Properties relisted at pre-COVID prices - are sellers in cuckoo land?

[househunter2020]

Started property search in February (London) and saw various properties quickly sold, obviously riding on post election bounce. We did not put in offer for any. Now we are seeing from this week properties that were sold get relisted at previous asking price (Jan/ Feb time). Are sellers in cuckoo land?

Just spoke to one agent about one relisting and asked if seller is reducing the price and was told oh that one was priced very well already and sold straight away last time it was listed, only now the buyer pulled out due to work problems... Of course it was February or a century ago...

I would expect about 5% reduction from previous listing. What do you think?

Supply and demand is bollocks - that would only be a valid argument if properties could only be bought in cash. They are bought with credit, so the prices completely depend on the availability of credit.

But supply and demand is at the essence of house prices, they are literally driven by nothing else. During the previous crash, there was much lower demand (due to the absence of available credit), and excess of low priced supply due to repossessions are some of the factors. The majority who have a choice do not sell when prices are low, they wait it out.

Also, there's not really any such thing as a peak, since house prices have continually risen exponentially with only a temporary drift. In my local area prices are c25-30% higher than they were in 2008.

You cant 'stop' a crash using supply and demand, supply and demand are driven by market forces and a whole range of factors.

Sorry, but supply and demand is literally the only thing driving house prices. Everything that you've said above are basically factors influencing demand, ie availability of credit is one of the key factors in demand for house purchases. If people cannot get a mortgage big enough, they either buy a lowed priced house or they don't move. So, demand for high priced houses is lower.

Sorry, but if you don't understand that the demand for house purchases is driven by the availability of credit, then you don't understand supply and demand.

@Home2018 Sorry, but the banks offering 100% mortgages which played a big part in the '08 crash, were they not? That hasn't been the case this time around, as far as I can see.

The fact is, demand will always exist in London. A property crash will affect supply more than it will demand, imo - people will be reluctant to sell unless they absolutely need to. Fewer properties available to purchase will only drive up price in London. I for one believe there needs to be a correction in any case. Do you think I'm comfortable with the price of property in London vs the rest of the country?
I just don't believe the "there will be 50% wiped off property in London" argument, which some FTBs seem to believe. We're not that fortunate, and this govt will do every thing possible to prevent a scenario like that from occurring.

This will sound rather callous, which isn’t how I mean it to come across, but we also have thousands and thousands of people who have died from covid-19 and the vast majority of them are the older people in the country. That’s the generation/s who are most likely to own property and many will have bought decades ago and be sitting on a massive profit which will be inherited by children. Most of those children will sell those houses and some will use the inheritance to buy somewhere new. That will continue to drive the demand in the housing market.

Your post below made no mention of the fact banks have already started restricting lending though.

This will affect demand.

Supply will be affected by other factors in the first instance. Job losses, probate, divorce etc. And later on, by sellers not going ahead because the limited number of people in the market. The latter as we're seeing at the moment.

There will likely be enough supply to meet the demand through forced sales so your supply and demand analogy, without mention of what banks are already doing sounded as though you were another head in the sand poster.

My post below is to @Tfoot75

A friend just sold her house. Listed on Monday, four viewings Wednesday and two offers at the asking price by Thursday. Some relatives are also currently in the process of moving (chain of about 4/5) and after lockdown stalled them, everyone is still now going ahead and nobody has tried to reduce their buying price.

Well, I said there was an obvious risk around mortgages. I'm not sure how much nervousness there is around lending at the moment, but clearly that's a critical element of both supply and demand.

Definitely not got my head in the sand, just a good understanding of what drives house prices, and enough understanding of the general economy to see that a long term reduction in House prices is extremely unlikely and would have far wider consequences than a few people able to buy cheaper houses!

@SunbathingDragon - What you said sounds logical, even if it might be viewed as callous to some people.

I know of a few people who would do well out of an inheritance just by inheritance and having their parents' house sold. Some people who are renting and want to buy are also sitting on a goldmine by way of inheritance. Even if their parents house sold for 50% below pre-covid prices, it would still run into a substantial about of money.

As for inheritance - remember that the government will stand to make a lot of money from inheritance tax alone. In London alone, the government could make a fortune on inheritance tax of sold properties.

"If you give away your home to your children (including adopted, foster or stepchildren) or grandchildren your threshold can increase to £500,000." www.gov.uk/inheritance-tax

"Inheritance Tax rates. The standard Inheritance Tax rate is 40%. It’s only charged on the part of your estate that’s above the threshold."
www.gov.uk/inheritance-tax

@smallgoon

Yes, 100% mortgages played a big part in the the housing downturn, but that's not the full picture.

There was a larger financial crash which happened globally.

Markets are connected as we're seeing now. Countries that are still open for business are suffering to the same degree as we are.

Back in 2008, lots of people with 100% mortgages were repossessed. Others with reasonable mortgages found themselves in negative equity. Many still are.

The level of debt needed to buy a house, owing to our stagnant wages, is just too high. Whether 10,15 or 20% deposits, house prices can only go so far, and that level is essentially what determines a peak.

It's illogical to think prices can continue to rise infinitely without wages doing so.

And, it's even more illogical to think that with such high levels of debt to cash ratios floating around our housing market, and with a pending recession/depression on its way, this flimsy house of cards won't come tumbling down. Again.

The 2008 crash didn't even play itself out fully. That can has been kicked down to this road. It still remains to be seen whether the government even attempt to salvage this, but many analysts say that even with all of the interventions in the world, they can't stop the inevitable.

And more important that their own intervention, they can't force the banks to lend. With Corona pt2 on the horizon come winter, it will be a miracle if banks move on their position.

The fact remains, anyone who buys now is taking a massive risk against all economic advice, even with purchases of 10-15% below. Anyone who buys even close to asking in my opinion is crazy. However, I understand that decision is personal, so they should be absolutely sure they're happy in negative equity and will not want to move for at least 10 years. I'd personally say 15-20 would be the sensible timeframe.

The is projected to be worse recession in 300 years. It's almost certain that it will be a depression now. House prices continuing at the level they are defies ALL financial and economic logic. All of it. Supply and demand arguments included.

I actually don’t know what to think. At so many stages in the past, the logical thing would have been to allow for small corrections in order to strengthen the bottoms layers.

Without that, I think we are at risk of sacrificing everything in order to protect the housing market. I am not sure that the top end who invest and fund businesses will agree with that - it isn’t that they want people to suffer or don’t care - they just understand how the money markets work and will not underwrite beyond a certain point- they don’t need to.

I also think it is hard to judge on selling prices. Someone could put their house up now for a reasonable sum and it will sell. It is whether the froth is still selling in places like London that really highlights what the vibe is.

My aunt sold her house just as lockdown started for a bargain- very underpriced imo, due to personal reasons.

As we are without a shadow of a doubt now in a huge recession, prices are inevitably on the slide, how far and how quickly remains to be seen and will depend on the relative strength or weakness of the local economy.

If I had a place to sell I would reduce straightaway by 10% and see how much interest came forward.

Lamentations where did she manage to sell in one week (region at least)? Was it an expensive house? I'm sure anything below national average and well priced can sell quickly now, but I'd be amazed if this was a high value house.

people will be reluctant to sell unless they absolutely need to
the pointi s though, there will be many people (more than usual) that will have to sell:
those who lost their jobs or couldn'y continue a business, many BTL landlords (incl student ones as many will be studying online this year), those who can only afford to keep their house if they earn on Airbnb (spare rooms) in London mainly, probates more than average number. Su spply will be somewhat higher than usual.

Home I agree with most of what you say, but surely it doesn't apply to all regions equally - not to the already cheap places (re 15 -20% reductions).
If you are talking about the worst areas of London and the unattracted and hugely overpriced bits of home counties - yes, I think it will apply.

*unattractive

@Tfoot75 You are the one who clearly doesn’t understand supply and demand.

You are thinking about supply and demand too simplistically without considering the real factors that drive demand (availability of credit, interest rates etc) and how these are intrinsically linked to the economy.

People might desperately want to buy a house but “want” is not equal to demand.

I've been looking and had my house valued and it's up around 10 percent on last year. The estate agent said that there was a bounce post the election ending uncertainty around Brexit. Obviously we are only 2 weeks out of absolute lockdown but he said the demand is there. People stuck at home reflecting on why their home is no longer suitable for their needs and sadly some people needing to downsize through job fears. So all prices are holding up so far. That's for our area - it's a high priced area with excellent state schools.

I'm not sure that this bubble will hold though into the new year. Especially if we have a second wave. But even if we don't I think things will take a downturn and the eceonomic impacts and job losses start to bite.

People need to downside due to job security fears and that holds up house price? I don’t think that logic holds

I do wonder if there will be more flats going on the market after this (outside London), thus a price drop. I have a couple of single friends in 2 bed flats who locked down at their parents' houses, as they couldn't stand having no outside space and constantly hearing neighbours while WFH. In my Wiltshire town, "apartments" cost more than 2 bed houses with a small yard or garden.

A local house that has been on the market for £850,000 since June 2019 has just been delisted for £1,050,000.

It was about £100,000 overpriced in the first place!

I'm SW London btw.

Agents are really doing all that they can

@hammeringinmyhead agree with this logic. I'm not convinced there will be a massive supply of larger homes with gardens on the market.

@Home2018

So, it's gone up? From £850,000 to over £100,000,000?