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 If its a 4 bed terrace house you are looking at, it makes sense why its more expensive than renting. my MIL owns a similar one and one of the neighbouring houses has been converted to HMO ( i swear there are probably over 10 people living there). Depending on the configuration, you can convert the reception and the loft into bedrooms, so that is about 6 rooms. NW London market rate is 600-700 so that could work out to £4900 a month, rental income of £58,800 per annum. i calculated that against purchase price of £825,000 and you get a yield of 7.13%. thats pretty good when you consider how low interest rates are if you let the money sit in the bank.

• oops i meant £4200 a month, so £50,400 per annum rental income. Yield is 6.11%. not as good but still decent. i mean uk average is 3.53%

The prices have already dropped 10-15% in the last 6 months, there is talk of a further drop of 30-40% drops in London and the South East in the next 2 years. A huge amount.

I haven’t seen any reports of that amount for the SE

Last data I saw was that SE would be effected the least where towns are supported by strong companies and less leisure

That would also mean that a typical 2 bed house worth £375k pre COVID could joe be worth around £200k

In the SE where property is short as it is and there is still low unemployment despite of this pandemic I doubt we’ll ever see prices that low

I’m not too sure the mortgage holidays could affect house prices positively or negatively yet either

People who have already been accepted for them do not realise that it’s on the basis of those missing payments being then paid off over the rest of the term rather than being added on to the end

This means that someone with a £700 a month mortgage who takes a 3 month payment holiday could have those payments go up to £730-750 a month.

Seems like not much but it certainly adds up, especially when people could potentially be furloughed longer term now, redundancies happening, wages being cut and hours being cut

@thequantofmontecarlo Now you're just being facetious. The comparisons that I (and others) gave were London specific. Those that rent in zone 1 will prob never be able to afford in zone 1. So there's your answer - yes renting in zone 1 is a million times cheaper than purchasing in zone 1 because guess what, you'll never be able to afford zone 1. Happy? Not sure I know many people that rent a 4 bed terraced either.

If you do however want to have sensible debate, try considering areas outside of zone 1, where most of the real world tend to buy when purchasing their first home.

it's clear you and I look at money, houses and investments quite differently

So tell me, why are we different? Do you want me to cry at the news that a potential crash is coming? I'm not in the slightest bit anxious, because as I've already mentioned - prices in London were inflated anyway. I managed to secure a 10% reduction on asking price. If a further 10% is knocked off, so be it. I won't be selling any time soon, and I know the market will pick up again. These things always balance themselves out. And demand in London will always outstrip supply.

@Devlesko you're clearly a fan of London aren't you? People will always want to live there. I've been actively looking at the property market for the last decade. Curiosity gets the better of you even when you know you're far off from being able to purchase. Demand in London has always outstripped supply. Maybe this will change with brexit, who knows. I know there are a lot of europeans that rent in London who may decide to leave. That will leave landlords in a bit of a pickle, and perhaps the market will be flooded with properties that landlords are trying to shift. We can all speculate but the position in London has always been quite unique.

it’s still cheaper to repay someone else’s mortgage amount of £200k (aka rent) than your own mortgage amount of £500k for the same property!

But this assumes that landlords charge their mortgage amount as rent? My old landlord owned a number of properties outright, including the one I lived in - by that reasoning I should have lived rent free but was still charged £1,500 a month rent

@Flixsfoilball

But this assumes that landlords charge their mortgage amount as rent?

Exactly. I mean what kind of logic dictates that landlords only charge whatever it costs them? A large number of landlords in this country, as I've already mentioned, will have owned their properties for 15-20 years - back when it was super easy to buy up lots of property, with next to no deposit, on an interest-free, buy-to-let mortgage. Their mortgage repayments will be a fraction of what they receive in rental income.

Rent is out of control in London. Nobody can truly believe that they get value for money, yet seem to ignore the fact that there are other factors why rent is so high. It's naive to believe the landlords don't take into consideration the cost of repairs/maintenance when their properties are tenanted, and account for this in the cost of rent.

No, I don't dislike London, we nearly went for it in the 80's.
I was just being realistic, meaning who would want to live there when there's mass unemployment, house repos and the worst recession ever known.
I think houses will plummet and business will go from London to where people can afford to live, and are more prosperous.
London has had it.

I grew up in that area and although we were secure as my parents bought in the 60s, the market in the 80s really took a lot of people by surprise.

Our ndn who had a computer business told us his property halved overnight and there were huge numbers of people handing the keys back. For some people that is a viable thing to do.

I also notice a lot of people who have bought in the last 10 - 15 years are not in the most secure of jobs (arts, etc and crucially are not high waged for London). I honestly understand that people can look at the sums and think things are OK but you cannot underestimate what London is like in a serious downturn - early 90s style, which many have not experienced.

Traditional, solid 6 bed houses in many areas have been divided up inside to flats - places like Blackheath, even. They will reduce individually and be brought back to a family some because, for all the people who have benefitted over the last 20 years, there have been lots quietly waiting for an opportunity like this. People who take the long view and think in terms of 30/50 years not 5.

Landlords definitely do not charge the same or similar amount in rent as what their mortgage is, my previous landlord purchased his house 8 years ago for £80k and now rents it for £800 a month. His mortgage is probably less than £300 per month. I rented for years and the only advantage to me was flexibility and not having to pay for maintenance, however, after owning my own house I would rather pay for the maintenance myself and actually get the problem fixed. Landlords are notorious for doing botch jobs and avoiding paying out for anything. Our boiler packed in 4 times a few winters ago when it was -9c and heavy snow, it was horrendous, we went days and days without heating and hot water because the landlord refused to get someone in to repair it as he knew it needed replacing, he wanted to come himself and attempt to repair it, only had no clue what he was doing so it broke down again and again. All while we were paying him £800 a month for a house worth £200k. Unless you’re very lucky, or need the flexibility renting should be avoided if possible as imo it’s money mostly down the drain and as tenants you’re very vulnerable. I’d rather own a house and be in negative equity than be renting again.

@Flixsfoilball "But this assumes that landlords charge their mortgage amount as rent?"

No it doesn't. It means that usually, the absolute minimum amount of rent would be the cost to the landlord. Rent, like the cost of houses, is driven by market forces, and if it was cheaper to buy the exact same property in an area (for a minimum deposit amount) than rent, then the rental rate would fall till it was cheaper to rent than buy since buying is the more desirable option.

Jeez - I feel like I'm doing an Econ 101 class.

Rent, like the cost of houses, is driven by market forces, and if it was cheaper to buy the exact same property in an area (for a minimum deposit amount) than rent, then the rental rate would fall till it was cheaper to rent
That isn’t the case. It often costs more to rent, but people do it because they can’t get a mortgage. My current mortgage on a 4 bed house is £100 per month cheaper than my previous rent for a 2 bed flat.

So why did I rent when it’s cheaper to buy?

1. I had an insecure job with unreliable income so I couldn’t get a mortgage.

1. DH had debt so the bank factored that into their affordability calculations and insisted we couldn’t afford a mortgage (even though we were already paying more in rent).

1. We didn’t have a deposit and it was taking ages to save one.

“if it was cheaper to buy the exact same property in an area (for a minimum deposit amount) than rent, then the rental rate would fall till it was cheaper to rent than buy since buying is the more desirable option.”

I really don’t think it’s that simple at all, you’re not taking into account that for most people the issue preventing them buying is not that they can’t afford the mortgage, it’s that they’re spending so much on rent they can’t afford the deposit. People aren’t renting because it’s cheaper than buying, they are having to rent because they can’t afford to get a deposit to buy. Also, a lot of people, especially those on low incomes, have credit issues which prevent them from buying. For most of the country, it is cheaper to buy than rent, especially when taking inflation into account.

@Devlesko Goldman Sachs and the banks are not going to move to the north. If you had bought in the 80s, whatever you would have bought would be £700-800k by now..London crashes the most but also recovers the fastest.. my dad is a property developer and plans to buy a Camden house in cash when prices crash 40%. he isn't going to buy outside London.

@thequantofmontecarlo you specifically stated that paying a landlords cheaper mortgage as rent was cheaper than getting your own mortgage.

I was just pointing out that a landlords mortgage has absolutely eff all to do with rent so that argument is nonsensical

Rent is pretty much all to do with market forces and therefore can be considerably more expensive than a mortgage depending on where you live (that £1500 pcm rent would have been approx £1000 mortgage)

Oh and you also appear to assume that landlords don't immediately snap up every vaguely affordable property, meaning that rent doesn't have to fall

And that the affordability criteria mean that a lot of people can't get a mortgage in the first place because they can't get the deposit together

@Devlesko

I was just being realistic, meaning who would want to live there when there's mass unemployment, house repos and the worst recession ever known

Because this won't happen in other parts of the country...? I forgot London was the only city affected after the '08 crash

@Flixsfoilball I wouldn't bother arguing with @thequantofmontecarlo she is a quanto something or other mathematician. She's right and everyone else is wrong, because she rents in camden and can't afford to buy in camden, therefore must be right

Goldman Sachs and the banks are not going to move to the north.

No, but potentially we could have smaller "hubs" dotted around rather than one big office block. Or support staff could be moved North like Allen & Overy did to save costs by moving a load of London staff to Belfast.

@foggybits India is cheaper. That's what a lot of banks are doing. Or the Phillipines. No need to bother with Manchester or Belfast.

London is one of the 4 big finance centres of the world and that is hard to change.

@foggybits and the City of London will just become a ghost town, right? I've heard these same theories for the last 15 years, and I guess we'll continue to hear them for the next 15.

Unlikely that London will never be a global hub.

Where did I say London would become a ghost town?