House prices and recession

[Mumof22020]

Whats everyones thoughts on house prices are they likely to come down in price if theres a recession? The prices are crazy at the moment and with the cost of living going through the roof we're surely going to hit a recession.

Everyone I know who wanted to move post Covid now has, so I think a reality check is coming fast.

Yes, I read somewhere that 1 in 20 households moved during the pandemic, which is an insane amount when you think about it!

Quantitive easing has been the plan all along that will be like the 70s when we look back and paying 350 grand for a house seems an amazing bargain relative to the £50,000 average salary that people are suddenly on.

I don’t know but we are house hunting and every house has 20-30 viewings and often they won’t allow viewings as they’re too booked up. With that much demand and people willing to pay how can they drop?!

I don't think we will see significant price decreases. Around here we are still seeing increases. NDN just sold their house for 15% more than we bought ours for 2 years ago.

@rainingsnoring

Yes, we'll be in recession soon and inflation is continuing to rise. The housing market will either flatten off which will be a reduction in price in real terms (compared to rate of inflation) or could drop significantly depending on what happens with the UK/ worldwide economy. The outlook for the economy looks very poor. The government/ B of E won't be able to use QE extensively because of the rate of inflation nor can they lower interest rates as they are already extremely low.

The BoE are increasing interest rates to fight inflation, not decreasing them. They have signalled that they will continue to raise them over this year and that they view the current inflation as a medium term thing (lasting a year or two).

There's a different thread running on what people are cutting back on. Whether it's essentials or luxuries, it all has an effect. Other people talking about whether they can afford heating or eating. God knows what Russia is going to get up to. Anyone who thinks house prices are headed for a soft landing are in cloud cuckoo land.

@Goblinwife- yes, I know that the bank have raised interest rates twice in recent months and may raise them further this year. I meant that they can't lower them much more if they want to do so in the event of recession. They have practically no scope. Also, the bank have been jolly inaccurate in their forecasts to date so I wouldn't rely on the latest one.

[quote rainingsnoring]@Goblinwife- yes, I know that the bank have raised interest rates twice in recent months and may raise them further this year. I meant that they can't lower them much more if they want to do so in the event of recession. They have practically no scope. Also, the bank have been jolly inaccurate in their forecasts to date so I wouldn't rely on the latest one.[/quote]
There haven't been any meaningful rises in interest rates for too long. I do not regard those types of rises.

I think there's a chance they might fall a bit, but only say back on value by 6-12months, nothing really noticeable.
Too much cash will still be chasing the safe haven of bricks and mortar to allow much of a fall.

There is absolutely no way the interest rates will rise causing people to not be able to pay their mortgages …. we have a population it’s almost doubled since the 90s crash and about one third of the available social housing, combined with 1.5 million refugees about to descend on this country there’s no way the government will allow the indigenous population to lose their homes as well they’ll be literally riots in the street.

@Bringsexyback

There is absolutely no way the interest rates will rise causing people to not be able to pay their mortgages …. we have a population it’s almost doubled since the 90s crash and about one third of the available social housing, combined with 1.5 million refugees about to descend on this country there’s no way the government will allow the indigenous population to lose their homes as well they’ll be literally riots in the street.

Well, they could devise a system whereby people do not dramatically lose their homes but the government is effectively given the right to become co-owners via placing charges on the homes.

The 3 houses I’ve owned in my life have never decreased in value. Not even in the worst recessions.

They’ve stagnated, but in booms have doubled/tripled in price.

I think it’s very dependent on area.

Money is still very cheap compared to the years of 14 and 17% interest rates when i first bought...lived on soup for a few years until it went down....neighbours just sold and made 160k profit in only 14 months....they only painted the bathroom....nothing else....still a big shortage here in east london....

Well if people haven’t taken out income protection insurance maybe now is a good time to do so.

@Soffit- yes they have been tiny, tiny increases only. I can't see them raising interest rates significantly or rapidly. Can you?

We bought last year. The previous time we bought was in 2009 which coincided with the credit crunch. We had sold and were renting but despite being in a strong position, there was bugger all choice on the market. The estate agents told us that potential vendors were seeking valuations but when there expectations weren't reached, they would just sit on their hands and not sell.
I think the scope for price falls is wishful thinking. Only forced sales will make it to the market and the rest will sit it out until circumstances change. We didn't bag a bargain despite buying in a recession.

@rainingsnoring they wouldn’t cut rates if we had a recession now (which we won’t) because it wouldn’t help. Cutting rates stimulates demand and incentivises spending. Inflation is being driven by lack of supply and high global commodity prices.

@deadlanguage- I disagree about the recession. I think we will definitely have one. I understand that the current high inflation is supply driven. However, the bank would tend to maintain low interest rates or possibly cut them in a recession because demand would significantly reduce.

I wonder if people wishing for a recession so that house prices fall understand anything about the economy. Buying a cheap house is no good if your are more likely to be unemployed, see your wages stagnate even further and generally have a worse standard of living than before you owned a house.

[quote rainingsnoring]@deadlanguage- I disagree about the recession. I think we will definitely have one. I understand that the current high inflation is supply driven. However, the bank would tend to maintain low interest rates or possibly cut them in a recession because demand would significantly reduce.[/quote]
Sound monetary policy. You would do very well in Turkey as Erdogan has sacked most of his staff. He’s trying the exact same thing (cutting interest rates in an inflationary cycle) it’s working wonders. Turkey’s inflation has now risen to 54%.

The only thing that will cause house prices to fall is yhe banks appetite to lend. Thd banks were told to introduce more 95% ltv last year and they did … clearly their strings are pulled from on high

Lending is obviously a big part of it but I think house prices will also rise and fall depending on confidence in the market. If enough people think prices are going to rise/fall then it can become a self fulfilling prophecy. It is a big gamble and people need to feed confident about what is probably the biggest purchase of their life.

@Lightscribe- are you suggesting that the Bank of England are likely to raise interest rates significantly even if we enter a recession? They have raised them extremely gingerly despite inflation far exceeding all their predictions. Do you think they are likely to raise them more sharply in a recession? The levels of individual and government debt make for difficult decisions for them...

@ancientgran neither consumer confidence nor wages have borne any relation to house prices for the last 22 years.

It’s no good trying to apply logic to the situation when houses have been unaffordable without government proper ups help to buy etc and now first time buyers are actually competing with the banks apparently and the banks are buying up residential property to rent back to its customers which seems slightly cannibalising but okay

[quote Bringsexyback]@ancientgran neither consumer confidence nor wages have borne any relation to house prices for the last 22 years.

It’s no good trying to apply logic to the situation when houses have been unaffordable without government proper ups help to buy etc and now first time buyers are actually competing with the banks apparently and the banks are buying up residential property to rent back to its customers which seems slightly cannibalising but okay[/quote]
Really? I think consumer confidence has alot to do with it. If people see prices flatten out, a few dropping a little in price and it is easy to start the equivalent of the run on the bank or even the toilet roll madness.

Not everyone lives in expensive areas, my two youngest have left uni less than ten years ago and both own their own houses without help from anyone,

Anyway I bought my first house 49 years ago so 22 years doesn't begin to cover my own experiences. At the end of the day house prices might go up, they might go down or they might just level off. No one knows even the cleverest economist can't always get it right.