House prices to fall 14% next year

[GreenestValley]

www.thetimes.co.uk/article/house-prices-forecast-to-drop-by-14-next-year-lbj77clv2

What does everyone think? I’m looking to buy my first home and this makes me very nervous. Stamp duty reduction is obviously a benefit but if prices drop by this much waiting would be a far better choice... Eek. Anyone else in same position?

Houses also going quick here one on my rd up and sold within 3/4 days as not much on the market

There was talk of negative interest rates. Surely that would drive the price of property up? And if the recession causes a lot of repossessions, then that is the best outcome for the banks?

Interest rates are surely more relevant.

Negative equity is only an issue if you need to sell short term.

When we bought our house a few years ago, value dropped below purchase price but it was irrelevant as we didn't want to sell.

Rent is likely more than a mortgage payment so unless interest rates rise hugely you're not going to lose out by buying a home.

We have two major estate agents where I am - one is convinced it’ll be extended, one thinks it definitely won’t be as the government need the income.

Either way, houses are still selling well here. Some of the less desirable areas have “settled” and aren’t going up in price, but generally houses are selling fast. Flats don’t seem to be selling at all.

Negative equity is a different issue. I was referring to the bank of England warning of negative interest rates and how this will drive demand for property as people scramble to invest in bricks and mortar, causing prices to go up not down.

Property price predictions are notoriously wrong. The so called experts seemed totally shocked by the buoyant property market at the end of sumner/early fall, when anyone with any common sense could see it coming.

I'm sure I read the people who are moving were those on the ladder with equity & or downsizing. I see a long period of stagnation with more incentives/props, longer mortgage terms etc.

Round here the prices didn’t even fall after the bank crisis. Just plateaued for a couple of years. It’s been buoyant here, houses still selling within a week or so if priced correctly and on a good road. The only ones struggling are the obviously overpriced and/or in undesirable locations eg on a main road. I just can’t see it collapsing in this town.

Too many factors at play. 1.4m people left the UK since COVID started a year ago, I guess mostly hospitality workers and other Europeans reliant on business to be open to work returned to their country. 700k alone were in London, that’s almost 10% of the city. The exodus from the capital is also spilling on the rest of England, and I am sure many have seen a flood of equity rich buyers relocating near their family. Rent in London are down 8%, even 14% in central locations.

And the job loss has not yet started, full effect will be visible later this year, will international buyer still show up? BoE prepared for negative interest rates should they need to implement them (complications around the practicality), but equally warned that inflation could also kick in pushing interest rate up.

So yes, there are every chances that the tories do something but equally the country is running an unsustainable deficit.

Round here the prices didn’t even fall after the bank crisis.

Lots of places didn't, the lowering of interest rates had a huge impact. Of course we now have the problem that we can't wean ourselves off low rates.

So yes, there are every chances that the tories do something but equally the country is running an unsustainable deficit.

I'm a homeowner but completely agree. It's not sustainable.

If you are treating housing as an investment, then I would take the same approach that I take for any investment - make it long term. Similar to investing in stocks don't try and time the market unless you really know something other people don't!
You can look at it as a financial instrument in a different sense - your monthly payments should be less than renting and you'll be building capital at the same time.

I think It depends on location.

A house I know what’s on for £425k, didn’t sell, reduced to £390k and still took a long time to sell. It was overpriced.

The sale has fallen through and its back on for £450k.

That’s on. Not ‘what’s on.’

🙄

The market feels much more stagnant now where I am, not much coming on at all, although the new build houses here seem to be selling well still which surprised me as none of them will be eligible for help to buy any more due to the cap here.

I am sure many have seen a flood of equity rich buyers relocating near their family

4 children have left my DD's class since September and 2 more are due to leave. All have moved closer to family in other areas. I'm in an area where you'd struggle to buy a 3 bed for less than £400k so lots of money for them to buy somewhere bigger elsewhere.

I'm in london & we would have stayed forever. However in a couple of yrs we will move out, Space is now more important to me than location & quite frankly even if we could stretch to what we want I rather have more disposable income.
It's pretty hard to build equity in some markets if you bought in the last few yrs & are paying £££££ in stamp duty.
If I was starting out now I would skip a stage & try & buy a house first.

OP: you won’t be able to complete before Mar 31st now, anyway.
Plus FTB pay less stamp duty.

See what happens, but ultimately paying a mortgage instead of rent is going to pay off in the long term.

I think maybe they will fall to pre covid levels , then stagnate I don't think we will see any long term falls. I think a lot of people have realised their house isn't fit for sitting in all day pre covid people were at work and not in the house all the time.

My ds and his girlfriend are trying to buy their first home.
They are struggling because everything is being sold before they can get a viewing.
The house prices are going up month on month.
It’s quite scary to watch.
They need a 15% deposit which is equating to 32k+
They have saved this between themselves but I’m concerned that they can’t save as quick as the prices are rising
Based in Cambridgeshire

If on a fixed rate for 5 years and need to remortgage, would negative equity affect your mortgage offer at that point?
I’ve always wondered

@arikel yes of course, it will affect your LTV. I'm assuming this is the case for refixing too. So if in negative equity you'd have to go onto the SVR I assume?

Thank you. In fairness we have 25% deposit so I’m guessing it wouldn’t affect us unless house prices dip below that? Or would it because of ltv ratio?

@arikel I'm in a similar situation, bought with a 25% deposit so have a 75% LTV rate mortgage, so if when we get to the end of the 5 year prices have dropped I might now only have 10% equity therefore I will need a 90% LTV mortgage so the rate won't be as good as if we'd maintained or increased equity. Although now my head hurts a bit and not sure what that means for mortgage size, hopefully someone will come by and correct me if I'm wrong on anything!!

But remember you will be paying some capital back in your first 5 years so you will build a bit of equity that way too.

I'm hoping any dip will be short lived and back up by 5 years.

@RainingBatsAndFrogs

OP: you won’t be able to complete before Mar 31st now, anyway. Plus FTB pay less stamp duty.

See what happens, but ultimately paying a mortgage instead of rent is going to pay off in the long term.

Not sure why people always compare rental cost and mortgage (effectively rental cost of money to the bank). The later is obviously cheaper as the borrower bears the risk of the asset. Whether it means maintenance, repair cost, or a reduced market value. So while a bank may ask for 2% net for lending the money, a landlord may have to request probably 4% gross to lend his asset knowing that occupancy will also not be 100% over the course of many years. If the law around tenancy was more protective to renters, in line with the rest of Europe, it would be a perfectly acceptable option for many (I think Germany as a majority of renter, yes, even families).

Stamp Duty Extension

www.telegraph.co.uk/politics/2021/02/12/exclusive-rishi-sunak-considers-six-week-extension-stamp-duty/

Rishi Sunak is considering extending the stamp duty holiday by six weeks to prevent tens of thousands of home buyers being caught in a “completion trap”, The Telegraph has learnt.

The Chancellor is looking at a limited extension through to mid-May which would help to alleviate fears that sales risk falling through after the March 31 deadline expires.

He is said to oppose calls for a longer six month extension due to the “gratuitous” impact this would have on tax receipts, with the Exchequer desperate to recuperate revenues depleted by various tax breaks announced during the pandemic.

“It is certainly the case that a lot of people would be caught in the completion trap if the holiday were to end when it is due to,” a source said.

The move is likely to disappoint Conservative MPs and campaigners, who have been calling on Mr Sunak to consider abolishing stamp duty altogether.