Is housing market set to crash ?

[Moominsweetie]

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

www.moveiq.co.uk/blog/news/housing-market/

@pepperpiper While new people come to the market, this is balanced by people exiting the market (probate, returning overseas etc). As another poster said above, there's not a shortage of property (there are not swathes of homeless middle class people littering the streets) but there is a misallocation of property. People will always need to buy, but the fact remains they can only pay what they can borrow, making prices a function of credit.

I think we broadly agree on a few points. In 2008 it was criminal what people were allowed to borrow, and self cert was common, although no lessons have been learned and people will default again soon. I also agree that the majority of people are still borrowing and will continue to, but that borrowing is curtailed by higher rates, so that + less affordability = lower prices. Yes, the majority of people can still pay their mortgages, or have no mortgage, so are unaffected, but prices are set by the people who have to buy and sell (death, divorce, debt, relocation), and that is a function of credit.

Whether we have a crash, a 10% drop or a flatlining of prices is in the hands of interest rates.

If someone can no longer afford to buy a 500k house, then can you explain how/why demand for 500k houses doesn't change?

For eg with a 100k deposit and a 1700k mortgage, at 2% I would aiming for a 500k house. At 6% I'd be bidding for a 360k house.

That's one less buyer who 'demands' a 500k house.

I concede there may be competing forces. But demand is a function of interest rates.

Well given a 30% deduction on today’s prices would still only bring the house I have my eye on back to 2020 prices id hardly call that a bargain. Certainly not enough to get as excited as some of these posters are.

Yep, I want a box of Cadbury Roses, but they cost 8 quid and I only have 3 quid so i have to buy a packet of chocolate biscuits instead. If everybody only has 3 quid then Cadbury Roses are no longer worth 8 quid and they either drop in price or stay in the box. Houses are the same but with bigger numbers and cash rich people with 8 quid end up buying them for 2.50 in the clearance sale.

Might come down a bit but crash? I don’t think so.

They said that before every crash, the question is can the government bail them out this time, and do they even want to?

I completely agree, the issue is that the people that were looking at a 700k house start to buy the 500k ones, the people looking to spend 1m start buying the 700k ones - and the £1m houses sit and stagnate on the market before being withdrawn, as people would rather not move. All of those houses remain broadly the same price, the people looking to buy them change.

It only really changes if enough people in 1m houses are forced to sell for for less, which then has a deflating effect on the whole market.

Sorry OP but you'll have to get yourself a crystal ball - a socialist on the "Government u-turn thread has one. Maybe they'll lend it to you?

HTH

@Moominsweetie

yes 20% down due to Brexit, affordability and this terrible government

www.bbc.co.uk/news/business-63119047

Without some context that doesn't tell us anything.

£700/sq ft would be an absolute snip in Chiswick, but wholly unrealistic and unachievable in Darlington.

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).

this is a major issue that the gov hasn't addressed, the huge demographic shift & what that will do to public services.

Doubt they'll crash despite the fact that some people have been desperate for that to happen for the last 30 years. Home ownership is ingrained in the British psyche, there are a lot of cash buyers about and there are not enough houses to meet demand. The government won't want a crash in the run up to the election in 2 years time - they'll do what they need to do to avoid that imo. A period of stagnation most likely.

I think that they'll be a dip, but definitely not a crash.

However, I suppose that depends on how 'crash' is defined. I've seen articles suggesting that house prices could 'crash' 10%. So that would take them down to last years prices then 😂

I agree @Sheenqueen

Wages will rise considerably over the next few years. They will have to because prices won't be going back down.

Where are these wage rises going to come from?

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?

@SilentHedges the 2008 crash was caused by irresponsible lending. This meant many, many people defaulted on their mortgages. Since 2008, there has been a legal requirement to stress test mortgages. I don't believe that we'll ever see a 2008 situation again.

Except…that was not what caused the 2008 crisis; and people didn’t default on their mortgages in 2008 — at least not in the U.K. The market was well and truly propped up by govt and the BoE.

If everyone has been stress tested, why are people squealing already?

People are squealing already because it makes a good thread on MN and other SM, they were doing it in the summer with the gas prices when no one has their heating on

@postcardpuffin

Erm, yes they did. Repossession rate jumped from 0.07 in 2004 to 0.41 in 2008. Massive increase due to the 2008 crisis.

@C4tastrophe

There was a thread on here the other day asking who could afford their mortgages at 8% interest. The vast majority said that they could.

As a said, stress testing was a legal requirement after 2008

Nobody in their right mind is moving jobs for less than a 10% pay increase at the moment and then when they typically go and hand in their notice they get counteroffered for another 15 to 20% because their managers realise there’s literally nobody to replace them with.

Is that you, Liz?

You must all be living in some completely different fantasy Tory version of the U.K. right now 😂🤣