Are prices shooting up where you are?

[Focusanddetermination]

Just that really. I'm in a small Midlands town, have a high amount of activity and prices shooting up in the past few weeks even.

I thought people would be more hesitant with a looming recession, but it's almost the opposite.

For those posting who are too young to have been in the property market in the late 80s/early 90s, this is exactly what happened then with the changes to MIRAS. Prices shot up over a very short period of time. Then fell heavily in the early 90s due to the recession and stagnated for years until about 1997.

The recession coming is going to be bad and jobs will definitely be lost but interest rates are ridiculously low at the moment and the stamp duty cut has been applied not only to people buying their home, but also to investors, holiday home owners and overseas buyers. People have money they want to put into a "concrete asset". I think prices will rise, then probably level off for a few years. I don't think we'll get a huge drop in house prices fwiw.

I see stagnation but my area of London has pretty much stagnated since 2015. The problem is moving up the ladder for many as you are not making the equity gains of the past. If I was a ftb I would future proof, the days of buying a 500k flat & selling it 3 yrs later for 750k are pretty much gone imo.

@DC10 "The recession coming is going to be bad and jobs will definitely be lost but interest rates are ridiculously low at the moment and the stamp duty cut has been applied not only to people buying their home, but also to investors, holiday home owners and overseas buyers. People have money they want to put into a "concrete asset". I think prices will rise, then probably level off for a few years. I don't think we'll get a huge drop in house prices fwiw."

Interesting analysis. I suspect a lot of people are future-proofing in preparation for the recession, which is actually a wise thing to do. If prices rise after this stamp duty holiday and then just stagnate, for a lot of people that may still be a worthwhile profit on an asset.

I would also factor in a potential interest rate rise so maybe fix for 5 yrs & save as much as possible in that time.

@dozzyf - yes, I think a rise in interest rate is ultimately what might seriously hit house prices if/when it happens. affordability has changed since the last financial crisis but not by a huge amount, the biggest difference has been low-interest rates. If they go back up to 3-5% then prices will drop and rise but very very slowly as banks simply won't lend as much. it is difficult to factor in a potential interest rate rise as effectively house prices have risen in response to low rates i.e. either you buy a worse house or in a worse location than what the bank will lend for.....and lots of people dont want to do that

We never joined the Euro so we've had the ability to print money as an economic lever. I think that could be done a lot after Brexit, so high interest rates could return. I suspect house prices will stagnate, but devalue in real terms. As will our salaries. But interest rates and therefore mortgage payments will increase. How much? I don't know, but mortgage interest rates cannot get any lower than today.

I agree @Greenhats10

And wage stagnation was a legacy of the 08 recession so I'm sure we will have that again.

@Rollercoaster1920 - logically if interest rates increase then prices will go down if there's a sharp increase or stagnate if it's slow and incremental - most people are already borrowing to the maximum.

it will be interesting to see what happens with wages - in my industry since the last financial crisis we've gone from annual increases of inflation plus to wage freezes and now tiny increases well below inflation.

so i really cant see how house prices can really rise all that much in the next few years but it might be a low and painful process which makes any predictions of a massive drop by Otcober or Xmas somewhat optimistic

I wouldn't be taking out a 90/95% mortgage.

@dozzyf

What do you suggest? Wait until Spring '21?

@serenada what's the question?

It's not only about LTV ratios though - you could take out a 60%LTV and still be at the maximum of your repayments.

Realistically the smart move is to borrow quite a lot less than your affordability on a 10year fixed interest rate term and plan to overpay by quite a large amount every month so that at the end of your fixed rate term, your debt will be a lot, a lot smaller regardless of what happens to interest rates.

But that probably means living somewhere a bit rubbish for 10years as for most people thats what it means to say borrow a 100k/150k less than what the bank will lend (in our case for example).

Prices might go down by next summer and hopefully interest rates wouldnt have shot up. Or prices might stagnate.....who on earth knows

But that probably means living somewhere a bit rubbish for 10years

That's the plan anyway!

That's true @Greenhats10 but I prefer lower LTVs. I agree with the borrowing less than you need which goes against the stretch yourself advice particularly for FTBs. I've noticed more 10 year fixes are about.

@dozzyf

I wouldn't be taking out a 90/95% mortgage.

It was just in response to this.

@serenada I just wouldn't take out one, not now or in 21 or 22.

Going in one direction only, eh? I tend to agree.

but sadly it depends on personal circumstances - am 40 and with a kid so realistically 10years of somewhere rubbish is basically till he is a teenager which seems a bit mean. but somewhere nice involves stretching ourselves now and not being able to overpay over the next 10 years....decisions, decisions

There's so much uncertainty we still have Covid, we don't know what the economy will look like at the end of yr, the scale of unemployment. Will the increase in remote working change how we want to live, will people go back to spending as they did, future tax hikes eg social charge care for the over 40s. 🤷‍♀️

It's a very privileged position to be able to say you won't take out a 90/95% mortgage in the next 2 years. Not everyone has that stability to be able to make that decision. People need to move, it's not often done for kicks. And if you're fixing for 5 years, what does it matter if you wouldn't take one in the next 2 years. Not everyone's role is in danger, my role is statutory (can't be dissolved) and my DH is in the military, if they get rid of him he'd be getting a big redundancy package as he's just signed on for another 10 years. And our buyer is clinical NHS- there are plenty of safe roles out there too.

There will be winners and losers, no one should be so arrogant to assume what'll happen in the next couple of years and I for one can't put my life on hold, we've been told not to move since 2016 and Brexit!

Interesting analysis. I suspect a lot of people are future-proofing in preparation for the recession, which is actually a wise thing to do. If prices rise after this stamp duty holiday and then just stagnate, for a lot of people that may still be a worthwhile profit on an asset.

@ChocoTrio There's the wellbeing side too, knowing that you have the security of your own home, rather than moving from rental to rental. For those that have secured a 5yr fixed on a low interest rate, you'll have a good idea on what your outgoings will be and can budget/save accordingly, whilst allowing the market to play out.

There's so much more to owning property than the profit you'll make. Sadly we've become a nation desperate to own, and a lot of that is down to rent being so expensive. If rent in this country was reasonable, I doubt I'd have been so desperate to purchase.

@notheragain4 I never stated whether it was privileged or not. I wouldn't take out a 95% mortgage or borrow 5x my salary pre Covid. If you are happy to do so then that's fine, everyone had different levels of risk, it's not arrogance.
You don't need to justify your reasons to me & why you would you put your life on hold because of my opinion?

@notheragain4 I think @dozzyf is referring to the fact that if prices do crash, those on a 95% mortgage will be worst affected by negative equity. My personal advice would be not to take on a 90-95% mortgage, on a 2yr fixed. Go for a 5/10yr fixed. Pay the little extra for the security, but also take job security into account etc.

House prices aren’t shooting up on the South Coast from what I’ve seen. There’s been a slight increase in sold properties, but plenty still kicking around that have been on the market for months. It will be interesting to see what happens when the stamp duty relief goes.