House prices dropping/stalling

[6poundshower]

www.theguardian.com/money/2022/nov/10/uk-house-prices-stall-as-mortgage-rate-rise-fuels-caution

Guardian article this morning

I don't think there is anybody with even a vaguely passing interest in the property market who can be surprised that when costs of borrowing have risen from 1 point something % to 5 point something %, that there will be a change in what people can afford and therefore what they're prepared to pay.

Yes, sometimes property decreases in value.

The affordability of mortgage payments has fallen by 30%ish so I'm not surprised people are readjusting budgets/expectations

Note the bit at the bottom about developers building fewer houses than planned next year though. The market will become a pressure cooker and rents will soar if people delay buying.

Interesting to see the cancellation rates for new houses is going up. Just yesterday a tradesperson working here was telling me that new houses have a planned lifespan of only 75 years now.😧

@MidnightMeltdown there would need to be a massive downturn in building before we ran out of properties. We already have substantially more properties than households in the UK especially since we packed all those foreigners off.

What planet are you on?

House building hasn't kept up with population growth in years, and as for 'packing the foreigners off' - the uk population is still increasing.

The number of households isn't relevant. Many people own multiple homes.

From a few years ago but still relevant

Is there really a housing shortage?
medium.com/@ian.mulheirn/part-1-is-there-really-a-housing-shortage-89fdc6bac4d2

On The Bottom Line on R4 someone predicted 10-15% drop by next? Spring but qualified it by saying it might bounce back again.

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Exec Director and Chief Economist at the Tony Blair Institute. Formerly Oxford Economics, SMF and HM Treasury economist. These are personal ramblings.

Enough said.

On The Bottom Line on R4 someone predicted had a bit of a guess at a 10-15% drop by next? Spring but qualified it by saying it might bounce back again.

I think currently the market can be at best described as 'deluded'. See chart below in the context of historical interest rates and prices.

As requested, an inflation adjusted comparison of historical house prices against variable mortgage interest rates. Almost the same position as 2007 only with c. £875Bn of QE still in the system and inflation to fight… whilst waiting for China to open. Doesn’t look fantastic! 🤦‍♂️ pic.twitter.com/wJU7HXODyK— Alex Groundwater (@alexgroundwater) November 10, 2022

That's a really interesting graph Cybercynic, great illustration of the current position.

Developers are in for a world of pain anyway. In London new build flats with help to buy were literally priced at 40% more than the equivalent 2nd hand flats. No help to buy, they will have to sell at much closer to wl2nd hand prices, probably 10% higher which was the historic norm
I am quite shocked that the government haven't come out with a new scheme for their biggest donors, and would be amazed if there isn't something in the pipeline for the November 17th budget announcement
If there is nothing then I can see a few housebuilding going bankrupt

Fact of the matter is that if you were borrowing 200k over 25 years at 2% you would have been paying 850 a month

With interest rates at 6%, paying 850 a month you can only borrow 132k

So that buyer has lost 68k of their purchasing power, and every buyer needing a mortgage will be in the exact same position

The buyer won't be able to magic up that extra money so it will have to come off the price if the seller wants to sell

Obviously the only person that loses out in these examples are people downsizing

That’s only for those with max mortgages which is by far not the majority.

Doesn't have anything to do with borrowing the max amount, the cost has gone up roughly the same regardless of the size of deposit

They were always going to stall or drop at some point, although you'll doubtless get loads of people saying the fact demand outstrips supply means they'll keep rising forever and ever.

Yes would expect something on 17th. Not sure what yet though

I think any price adjustments all depend on the area....we are in a newish gentrified part of east london....prices are holding up....the young couples have buckets of cash....they outbid each other...skips arrive soon....lofts...basements...full refurbs....no idea where they get all this money...rich parents my agent friend told me....

LOL.

Demand is supposedly in freefall at the big developers, guess a lot of people will be sleeping on park benches until prices correct..........