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.

thequantofmontecarlo

You have no crystal ball and if you have such great insight, you wouldn't be on Mumsnet speculating about future house prices. Frankly you'd be to rich to care...

Now, although what you've said makes sense, while you use you understanding of economics to draw authority and confidence.

There have been several property crashes in the past and the government has always acted to prop the market up.

Its dangerous, to influence a buyer to determine where the bottom of this market is, if there is a bottom. They may just find, in 12 months they are now priced out of that area.

You also, have no control over the governments interventions and seem to assume these are used up. As everyone did in 2008 and to their surprise, whilst nobody sold because of lost confidence and negative equity, supply was restricted and higher deposits reduced, FTB demand.

So be careful, as the future may not turn out as you intend, during the spanish flu, house prices rose 20% in this country and other parts of the world.

Remember interest rates are at 0.1%, this will incentivise, people to move money into assets. Theres alot of cash holders out there buying up assets right now. If they go negative which the BOE is resisting, then cash will flood out of the banks.

There are many tools left in the BOE and Governments arsenal. Such as Mortgage tax relief, negative interest rates and new props... just look towards Australia and scotland, recently extending HTB to all homes. The EU central bank is negative on rates and some countries already offer negative rate interest mortgages.

Your hoping the path with follow your trajectory, however you fail to give weight to exactly who keeps the Tories in power. The main Key are boomers whom are house owners, what your hoping for would see 100,000s of people lose their homes. Not to mention all the equity release schemes and interest only mortgages, these individuals hold. It would be carnage, the health and social care system would collapse, through lack of funding from these sales.

The Tories are funded through donations, from these very individuals, money talks and the last thing they will want is to slap these very people in the face, as they will replace them.

So, I would agree with everything you've said and assume the path you've given is absolutely correct, if there wasn't any goverment influence. You're forgetting who keeps the Tories in power and there interests.

It's just as likely, they deregulate further, reducing standards of living within houses. Encouraging co-living and pushing immigration through the roof, they've just offered 3 Million HK residents potential citzenship. Do you not assume, when Brexit is done, that we wont have mass immigration? From other countries...

As, I said you have no crystal ball...

@xcess2184

same here

@TheGuruishere

thequantofmontecarlo

You have no crystal ball and if you have such great insight, you wouldn't be on Mumsnet speculating about future house prices. Frankly you'd be to rich to care...

Now, although what you've said makes sense, while you use you understanding of economics to draw authority and confidence.

There have been several property crashes in the past and the government has always acted to prop the market up.

Its dangerous, to influence a buyer to determine where the bottom of this market is, if there is a bottom. They may just find, in 12 months they are now priced out of that area.

You also, have no control over the governments interventions and seem to assume these are used up. As everyone did in 2008 and to their surprise, whilst nobody sold because of lost confidence and negative equity, supply was restricted and higher deposits reduced, FTB demand.

So be careful, as the future may not turn out as you intend, during the spanish flu, house prices rose 20% in this country and other parts of the world.

Remember interest rates are at 0.1%, this will incentivise, people to move money into assets. Theres alot of cash holders out there buying up assets right now. If they go negative which the BOE is resisting, then cash will flood out of the banks.

There are many tools left in the BOE and Governments arsenal. Such as Mortgage tax relief, negative interest rates and new props... just look towards Australia and scotland, recently extending HTB to all homes. The EU central bank is negative on rates and some countries already offer negative rate interest mortgages.

Your hoping the path with follow your trajectory, however you fail to give weight to exactly who keeps the Tories in power. The main Key are boomers whom are house owners, what your hoping for would see 100,000s of people lose their homes. Not to mention all the equity release schemes and interest only mortgages, these individuals hold. It would be carnage, the health and social care system would collapse, through lack of funding from these sales.

The Tories are funded through donations, from these very individuals, money talks and the last thing they will want is to slap these very people in the face, as they will replace them.

So, I would agree with everything you've said and assume the path you've given is absolutely correct, if there wasn't any goverment influence. You're forgetting who keeps the Tories in power and there interests.

It's just as likely, they deregulate further, reducing standards of living within houses. Encouraging co-living and pushing immigration through the roof, they've just offered 3 Million HK residents potential citzenship. Do you not assume, when Brexit is done, that we wont have mass immigration? From other countries...

As, I said you have no crystal ball...

It's you who doesn't understand.

Financial cycles last for far longer than a decade or two. 2008 didn't play out to its natural conclusion as financial props were able to be introduced because of QE and reducing interest rates to zero was 'new' monetary tool.

There's no backup now. The world cannot do a Japan and print forever in stagflation. The government is only re-arranging the deckchairs on the titanic to appease the HPI vote winning masses.

The props are only designed to get this year out of the way, property crash = no consumer spending confidence. The government wants to avoid that in all circumstances.

In the next year when austerity/tax rises/unemployment hits you really don't want to be invested in an over inflated asset bubble.

My crystal ball is working perfectly, in fact my investing in gold/silver and PM miners means I'll be able to retire a lot earlier on the back of this.

After the crash in 2008, which was due to subprime mortgages, many people kept holding out rather than buying... banks withdrew lower LTV mortgages.

Everyone was speculating, that house prices were still due a correction. As time went on and people waited, house prices shot through the roof. People who bought right before the crash are now half way through their mortgages, whilst others have paid 12 years in rent. There's a clear winner here, some have made 100% gains. Theres the odd outlier, who've done really bad buying in areas with poor underpinnings.

Those whom bought in 2010, did best, however some, could no longer afford to live in the area they were hoping for. That very problem could arise again now, where they will be priced out of that area with no or little supply, once the dust settles.

What we are seeing now is wealth trickling out of London, like a wave as people no longer need to live their to work. Its pushing up house prices, in Milton Keynes and Birmingham/Manchester.

Those whom envisage a problem, with mortgage payments are exiting their postion now, spurred on by the stamp duty tax.

Also, don't forget banks & building societies such as nationwide have said they will not repossess houses for 1 year. If the banks reposses on mass and auction these properties, they'll go under also. Imagine a supply of 500k houses being auctioned off, everyone and their dog would default on their mortgages. As house prices would fall about 70%, It's not in the banks interests to do so.

@TheGuruishere

After the crash in 2008, which was due to subprime mortgages, many people kept holding out rather than buying... banks withdrew lower LTV mortgages.

Everyone was speculating, that house prices were still due a correction. As time went on and people waited, house prices shot through the roof. People who bought right before the crash are now half way through their mortgages, whilst others have paid 12 years in rent. There's a clear winner here, some have made 100% gains. Theres the odd outlier, who've done really bad buying in areas with poor underpinnings.

Those whom bought in 2010, did best, however some, could no longer afford to live in the area they were hoping for. That very problem could arise again now, where they will be priced out of that area with no or little supply, once the dust settles.

What we are seeing now is wealth trickling out of London, like a wave as people no longer need to live their to work. Its pushing up house prices, in Milton Keynes and Birmingham/Manchester.

Those whom envisage a problem, with mortgage payments are exiting their postion now, spurred on by the stamp duty tax.

Also, don't forget banks & building societies such as nationwide have said they will not repossess houses for 1 year. If the banks reposses on mass and auction these properties, they'll go under also. Imagine a supply of 500k houses being auctioned off, everyone and their dog would default on their mortgages. As house prices would fall about 70%, It's not in the banks interests to do so.

Yes...still not getting it. Very short timeframe, think Spanish flu and then x10 economic damage due to monetary policy.

The current flurry of transactions and prices is meaningless is longer term. Affordability and banks willingness to lend will dictate over the perception of what current prices are 'worth'.

@xcess2184 @serenada I promise you it's not been easy for us too! We had our mind set on buying this year (been looking for nearly a year for the right area/house etc.) but decided against it.

@ComtesseDeSpair If prices fall, then higher LTV mortgages are going to become harder to come by, which means that many FTBs with smaller deposits are going to be priced out and won’t benefit anyway.
This is simply not true! I've explained this earlier but house prices are driven by credit. If the banks pull high LTV loans, then house prices will fall. The reason house prices are in this position in the first place is because the government introduced the HTB scheme that allows everyone, not just first time buyers, to buy houses with just 5% deposit!

@TheGuruishere You have no crystal ball and if you have such great insight, you wouldn't be on Mumsnet speculating about future house prices. Frankly you'd be to rich to care...
I'm not going to bother to respond to your verbal diarrhoea. You honestly don't have the first clue about what you're talking about and everything you're saying is based on emotions rather than logic and it's not something I'd want to waste time arguing against.

Ps. I'm a 30 year old looking to buy our first house for over £850k with 15% deposit cash (and we've not had to liquidate any investments etc.). I put my money where my mouth is and it's done me in good stead. Feel free to try your own luck.

@lightscribe

"The props are only designed to get this year out of the way, property crash = no consumer spending confidence. The government wants to avoid that in all circumstances."

Exactly, what people said in 2009-2010, that the lower interest rates, were going to change and all these people would lose their homes... it never happened did it???

Quite frankly, I don't care where you have you money invested, good for you, if it's in an assets which is not affected by devaluing of USD or GBP. Myself personally, would be terrified holding cash right now. You see, I wish the best for you and hope you achieve and build wealth, which helps us all.

So now, the government has cut stamp duty, first prop...

They've just cut VAT and are giving 50% off meals, do you see where this is going?

Have you not noticed that the government are doing everything in their power to propr the market.

Why even have Furlough in the first place, just to waste money and put us in debt? If they really wanted what you're suggesting, why not just allow the market to crumble then? COVID19 would have been the perfect excuse? So your argument is they've spent all this money, to put us in debt and then take wealth and assets from the very people who vote to keep them in power, I laugh 😂😂.

Economics, someone once told me it was a science 😂 but lacks the crucial understanding of human psychology and nature....

Here that people, the govmenrt spent all this money, just for fun and then later are going to screw us all.

As a ftb now is the time to buy. If the economy tanks next year it may still not affect prices as new mortgages could be restricted to higher incomes (similar to the 2008 crash). Start looking now if possible.

North Suffolk : asking price being dropped by 8%+. This seems a reasonable adjustment. It seemed to me that EAs were inflating prices pre Covid.

@thequantofmontecarlo - For all your economic insight (and if you are who you seen to be saying you are, we work very closely, so I’m not entirely clueless) you’re being somewhat disingenuous. You’ve described your position and you know you’re not representative of most of those either on this thread or who are genuinely concerned about whether now is the right time to buy. The average FTB isn’t looking at properties close to £1mill, doesn’t have over £100k saved as a deposit and doesn’t earn upwards of £150K a year. The advice you give may be correct for some of those in your position; it isn’t so across the board and obscuring that in high level economic theory isn’t really in the spirit of threads like this.

[quote thequantofmontecarlo]**@xcess2184* @serenada* I promise you it's not been easy for us too! We had our mind set on buying this year (been looking for nearly a year for the right area/house etc.) but decided against it.

@ComtesseDeSpair If prices fall, then higher LTV mortgages are going to become harder to come by, which means that many FTBs with smaller deposits are going to be priced out and won’t benefit anyway.
This is simply not true! I've explained this earlier but house prices are driven by credit. If the banks pull high LTV loans, then house prices will fall. The reason house prices are in this position in the first place is because the government introduced the HTB scheme that allows everyone, not just first time buyers, to buy houses with just 5% deposit!

@TheGuruishere You have no crystal ball and if you have such great insight, you wouldn't be on Mumsnet speculating about future house prices. Frankly you'd be to rich to care...
I'm not going to bother to respond to your verbal diarrhoea. You honestly don't have the first clue about what you're talking about and everything you're saying is based on emotions rather than logic and it's not something I'd want to waste time arguing against.

Ps. I'm a 30 year old looking to buy our first house for over £850k with 15% deposit cash (and we've not had to liquidate any investments etc.). I put my money where my mouth is and it's done me in good stead. Feel free to try your own luck.[/quote]
I'm not working off emotion, you are working off a skewed perspective, through your vested interests, in a house price fall, to judge the market correctly. Your trying to predict them bottom.

Even if hosue prices drop 10-20%, they will most likely recover and then some due to QE and government props.

Nobody is going to sell, to pay rent unless they are extremely overleveraged. Mortgages are much cheaper than rent...

Who in their right mind, is going to sell paying 1k mortgage, to pay 2k rent.. to pay £500 mortgage to pay 1k rent.

You are not understanding, youself how buyer behaviour works within the mortgage market.

As I've said, you have no crystal ball and I've also put my money where my mouth is, by buying previously and not exiting currently. If I believed what you were saying, I would exit now and rent... quite frankly, I don't.

Also, please don't come on here, discussing buying property for nearly 1 million pounds...

Which you and I both know, has different underpinnings from houses in the 100-300k range.

London has been running flat, why? It's at the top of the bubble. Saying a house in London has been reduced by 10%, can not be compared to properties in Manchester where prices are much closer to wages and there are much more individuals on minimum wage. The population of buyers and their purchasing power is different.

As I've said, you have no crystal ball...

thequant are you on HPC by any chance? Your posts have a certain ring about them.

I'm in Edinburgh. Hard to tell (yet) what prices are doing really as we only really reopened for viewings 2 weeks ago. But I put my house on the market and sold within a week, and a lot of stuff is flying off the market.

I also work in financial modelling funnily enough, but I wouldn't pretend to have a crystal ball. We don't know for sure what's going to happen and this situation is very difficult to model because the drivers of this recession are pretty unusual.

However, for us the situation was different to you OP - we already own, with lots of equity, and we aren't looking at taking a massive step up in terms of value (basically buying a house about £10k more, plus stamp duty, costs, doing it up etc). But after spending lockdown in a too small house with no outdoor space we decided to take the risk of moving even if the new place is less likely to hold its value as well as our current place. We're looking for a longish term family home and either way we are exposed to the property market. So we're only really trading the risk of the lower loss on a prime city centre place vs a small town family house. I'm comfortable with that.

Would I be leaping now if I was a FTB? So much would depend on where I was in life. Single/couple with no kids, doing the sort of work that could be done in different locations? Hell no, I'd be keeping my options as wide open as possible to take advantage of what might come (as chances are there will be opportunities somewhere, even if it is localised). Looking for a first home with children not far off school age? I'd be prioritising finding a home where we could ride out whatever comes.

I'd very definitely be avoiding a "we'll stay here for a couple of years then get somewhere bigger" type purchase as there is a higher than usual risk of getting stuck.

@ComtesseDeSpair - Agreed! The differential in salary ranges, levels of deposit and personal circumstances do impact on decision making. For example - if we calculate one year's rent expenditure in London plus current 'discount' on stamp duty - it adds up to 39k (ok in my case). Somebody not currently on the property ladder (FTB or otherwise) - will have to see prices go down by 39k min just to stand still.

This means that for the 800-900 price range with a salary of 150k it makes sense to wait. Even a 5% correction (which is v likely) results in you not losing much.

In the 600k range - you need a 8% drop to stand still - and if you are not on 150k per year you might very well get priced out if a correction doesn't take place and prices just stall as you would have lost 40k.

In the range of 500k - you almost need a 10% drop. But you are most likely to be outpriced if it doesnt happen or if the correction is a small one.

Age also matters. At 30 - yit's possible to extend your payments/affordability to 30 years plus especially on a 150k salary. Or just move to a nice but marginally cheaper area and re-locate in a fe years. At 40 this is much harder and at 50 even more so......

So whilst I do not question the economic analysis - the psychology of buying and one's personal risk assessment can differ depending on ones personal circumstances.

HPC?
Is that place still going?
Blimey!

I work for one of the big 4.

The only contribution I can make is that where I work there is some serious shifting and prepping going on no matter how hard the powers that be try to hide it from the majority of the workforce.

People, budgets and resources are being moved ‘unusually’ even when compared to 2008. Areas that have even the vaguest connection to bad credit, collections, problems, complaints, repos, recovery...especially in relation to secured lending...are being saturated with new staff, temps, whole departments transferred. Shiny new processes, mandatory requirements and policies being eased, lots of other stuff.

ie the big banks are currently prepping for a shit storm of EPIC proportions. They know it’s coming. And that’s never going to mean good things for the economy, the housing market or anything else.

The very last thing I’d be doing right now, unless completely unavoidable, would be making a large or life changing purchase and definitely not a house.

[quote ComtesseDeSpair]@thequantofmontecarlo - For all your economic insight (and if you are who you seen to be saying you are, we work very closely, so I’m not entirely clueless) you’re being somewhat disingenuous. You’ve described your position and you know you’re not representative of most of those either on this thread or who are genuinely concerned about whether now is the right time to buy. The average FTB isn’t looking at properties close to £1mill, doesn’t have over £100k saved as a deposit and doesn’t earn upwards of £150K a year. The advice you give may be correct for some of those in your position; it isn’t so across the board and obscuring that in high level economic theory isn’t really in the spirit of threads like this.[/quote]
@ ComtesseDeSpair. You make a good point. FTB are as varied as the places they are buying. Blanket advice won’t be universally helpful.

The path to the next crash might be supposedly economically literate people like the Quant buying £850k+ houses with only a 15% deposit.

Interest rates very low.. won't go up... bricks and mortar safer than stock market....??..I doubt prices will drop much if at all...busy where we are in East London..lots of sold signs up and skips outside with big refurbishment going on !!

@ComtesseDeSpair you’re being somewhat disingenuous. You’ve described your position and you know you’re not representative of most of those either on this thread or who are genuinely concerned about whether now is the right time to buy.

Irrespective of whether you're buying £1M worth of property or £500k, the effect of an economic recession, 3 million plus unemployed and potential jump in inflation due to trade tariffs etc. would be to depress prices significantly. Those of you who compare this to the last financial crisis simply don't appreciate the fundamental economic differences at play and despite my explanations, simply don't understand.

@TheGuruishere
Even if hosue prices drop 10-20%, they will most likely recover and then some due to QE and government props.
All the more reason to wait for it to drop! You have no idea what the timelines for a recovery are and like I mentioned earlier, there's only so much QE you can inject before inflation explodes and your currency is worthless.

Mortgages are much cheaper than rent...
I live in zone 2 London and buying here would result in me paying easily 60% more in mortgage. Rent, in most cities (and I've lived in a few of them globally), is cheaper than mortgage as you're paying off your landlord's mortgage (which was taken out years ago when house prices were a lot cheaper!). Also, if you factor in the opportunity cost of a deposit, insurance, maintenance etc., it's not cheaper to buy in the same area where you rent. That's why most people rent centrally and then buy further away.

You are not understanding, youself how buyer behaviour works within the mortgage market.
Sure and you're the expert! What I do understand well (no means an expert) is how the economy works and I've got enough data to back up my conclusions so I'll go with my opinion for now thanks.

Also, please don't come on here, discussing buying property for nearly 1 million pounds... Which you and I both know, has different underpinnings from houses in the 100-300k range.
You're absolutely right. The supply of houses in the sub £500k range far outstrips that of the £1M range. If anything, houses below £500K will fall further due to 3 reasons: 1. Folks who own them may have bought via HTB scheme and will have very little actual equity in the house 2. Unfortunately, the probability of the people being made redundant owning sub £500k houses is higher as most of the jobs are from sectors paying in the middle range of income and 3. BTL/property investors tend to usually buy properties in this range and given the current issue with Airbnb, tourism etc. those who're unable to service these mortgages will put these back on the market (we're already seeing a flood of these properties now).

@ThroughThickAndThin01 Lol! I'm guessing by that you mean in MN I'm only allowed to say property prices will rise forever, Brexit is great for house prices etc.? Are you a real estate agent?

@StatisticallyChallenged We don't know for sure what's going to happen and this situation is very difficult to model because the drivers of this recession are pretty unusual.
No one knows exactly how this is going to play out. But I'm assuming you research trends, make informed assumptions and use these as features in your model right? Otherwise how would you allocate your client's portfolio or give advice on if somethings a buy, hold or sell? Since you're in a similar profession I'm sure you appreciate there's always uncertainty and we get paid to make informed decisions. I'm just applying this to my personal life as well.

@Greenhats10
In the range of 500k - you almost need a 10% drop. But you are most likely to be outpriced if it doesnt happen or if the correction is a small one.
Technically you need an 8% drop and most economists are expecting an 8 - 15% drop. It's only the real estate agents who are desperately trying to play this off as a blip.

Age also matters.
Would waiting for a year make such a big difference?

the psychology of buying and one's personal risk assessment can differ depending on ones personal circumstance
I agree. I was simply hoping to inform the OP of my opinion and the data and logic used to arrive at it. Ultimately, it's down to your individual risk appetite, needs and financial discipline.

@BlueLagoona That's what I'm seeing at the bank I work at as well. We've written down several billions worth of car loans, credit card loans and mortgages and we're making sure our tier 1 capital ratio is higher than usual as we brace ourselves.

@RedtreesRedtrees The path to the next crash might be supposedly economically literate people like the Quant buying £850k+ houses with only a 15% deposit.
exactly.

Otherwise how would you allocate your client's portfolio or give advice on if somethings a buy, hold or sell

I don't, it's not a part of my role to provide advice. But I am certainly making informed decisions with regards to my own life and as I said the right course will vary for different people. For us, the relatively minor risk increase of a slightly higher mortgage (not much due to lower rates) and potential bigger short term drop in value is acceptable because of our particular situation. I'm buying with a just over 50% ltv for context.

@BlueLagoona

Thanks for the inside info. What are your thoughts on the car credit situation? I am in the market for a new vehicle and keep seeing prices going up. I am inclined to think that as Furlough comes to an end and companied cut staff that people will default on car finance in order to pay their rent and mortgages. But I am only speculating.