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.

@Alexalee

So you think the inflation in food and energy prices is to do with qe.....

Yes as you effectively devalue the currency. You can’t print 1/5th of the global reserve currency without it having a knock on effect and seeping into the system, especially when injected into the economy itself.

www.cityam.com/almost-a-fifth-of-all-us-dollars-were-created-this-year/?amp=1

This is why in the example of 5-10 year old cars haven’t risen in value, it’s the currency that has devalued.

This is why a combination of rising commodities (becoming scarcer and more in demand) and devaluing currency is fuelling inflation that we are seeing. You just have to look at the rate of increase in the last two years.

@MrsBellamy

Prices did fall in the 2008 crash, by a fair amount in some places. I live in Scotland and bought my first property (a new build) in March 2008 right before the markets crashed.

Within around 8 weeks the builder who built my house had gone into administration and was selling the exact same house as mine for £82,500 (I paid £115,500) so I had lost £33k in a matter of weeks. I stayed in the house for 10 years and had to move in 2016 due to marriage breaking down and sold for £99k so still a 15k loss despite staying there for 10 years waiting for the market to recover a bit.

I've been renting since then as the loss wiped out what little equity I had and I'm still struggling to get a deposit together to buy again. It's so frustrating and I feel like I'm never going to get there again now.

I do sympathise. I think alot of people just don't realise how devestating it can be and how much some people lost.

I hope you do get there.

Where we’re looking to buy it’s the same: things coming to market with very confident prices, then lingering. There’s one just on that last sold 2 years ago, no changes made in that time, that wants another £150k – I’ll be interested in seeing if it lingers as that just seems cheeky. Quite a few that start off with a “POA” have also now faltered and admitted the price, then reduced it. That's interesting, I did wonder if it was something local to me. I suspect some people were being a bit optimistic.

Where I live (SW London, between Thames and Richmond Park), even at the peak of the pandemic buying mania, houses were selling for less than what they had initially been listed on the market for - even on very desirable roads (see attached example of a 5 bed detached). I think property listings are now being driven more by the fear of missing out rather then logic - you'll see a lot of chancers hoping they can beat the downturn and sell to the "greater fool"

I'm in SW London & prices have pretty much stagnated since Brexit particularly once they add in the stamp duty.

I think much of the "boom" has been people who were stuck on the ladder finally being able to move up or move out of london so the prices are higher.

I read that for the first time ever more FTBs left London to buy which will surely have an impact in a few yrs.

We're in Devon and even here (where things went bonkers during covid) things are slowing a lot. Stuff comes on at mad prices and then sits there. A friend of mine got something under offer two weeks ago for quite a long way under asking, which would NEVER have happened at any point in the last two years. And that was before Ukraine. Some people have to be in the office a couple of days a week in London and are realising that it is a LONG way from devon to london if you're doing it every week, so they are thinking about selling up again. And everyone has suddenly realised that energy and commodity price rises are going to impact them hard.

Yes, inflation caused by all the QE is massively devaluing the currency. The financial sector (particularly the growth stocks) seem ridiculously over valued and I think will fall much further. I think the property market seems to be turning in some areas as price increases and tax rises start to hit home. @Lightscribe- do you think rates are likely to go up soon or do you agree that the end of the year is more likely?

@ledbydonkeys- I think the increases in (most of) London have been much less than in other regions. There has been a big exodus from London and wealthy Londoners have been buying up property elsewhere, pricing locals out and causing prices to rocket. In my area, where prices were crazy and everything selling immediately during 2020/21, things have definitely slowed but certainly not stalled as supply is so low.
@MrsBellamy- I'm very sorry for your situation.

@Wilfulchaos

We're in Devon and even here (where things went bonkers during covid) things are slowing a lot. Stuff comes on at mad prices and then sits there. A friend of mine got something under offer two weeks ago for quite a long way under asking, which would NEVER have happened at any point in the last two years. And that was before Ukraine. Some people have to be in the office a couple of days a week in London and are realising that it is a LONG way from devon to london if you're doing it every week, so they are thinking about selling up again. And everyone has suddenly realised that energy and commodity price rises are going to impact them hard.

I'm in Devon as well. It has really changed in the last couple of months.

@rainingsnoring

Yes, inflation caused by all the QE is massively devaluing the currency. The financial sector (particularly the growth stocks) seem ridiculously over valued and I think will fall much further. I think the property market seems to be turning in some areas as price increases and tax rises start to hit home. *@Lightscribe*- do you think rates are likely to go up soon or do you agree that the end of the year is more likely?

@ledbydonkeys- I think the increases in (most of) London have been much less than in other regions. There has been a big exodus from London and wealthy Londoners have been buying up property elsewhere, pricing locals out and causing prices to rocket. In my area, where prices were crazy and everything selling immediately during 2020/21, things have definitely slowed but certainly not stalled as supply is so low.
@MrsBellamy- I'm very sorry for your situation.

As I said previously the Bank of England will follow the Fed. The $ is the reserve currency and oil is priced and paid for in the petrodollar.

The Fed is largely expected to raise rates by about 9 basis points come 2023 which will take their rate from 0.25 to 2.25%. So I would estimate a similar move from the BoE to around 1.5-2%.

www.barrons.com/amp/articles/jpmorgan-now-expects-nine-straight-fed-rate-increases-until-march-2023-51645298667

Mortgages rates have to front run that rate which is why Nationwide raised by three times.

www.telegraph.co.uk/personal-banking/mortgages/nationwide-hikes-mortgages-bank-englands-rate-rise/

Remember central banks make monetary policy decisions independently from the governments.

@ancientgran It's interesting, isn't it? Prices where we are have gone totally mad, but they're suddenly just not shifting. And there's quite a lot that's coming on because it's spring and it's all starting to look pretty, and it's stalled.

Houses around here are still flying as soon as they come onto the market. There’s hardly anything coming on either, which is decent anyway (doesn’t need tonnes of work).
We should also Remember that only 28% of homes are mortgaged. The rest are owned fully outright so the impact of raising rates only affects a smaller proportion of the population

@Fretfulmum

Houses around here are still flying as soon as they come onto the market. There’s hardly anything coming on either, which is decent anyway (doesn’t need tonnes of work). We should also Remember that only 28% of homes are mortgaged. The rest are owned fully outright so the impact of raising rates only affects a smaller proportion of the population

Yes the younger generation and PAYE workers that support all the rest of the country through taxes and NI contributions.

@Fretfulmum Where are you getting those figures? About 1/3 of people are in rentals, for starters. Then according to the ONS only about 8.8million houses are owned without a mortgage - that's about 1/3 of the 25million houses in total. The idea that raising interest rates only affects a small percentage is for the birds, I'm afraid.

[quote Wilfulchaos]@Fretfulmum Where are you getting those figures? About 1/3 of people are in rentals, for starters. Then according to the ONS only about 8.8million houses are owned without a mortgage - that's about 1/3 of the 25million houses in total. The idea that raising interest rates only affects a small percentage is for the birds, I'm afraid.[/quote]
From 2016/17 figures which is outdated.

www.homewardlegal.co.uk/news/post/england-homewners-grow-number-and-age

More recent statistics put the total mortgage debt of the country at £1.4 trillion (the largest in Europe). There are over 2.5 million BTL landlords in this country in which their own paid off homes will be held as collateral.

www.statista.com/topics/6114/mortgages-in-the-uk/#topicHeader__wrapper

And there’s a considerable percentage of BTL that have been moved into limited companies and therefore the landlord‘s home will not, if it ever was going to be available for collateral against the BTL loan.

www.estateagenttoday.co.uk/breaking-news/2022/3/agents-braced-for-new-interest-rate-blow-this-week

Todays news

@Mumof22020

I thought if there was a recession the house prices would drop, would this not be the case?. I was speaking to a friend about this and they said the house prices could possibly fall around 20% are they being daft?

Houses have fallen as much as that in the past, but I'd say it seems unlikely in the near future. I've been expecting prices to drop for years now, as they are increasingly stupid compared to incomes, but they haven't. More likely that the market just stagnates. But it does depend a lot on the ongoing effects of brexit and on the outcome of the Ukraine situation in terms of sanctions. As for prices at the moment, I keep hearing that they are going up, and that houses are snapped up in days. The Zoopla valuations for houses on this street are bonkers (as in ridiculously high) but there are two houses on this street that have been for sale now for close to a year. One went SSTC, came back on the market, and has now been SSTC again for about four months, during which time some serious-looking work was done to the brickwork. Still SSTC and not actually sold. The other has just stayed for sale. A smaller property, I'd say more sensibly priced, sold fairly quickly. But not immediately. I think it depends an awful lot on where you are.

There's a bit coming on in dribs and drabs where I'm looking and it seems quite punchy pricing- a lot sitting for a while and even the decently valued stuff not flying. One came on today in the area I'm looking- guide price of £625k-£650k. House sold (granted, in worse condition, but it was an end of terrace rather than a mid like the one just come on market) a few doors down for £400k just under two years ago!

I noticed another was reduced today from £850k down to £795k. It's massive and was an HMO- it's nearly a mile to a station so assuming it's not attracting investors, and it needs a lot of work to turn it into a family home.

@Lightscribe- Yes, 1.5% or sounds about right but is still very low by any sort of historic standards.
I wonder if that will be enough to lower house prices or just cause stagnation.

'Remember central banks make monetary policy decisions independently from the governments.' I theory.

Which part of the country are you in @Fretfulmum? 28% of homeowners is still a lot of house, a lot of people and huge amounts of debt.

@rainingsnoring I’m in South Bucks. Everything is flying off the market, well over asking. There are some houses which haven’t sold but they are way overpriced or need so much work doing to them which isn’t reflected in the price.

We’re in the South East. Houses aren’t hanging round for long here either. We still getting a weekly call from a local estate agent trying to persuade us to sell after valuing our property for remortgaging purposes 😅. They’re desperate for stock.

It’ll be interesting to see if the predicted interest rate rise on Thursday has any effect on the market.

[quote Fretfulmum]@rainingsnoring I’m in South Bucks. Everything is flying off the market, well over asking. There are some houses which haven’t sold but they are way overpriced or need so much work doing to them which isn’t reflected in the price.[/quote]
Thanks for answering @Fretfulmum. It sounds as if the SE is still a hot market but things have calmed down in other places.

Just saw that Fed rate expected to go to 2% this year from 0.5% currently. What will BoE do?

Predicted to rise by 0.25% tomorrow and then 0.25% again in May - which will take us to 1%. Not sure after that……

I've seen forecasts of 1.5% by end of yr but who knows.