viable. The council aren’t going to ride to the rescue and a lot of the properties that the council have are really those being leased to the council from BTL landlords.

Otherwise flats and houses that were rental properties were more profitable as holiday let’s. And will remain so when things get back to normal. Which they will.

I found that people who were rubbing their hands together with glee when this policy or any policy that impacts BTL landlords was announced were being very short sighted and I don’t think they saw what was plain to a lot of others.

If you impact BTL with knee jerk policies and drive out a lot of landlords the properties don’t automatically come on to the market to drive sale prices down.

Landlords just look at alternative ventures for the property and as there are fewer rental properties this then drives rents up.

Or the ones that stay in the market just raise rents to offset their losses.

What are some of the "alternative ventures" you see for a 1 or 2 bed BTL going forward?

I was referring to turning them into holiday let’s.

Most BTL isn`t suitable or viable as a "holiday let" IMO, most BTL business models rely on a steady stream of EE workers, students or professionals , and these streams are likely to be very disrupted if there is a recession or more lockdown needed? See Airbnb in Edinburgh without a festival this year as a case study, not saying they will all go bust but some will.

@Oliversmumsarmy
You say why discourage Landlords by changing the tax situation.Exactly that they wanted to discourage landlords,especially the multi highly leveraged ones.It was becoming politically less viable.

But if you discourage landlords then you don’t get the rental properties available so you can’t then bleat that there isn’t the rental properties available.

I think you have to get your mind around the fact that Airbnb type places don’t have to be by the sea side or in areas of interest and when we have needed places on various occasions there sometimes can be a shortage even in towns and villages in the middle of nowhere.

They are a cheaper and much more comfortable alternative to hotels.
Why pay 2x £80 for 2 hotel rooms with en-suites when for £55 you can stay 200 yards away in a brand new 5 bed house with multiple bathrooms and kitchen facilities and Netflix and Amazon Prime available on the multiple TVs
With a holiday let you don’t have to be full 100% of the time to cover your expenses depending on the rate and the outgoings only 1/2 or nights per week might suffice

Whilst things like the Edinburgh Festival might not be going ahead there is all the rest of the year to make up the amount that people would have taken instead of being closed during lockdown.

If someone is relying on one event to cover their expenses for the year then that is not exactly good business.

Watching with interest. Property fell by 16% in 2008 so I would not be surprised if it happens agan and possibly deeper, depending on the economic fall out. 25% does not seem unrealistic, just when you look at demand disappearing from the university sector.

Another area of concern is student accommodation. Many of these HMOs will remain empty. Universities are/will struggle. If they think students will be willing to get into £30,000 plus debt taking online tuition instead of the whole university experience, they are in for a shock.
Cambridge Uni's announcement was beyond stupid.

I think in general covid 19 has made a lot of people stop and reassess things.

If I was in my 20s, I think I would head to Spain/Greece/Sweden/Denmark (once this is over) or somewhere cheap and see what I could do over there. Spend a few years working in jobs to learn teh language well then do a degree (free) in their universities and try and get funding from there to do a masters in the UK. They will still be in the Erasmus scheme, too so you could feasibly live in Spain, do an Erasmus in Germany and then UK for postgrad. That way, you'd get the languages, experience and opportunities for much less cost.

Then 08 and interest rates shot up.
Our £700 mortgage went to close to £1500 and we were only on salaries of about £16k a year at the time

Interest rates didn't shoot up in 2008. They went down.

www.ngiresidential.co.uk/rise-and-fall-historical-interest-rates-in-the-uk-1979-2019/

I recall interest rates going up in the late 90's, gradually. But even when they did go up, they've not "shot up" for a very long time.

I'm in a different position to many people. I own my home with no mortgage, but I'm unlikely to have a job for quite a while now.

I would like high interest rates so I get some return on my savings!

Lightscribe absolutely agree regarding the 500K shoeboxes - who'd want them, still some foreign investors maybe as here will be SOME rental demand always, but the prices will have to come down even in London.
But what do you think will happen to the other end of the spectrum, by which I mean extremely well priced houses (family size 4-5 beds) that are below/on national average and cost LESS than a studio in London (say, good Midlands locations, some of the North) - they are extremely good value, and actually genuinely undervalued for their size / good transport links / proximity to countryside. Do you think those will keep or even rise in price? People will start recognising value in non-London locations having tried working from home, or at least that would make sense.

But not everyone in London lives in a £500,000 shoe box.

Having looked at somewhere like Sutton Coldfield where I have a few friends I could get a bigger house than where we are atm but it wouldn’t be a huge leap and once you cost in that all our work is London based and you have to factor in journey costs and time it wouldn’t make it worthwhile.

I think some people will move out of London and others who would like to won’t actually make the move when they take into account their personal circumstances.
You have to be in a relationship where both parties wfh and both want to make the move in the first place and if you have children they would need to be on board as well.

I can see people compromising and going for HC. Near a good train station.

@CatAndHisKit
Yes exactly that. There are areas up north that haven’t recovered after 2008. In Durham for example terraces houses are available from £20k and larger houses in nicer areas are available from £50-100k. In nominal terms those areas have actually lost value when inflation is taken into account. These areas will be relatively unaffected (you couldn't build a house for less after all).

It’s areas in the large cities and in the south that have seen prices rise exponentially which will be affected the most. The driving forces that caused that rise are now completely in reverse.

People won’t quite grasp that however, as they’ve been misled by the media and skewed common perception that HPI only goes one way (and you can’t blame them as over the last decade, all the government props have allowed that to continue)

We may see areas like Cornwall and Dorset etc become permanent residences for the wealthy that can work remotely. The locals will out for blood with their pitchforks at dawn.

So overall, the forthcoming ‘correction’ short term (next 1-2 years) will have greater affect in some areas more than others.

Longer term however, the wider financial landscape will affect everyone. Deflation at first as the economy constricts, then helicopter money (maybe even UBI), zero/negative rates and more QE like never before. Then comes the pivotal point, the government has to ’inflate’ away the debt. They then have a simple choice, allow the currency to become toilet paper or raise rates massively (90’s style) to save the currency. Affordability of repayments of the over leveraged won’t factor in their concerns

This is an interesting article about air bnb

www.google.co.uk/amp/s/www.nytimes.com/2020/05/14/travel/hotels-versus-airbnb-pandemic.amp.html

@Lightscribe

You mentioned UBI (Universal Basic Income). Very interesting point because I saw the USA Democratic candidate (now out the race, of course) and numbers guy Andrew Yang make the case for UBI because of how AI/Machine Learning is likely to automate most jobs, rendering a lot of people unemployed.

There was even an article about it in the NY times. Andrew Yang’s $1,000-a-Month Idea May Have Seemed Absurd Before. Not Now.

"For more than two years, Andrew Yang traveled the country as a presidential candidate trying to convince voters that a crisis was coming. The economy was going to evolve, he warned, jobs would be automated away in droves and many Americans were going to find themselves at home without a paycheck."