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/

“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.”

Same buyer or a different buyer? Property tycoons and investors love recessions as they can snap up numerous bargain properties paying in cash or with small mortgages. You really think properties are going to become 50% cheaper and first time buyers will be able to buy with 80% mortgages?? I think that’s wishful thinking tbh.

ChrissieKeller61 ours was say 2.5 % above base (can’t remember exactly)

Our problem was when the interest rates started to fall they added the percent to our mortgage rather than taking it away.

It really was f**ked up (the words of someone who worked there)

We did score a minor victory when we came to sell because Dp had found another job.. We were in negative equity because of the complete f**k up with our mortgage.
Although they kept threatening repossession, we were still paying what we could. If I knew then what I know now I would have stopped paying the mortgage completely.
They couldn’t repossess or do anything as they had lost our deeds years ago. We found them in Bedfordshire and had taken possession of them and they had lost all the paperwork including the original mortgage agreement which we had our copy so there was nothing ever they could have done.

They agreed to let us sell and add the negative equity to the next houses mortgage.

We sold within minutes and completed 3 weeks later. Seconds after taking the call from our solicitor that all monies had been paid and to vacate the house I received a call from the bank to say they were reneging on their deal that I couldn’t sell the house.

I told them they were too late and it had already been sold. They didn’t seem to get it and told me they were going to call me back. (Pre mobile phones) I said I wasn’t going to be there.

We did try to get a mortgage with them and told them about the NE amount (really were that naive) but they refused us a mortgage so we went elsewhere.

By the time they did get in contact with us a few years later I was more savvy regarding paperwork and sent them packing

@Rebelwithallthecause @Smallgoon

I exchanged on a new build before lockdown and don't feel it's a shame because I did some homework beforehand. It's hard to generalise IMO, because really depends on location and builder tbh; the development I've chosen is well established, great transport links, good schools and popular.

For the location, I calculated that a new build would actually be more cost effective and worthwhile. The 2nd hand homes that were coming on to market (quite a few were probate homes) needed work and that could easily become a money pit (not to mention the time and hassle involved; I wanted a new home not a renovation project!).

New builds are not all the same. For instance, I would never buy a new build flat because I don't trust leaseholds in general (as far as I understand, the ground rents and service charges are unregulated, so they can increase unexpectedly).

Sure, new builds can be overpriced but it's a trade off as they also come with lower running costs, good broadband connection and lower general maintenance (everything is up-to-date and shouldn't need replacing for quite some time). There is a little cushion with a new build because of the guarantee and warranty that comes with settling in and dealing with the snags; a developer with excellent customer service is key!

Some people are prepared to pay the new build premium for the simple fact that it's a brand new home and they can immediately put their own stamp on it - and I'm very much in that boat. Of course, it also comes down to affordability.

My only niggle since the lockdown and talk of a house price crash is that I wish I had known earlier so I could have negotiated more freebies and incentives to be thrown in (flooring, wardrobes etc. as that would have saved quite a bit in extra costs). That is what new build developers do; instead of lowering the actual house price, they just include lots of extra freebies as incentives so the final sale price advertised on Zoopla etc still looks expensive.

@ChocoTrio not all flats are leasehold, some are leasehold but the freehold is jointly owned by the residents (like my flat) so the service charges are decided by us.

the problem with new build is that many of them are help to buy properties. help to buy already artifically inflates the prices because the people buying those houses would not be able to afford them on the conventional market. I can only afford a 400K flat, but then with HTB in London, my affordability immediately jumps 20%. But this isn't free money. After 5 years, you have to start paying back the equity loan and you need to get a mortgage product that accomodates that. of course, the equity loan goes down by how much the property goes down for.But I still wouldn't like to be in a situation of having 95% mortgage of a property I couldn't afford in the first place.

@Desiringonlychild

Ah right. Sounds like you have a decent deal. Tbh I don't know enough about flats/apartments. Many many years ago, when I was looking at flats, I was told that in England flats/apartments generally were leasehold as a mortgage requirement (to ensure all parties had a vested interest in caring for the communal areas). Are you based in Scotland or NI?

"Present property law in England and Wales effectively requires that flats be leasehold, although some leasehold flats are now sold with a share of the freehold, through participation in a residents management company." Source: Leasehold Flats Guide.

In North London, my friend managed to buy a share of a freehold flat but it was an older building that had been converted into 2 flats (one on the ground floor and the other upstairs). I wasn't aware that new builds in larger complexes could come as share of freeholds; I was under the impression they were leasehold only.

Your point about Help To Buy makes sense - is there a reason that they only apply to new builds at the moment? There's speculation the government will extend HTB to 2nd hand properties and that could be interesting...

I still think new builds are worth it if you just want to move into a home with up-to-date technology/features, want minimal hassle (no renovation required etc.) and be without the worry about maintenance costs for a long time. There are snags, but professional staggers are reasonably priced and a builder with good customer service tend to iron things out quickly thanks to the warranty and guarantee schemes. Often you can choose the design, material and colours for the kitchen, utility and bathrooms etc. - and they tend to be the most expensive rooms to re-do etc.

Friends mother died recently. Just out her house in the market...£30k less than what they have been selling for. Agent said the market was heading down and recommended a reduced price. Others were similar. That was a discount of about 10%

@Desiringonlychild i am based in north london. a lot of the larger houses have been converted into flats and they generally come with the share of freehold. My problem with them is that its a dream if the other freeholder is nice and reasonable but if the other freeholder is a nutcase, then its quite hard to coordinate repairs. And there is usually no sink fund so if there is a roof repair, you need to cough up (though i suppose if you own a freehold, its the same).

I live in a purpose built block of 34 flats. The residents of my block clubbed together years ago and bought the freehold. We appoint a managing agent to deal with the day to day affairs and we pay him a fee. My husband is a director of the management company. Not all the units own a share in the freehold ( as not all the flat owners participated in the collective enfranchisement, but the entire freehold was bought up anyway) but we all pay equal service charges and we know that ultimately the people who decide have to pay the service charges and also suffer if the building falls into disrepair.

But thats why I dont like to buy new build flats either as usually new build flats would not have gone through this process. and I find that nowadays property is practically an oligopoly- there are only the big developers. The building standards they are held up to are very low, much lower than in earlier times. I would only buy Victorian housing or 1920s style housing, it has held up for such a long time for good reason.

@Desiringonlychild That informative thanks. I get the whole needing a good neighbour thing - that's why I went detached and freehold!

It's swings and roundabouts. I have family with Edwardian and Victorian homes which are lovely period properties with character, feel really cosy and have lovely large gardens. However, they can be a money pit when it comes to repairs. That's the kind of thing that worries me because there is uncertainty with repair costs and finding the right tradespeople to do the work.

Home buying is very personal - it's an emotional investment as well as a financial and logical one.

@Desiringonlychild It's simplistic to say properties will take a 40% hit - the biggest hit will be those that worth close to or £1m+, but even then, I don't believe it will be as high as 40%. The other point to consider is that a property selling for 40% less than it was advertised at doesn't mean the market has necessarily taken a hit. Properties are notoriously advertised at an inflated price. Mine was listed at £350k so I technically got 10% knocked off. I can't see my flat taking a 40% hit and being worth £189k - sorry but I just can't so we'll have to agree to disagree.

@thequantofmontecarlo - I didn't realise the you were solely focusing on comparing renting with purchasing in the same area - this isn't quite so simple in London. People do tend to rent in areas they can't afford i.e. zones 1/2, so comparing the same areas just seems a pointless activity. I mean, 50-70% of London is un-affordable for your average Joe so what's the point in that comparison? Obviously it would be cheaper to rent in chelsea than having a mortgage in chelsea. Pretty bleeding obvious.
Finchley isn't the cheapest area either and my initial thoughts were that you were setting the bar too high for yourself. However, if you have a partner to purchase with, you should be ok.

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

It is actually. Because you may as well include the cost of the stamp duty, legal fees, furniture renovations works etc. If these costs were all taken into consideration, then OF COURSE purchasing is more expensive. As a renter, those costs are accounted for, whether you know or not, they are. The landlord is rarely out of pocket for cost of repairs because they make a fair bit of profit (by renting to you) to account for these.

"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"

Well I can only speak for people I know who did manage to save that much, bearing in mind some bought as couples. Also, those that didn't, but managed to buy much earlier than I did (with a lower deposit) managed to then sell the property, and earn enough to then have a substantial deposit for their next property. I don't believe I am an exception. Compared to my friends (people of a same age), I was quite late getting onto the property market.

@ChocoTrio I wasn't bashing new builds per se, but when I refer to new builds, as a Londoner, I am referring to the 1/2/3 bed flats, of which there are surplus and they are extortionately priced. Most come with pretty hefty service charges too.

My flat was a new build, albeit 12 years old and as @Desiringonlychild has pointed out, some, like mine, come leasehold but residents have a share of the freehold. We essentially get to decide how that money is spent rather than the building management.

This is the second time we’ve been in the same situation. We were offered a 100% mortgage literally weeks before the last crash, and now we’ve saved 10% we probably won’t be able to get a mortgage again. You couldn’t make it up

@Winnipegdreamer Wow, I can't believe 100% mortgages are still a thing.

There's a new article every day. Some say 5% drop now, but prices in next three years will go up 15%. Some are gloomier. Who knows. I do know that I bought my first flat at the height of the market in 1986 for £80,000 and after two recessions it last sold three years ago for over £700,000. No one who sold in the intervening years lost money on it. Anyway, if you lose on a sale, you gain on a purchase.
We have record low interest rates - that's completely different from before too.

@Smallgoon I dont think quant is wrong in comparing the same area zone1/2. affordability is all relative, chelsea is unaffordable for you but for someone from HK who is used to the prices there, chelsea is fine. The thing with zone 1/2 is that central london property tends to be an investment vehicle, so people aren't just looking at the rental potential. they are also looking at the long term capital appreciation. Hence why there are studio flats in kensington for £995,000. the rent would never cover the mortgage. But it doesn't matter because a lot of these properties are bought using large amounts of cash and merely serves as a bank account. In Finchley, its more 'residential', more people buy to live here. Hence they are more affected by dollars and cents.

This is the worst recession in 300 years. And it looks as if it would be a depression. I think its a given the property market would be affected. Furlough has been extended, which is good cos it means that people may not lose their homes in the upcoming months.

YappityYapYap

The Aberdeen market is so hard!! loads of people who bought five years ago are in negative equity!!

The amount of new houses being built in the last five years and the amount still being built is not helping.

The price of oil at moment is very worrying, and I think a lot of people will be losing there jobs over the next year.

There are nearly 6000 properties on the ASPC already that’s with out all the new houses with all the developers.

All very worrying, but great for first time buyers.

I would like them to come down BUT with hardly anything on the market it won’t be that simple. Depends on how many people will need to downsize I think

wfh may have an impact too, if lots of companies make the switch.

@ Smallgoon they aren’t. Before the last crash

@Pipandmum dare I say it but 80k back in 1986 would have have been a helluva lot of money!

For context my Dad purchased a very beat up 6 bed home in east london for £80k (cash) in 1996!!

@Desiringonlychild

chelsea is unaffordable for you but for someone from HK who is used to the prices there, chelsea is fine

This is irrelevant, unless you're saying this person in HK is currently renting in Chelsea.

The point remains, that there are several factors to consider. It's not a simple black and white argument. I purchased in Forest Hill. Before purchasing, I looked at rental options as I was born north of the river and wanted to be sure of the area before committing. Rental options were not cheap here, I looked at 1 bed flats as well as house-shares. The rent for a 1 bed was out of the question. For house-shares I was looking at £700-800 as standard.

My mortgage is lower than renting a 1 bed, but then I was able to put down a substantial deposit. If I were only able to put down a 10% deposit, my mortgage repayment would be circa £1100 (over the same repayment period). That's still cheaper than renting a 1 bed flat in Forest Hill.

So in my view, renting is more expensive than purchasing. But I can say this whilst being realistic about where I'd purchase.

It will be interesting to see what happens to London prices and the repos when mass unemployment happens.
They'll struggle to sell as who would want to live there?

@Devlesko many people do live here because they need to. my MIL earns £15k and is not earning anything right now. She also owns a £700K-800K house (bought in the 90s), she could sell it and retire somewhere cheap. But she would never sell it, as she is Jewish and needs the eruv, synagogue, shops, community. She could retire to israel but she wouldn't get anything decent in the places she likes with £700K and still have money to live on. So she would work till she drops to live in London.

Thats just one example of a community who needs to live in London as it is a community i am a part of. there are probably many others.

@Devlesko also londoners are less affected by covid as 1 in 2 jobs in London/SE are WFH. Its places which have less skilled jobs that would be really affected.

@Smallgoon If we're not comparing the costs in the same area, what is the actual point of the comparison! You might as well ask me to buy an entire street of 4 bed detached houses in Hull for £850k instead of buying a single 4 bed terraced in Finchley!

As for the rest of your comments to my post - it's clear you and I look at money, houses and investments quite differently. I fully recognise that it is it's an emotional topic (read all the threads where people simply refuse to accept a house price crash is coming despite every economic indicator saying otherwise) for a lot of people and there's little I can do to help you see any other way.

We are both wfh with DH looking likely to continue for a long time. I love London & my neighbourhood. Lots of what I love may be affected by social distancing though & the landscape may look very different. We would defo consider moving further out & changing our lifestyle. All our family are here but they would likely follow us anyway.