Is housing market set to crash ?

[Moominsweetie]

Talk to me, clever people - what’s the outlook over the next 6-12 months?

Where I am (popular part of the SE commuter belt to London) will never crash.
Might dip slightly or stagnate but with the sheer amount of people who want to live here and the lack of stock houses will always be in very high demand- especially those with reasonable outside space

I believe the crash in 2008 was about 20-25%. However, we bought a house in mid 2006 and then sold it in mid 2010 for 15% more than we paid for it. Our house held its value because (1) it was in a popular location, commutable to London and (2) in excellent condition. Even if there is a “crash” there are many variables and it doesn’t mean that your house will lose as much as someone else’s.

We bought our house for £500k 1.5 years ago. Just had it valued at £650k which I was surprised by. However, that increase in value is representative of the market around us and of a lot of similar areas in the South. I'm not really seeing the extra £150k as real money given that we don't want to sell. In fact, it's possible that it has already fallen in value just in the last couple of weeks.

If the market "crashes" 10% from its high point we'd still be a long way up on what we bought the house for.

Obviously a 10% decrease in value would be an issue for anyone who has bought recently but a lot of people may not even be aware of how much their house has increased in value over the last couple of years and would not therefore feel a loss if there was a fall in value.

going to be messy. A real blood bath

once it starts and it looks like it has, it will snowball

expect 10-15% next year and then more in 2024

exactly

2008 was softened with ZIRP and QE. those tools are gone. 2008 never fully deflated.. it will now

I'm not sure about a big crash but certainly years of stagnation. It will take a while to feed through due to so many people on fixes & stagnant prices will make it harder to move up that ladder in future years. Plus higher interest rates makes property less attractive to people with spare cash. Where I am prices didn't really change since Brexit & it was only the stamp duty saving & lockdown savings that got it going.

Cheap borrowing is the biggest driver of the rises seen after 08. A 400k mortgage would have cost some 1.4k last yr, at 5% it's 2.3k, that's a huge difference & will definitely change peoples mindset in terms of borrowing. Even if wages did rise in line with inflation accepting you could be paying thousands of pounds more in interest isn't particularly palatable. I don't think wages will rise with inflation though.

Personally I think the economy will be better long term if we aren't on emergency interest rates but that's won't be without pain.

It’s already dropped 10%.
The only sales taking place over the next month, are the ones well down the path to completion from the previous 2 months.
Anyone trying to sell now will be expected to entertain -10% offers, or more.

I really can't see how. Demand is still outstripping supply. We've had really high

immigration which can only worse than he situation with regards to d vs s.
People will probably hold fast in their properties rather than selling so less supply. Maybe as pp have said prices may correct to more appropriate levels post the stamp duty relief but I doubt very much a crash is going to happen.

Demand is only due to availability of credit. nothing more nothing less

THIS.

To illustrate that demand is only driven by the availability and cost of credit, just ask yourself what happened in 2008. Did house prices suddenly drop because there was a sudden mass exodus of people from the country, decreasing demand? Or did house prices drop because the credit taps were turned off?

@pepperpiper While many will hold onto their homes and not move, there are always those that need to sell (death, divorce, debt, relocation) and they will set the new price thresholds. In 1995 and 2008 there was less supply, but what was for sale, set the new price thresholds. For the rest of us who have home to live in (rather than investment cash cows) it makes very little difference as a house is worth a house, and as I won't be selling up to live in a tent it's immaterial to me what my house is worth.

I don't think it will properly crash but I would expect total stagnation price wise at the very least for the next couple of years, and I would be surprised if some sort of drop didn't happen.

I think the days of multiple offers for thousands over the asking price being received within 24 hours of going on the market are long gone.

That is a spectacularly naïve view to take!

No area will be entirely immune, although some will be affected less than others.

If the cost of servicing the interest needed to obtain a mortgage has quadrupled this will affect prices, no matter how desirable your SE commuter town is.

To know of no reputable analyst who would claim that demand for housing outstrips supply. The housing stock in the UK is notoriously limited and the single reason for the phenomenally high prices.

I doubt it will crash as demand still exceeds supply. I would expect prices to stop rising and maybe fall a bit but a plummet - no

@SilentHedges but on the flip side how many 'new' people will be coming on to the market. If there are more people that need to buy then there will still be a supply demand negative situation, I worked for a mortgage company in 2008. Those defaulting should never have been given a loan in the first place, the company I worked for was fined £millions as a result.

Nowadays the banks are far more stringent about who they lend to they're also very fast at changing the goal posts on who they lend to. But still people are borrowing, there's still huge numbers who will be borrowing.
There will of course be people defaulting next year but there will also be people still earning, still able to pay the interest and still cash buyers. And immigrants often come in with cash to buy. I'm not saying prices won't level out or stagnate but I am saying I don't believe it will crash.

Sure, but there isn't unlimited borrowing power.

If supply and demand remains constant, but average borrowing power decreases 30%, then there is presumably downward pressure on prices?

Nobody is suggesting a crash. But not every buyer has room in the budget o make up that 30% themselves.

And of course many buyers are cash. But those buyers are facing competition from savings accounts and the prospect of lower capital growth,

This. Inflated housing values have been many many times higher than is warranted by underlying fundamentals. They’ve been kept like that by a mixture of cheap credit, government intervention, unwarranted confidence, economic policy directed at asset-rich boomers and migrant labour. Brexit, and the coming reversal of the demographic boomer bulge, are about to unwind the inflated “demand” we’ve seen in the last two decades.

Put simply, in the UK we don’t have either the industry, the natural resources, the workforce or the future earning power for the next thirty years to support housing values at current levels. And no handy influx of EU migrant labour to bolster the smaller demographic of workers trying to support a big bulge of elderly boomers (with increasing health and care needs and looking to downsize).

@postcardpuffin we've had over 140k people apply for a visa since 2021 under the HK BMO scheme alone. They more than likely do have the cash to buy property.
It's not just eu immigration that affects house prices.

A lot of this depends on your definition of 'crash'

10% down would only take most house back to where they were at the start of this year. 20% down (which by most definitions would represent a crash) would take a lot of areas back to where prices were at the end of 2020/beginning of 2021.

I doubt 140k people are about to save the boomers from the disastrous nationwide mess of our health and social care and huge skills shortages.

What gives you the impression that UKPlc’s workforce is going to be doing so fantastically well over the next thirty years to sustain a housing bubble at historically unprecedented levels? What are we going to be making, selling or extracting that’s going to fund it? Will interest rates be at record lows? Will our industry take off with a huge boom in exports? Is there going to be an explosion in incredibly high-skilled young workers generating new income? Are wealthy industrialists going to be flocking to set up new businesses here in this youthful dynamic country full of promise?

Because if you believe they are then I have an investment opportunity for you…! Just send me your bank details by PM and I’ll tell you all the details 🙃

Not if you understand the basic differences between percentages up and percentages down 🤣🙃

Fortunately I do! 😎
Which bits are you disagreeing with....?

It looks like there are a lot of really thick people on here, no wonder the bankers managed to run their Ponzi for so long, as someone said - Why did it crash nearly 30% in 2008? Answer - THE CREDIT TAPS WERE TURNED OFF - and they cant drop rates again to save it AND people are in a Shit-Ton more debt now than they ever were in 2008! This will be like a wild starving king size Grizzly crashing through the trees and eating anything that crosses its path.

This article from 2009 indicates that house prices fell by just under 16% on average in 2008; they then spent a couple of years stagnating before beginning to rise again. They didn’t crash further because people who didn’t need to sell just stayed put: amp.theguardian.com/money/2009/jan/06/house-prices-fall-in-december
Drops of 30% or more must have been localised rather than across the board.

I think the noise for the government to ‘do something to help the hard pressed mortgage payers’ will escalate, but the government has no money. It’s in everyone’s interests to have a correction now.
I would guess, maybe people can go interest only for a few years, and add the debt to the mortgage, or extend the mortgage out to 35 or 50 years.