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/

Also, in response to “if house prices fall lending will become stricter“..

Yes, and stricter lending leads to more falls in house prices as it reduces demand (since people can no longer borrow high LTV loans).

Depending on how far along you are in the process you may need to be careful trying to bargain down. We tried this, but we were at the stage of having a mortgage unconditionally approved.

We had guidance from our lender that any change (even down - which would have been better for them) would mean we would have to effectively reapply for the loan. That meant new stricter lending criteria, higher rates (they're pricing in higher risk levels) and a lower mortgage.

We decided to stick with the price. Because we wouldn't be able to do the loan the same way at the great pre covid rate we negotiated.

So yeah, be careful if you're at lending stage.

YappityYapYap

You must live near me! We bought in 2014, house now worth 50 - 60k less than what we bought it for and in around £30k negative equity.

I'll still be living in this one bedroom place when I'm 90.

Yes, and stricter lending leads to more falls in house prices as it reduces demand (since people can no longer borrow high LTV loans).

Which is great if you have a huge deposit, and are buying an expensive house, you can snap up a bargain, not so great if you’ve struggled to scrape together a 10% deposit on a property under £250k and are paying a fortune in rent.

@turkeyburgers and @Home2018

Re: your discussion/speculation about new builds, I'm not entirely sure because it depends on a lots of factors. I agree that in the past new builds would have been hit the hardest. However, new builds have improved a lot since the last recession (12 years ago now?) and covid is going to change buyers' needs/wants.

Some of the things that people will be looking for going forwards will be automatically catered for in new build homes. Naturally, they are built to up-to-date building regulations so they are well insulated and energy efficient which will mean cheaper bills and other running costs whilst WFH. They have loads more plug sockets for gadgets, laptops and etc. One of the 'must-haves' for a lot of home workers going forwards will be good broadband connection etc., which new builds generally come with.

Yeah, there are snags but it's balanced by not having to spend time and money renovating a 2nd hand home (I suspect that kind of renovation work will become more expensive due to a shortage of materials etc.?). New build gardens are smaller than older homes, but the developments I've looked at all have communal park-like areas in addition to private gardens. I also suspect that savvy developers will change their open-plan layouts to allow for more rooms within a home (they might increase the number of 3 storey homes they build to maximise space as land is still at a premium or something like that).

It is a balance. I suspect that developers may be a bit nervous, but the good ones will be fine as they can highlight the things that make new builds very working-from-home friendly (energy efficient, lower bills, good broadband, insulation etc.).

If you are looking at a new build, check it's with a 5 Star Builder as they will be keen on maintaining their high rating, especially if the new build market starts to become more competitive in the event of a housing crash.

@Elsiebear90 The market always reaches equilibrium. The same buyer will be able to buy the same property with a higher deposit requirement as the prices will correct itself to match the drop in demand (and therefore their initial 10% deposit at preCovid value, for example, will now be equivalent to 20% of postCovid value)

@selfisolatingsince2007 yes, but surely banks reducing their lending is exactly why you shouldn't be going ahead with purchasing at such a high LTV.

If they think they'll recoup their money they will give it to you with bells on.

The only reason they wont is they think your asset wont be worth the loan!

They're predicting 15% drops and more. Surely the idea of being careful isn't about not being able to borrow, but rather not finding yourself stuck with a massive debt on an overpriced house.

This thread is so depressing

I'm a FTB looking to purchase later this year, and have access to a very good deposit in relation to the value I'm looking at. In theory I could take advantage of a crash this year, but not if I get made redundant!!

@thequantofmontecarlo I bought in East Finchley and mortgage is lower than rent. It also depends on deposit and loan term.

Though your gain would potentially be somebody
else’s loss,

I'm currently just waiting for our chain to fall apart, probably by our buyers wanting to reduce the price. In theory if everyone agreed to reduce prices by the same percentage we'd actually benefit as we'd save more than we'd lose, but I suspect that that's unlikely and it would just collapse somewhere instead.

I'm quite sad about it because I was going to get a huge lifestyle improvement out of moving - I was going to be a 10 min cycle rather than an hour's drive from work and use that to work a compressed four day week and have an extra day with my toddler - and I suspect we're just never going to sell our current house in a bad market - it wasn't super easy in an ok-ish one. But then I also don't know when the physical location of my office will next actually feature in my life, so...

@thequantofmontecarlo we have no idea how long it will take the market to recover and how much house prices will fall, we also have no idea what interest rates will be, or what house prices will rise to once the market has recovered to the point that people with 10% deposits will be able to buy again. This is all just speculation and we can’t predict the future. Even a rise in interest rates by a few % could result in payments being £100’s higher per month than what they would be now.

I'm currently just waiting for our chain to fall apart, probably by our buyers wanting to reduce the price. In theory if everyone agreed to reduce prices by the same percentage we'd actually benefit as we'd save more than we'd lose

Sadly there would always be one person at the top of the chain that would lose out, even if everyone else wins. I know how horribly stressful the whole process is so am keeping everything crossed for you

@Home2018 we're not actually doing too badly on this one, we sold our current home pre covid so we didn't do badly on the price, and we bought it a very long time ago so the equity is ok.

We were pretty conservative to make sure we could afford it on one income (I'm not working, on maternity leave soon), so when I go back work it should all be alright.

Both of us are pretty conservative, so even if the prices go down the LTV is ok, and its not in an overpriced area by any means... not posh at all 😂😂

Sadly there would always be one person at the top of the chain that would lose out, even if everyone else wins.

Oh, yes, I was being completely selfish - which is why I don't think it'll happen, I don't see the top of the chain (there's only three of us) agreeing. My reasonable best case scenario is that we all go ahead at the current price - we have a LTV of 60%, so we could take a hit in prices and there are so many non-financial advantages to moving for us (it's not just work, we'd also be moving a lot closer to family and into a house with room for a potential second child) that I would take the risk, especially since we would have a 5 year fix on the mortgage, but I don't see why our buyers would so I think that's where it'll go wrong for us.

Nanalisa60 "I take it you have never been in negative equity!! Very upsetting to no your home is worth 20% less then you paid for it."

Nope @Nanalisa60 I haven't. I have had a mortgage in the 80s when the interest rate rose to somewhere near 15%! I've made money on each house I've bought and sold, but I buy a house to live in as a home. I think it's a recent phenomena that sees property as a mainly money-making investment. But I've always been cautious about where I have bought - if you have limited funds buy the worst house in the best area.

@selfisolatingsince2007 yes negotiating 'just because' may not work, but those people who get down valuations from their lender will likely negotiate accordingly.

Will they all be going back to work though? In certain sectors of hospitality & travel sectors I'm not sure the demand will be there

I think it depends on which sectors you are in.
I know dc had a lot of events booked which have been cancelled and rebooked to much later on in the year so if anything their sector will have twice the amount of work and need more and more people to cover the functions.

Dp isn’t anything to do with hospitality and travel or even in anything remotely affected by this virus. If anything his work opportunities will increase as well.

He was about to take on new work before this collapsed everything.

A lot of people I know in different industries are in the same position.
No work means no pay but the work will be there when the lockdown is over.

I think the UC claims don’t tell the full story and we won’t know the true numbers till this is over and things have got back to “normal”

Home2018 your numbers don’t take account of any increase in rental prices
It is a sliding scale if house prices increase then rental demand and rents tend to lower. If house prices fall then there is usually a higher demand for rental and rents increase.

I think people need to feel comfortable with their choice of paying a mortgage or paying rent and if they are looking at the best time to buy they need to keep a close eye on what is happening in their preferred location

I wonder to stabilise house prices and keep the economy moving and to stop repossessions there will be things like periods of time where you can be on an interest only mortgage for a couple of years and your mortgage gets extended by the couple of years or for ftbs 35 year mortgages with the first 10 years as interest only to keep a roof over peoples heads

No one would really lose out and the interest only mortgage element would ease people’s bank accounts till they get back on their feet.

Also Home2018 the mortgage the person that was paid will lesson the amount that the mortgage is for if they came to sell even if they were still in negative equity

@thequantofmontecarlo

@Elsiebear90 The market always reaches equilibrium. The same buyer will be able to buy the same property with a higher deposit requirement as the prices will correct itself to match the drop in demand (and therefore their initial 10% deposit at preCovid value, for example, will now be equivalent to 20% of postCovid value)

Yes!

.No work means no pay but the work will be there when the lockdown is over.

I guess that's will be key. I only know one person furloughed (airline) & their job is defo risky. The rest of my family & friends are all working & nothing has changed in terms of workload.

I have lived through several Property Price falls,none of them caused by anything as disastrous as what is happening now.

Prices will fall drastically,I have already noticed what appear to be bargains coming onto the market.I definitely wouldnt be thinking of buying at the moment,unless not bothered about paying about 30% over what the selling price will be in a few months.

It is good news for first time buyers.I think a lot of small building companies will go bust,there won’t be as many new houses on the market.

It will be years before we recover from the financial fallout from this.

sbplanet

I’m not saying don’t buy, I’m just saying that it might be a good idea to wait six months because I really think that prices will drop.

I yes I also remember interest rates of 15% in fact I think ours was ever higher at about 18%. And I personally have only ever made money on houses.

As for renting if I was a tenant I would be asking for a rent reduction for the next six months.

@posterthequantofmontecarlo surely mortgage repayments are dependent on actual LTV too, are they not? I think it's crazy that anyone would think rent is cheaper than a mortgage in London. Take a 1 bed flat for example, even in a less desirable location, you'd be looking to pay in the region of £1200-1300 a month. This alone was what forced me to buy, I just grew tired of having to give up that sort of cash to essentially pay off somebody else's mortgage.
I bought this year (FTB) in London (zone 3) and my mortgage is £650 a month. That's a significant saving for me.

@smallgoon

That sounds as though you rented the whole place? Some people (like me) are renting rooms in HMO (so much less circa 500 pcm)