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/

@thequantofmontecarlo I think the issue you have, which others have pointed out, is your ambition to purchase in the same areas that you rent. I've previously rented in Camden and Brixton. Any ambition I had to purchase in those areas were completely unrealistic, especially Camden, and quite frankly, most areas north of the river (Islington etc).
I'm sorry, but unless you have a sizeable deposit and earn a significantly high salary, you won't be able to afford property in those areas.
The other thing which is relevant, is how much harder it is to purchase on your own. Two salaries are better than one.

You're only 'not paying for maintenance' if you rent in the same way as you get a free meal on a flight - you're not charged separately but it's built into the price you pay!

@Desiringonlychild I went for a 5 year fixed too. I gathered interest rates were so low right now, and there was impending doom about brexit, so I gathered, like you, that the 5 years would allow me to ride out a potential shitstorm.

@Oliversmumsarmy Good point re interest rates being ridiculously low in '08. @Rebelwithallthecause be keen to know why your mortgage repayment shot up so drastically.

@LisaSimpsonsbff So true. Renters don't seem to realise their rent amount doesn't just cover the cost of them sleeping in the property. The amount is based on several factors. Not to mention the annual rent increases.

@smallgoon

Must have been 07 that we felt the worst pinch on interest rates

Bought before they rose and managed to hold on until the fell to rock bottom again

Glad it’s a distant memory. It’s certainly made me exceptionally cautious about any savings and house purchases and affordability ever since

It was 3.5 when we took it out, when the financial crisis hit and rates went up because we couldn’t remortgage we were on a standard variable rate of which the percentage we were paying was higher than the 5.75 base rate but by how much I can’t remember

Things became very affordable after they plummeted

@Rebelwithallthecause Ahh yes, this is the same issue my brother had as he had purchased just before the crash. Such a horrible time for so many, and served as a lesson.

Just can't believe the banks behaved so despicably and were then bailed out by the public.

@Smallgoon i think a 20-40% house price drop and the fact that many people would hold on to their properties are not mutually exclusive.a buyer just need 1 owner in my development of 34 flats to become distressed. Its not going to be the guy who bought 25 years ago. It may not be the owner who bought at the peak of £450K (that couple is very comfortably off). But all we need is one owner and my flat's valuation would come sliding down.

Its the same for all the family homes around my area.there are actually very few transactions for them as they are very unaffordable- £800k to the millions. Most people who lived in them never paid that price. But we just need 1-2 people to go bust and some lucky person would be able to benefit from the discount.

@Oliversmumsary - who did you challenge because following my last conversation on this subject I’ve been stuck on SVR for 13 years. Suggested to A&L this was morally wrong and they have investigated and confirmed they’ve done nothing wrong. Which I suppose they would wouldn’t they?

serenada

@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!

Where are you getting the maths to work this out?

So say a property is currently £200k and people have saved £20k which is a 10% deposit and banks stop lending to anyone with less than a 20% deposit because we’re in a recession. So the only way someone will have a 20% deposit with £20k on a £200k house is if it lost half it’s value and was now worth £100k?! That’s not going to happen. It’s wishful thinking that people with small deposits will snap up bargain properties in a recession, they will be snapped up by developers and people with large deposits who the bank will still lend to. Houses are not going to decrease in value by 50% so 10% deposits become 20%.

If I was a first time buyer I would wait. I hope they do fall. It will be fairer for nearly everyone.

Such a shame for people who just moved into overpriced new builds in February

They will see the biggest drops of all

@Smallgoon "I think the issue you have, which others have pointed out, is your ambition to purchase in the same areas that you rent"

I rent in Camden and I want to buy in Finchley. I was merely pointing out that renting in a location is not cheaper than buying a similar property in that same location unless you're willing to put up sizable deposits and stretch out your mortgage term significantly.

There's simply no point comparing the cost of a mortgage to the cost of rent in two different locations!

@Elsiebear90 "Where are you getting the maths to work this out?"

From 5 years of education in financial engineering and economics and 14 years in working as a quantitative analyst ("quant", hence the username) at one of the biggest banks on the planet .

Believe what you must but the principle is simple: House prices are driven by availability of credit and when that falls, house prices will fall along with it till the same buyer is able to buy the same house.

@Desiringonlychild not being facetious but I'm not sure what point you were making with your last post. Or why it was directed at me?

I haven't mentioned anything about price drops. For what it's worth, I just can't see prices dropping that drastically. These things always balance themselves out, and for London, it will always be a case of supply and demand. In the last 5-10 years, despite not being in a position to buy, I continued to research properties on rightmove, saving those that fit my personal criteria in a saved list. None of them stayed around for too long. I can see a 10% hit, but in London, I wouldn't foresee anywhere close to a 40% hit.

@thequantofmontecarlo which part of Finchley do you want to buy in? I bought 2 bed flat in East Finchley and it took me a year of searching. Prices dropped 50k while I was searching..

@Elsiebear90 Bingo! The only people that benefit in a recession is those with lots and lots of money that can snap up a large number of 'cheap' properties. Cash buyers and investors will gain the most. Sadly I can't see that FTB will, unless they have a sizeable deposit. Banks will not lend as much as they currently are in a recession.

@desiringonlychild I agree with you re people putting a hold on buying/moving. I was most surprised to see plans for yet another housing estate of some 200+ houses on green space in the village next to mine. My first thought was people would be losing their jobs never mind having the money to buy a new home after this

@Rebelwithallthecause Yup, I avoided the new builds. For one, they are so ridiculous overpriced for what they are and in terms of space. My friends bought a new build 4 years ago, they paid around £460k for it, and it's a one bed in west london. They know that it's not worth that today. They're now married, with a child and just don't know what to do. So many people got sucked into the flashy new build properties, not realising that they were way, way overpriced for what they were. And now there are surplus of these properties on the market. I can see prices dropping on these particular properties, but only because they were so overpriced in the first place.

@Smallgoon I bought last year but I have to disagree. I do foresee a 40% hit and having to stay in my 2 bed flat forever. I did prepare for that, hence looking at all the local schools. But at that time, it was because I couldn't see how I would ever afford to upgrade while paying childcare / education expenses for 1 child. Now it's because of negative equity and the property market to be down.

A massive correction is long overdue anyway. Frankly it's a catch 22. If house prices had continued to go up, we would be stuck on the ladder. If house prices crashed, we would be stuck due to negative equity. Not an easy situation.

@Smallgoon - Sorry missed this post earlier...

"Your point on the additional costs of repairs etc is a little moot if I'm honest."

It's not. You either account the total cost of ownership accurately or don't compare at all since the comparison is invalid.

"But it's unfair to presume those of that did relied on bank of mum and dad. I started saving solidly from the age of 23 and was able to purchase just shy of my 35th birthday...."

Very few people can save for a 20% deposit for London property while living in London. People like us are the exceptions not the rule.

@Desiringonlychild "which part of Finchley do you want to buy in?" DH and I are FTBs looking around Finchley Central for a house. We actually made an offer on one, in early Feb, for 10% below asking and was rejected. Then about 2 weeks into the lockdown, the agent called us and said the sellers were happy to take our offer as the buyer had pulled out. We politely refused . We're going to wait for 12 months as we're certain the market is going to undergo a correction.

@thequantofmontecarlo I am sure it would undergo a correction of at least 20%. Also, like the rest of finchley, Finchley central is within the eruv and also probably walking distance to Kinloss synagogue. It is also probably within catchment for akiva. Therefore I predict that the exodus outside London caused by homeworking would not affect NW london as much because the jewish amenties of NW London are not as easily replicated. Certainly I knew I was paying a premium for this when I bought my flat.

@Desiringonlychild It didn't actually factor into our decision making as we're not Jewish. Love the area though .

@BittersweetMemories couldn't tag you on the app. Is it Aberdeen?